Robert D. Benton
[A paper presented at the 15th Annual Conference of
the Henry George Schools of Social Science, Rutgers University, New
Jersey; 11 July 1959]
An increase of currency creates a privilege for debtors by making it
possible to repay a debt with less labor than the loan represented. A
decrease of currency creates a privilege for creditors by asking it
possible to obtain more labor than the loan represented. The
authoritarian changing of the amount of currency changes the
relationship between creditor and debtor and creates a privilege for
one or the other. When governments of state have increased their
amounts of currency to pay off their debts, it is the same as debt
repudiation at well as a sneaky tax on savings. Whenever attempts have
been made to forestall depressions by increasing the amount of
currency, it has been at best, only temporary. Some people feel that
the additional currency makes it easier to borrow in order to buy or
lease land. This may help to maintain certain production levels until
time as the price of land again seems out of proportion. In the
meantime, the continued production levels may serve as a political
expedient for a certain administration. But to continue increasing the
amount of currency finally destroys that measure of value upon which
the facilitation of exchange depends.
This should make it evident that the amount of currency should never
be changed. And this is true in spite of any anticipated or actual
changes in future population and future production. However, this is
not a recommendation for the old cliché of 'stabilizing the
dollar' or for any attempt at regulating the value thereof. Rather
this is a plea to permit the value of that unit to go freely and
naturally where it will with a stable amount of currency.
Now if the amount of currency should never be changed, what is the
proper amount which will best serve its purpose?
I submit that the main purpose of currency is to serve as a device
for measuring value. To the extent currency serves this purpose well,
its units will be generally acceptable as mediums of exchange. The
concept of currency is often used as a measuring device upon numerous
occasions when its units are not actually used as mediums of exchange.
It is well to note here the difference between the 'measure of value'
and 'mediums of exchange'. The device which measures value is the
numerical total of all the physical units of currency. There are many
and varied mediums of exchange which cannot be considered identical
with currency, nor can they be considered in its sum total.
The criterion of a measuring device is that it must always consist of
a constant number of composing parts. A measuring device which now and
then has its number of composing parts increased or decreased begins
to lose its effectiveness as a measuring device. So long as the sum
total of units of currency remains stable, it can well serve its
purpose. This seems to be true regardless of what that amount of
currency may be. Such stability can be accomplished, not by new laws
and new bureaus and new committees, but by abolishing the laws which
create the instability, the main one being the Federal Reserve Act
which was passed in 1913. this Act permits the increase and decrease
of currency and permits monetizing the government debt.
This constant amount of currency is sufficient for all needs of
future production and future population for the following reasons:
- Any amount of currency can measure any value.
- Its units can be used indefinitely for an infinite number of
- The possibilities of substituting mediums of exchange are
If future production and future population happen to give such an
increased value to a unit of currency that it becomes inconvenient to
use, then smaller denominations of currency may be issued to represent
lesser values in place of equivalent larger denominations, this would
not change the total amount of currency in any way.
Any change in the value of a currency unit resulting from such
natural causes as production or reproduction are obviously natural
effects and such new values deserve right of expression without
governmental interference. In an economy where currency is left alone
and where there are no privileges, it would be impossible to get
something for nothing. It is not necessary to juggle the currency to
assure that each person receive his just share of production. In fact,
juggling the currency, on any pretext, distorts the measure of value
and contributes to an injustice.
Presently, the sum total of all our alloyed coins and the three paper
currencies, the Silver Certificate the United States Note, and the
Federal Reserve Note, serve as our device for measuring value. All its
units serve as mediums of exchange regardless of the origin of any
issue, or its backing or any debt it represents. Any change in the
some thirty billions of units of currency in this country would be
both immoral and unscientific.
Currency need not be secured by precious metals to give it purpose.
Nor is it necessary to coin gold and silver to make currency
redeemable and convertible in such metal. Let such metals be bought
and sold in the free market without coinage. The sum total of fiat
paper currency and any alloyed coin of convenience may well serve as a
measure of value and its individual units as mediums of exchange so
long as people have reason to believe the total amount of such
currency will remain stable.
Counterfeiting currency, that process of imitating and increasing the
amounts of the genuine article, will always be wrong whether
accomplished by individuals, co-operatives, or by government of state.
On the other hand, individuals, businesses, including banks should be
free to create create their own debt and credit to any amount without
help or hindrance from the all-powerful State. All, however, should be
put on guard that any embarrassing extension of debt or credit could
not be underwritten nor subsidised by new issues of currency from some
Saving and even hoarding currency should be freely permitted as this
represents voluntary abstinence of consumption. No one should be
forced to spend or consume nor suffer demurrage for not doing so.
The Federal Reserve System should be completely separated from the
Government and be made to stand upon its own feet as any other
business. Let it merely serve as a banker's bank, a clearing house.
The laws which now permit it to issue and retire notes must be swept
away and it must be prohibited from making any future increase or
decrease in the amount of currency. It is now time to separate Bank
and State. A well-informed citizenry must restrain the government from
conjuring up other methods for changing the amounts of currency from
tine to time.
Governments must learn to live by and within their own natural
income, economic rent.