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The Practical Realization of the Milhaud Proposals
By Ulrich von Beckerath
part 1
Reprinted from a 1935 'Annals of Collective economy', issue, a quadlingual magazine from Geneva which still exists but with a very much more fragmented...eh...sorry, "specialized" focus meanwhile, contrasting starkly with back then when Milhaud was holding the reins.
(Milhaud was the editor there at the time and Beckerath a correspondent; the document is presented in full (three parts at this site)
Contents of the quadlingual
'Annals of common economy'
issue where the substance of this file, and that of some others in this first batch of guest appearances as well, first appeared:

Forms of Organisation of Italian Public Undertakings. By G. Lowell
 The Woergl Experiment with Depreciating Money. By Alex. von Muralt
A New Economic Mecca. By Claude Bourdet 58 ;
The End Results of the Woergl Experiment. By Michael Unter-guggenberger  63
Will Governmenta Heed our Proposals at last By Edgard Milhaud 65
 The Practical Realization of the Milhaud Proposals By U. v Beckerath
 Railway Money and Unemployment. By Dr. W. Zander  163
 Further Remarks concerning Railway Money.  Walter Zander
the Introduction of Clearing Certificates, By Dr. W. Zander
Scrip Tax Remission Certificates, and Requirements Certificates in Germany.
By Dr. W. Zander (the first and green article by this author is part of this guest appearance batch also.... I believe.....well same author and subject anyway.(check the intro you may clink to at the top or head straight for: 'a way out of the monetary chaos'); by the way.....after the war he went Zionist, wrote a book about how and why Jeruzalem should become the most ecumenical place in the world..... and forgot all about these prewar fancies of his)
 Unemployment as a Problem of Turnover Credits and the Supply  of Means of Payment. By Dr. H. Rittershausen also to be found (here) in this batch of guest appearances.
A New Basis for External Trading. By Karl Kuettel
The Question of an Inter-State Goods Clearing System. By Karl Kuettel
A Method of Reconstructing International Economic Relations. By M. A. Heilperin
Simultaneous Provision of Employment and of Markets and an International Clearing System. Progress of the Movement. By Edgard Milhaud
Postscript. Tke Compensation Problem before the Assemhly of the League of Nations. By Edgard Milkaud  344
Appendix 1. Phipsonism and tke Homecroft Experiment  353
 Tke Dean of Canterbury and a System of Money Tickets  377
Upton Sinclair s Economic Programme as Candidate for the Governorship of California .................
A French Precursor of Exchangism: Leclaire ......
Payments in Kind in France ..........................
Foreign Trade Questions in Germany ...............
The Milhaud Plan and tke Revival of International Trade
 

Contents of this file:
1. Public Opinion and the Milhaud Proposal.
— 2. Points Differentiating the Milhaud Reform Proposals from those of Others.
—3. The Milhaud Proposals as an Integral Whole.
—4. A Basic Flaw in our Economic System.
A) The True Nature of a Money Debt.
B) Security in Cash Payments and in Non-Cash Settlementt.
—5. The Milhaud Proposals as a Basis for a New Syatem of Pécuniary Settlements.
A) The Prevailing Money Monopoly as a Cause of Money Shortage and therefore of the Trade Depression;
B) Exchange of Commodities without Goods Warrants.
C) Exchange of Commodities with Goods Warrants.
D) The Placing of Orders as a Factor in the Goods Warrants System.
clink for part 2 leaving from this light purple line
E) Short-Term Validity of the Goods Warrants.
F) An Improvement in the Civil law as a Result of tke Milhaud Proposals and as a First Step towards a Social Reform.
6. The Realization of tke Fundamental Conceptions underlying the Milhaud Proposals, should States not take tke Initiative.
A) Purchaaing Certificates in External Trading on a Private Enterprise Basis.
B) Work Supply Banks as Private lnstitution.
part three starts to conclude point B)
C) Technical Details concerning the lssue of Goods Warrants by work Supply Banks.
D) Financing by means of Goods Warrants Manufacturing Operations occupying a Considerable Time.
7. Other Aspects.
A) Payment of Rent with Goods Warrants.
B) Payment of Dividends witk Goods Warrants.
C) General Objections on the part of "Practical Men"
part four starts with the following:
D) lssues of Goods Warrants and "Creation of Money".
E) ls a Homogeneous Circulating Medium the Ideal ?
I added a partially (spectral w)ring passage repro hereabouts
F) Security against Inflation of Means of Payment Generally.
—8 . Conclusion.
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Go see what else poetpiet can puzzle you with here
......................................or here.......................................
or check the intro to my first batch of guest appearances
which concerns all sorts of currency issues
Tripod tool NedstatNedstat Counterinstalled end of nov 98  This file was created in the fall of 98
Last (minor) changes to it occured at the beginning of december 98    poetpiet@hotbot.com

The next segment is probably a fragment of an introduction by Milhaud himself.
..............the Commission of Inquiry on Nat;onal Policy in lnternational Economic Relations. This Commission invited M. Michel A. Heilperin to submit a memorandum on that problem, which we also have the pleasure of reproducing. It affords additional proof, if such were needed, of the univeraal concern in this subject and accords moreover, with analogous views several times expressed by Preaident Roosevelt himself.Much ground has been cooered aince the time when, in 1931 and 1952, we placed before the public opinion of the world our suggestions in favour of the conjoint creation of employment and of markets and of the international organisation of a system of compensations. To-day we are able to point in our pagea to a long ~eries of convergent propoaala coming from many competent quarters, which Governments have no right to ignore.The roads to take are now marked out for us and the goal is manifest. To the sorely tried people of the earth, they offer a firm asssurance of escape. Will Governments heed our proposals at last

Every social advance without exception waas conceived by a lucid thinker adnd wittled by a dynamic personality.
H. L. FOLLIN, "Paroles d'un voyant"
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1. 1. Public Opinion and the Milhaud Proposal.

