What is that number?
The Witness: The national bankers' circular.
This is part of the Congressional Record of a later date. It is published in several books; one. "The Management of Credit," by T. Cushing Daniel, is a well-known document.
A statement such as that may help hon. members to understand why they have heard only disparaging remarks about the greenbacks.
Then there was no form of price control in use by the United States federal government. The greenback was not subjected to intelligent control as debt-free money now could be, either as to the amount created, or as to the manner of spending it into circulation. There was besides no rationing or over-all control or direction of material supply.
What were some of the phenomena associated with the use of greenbacks? Opponents of debt-free money, state-created money, affirm that the greenbacks are unsound; that they caused enormous price
increases from an index of 100 in 1860 to 217 in 1865; that they hurt the wage earners whose wages during the same period rose only from 100 to 143; that those on fixed incomes, such as schoolteachers, were severely hurt; that soldiers were severely hurt; that the civil war cost the people of the northern states $389 million extra because they used the greenbacks.
But any kind of money, $450 million of it, spent by the government into circulation in the northern states in so short a period would have produced exactly the same rises in price. All we have to do is remember our own experiences in the recent war and in the first war. Specie borrowed directly from the United States banks would have done it. Currency borrowed from the United States banks or credit borrowed from the United States banks would have done it. Solid gold in the form of five dollar gold pieces stamped in the United States mint and spent by the government would have caused exactly the same price rise and created the same other effects, other things being equal. The rise of prices, therefore, could not with justice be blamed upon the greenbacks.
Fundamentally the price rise accompanying greenbacks was a result of having too few goods to buy with the greenbacks and all the other different kinds of money already in circulation. May I repeat that the price rise had and could have little or nothing to do with the kind of money the government used to spend, whether it was debt-free paper, debt or borrowed bank paper, paper backed by specie or gold in any percentage, coins of either silver or gold, either minted by the government and spent, or minted and borrowed from the banks and spent. A relative shortage of goods was the only monetary cause of the price increase. Of course, where there was no price control or rationing, price rises could have been the result of profiteering.
But there were several other contributing factors besides the spending into circulation of $450 million, no matter what kind of money those millions might be. Many weaknesses existed in the general financial situation prevailing at the beginning of the administration of Lincoln.
When the new administration of Lincoln took office, I quote: "it found the national finances in a very bad way". "The treasury was practically empty," "customs receipts had fallen off considerably," "the public credit was shaken," "the administration did not feel itself able to impose severe taxation on the people," and "three out of every four dollars the government spent was borrowed money." See "The Story of Money", pages 292 and 293.
Government Financial Policy
Soon after war broke out the government borrowed $150 million from the banks, demanding it all in specie, thereby weakening their specie position enough to force the banks off specie ultimately, and on to a strictly paper basis. Even at that the government had so little specie in its subtreasury that the government had to go upon an inconvertible paper basis.
Against this disquieting background, the government, sorely in need of funds, began issuing greenbacks. See Sir Norman Angell's "The Story of Money", pages 292 and 293. To recapitulate the adverse factors affecting the greenbacks: A dangerous civil war was unpredictable as to its outcome, thus engendering lack of confidence. Production was very seriously disrupted in the whole nation. The nation was accustomed to specie and so naturally was anxious about being only on paper. The greenback was constantly under attack by bankers and financiers. On the other hand, as I have already indicated, there was no form of price control. The greenback was not "subjected to intelligent control" as to amount created, or as to manner spent into circulation. There was no rationing of either retail goods or of raw materials for manufacturing. Finally, from any standpoint either of orthodox or of nonorthodox monetary thinking, the greenback was at a real disadvantage on the United States money market because of the fact that the government would not accept it in payment of customs duties and interest on the public debt.
Any just and accurate appraisal of the greenback experience must be made bearing all of these considerations strictly in mind; but when men talk of the greenback I notice they never bear any of these considerations in mind. They becloud their thinking.
What is the importance to us and our generation of state-created debt-free money? With it men can make financially possible what in a community is physically possible. This is a fact of epoch-making significance if men can only come to realize and appreciate it. If members of this house could come to appreciate that fact, it would mean the possibility of an epoch-making event in Canada, greatly to the benefit of this nation.
Let us now review the facts about Guernsey island. In Guernsey island the government in 1815 created and spent three thousand one pound notes with no gold or other backing except the going-concern-goods-and-services-producing-and-consuming-activi-ties of the island. These notes the government spent into circulation to build a markethouse from its resources, material and human, with the understanding that
Government Financial Policy those notes would be redeemed with revenues derived from renting the markethouse. Records indicate no inconvenient rise in prices. The state notes were therefore unquestionably sound money. The Guernsey islanders, therefore, built the markethouse at no financial cost whatever to themselves.
Did they get something for nothing? No. They merely set to work resources, human and material, that were not in actual use, and would have remained unused, except for the creation and spending of the state pounds. Before the government created and spent the three thousand state-note pounds, many of its workers were idle or partly idle. The stone in the quarry was idle. The tools were idle. Considerable food, clothing and shelter were unbought in the markets, and were therefore more or less idle or unused. Resources like soil and fisheries, ready to produce more food, etc., were partly or wholly idle. In other words it was physically possible for the islanders to build that markethouse. The physical potentialities of producing the necessary goods and services to build the markethouse were available to the islanders.
But they could not get the money essential to set those potentialities into action, to make their existing goods and services begin to be built into the markethouse, and then to turn such of their resources as fertility of soil, hay, milk cows, fish in the sea, fishing equipment, stone in the quarry, into replenishing goods and services, and to cause those additional replenishing goods and services, thus brought into being, to be built into more and more of the markethouse, and so on, until the markethouse would be completed.
The state pound notes, when created and wisely spent, provided the money essential to turn Guernsey island's physical possibilities of building the markethouse into the physical realities that constituted the completed markethouse. Therefore the Guernsey islanders did not get their markethouse for nothing. They built into the markethouse the requisite amount of stone from their quarry, their food, clothing and shelter up to that time being left unused, their human energy and skill up to that time unused. To effect the building process, to motivate it, they employed their'state-created one pound notes. In other words, they made what was physically possible, as regards a markethouse, financially possible as regards that market-house, by the use of the debt-free pound notes that the government created and issued.
Their markethouse cost them a substantial amount of depreciation of the stone in their quarry, of the fertility of their soil, and of
Advisory Council on Manpower commonwealth peoples could have something resembling sterling, which was so successfully used by the British, to enable members of the commonwealth to exchange their goods freely to the benefit of the commonwealth and to the benefit of all mankind.
Debt-free money is the only means of scientific distribution. Hon. members will recall that men have solved the problem of production, but we must now solve the problem of distribution. Debt-free money is the key to the solution of the distribution problem. International plans such as the Colombo plan and others depend upon money. If you cannot or dare not obtain by taxing and borrowing enough money to finance Colombo plans, you cannot achieve your goal. With debt-free money and adequate production, men would be able to do all they desired to do with the Colombo plan.
Debt-free money, Mr. Speaker, used in conjunction with adequate production, constitutes the only possible means of preserving freedom, the only possible way of successfully combating communism.
Topic: GOVERNMENT FINANCIAL POLICY
Subtopic: PROVISION OF DEBT-FREE MONEY