A Do-It-Yourself Theory of Money

Jan J. Pot

[Reprinted from the International Union Newsletter, February, 1970]

Dr. David B. Ascher ("Two Questions," International Union Newsletter, No. 9) proposes to change the backing of currency from gold to land. But may I ask, what is money? If one has no barter for my produce, I accept gold. But that is sheer nonsense. I cannot eat it, I have no use for it, for I am not a dentist or a jeweler. "Why then do I accept gold for goods and labor? Only because I trust that all other people will be so stupid as to accept my gold for delivering goods and services to me. Gold as barter-called-money is solely based upon confidence. AS long as we all trust that gold, or paper money (with or without gold behind it) will remain exchangeable for goods and services, the system works. So the only backing of money is confidence.

If I render a service to Dr. Ascher, a payment with land is of no use to me. And paper money backed up by land has value to me only so long as I trust that all other people will accept it for goods and services, for the backing with so much land is of no use to them, either. Again the money is based upon confidence, (By the way, in case of lack of confidence, would the government sell the land?)

If the buyer of my goods or services runs short of cash, he may render me an I.O.U. In that case, I will look over his shoulder to see whether the amount is covered by a bank account, a house, some bonds or shares, or other valuable and exchangeable things. In that case, I will trust his I.O.U, and in doing so, we have "made" money according to our needs. Sometimes it will be easier to use currency, if available, but that is not essential. If a country no longer trusts the currency of another country, the merchants will only exchange goods against I.O.U.'s or credit notes when they know there are useful tangible things behind it. They will make their own money as they need it, based upon confidence. (Oscar B. Johannsen in the June 1969 Henry George News says that paper money is government's I.O.U. on which no interest is paid. In the same issue, Robert LeFevre refers to "whale money" as an instance of private enterprise coinage.)

Besides the well-known and quite normal protection by law against falsification and the like, violation of confidence in money can occur basically by the two prime factors, land and labor. In the case of labor: If the labor unions exert idle power to enforce for labor more pay than the value of its produce, the difference is void. Nevertheless, this difference-without-product circulates with the currency, so the currency is debased. In the case of lands: If the landowner exerts the power to sell the land for more money than it was bought with, the difference lacks produce, so is void. Nevertheless this difference also circulates with the currency, so the currency is debased.

Under land value taxation, the above-mentioned power of land would no longer exist. The power of labor can perhaps be lessened with LVT, if rent exceeding governmental expenditure is distributed among the citizens, as has been done in Alberta, Canada. But members of parliaments are not representatives of the people, but of special-interest groups who fight like lions for the power to rob from others. And this is the very reason for the violating of confidence, that is, of debasing the currency, in spite of gold or land.

Dr. Ascher says, "If the value of the land goes up -- as it will if production increases..." Well, then: if the value of the land is backed by production, the money of Ruristan is covered by production. The (rental) value of land is merely an indicator of production. Certainly, marginal land does not have a price, so marginal land cannot back money or be a yardstick for money; yet there is production on marginal land.