Who can doubt that a practical proposal to find work for twventy-five million of the world's unemployed to-day would be of no less (indeed, of far greater) significance than was, in its time, the introduction of railways or telegraphs ? In these circumstances it is surprising that the Milhaud proposals have not been, on the whole, more warmly received and more closely examined. A staunch partisan of tbe proposals has not apparently yet appeared. On several occasions Milhaud has personally defended bis thesis, but without calling forth a clear response in his listeners or readers. It is true tllat our times are not propitious for a scrupulous examination of a new reform scheme. Probably all Governments have had submitted to them hundreds, if not thousands, of projects. It has been stated, for instance, that during the last few years the German Government received some 50.000 proposals and the Reichsbank over a thousand during the first~months after 13 July 1931. In former days, too, there waa no ahortage of projects. In hia article "Property and Legislation" published 15 April 1840, Bastiat reports that by that date over 500 proposals for the organization of labour and as many for the organiaation of credit had been submitted to the French Govemment.
     Hence the first impression created by the Milhaud proposals might have been confidently anticipated. "What, another reform project? And actually one relating to monetary reform". But he who is acquainted with even a small proportion of the hitherto published projects, will be surprised that the Milhaud proposals do not include certain points which appear in well-nigh all other proposals and which, according to current opinion, should on no account be omitted. Let us examine these points.

2. Points Differentiating the Milhaud Reform Proposas from those of Others.

The total number of post-war proposals aiming at combating the general trade depression, either published or submitted to Govemments, exceeds almost certainly 100.000. The Milhaud proposals are favourably differentiated from these by the following characteristics, among others:
     a) Milhaud desires to retain gold as the standard of value and only bans it as a means of payment. Thus creditors would receive gold values in the place of gold. Here Milhaud stands almost alone. The view that the gold standard has failed and should be therefore abolished, is held fairly generalb to-day. As a matter of fact, however, it is not the gold standard that has failed, but those to whom we entrusted it. Or, as Rittershausen contends in his Neubau des deuhchen Kreditsystems (Reform of the German Credit System), it is not the gold that has deteriorated, but the bank directors.
     b) Milhaud proposes no re-distribution of the world's gold. Here, again, Milhaud stands almost alone. Broadly speaking, the countries possessing little gold fasten the responsibility for the economic crisis on the countries holding much gold. Thus Mil. haud belongs to the select few who do not share this prejudice.
     c) Milhaud does not call for an autarchy. This is very old-fashioned. We had all become accustomed to the idea that a "homewatch" industry in Greenland and hometea plantations on the Alpine glaciers were just the thing and that an eschange of Greenland blubber oil, Swiss watches, and Chinese tea would 73 (this is a page number and refers to the 1934 Annals issue I used for scanning and correcting; courtesy MFN) throw out of employment Eskimos, coolies, and Swiss factory workers. Admittedly, autarchists tend incidentally to demand a forcing of exports and a throttling of imports (although probably not one of them would voluntarily give up his morning coffee and his afternoon cigar simply because they are imported goods). Milhaud is one of the few economists who fervently identify themselves with the old thesis: exports pay for imports and vice versa; credit and debit trade balances dwell only in men's imaginations and in defective trading statistics.
        d) Milhaud belongs to the small remnant of economists who hope to combat the depression first and foremost by reviving the consumable goods industries, that is, the industries producing articles in daily demand. Virtually all other economists ask that work should be found for the unemployed mainly or exclusively in the industries producing durable goods, among which are to be specially counted means of production and houses. Accordingly, in order to reduce unemployment, the official measurea in all countries have aimed primarily to assist the industries producing durable goods. In boldly asserting that production is the servant of consumption, Milhaud also declines to call on his contemporaries to "return to the simplicity of their forefathers", so as to grapple successfully with the depression. Few only see the blatant contradiction of simultaneously stimulating sales and discouraging consumption.
    e) Milhaud submits no proposal for floating a long-term loan. Practically all other social reformers ask that the State should concentrate on raising a huge loan, preferably in the shape of an extra issue of paper money, and build houses therewith.
    f) It is true that Milhaud proposes a new means of payment; but he asks for no forced currency nor for using it as legal tender, i. e., for making its acceptance in private dealings compulsory. The few who still share the classical view of a forced currency namely that it argues a specially heinous form of despotism, may be almost counted on one's fingers. In Germany they are represented by the small group of the authors of the Vier Gesetzentwuerfee (Four Draft Laws) (available on fiche) and by the Sparerbund (League of Investors) among whose lenders Oberlandsgerichtsprasident Best and Justizrat Brink occupy a prominent place: in France, primarily by H. L. Follin and in England, by Henry Meulen.
       g) Milhaud calls neither for a raising nor for a lowering of wages as a condition of reducing unemployment. He claims, however, that when his proposals shall have been put into effect, real wages will in all probability considerably rise.
        h) Nor does Milhaud demand an immediate reduction of overhead charges to permit a reduction in unemployment. But he does not overlook the fact that after the realisation of his proposals, they will be probably decidedly lower.
      i) Milhaud does not stipulate as a preliminary the "return of confidence". He informs the sceptics that a number of persons, that is, the debtors of the issuing offices, chiefly shopkeepers— would be obliged to accept the purchasing certificates, never mind whether general confidence existed or not. Expressed differently, Milhaud tells the timid, in effect: "Take your certificates to the shops and exchange them for commodities. In the very act, you will have rid yourself of your certificates and your mistrust."(this is referred to as shop foundation and must be understood as the basis for any succesful uprising anywhere; Indonesian students take note!!!!)
j) Milhaud deliberately concerns himself with a special problem and not with the social question as a whole; but he recognises that once the monetary problem has been solved, the social question will have changed its character. It may be added that only then will its nature be clearly revealed to us. Hence Milhaud has little in common with his contemporaries. It is therefore no wonder that he may for some time yet be scornfully treated as a  theoriser bu it would also be in accord with a widespread custom if, before his contribution has come to be appreciated at its true value, critics shall have insisted that such and such a thinker once proposed this or that part of his plan and such and such another thinker another part. just as Bastiat was accused of plagiariaing Carey. However, the originator of a crucially important conception is not he who once gave expression to it without determinedly following it up, but he who successfully challenges therewith the world, even though his proposals, like all proposals whatever, may require to be modified in certain particulars.

