The A B C of Finance

Value Cannot Be Given By Government.

LESSON V.

The second notion to be unlearned is intimately associated with the former one. It is that governments possess some wonderful power of giving value to money, which every one must admit, but which no one can explain. Widely as this notion is extended, it is as pure a superstition as was the old notion that a witch could make her enemy sick by secretly making a wax image of him, and then by sticking pins into it, roasting it before the fire, and otherwise torturing it, could make him suffer corresponding tortures. The disproof of this theory by an appeal to facts is easy and conclusive. Every man of intelligence knows that the coined money of all nations is worth only the gold which is in it, except that the coin bears a slight premium, owing to the certainty that it is the real metal; whereas the gold may have to be assayed, and the cost of the assay must be deducted from its value. In other words, the coined money may bear a premium over the mere bullion equal to the cost of coinage. The stamp of Government goes for absolutely nothing, except a certificate of the weight and quality of the metal.

Now, if the common notion were correct, the coin might be vastly more valuable than the crude bullion out of which it was made, the premium depending on how great and powerful a nation put its stamp on it. But all nations are here on a dead level; their stamps, one and all, go for just nothing, so far as giving value is concerned. The dollars of the poorest South American states, the sovereigns of England, the napoleons of France, and the gold bars fresh from the mines without any Government stamp upon them, all exchange in the markets of the world according to the amount of gold in them, and nothing else. This fact is a conclusive refutation of the opinion that Government can confer value on anything by its stamp.

A maxim is often quoted which is true in one sense and not true in another, but which people are expected to believe in the sense in which it is not true. It is said that the dollar is anything which the law makes it. To see in what sense this is true, let us take the similar, but easier, case of a loaf of bread. Our city authorities may have the power to declare how much bread shall constitute a loaf, and this year they may provide that the loaf shall weigh one pound; next year, two pounds; and the year after, half a pound. They might also, from time to time, allow the baker to add corn or rye meal to his flour. We might then say that the loaf of bread was anything which the law made it. But it would not follow that the loaf of one year was the same as that of another, and it would be monstrous for the law to suppose them the same. It is the same with the dollar. If Congress provides a gold dollar this year, and a silver dollar next year, and a paper dollar the year after, there is no necessary relation of value between these different dollars any more than between the loaves of bread we have supposed.

If, now, the reader will remember that there is only one kind of value, namely, that measured by the necessaries of life anything will command in the market, and that the value of a gold dollar does not differ in any essential respect from that of the same quantity of gold in a nugget, he will have taken the second great step towards understanding the money question.