If you go to your storekeeper and order goods to the amount of five dollars, you may use various forms of money to meet your payment:
You may give to the storekeeper 10 pieces of silver, each bearing the indication: 50 cents. Or 120 quarters (25 cents each); or any other choice of coins which add up to $5.00.
You may also pay him in paper money: five one-dollar bills, or one single five-dollar bill.
Both ways will be equally acceptable to your merchant.
If you have a bank account and are trusted by the storekeeper, he will be satisfied with a simple piece of paper on which you order your bank to transfer $5.00 from your account to the merchant's account.
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This means that the material of which money is made is unimportant, as long as the token is accepted without hesitation in exchange of goods or services.
To use the definition given by Professor Walker:
"Money is any medium which has reached such a degree of acceptability that, no matter what it is made of, and no matter why people want it, no one will refuse it in exchange for his product.”
Some five hundred years ago, people would have frowned on money made of a piece of paper. The “degree of acceptability” was then limited to metal coins, gold or silver money.
But today, in all civilized nations, a wide use is made of paper money; and, in business transactions, a still wider use of the check money, which is mainly of a bookkeeping nature: script money.
To the degree of acceptability is added the degree of convenience. Our forefathers preferred small dies of precious metals to bulky pieces of more common material, to represent the same value. Our contemporaries carry only a limited percentage of their pocket money in coins; paper money in their billfold is far less cumbersome. For the businessman, the most convenient thing is the check-book, where millions take no more space and weigh no more than a one-digit amount.
Coins, bills and script money have one thing in common: they carry figures. And that is the one thing you look at whenever you are handed a bill or a check to pay for your goods or services. In fact, nothing but the figure makes the difference between a one-dollar and a twenty-dollar bill, or between a ten-dollar and a thousand-dollar check drawn on a bank account.
The creation of money, therefore, presents absolutely no physical difficulty. Of course, it cannot be done at random, and legal measures of some kind are necessary to preserve its character of acceptability by all. But it is unthinkable that the whole economic life of a sovereign country may be paralyzed just for lack of money. And yet it has been, and for years at a time! And in our own generation.
But is not money based on gold? Is not paper money, or bank money, just a substitute for real money, placed in circulation, but represented by an equal amount of gold in the vaults of the banks? Is not all sound money convertible into gold?
Sound money is any money which will accomplish its function. The function of money is to move goods. If it moves goods, it is sound money, whatever it is made of, or whatever it is alleged to be based on.
People have been hypnotized into believing that their money is based on gold. Our Bank of Canada notes are not at all based on gold. And God be blessed for that! When wheat has been grown, why on earth should we have to dig the ground and mine some metal, before the wheat be allowed to reach the homes of the people and be turned into bread?
Our amount of currency may have been governed by some relation to a certain amount of gold — by no means an equal amount — in time past. Surely not today.
In fact, not an ounce of gold is at the back of our national currency since the 1st of May 1940. Yet our money was just as sound in May 1940 as it was in April 1940 when on a fractional gold standard.
Try to convert your money into gold, and get the news!
Your money can easily be turned into food, into clothes, into goods and services of all kinds, at your bid. But not into gold. It is based on the goods it can obtain for you, not on the gold it cannot obtain for you. And what would you want the gold for?
The companies who dig and refine gold hasten to sell it, and they sell it for just the kind of paper money or check money that you or I are using when we buy meat, shoes or soap. They are very much pleased, also, to get subsidies from the Government, to make up for what they call the low price of gold; and the Government does not pay the subsidies in gold, nor in money based on gold, but out of the vulgar money pilfered from our pockets in taxes.
If money had to be based on gold, how could Canada, and the United States, and England, and France, and Germany, and other nations, have been able to meet the heavy expenses of a six-year war?
During the previous decade, Governments had been repeating that they had no money to help put men to work. Was it because gold ore had run short in the mines?
And where did Governments direct man power when war was declared and had to be financed. To gold mines, or to armament factories and to battlefields?
If tomorrow all the gold in the world were changed into rock, or lost in the bottom of the ocean, would all the money in the world lose its buying value, and would people have to starve in front of elevators and meathouses crammed with food?
And conversely, what would pure gold money buy where no goods or services were available?
"The essential quality of money", writes Douglas, “is that a man shall believe that he can get what he wants by the aid of it.”
The dollar bill you give me in payment for my work is good, because I know that I can get any thing I want, to the amount of one dollar, by presenting that piece of paper.
“Looked at from this point of view, money is simply a ticket.” (Douglas) The only difference between money and a railway ticket, or a theatre ticket, is that the railway ticket entitles you to only a particular form of service, — transportation; the theatre ticket, only to another limited form of service, a seat in the theatre for a particular date; whereas, money is a ticket giving you the choice between many kinds of goods or services to the value indicated on it.
Now what would you think of the management of a theatre, where people would be turned away at the door, although half of the seats were still vacant, just because of a shortage of tickets?
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Quoting Douglas on the same subject:
"If the whole population of Great Britain were to besiege the gates of the great London termini, under the urge of some necessity, such as, let us say, the invasion of London, to remove themselves to Scotland, and were to be told that there were plenty of trains, plenty of tractive power, and that, in fact, the whole of the railway system was physically capable of meeting their necessity, but that unfortunately only 15 percent of the tickets necessary to entitle them to seats were available and that the Traffic Department, as a matter of policy, did not propose to print any more, it would probably be agreed that the Traffic Department would hear something to its disadvantage.” (Warning Democracy, page 16).
These lines were extracted from a paper read by the author at the Institute of Mechanical Engineers on April 22nd, 1927. And Douglas could add:
“The extraordinary feature of the present day is that, when people are told that the workshops of this country are clamouring for orders, that the shops and department stores are full of goods, that a large proportion of the population is, at one and the same time, asking to be allowed to make goods and services, while complaining that it cannot get more than a bare minimum of those goods and services that are available, because it has not got the tickets to hand over in exchange for them, the situation is regarded as an act of God, and impressive gentlemen deliver homilies to us on the inexorable nature of economic law. In other words, the statement that a thing cannot be done because there is no money with which to do it is accepted as a good and final reply to a demand for action.” (Ibid)
How is it that such a discrepancy in a railway ticket system, or a theatre ticket system, would be branded as madness by any normal mind, and that the same discrepancy in the financial ticket system is regarded, by those who drink at the founts of knowledge, as an act of God or as the unavoidable effects of an economic law?
If the supply of transportation or theatre tickets is expected to be governed by the number of seats available, should not the supply of financial tickets — claims on goods — be similarly governed by the availability of goods and services?
When goods are so easy to produce, why are the tickets to buy them so difficult to obtain?
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