3. The Milhaud Proposals as an Integral Whole.

In the last resort, goods and services always exchange for goods and services. This principle has never been seriously disputed. It seems though that, apart from Milhaud, few have attempted to found thereon an economic plan without at once falling into primitive barter or African tribal communism. At all events among recent reformers of this class, Milhaud occupies now first place.The clear recognition of the fact that payment with money other than legal tender, which is already the common practice on the world market, need only be systematically developed in order to yield the advantages of money and barter both, has enabled Milhaud to solve simultaneously two aeemingly unrelated problems — reviving external trade and finding work for the unemployed—according to a coherent plan that might be frictionlessly realised from one day to another. In Milhaud's system the idea of the purchasing certificate is central. It may be expressed in this way: in small denominations, it serves as a means of payment internally; in large, externally. In the current system of payment, debtors must find purchasers for their goods or services, so as to satisfy their creditors with the proceeds of their sales. In Milhaud's system, however, it is the business of creditors to find vendors in order to realize their assets. By means of the system of "production on orders placed" (subscriptions), to be treated of fully in the sequed, the possible "inconvenience" of payment by purchasing certificates might be so -reduced that the creditors would not be worse placed than they are to-day. But, in principle, through the Milhaud plan every debt becomes a debt which is not tendered but has to be collected. Since everybody is in turn creditor and debtor, and since this mutual relationship represents, indeed, thc essential nature of economic activities, Milhaud's plan, abstract as it may seem at first sight and little as it may at first affect the general form of trading, is extraordinarily far-reaching. Not one of the numerous "practical men" who daily, on the basis of their "experience" (which really represents a frog's perspective), put forward proposals, have hit upon this fundamental but simple inversion. This confirms a sapient remark made by the German Secretary of State Feder, in a speech delivered on 28 March 1933: "He who desires to direct a country's economy, must not be engaged in it". Some of Milhaud's critics have thought that his arguments, which appear to them highly complicated, would fall if countries adopted another economic system. Manifestly, the other system in question is Bolshevism. Here also there is a self-contained system aiming at the simultaneous solution of the two problems, that of unemployment and that of the protection of home industries; but this very system, in its diverse degenerate forms, has proved unequal to the task. In Russia numberless machines, and even whole factories, are Iying idle, perhaps because a pair of missing screws worth a few dollars cannot be ordered from Pittsburgh because of the Russian exchange legislation. Ten years after the proclamation of the dictatorship of the proletariat (which is in deeper servitude to-day than under the Czars), over a quarter of Russia's non-agricultural population was unemployed. The subsequent abolition of this unemployment recalls in many respects the increase of employment in ancient Egypt by the building of the pyramids undertaken by the Cheops and Chefren. Moreover, the Russian exchange legislation is in substance the same as that of "capitalistic" States and, in fact, altogether a product of what Marx called "vulgar economy" and which he combated. This "economy" dominates everything in Russia, and if freedom of expression were not so restricted there, this could be proved out of Mars's writings even to those at present in the saddle in Ruaaia, Happy Geneva, where these Annals appear, and where reason may speak without donning the cloak of authorities

4. A Basic Flaw in our Economic System.

A. The True Nature of a Money Debt.
In wholesale commerce, and especially in transactions on the exchanges, it frequently happens that a merchant undertakes to deliver goods by a certain date, without possessing them at the time. He hopes to be able to secure the goodt by the date agreed upon. These sales are called: short or uncovered forward sales (now known, ironically enough as: "futures"). The legislative provisions of all countries eye this type of transaction with suspicion. Frequently, in order to stop such sales, legislative enactments have prohibited all dealings in futures (oops, even back then). Sometimes such forward bargains only have been permitted where the vendor reserves to himself the right, on payment of a premium, to cancel the contract. But almost invariably legislative provisions limit legal proceedings in the case of "futures" and, above all, uncovered dealings, to contracts among merchants. This limitation is justified, for if any other but an experienced merchant were frequently to sell goods not yet in his possession, but which he hopes to procure by a given date, he would soon be entangled in difficulties, and injure both himself and others. (how prophetically old fashioned!!) As far back as 1417, the Hansa thus prohibited "the sale of herrings before they are caught, of corn before it is grown, and of cloth before it is woven". (Roscher, Handel und Gewerbfleiss, § 15.)
Now it is one of the most decided peculiarities of our economic system, and one only quite recently discovered, that forward bargains and blank sales relating to the most important and commonest commodity, that of money, are not only not prohibited, but are actually favoured by the laws of all countries. Economists have hitherto overlooked the fact that our entire credit system, as well as labour contracb, leases, and many other agreements of daily occurrence, constitute in reality short sales of money. The very idea that money as such may be sold, appears foreign to our present-day economic theories. It appears that in Europe attention was first drawn to this by Henry Meulen in a profound work entitled "Industrial Justice through Banking Reform" (London, 1917) . Meulen quotes an American author unknown in Europe, Colonel W. B. Greene (died 1878), who in his "Mutual Banking" stated: "We must remember that when we sell anything for money, we buy the money and vice versa". This brief but pregnant remark throws a new light on our economic system, for Greene a observation refers manifestly not only to ordinary sales but to every agreement involving a money payment. This aspect merits aeparate examination. Who, before Greene and Meulen, would have thought that in an employment contract the employer sells his employee blank and on credit gold or other legal tender? And yet this reflects closely the reality. Or who, before Greene or Meulen, would have thought that in an ordinary loan agreement the debtor sells the creditor blank and on credit gold or banknotes? And yet such is the fact.However, once we recognize the nature of agreements based on future payments, namely that they are blank sales of money we shall not be surprised that in auch transactions those difficulties of delivery become apparent which are inevitable in the case of this type of sales. For clarity sake let us apply the new knowledge we have here gained to a particular example. In 1929, the aggregate income of employed persons in Germany was around 43.000 million marks. What does this signify? It means that the employing class had bound itself contractually to provide the employed class in the course of the year with over 40.000 million marks in gold or banknotes, although when the contract was concluded it did not possess the gold or banknotes involved. The employing class had sold gold or banknotes forward and blank, a transaction which in the case of cereals and most other goods is in most countries legally prohibited because of the associated risk of non-fulfilment. And yet goods, e.g., cereals, are more easily procurable than money. Indeed, the rule is that goods may be procured the more easily, the more difficult it is to procure ready money. (Similar reflections will be found in Dr. G. Ramin's article on "Non-Cash Wage Payments" in the Deutsche Bergwerkszeitung (German Mining News) of 30 September 1931 and in the business report of the German Festmarkbank in Berlin of 31 December 1931.) All leases are, in fact, short sales of gold or banknotes of tenants to lantlords. Every credit acrreement constitutes such a sale. That many sales involve no cash payments, as in clearing and balancing transactions, leaves the legal basis of the prevalent methods of settling accounts unaffected. In conformity with the legislation of all countries, creditors are entitled to refuse noncash payments and to insist on receiving legal tender, that is, metallic or paper money, insofar as these represent legal tender. (The latter probably applies  to all countries save China.) 'We should not be far wrong in assuming that in 78 Germany the aggregate total of all such time obligations during 1929 amounted to 100.000 million marks. That would correspond to two-and-a-half times the aggregate income of employed persons. The amount does not appear escessive when we remember that the total tumover in Cermany, inclusive of noncash transactions, has certainly exceeded 1.000.000 million marks, whereof about half was negotiated by the Reichsbank. If we suppose 100.000 million marks as correct, then the amount per head of time transactions to be fulfilled within a year in Germany is about 1.500 marks. In other countries the amount may be approximately the same. If we now consider that the ready money circulating in Germany is not equal to 100 marks per head, we find that the total of time obligations during a year is over a dozen times greater than the value in which the time obligations are to be honoured. Even the boldest and most experienced stock eschange speculator would deem it very hazardous to be burdened permanently with such time obligations. Strangely enough, the legislative enactments, the legal findings, and the public opinion of all countries regard such obligations in settlement of ordinary accounts as quite normal. And yet the probability that all time obligations will be honoured, is certainly not greater than when twelve ball players stand far apart in a circle, throw the ball one to another, and expect that the ball will never be missed. Even if we calculate the chances at 94% of a player throwing the ball correctly, there remains a probability greater than ~,5 that the ball will not pass round once without a miss. By a different route than that followed by Greene and Meulen, Milhaud reaches practically the same conclusion as they do. He therefore pleads that at least whilst the depression lasts, creditors as regards (a) external trading and (b) wages contract should not be entitled to payment in gold or in banknotes which are either convertible into gold or must be legally accepted as the equivalent of gold. Instead, creditors are only to be entitled to such goods or services as the creditor would havo normally bought with the gold or the banknotes. In practice, this means that creditors are only entitled to compensation, in the economically soundest way. However, Milhaud does not forbid debtors to settle foreign liabilities in gold or pay wages in banknotes when they posess these means of payment. To begin with, creditors are to renounce voluntarily the right to be paid in legal tender, and later this right is perhaps to be regulated anew legislatively. The popular presentation of this line of thought is rendered somewhat difficult by the circumstance that workers are conceived as creditors and employers as debtors, a conception alien to popular thought. The common conception is rather that of 79 regarding workers as poor debtors and employers as rich creditors. Naturally, science cannot compromise with popular misconceptions. Moreover, a popular presentation of the case is rendered difficult by the consideration that an economy based entirely on clearing, involves in reality a pure and simple return to barter, even when the inconveniences of primitive barter are avoided. The older political economy did not elucidate this aspect, but an excellent discussion of the subject, to which the reader is referred, will be found on p. 121 of Lexis "Volkswirtschaftslehre" (Political Economy), in the Chapter headed "Theoretisch mögliche Ausschaltung dea Barverkehrs" (Theoretically Possible Exclusion of Cash Settlements). The purchasing certificate proposed by Milhaud, which, in a very imperfect form, circulates among the American unemployed, is, in fact, a clearing note, i. e., an instrument for conducting business on a non-cash basis, aa we shall again see. A closely related question requires now examination, namely whether we are faced by a blank forward sale of means of pay, ment when somebody, for example, buys goods and promises payment after three months in Milhaud's purchasing certificates. The case may seem identical with that where payment in gold or banknotes is promised. But in reality there is the following difference. Whether some one promises to pay in goods or in purchasing certificates entitling him to goods, is manifestly indifferent. But when two owners of goods combine and say: "Each of us undertakes to accept the purchasing certificates of the other up to a certain amount", the legal position of the creditor of each of the two owners of goods is obvioudy strengthened and not weakened and no additional time risk is involved. When, however, the two, with a view to simplifying the legal position, do not place their individual names on the certificates, but the name of the association they have formed, the position of the creditors is once more strengthened rather than weakened. This is precisely the case when an owner of goods promises to pay in Milhaud's purchasing certificates. In effect, he only promises to pay with his own goods, although he virtually adds: "My business friends, forming the X bank, also place their goods and services at your disposal" The larger the number of the bank's clients, the greater is the choice of goods for the creditors and the more they are in the position of creditors who receive gold or at least legal tender.
B. Securing in Cash Payment and in Non~Cash Settlements.
To judge- by general «perience, the Iosees incurred in nonc~h transactions repreaent only an inugnificant fraction of thoae which take place in cash operations: they are practicalb non 80 existent . The only re al danger involved in non-caah transactions arises when creditors suddenly refuse to accept non-caah payments and demand ready money. Thia suggeab the advisability of generalising aa far aa posaible non-cash settlements and limiting the right of creditors to demand cash. Unfortunately, this suggeation is not as self-evident as it seems, for it has occurred to few economists only and to fewer «practical men». In his work: "Money" Jevons states that the leading London bankers declined to have anything to do with the hearing House long after it was instituted (see p. 264 of the 1923 edition) and that in his day (in 1875, that is exactly a hundred years after the establishment of the London Clearing House) both the Liverpool merchants and the Liverpool banks would have nothing to do with clearing transactions, and inaisted on receiving cash payments, (p. 280.)The intellectual barrenness of  "practical men" in all economic, and generally also in political, matters has often been noted by thinkers. The Bible is already remarkably clear on this point (Jesus Sirach, ch. 39). Adam Smith, in the Chapter "Commercial Systems" of his classic work, comments severely on the economic views of merchants. And Rudolf von Mosch, an unjustly forgotten German social reformer, wrote in the 'eighties: "If professional associations were a natural breeding ground for far-seeing reform projects, we should have to-day no lack of these, for almost all professions have their special associations, their special periodicals, and their special congresses. What reform projects have these brought to light ? Virtually none".  (Materialien zu einem Katechismus der Sozialreforrn (Materials for a Catechism on Social Reform), Berlin, 1888, p. 413.)

5. The Milhaud Proposals as a Basis for a New System of Pecuniary Settlements.

A. The Prevailing Money Monopoly as a Cause of Money Shortage and therefore of the Trade Depression.
Milhaud repeatedly states that he only proposes an emergency measure and that he has no objection to the disappearance of the purchasing certificates in extemal trading and the goods warrants in internal trading, once "normal" conditions have returned. But Milhaud is assuredly more fully aware than any one else that such an extension of exchange transactiona without State money is in reality the beginning of a new system of settling accounts, indeed the beginning of a new economic order. ne retention of the purchasing certificates and the goods warrants would be irreconcilable with the present economic system. The most fundamental mark of this—after all not very old—economic order of ours is the State's money monopoly. 81
Purchasing certificates in external trading and goods warranta in internal trading challenge this monopoly. Once Milhaud's means of payment have been introduced, thc aupply of money would no longer be dependent on the judgment of the few who are entrusted with supervising the monopoly, for the supply of money would be regulated by the needs of the general economic life. In fact, any individual, so long as he efficiently conducts his business, would be able to determine himself the measure of his monetary supply, just as he determines his supply of air and water.
           We live to day in a state of society which is no longer even "capitalistic" and where fewer than a hundred people dictate how much the world is to produce, how much of its products it may consume, what proportion of the social product may be retained within a country, and what proportion may be exported. In addition, those few scores of human beings also influence decisively such conditions of exchange and production, as, for example, commercial treaties and credit aupply, and they exercise that influence in all cases so far as their sense of duty prompts them to. Who are the~e individuals ? They are not Rathenau's "four hundred". Their day has long passed. Some have become insolvent; a few are in prison; and perhaps every one of those whom Rathenau knew, has lost in power and wealth during these years of depression. Who, then, rules the world to-day ? In the first place, the heads of the Central Banks; then a few Trade Ministers and politicians and. appar ently, a few writers whom the former consult—all of them loyal brave, honest, and even cultured individuals who are held in high esteem and who, in sharp contrast with the ruling classes of pre-war times, enjoy the confidence of over nine-tenths of thc population. The only reproach sometimes levelled against them publicly, is that they make too little use of the authority possess. Accordingly, day by day proposals are being made to place some as yet free domain under their dictatorship; to-day wage contracts; to-morrow, the choice of a profession on leaving school; and nest, the entire literature of economics. This tendency is not restricted to one country: it ia to be found in Japan and America, in the Russian colossus and in the dwarf countries created by the War. China alone appears to form a notable exception.
     The opinion prevailing in almost all countries since the War that the State may rightfully claim a monopoly for all means of payment, not only for money, has become more emphatic with the development of the depression. Even noted scholars have insisted that the remnants of private money, as, for instance, cheque money, were partly responsiblc for the depression, and that these also should be therefore taken over by the treasury.
82 ENDING THE UNEMPLOYMENT AND TRADE CRISIS
This widespread prejudice that as many means of payment as possible should be monopolised by the State, has a serious aspect. Indeed, when we examine its results, it suggests a comparison with witchcraft in the Middle Ages. The new money oligarchy has sprung out of this prejudice, just as the fear of witches gave rise to an oligarchy of omnipotent inquisitors. The old money aristocracy of the Rothschilds, the Morgans, end the Vanderbilds has been quite eclipsed by the new oligarchy, and readily places itself at the latter's disposal, as readily as the man in the street. We have not perhaps sufficiently realised as yet that in no previous economie crisis had the world's monetary supply depended on so few people as to-day and been controlled so exclusively by doctrinaire State interests. It may even be that this very circumstance involves the danger of the trede depression becoming permanent. And it has yet to be shown that the "forces of self-recovery'' that were active in former crises, were not connected with the free circulation of gold coins, the existence of private banks of issue, and other long forgotten facilities.
         Some thinkers have justly compared money with language and said that what language is to human intercourse, money is to the exchange of products. (Roscher quotes Hamann, Adam Muller, end Schmitthenner.) If the comparison is valid, he who monopolises the circulating medium is armed with a similar power as the individual who may have succeeded in monopolising language and brought men to the pass that they can only convey important information to one another through him. It seems that a few primitive tribes ruled by Shamans are not far removed from this to us almost incredible condition. According to Caesar, the Druids possessed such a monopoly among the Gauls. Along with these may be classed the law in the old kingdom of Sardinia which ordained that the lower classes were prohibited from learning to reed and write.
          And what is the reason that a monstrous monopoly such as that of money is to-day defended by almost all writers and by all "practical men"? May a future sociology explain it! However, the origins of the modern view of money and of State predominance lie in the near past. Herbert Spencer, who is almost forgotten to-day, prophesied decades ego as to what was in store for us ("The Coming Slavery", first printed in April 1884 in the Contemporary Review"), and prior to him Bastiat raised his voice against the already powerful worship of the State in his day. ("The State"' in Sophismes Economiques.) ~In vain ~
       The State monopoly of money is one of the basic demands of Communism. Already the Communist Manifesto of 1847 stated clearly under point 5 of its programma: a Centralisation 83 of credit in the hands of the State, by means of "national bank" with State capital and an exclusive monopoly. '' In an edition of the Manifesto intended for Germany, which appeared before the Revolution of 1848, we read under point 10: "The private banks will be superseded by a State Bank, whose notes will be legal tender..".
         These communist demands have been meanwhile realised almost in all countries, partly by the communiste themselves, as in Russia, and partly by their enemies, who honestly believed that they thereby combated Communism. One thing is certain, namely that the communist monetary conception has triumphed even there where all communist literature is prohibited. There is scarcely a parallel to be found in history of an idee having so completely triumphed end having been accepted by rulers and ruled alike as a self-evident proposition. Only in China—where in 1853 the Govemment granted full freedom for the issue of notea (Ku Sui Lu, Die Form bankmaesiger Transaktionen im Inneren Chinas (Banking Transactions in the Interior of China) Hamburg, 1926) end where full end judicious use is made of this freedom- do demands for a monetary monopoly not dominate entirely most men's minds.
           Among the very few who venture to doubt the wisdom of an economy largely planned by the Central Banks, is Milhaud. Just like Bastiat—one of his spiritual predecessors—, he recognizes that when once external trading is free, State action would soon be reduced to its natural limits. It is true that Milhaud nowhere expressly states this. But he must pardon his friends if they regard him as a logical thinker whom such an evident inference could not have escaped. Even the American unemployed, in tentatively, primitively, end inadequately organising an exchange of services not based on legal tender, felt that they were creating a new economie order, and were not afraid to state this openly. (Report concerning the Natural Development Association in Salt Lake City, Utah, by Murray E. King, Annals, 1933, no. 2. pp. 257-261.)
          Milhaud's appeal to Governments end Central banks calling on them to introduce the new system of exchange, ia nevertheless tactically correct. To-day only Governments and the Cetral Banks cen take the first step in the direction of relamng the present system of economie tutelage. Permission to utilise purchasing certificates in external trading presupposes such a relaxation, even if a first sight this should imply an extention of State activities.
Milhaud is one of the very first who has deliberately dissociated the unemployment problem frolh the problem of the distribution of the social product end thereby declared that the former may
84 ENDING TFE UNEMPLOYMENT AND TRADE CRISIS
be solved within the framework of the present imperfect social order. This penetrating thought cen only be compared with that which "the age of enlightenment'' of over a century ago reached in the matter of epidemics. Men recognised then that pestilence end cholera were not at all to be attributed to human nature as such, nor to be regarded as problems to be solved by grearer piety end by pilgrimages. They were problems relating to water, soap, and the destruction of vermin—that is, problems to be solved by purely technical measureg, without the need of changing human nature itself.

B. Exchange of Commodities without Goods Warrants.
Many American unemployed who helped themselves hy resorting to barser, imagined that they were "reading an entirely new road. It is, however, precisely in America, where primitive barter, as once practised on the Congo, is no novelty. In § 116 of his Grundlagen der National-Oekonomik (Foundations of Political Economy) Roscher remarks on this point: "ln some parts of the United States barter was still widely prevalent neer the close of the eighteenth century. For instance, in Vermont the doctor bartered his medicines for a horse, the printer his newapapers for corn, butler, etc. (Ebeling, Geschichte und Erdbeschreibung (History end Geography). 11., p. 537.) In Maryland, the Assembly had fixed the reciprocal value of pork maize, end wheat. (Ebeling, V., pp. 435 ff.; Douglass, Summary of the British Settlements in N. Amenca, 1760, V., pp 2 359.) As late as 1815, lade ren through the streets of Corrientes shouting ' Salt for candles, tobacco for breed, etc.'
       In § 134, Roscher mentions that in 1843 in the Westem States of America farmers bartered 2 pounds of raw wool for 1 pound of woollen yam end 4 bushels of wheat for 3 bushels of flour. Morcover, in 1618 there was in Virginia a forced rate of exchange for tobacco I ( § 119. )
      During the inflation period in Cermany barser was common among dealers, e. g., the provision dealer bartered his foodstuffs for shoes.
           However, history makes it plein that primitive barser tranaactions are quickly abandoned end forgotten when even ,bad money, in whatever form, circulates for a few years in sufficient quantity. Hence the barser trading of the American unemployed to-day, without its extension through a system of goods warranta in accordance with Milhaud's principles, cannot leed to a new economie order. Economic history will consider such trading as a curiosity, as it conaiders the Virginia edict of 1618 regarding a forced rate of exchange for tobacco. However, that the goods warrant by itself is not sufficient for effecting frictionlessly the exchange of unordered goods, is shown by the history of the barter  85 banks in France, England, and Germany. (Roscher, § 75; Helene Simon, Robert Owen, Jena, 1905, p. 225.) In the United States these highly informative facts seem as yet quite unknown.
        It should be also noted that Adam Smith has no means overlooked the possibility of a return to barter in the case of a shortage of money. In the chapter headed "Commercial System" of his Wealth of Natrons, he remarks on this point: "If money is wanted, barter will supply its place, though with a good deal of inconveniency. Buying and selling upon credit, and the different dealers compensating their credits with one another, once a month, or once a year, will supply it with less inconveniency. A well- regulated paper-money will supply it not only without any inconveniency, but, in some cases, with some advantages". (p.11.)
           It is true that this passage clashes with another which is far better known and has often been quoted, a passage which became of decisive importance for the monetary doctrine of the 150 yeare that followed Smith. Unfortunately, it is held to represent Adam Smith's real opinion regarding the replacement of gold and silver by paper money. In the chapter "On Money ", he writes: a newhole paper money of every kind which can easily circulate in any country, never can exceed the value of the gold and silver, of which it supplies the place, or which (the commerce being supposed the same) would circulate there, if there was no paper money... ,, (p. 331.)
          The qualification "the commerce being supposed the same", does not neutralise the mistake here made by Adam Smith. According to this the whole turnover of a country m;ght, if necessary, be mediated with gold end silver, a state of thinga from which our time ia aa far removed as were the Middle Ages or any other epoch. In truth, not all the world's gold end silver could serve as medium for the entire turnover of one country, like Germany, where the Reichsbank end the Post together have, even in bad years, a turnover far exceeding 500.000 million marks.
      Yet the passage, whereof we have quoted the first portion, has influenced the monetary legislation of all countries down to our time. In all probability, the psasage was written much before the one we cited first, although in the work the two passages are placed only a few pages apart.

C. Exchange of Commodities with Goods Warrants.
In an economy based on the division of labour, a frequent exchange of immediately consumable goods for auch as are not 86 immediately consumable, is naturel end almost nommal. In primitive barser, however, the goods exchanged are almost always such as are immediateb required. That was so in ancient times end is so in our day. In thinking of the barser associations called into being by the United States unemployed, one is tempted to recall the basic biogenetic law, according to which the - new-born progeny passes through the stages that marked the evolution of its kind. Thus in inter-commerce, peoples who only knew barser, rarely acquired by barser except what they needed for immediate use. Roscher, in his Grundlagen, etc., § 118, mentions in this connection the Goahiro Indians of modern times and the Livanders of the twelfth century. Similar tendencies were naturally observable when barser transactions were first resorted to among the United States unemployed. Thus the transactions were limited to bartering what was immediately and urgently necessary for life. Soon, however, the unemployed discovered that the hours of labour which they bartered for urgent necessaries, could not possibly be employed in their entirety on the production of such consumable goods. At the same time they recognised that barser might continue, provided the claims of those who were prepared to wait for delivery could be protected. The introduction of goods warrants solved the difficulty. This meant  a decided advance. Primitive barter signifies a retum to an order economie order, whereaa barser by means of goods warrants betokens undoubtedly the beginning of a new order.
             A complete theory of the goods warrant, similar to that of long-term credits, has yet to be elaborated by our economisb. It is certain, however, that the goods warrant by itself is not enough to ensure in all cases a frictionless exchange of uncommissioned goods.
          A goods warrant can only circulate at per if someone is ready to accept it at its face value at any time end offers therefor an equivalent which is in urgent end general demand. The railway, for instance, is such an acceptor The su'bject has been examined in Dr. W. Zander's "Eisenbahngeld und Arbeitalosigkeit" (Railway Money end Unemployment), which appeared 1n Berlin in July 1933 end has been reproduced in the Annals. Zander has dealt so ably with the practical aspect of railway money that a general theory of the goods warrant might be easily deduced therefrom. The German Reich Railway fully bears out Zander's reflections, seeing that during the inflation period, end particularly during the transition time 1923/24, it issued scrip. According to the Statistisches Jahrbuch fur das Deutsche Reich (Statistical Year-Book for the German Reich), 44th annual issue, p. 313, there was in circulation on 31 December 1923 railway scrip to the value of about 151 million gold  87 marke. Oeser, the minister to whom the lnitiative was owed probably saved thereby the German economy from grave disasters.
              Germany's entire monetary circulation on 31 December 1923 was 2.273,6 million Reichsmarks, of which therefore only I I % was in railway scrip. lt might be thought that the absence of so small a proportion of the whole would have entailed no serious consequences end should have been therefore dispensed with for the sake of maintaining uniformity in the circulating medium. But it is far from true that economie difficulties wax end wane in direct ratio with the supply of money. Indeed, as has frequently been remarked, money may rightly be conceived as the brood of the body economie. Just as a diminution by one-tenth of the normally required quantity of brood in the body does not weaken it by one-tenth but by far more, so a seemingly trivial deflation may very seriously affect our economy. Contrariwise, a seemingly trivial increase in the available means of payment at a critical juncture, may suffice to produce an economie recovery. John De Witt Warner's The Currency Famine of 1893 (published separately by the periodical Sound Currency at New York, in 1895) offers a striking illustration of this. The quantity of gold, silver, end paper then circulating in the Union was about 1.700 million dollars, a very considerable amount But when in August 1893 the "famine " broke out, even millionaires at the seaside could not sometimes scrape together the few dollars required for a return ticket to New York. At that time business saved itself —a fact not remembered to-day—by also resorting to a kind of goods warrant, of which altogether about 80 million dollars' worth were issued. That amount constituted only about 55% of the money in circulation; but this small addition sufficed to keep things going end especially to pay wages with. Without these 80 million dollars of goods warrants, looting would have probably ensued. The security offered for the goods warrants varied considerably. Almost everywhere, however, banks, shops. end factories accepted the goods warrants at their face value in settlement, end publicly undertook to do this. Banks end factories were among those who issued them. Warner s study, written with keen insight end containing highly interesting particulars, would be welf worth reprinting in order to wrest the facts from oblivion. Even more remarkable than the effect of the United States goods warrants of 1893, was that of the Prussian Loan Banlknotes of 1848, which we shall discuss in the sequel
                Milhaud is fully aware that there must be an acceptor for the goods warrants, who will accept them at all times at per end who offers as an equivalent something that is in general idemand. Milhaud proposes to anchor his purchasing certificates in taxation. This Proposal merite close consideration. Suppose that unem 88 ployment riots endangered the existence of a Government and the latter had only the choice between being swept away or making within twenty-four hours a serious and unmistakable beginning with the abolition of unemployment. The Government could not proceed otherwise than by supplying the unemployed with some form of goods warrants as a loan to employers to cover wage payments, perhapa even as loans to the unemployed themselves, and to enaure the parity of the goods warrants by validating them for tax payments, as Milhaud suggeats.The tax basis is a security available at any time, even when the Government machinery is no longer intact. In the hour of danger the Government might inform the munici palitiea by wireless that they are authorised to establish Work Supply Banks (as Milhaud proposes) and that all tax obligations may be discharged with the goods warrants isaued by theae banka, but that the forced currency only applied to Government pay offices. Most probably the impending danger would be averted through this, and daya and perhaps weeka might be gained during which the technical arrangements could be perfected. The menaced Government would be hailed as a social saviour and, as a reault, its authority would be more firmly grounded than that of any possible communist dictatorship. How different, for instance, would have been the recent history of Cuba and Spain if the overthrown or even murdered rulers had been acquainted with Milhaud's proposals. When will the great reformer arise in these countries, who will make it clear to the masses that still believe in sheer brute force, that an asaociation of 100 workers intelligently applying the system of goods warrants would be a greater menace to capitalism than all the world's bomb-throwers combined. The declarations of the Governments now in power in all co un tri es an d of th e parties th at op po s e them , demonstrate however that they do not view the unemployment problem as a pecuniary problem. In these circumstances, it is unlikely that such Governments should provide a tax basis for the goods warrants created through the self-help of the unemployed. It will be necessary therefore to dispense provisionally with such a foundation. Thus the idea suggests itself naturally that as large a number as possible, especially of workers, should undertake to accept the goods warrants. Of course, we class as workers those unemployed at present, those working short time, as well as those fully employed but who may any day loae their employment. It may posaibly alao be found that the undertaking of the workers to accept the gooda warrants cannot be executed without guaranteeing the sale of the goods payable by means of goods warrants through the previous placing of orders. 89

D) The Placing of Orders as a Factor in the Goods Warrants System.
When, a century ago, Robert Owen founded bia exchange bank, many of his followers recognized that rendering the workers independent of the money market was not enough, and that to a larger extent than heretofore employment must be linked to orders placed. (Helene Simon, Robert Owen, p. 230.) Owen himself does not appear to have stressed this and rather regarded as an essential the supersession of gold aa a standard of value by a standard of value having the working hour as its unit. The emphasis by English workers in 1833, on the placing of orders as a factor in a new economic order showed great might, and it is a pity that the economists of that period entirely ignored thi point in the labour programme.
       The fact that to-day production is rarely based on orders and is mostly for the market, is, of course, not the sole cause of the marketing crisis. It is, however, a conditio sine qua non of every such crisis. The hitherto attempted explanations of these crises appear to have done scant justice to this aspect.
           The primary characteristic of a crisis is that the population cannot re-purchase its own product. But the fact that production is not for firm orders, but for the market, also explains why sometimes the population is not willing to re-purchase its product. Such reserve on the part of purchasers is far from uncommon. Nor is it in doubt that this reserve often results in the same individuals who at first refuse to buy, producing dhe conditions whereby they can no longer afford to buy.
         These interrelations seem to have been but little studied hitherto. Yet a closer examination would be well worthwhile, although it is evident that not every marketing crisis has been started by a strike of purchasers. A fact, however, may be mentioned, one which Irving Fisher was perhaps dhe first to stress. In economic discussions falling prices are frequendy confused with lower prices and rising prices with high ones. In conformity with this, it is commonly contended that low prices stimulate consumption and that, in an undisturbed market, this would be therefore conducive to a natural trade recovery. But whilst low prices stimulate buying more than high prices, falling prices invariably discourage buying. So long as prices are falling, and this may continue for years, everybody postpones buying in the hope that to-morrow's prices will be lower still. Hence only when prices have become stabilised or a tendency for prices to rise has set in, does buying become "normal". Thus not only is production for markets a pre-condition of every sales crisis, but consumption beyond markets also tends to aggravate, and not to cure, an oncoming depression. Hence there is much to be said
90 ENDING TFE UNEMPLOYMENT AND TRADE CRISIS
for the demand of the English workers in 1833, that production should be governed more by orders placed and less by market considerations.
          Call up in imagination Thuenen's famous "isolated State". If in that State all production were governed by orders placed and every party ordering were solvent, no sales crisis could occur in that State. This is obvious from the following considerations, which, however, call for a brief analysis of the concept of "solvency", Let us assume that our isolated State possesses one or more well-managed banks of issue; that these banks are authorised or indeed bound to make advances in notes on orders placed, most especially for wage payments and other cash expenses. We should then observe a complete correspondence between the circulation of money and that of goods. Expressed dif,ferently, solvency would be general and follow from the system of production on orders placed.
           Artizans, manufacturers, labourers, farmers, and others, would produce commodities and bring them to the sales establishments where they would lie waiting for the purchasers, Then the employees would present themselves a second time at the shops, but this time as buyers. They would buy the goods they had ordered, pay for them in notes, and take them home. With the notes they had received, the shopkeepers would then pay their wholesalers, and with their own profits they would also make purchases, i.e., they would get rid of their notes in other shopa. In their turn, the wholesalers would pay their manufacturers or farmers with the notes they had received and also indulge in purchases with their business gains. But the manufacturers, farmers, and other producers are precisely those persons who received notes in the shape of advances from the bank of issue. They are now in a position to repay these advances, and this also in notes. The repayments having been made, the banks would destroy the returned notes and thus the circulating process would be at an end. It is true that the country would have then no saleable goods and no notes; but the process of production might be at once resumed.
           What has been stated here regarding the isolated State, holds very largely of the non-isolated State, but proportionately less the smaller and the less isolated a territory is. However, even such a small territorial unit as Belgium, for instance, might benefit by the system. If Belgium possessed a few banks of issue that granted advances in notes on orders from "average customers", this might secure for every Belgian willing to labour 4 or 5 hours' work daily. That would be possible, even though Belgium, more than any other country, is intimately bound up with the world economy. The 4 or 5 houra would naturally only produce a merc subsistence wage and many 91 workers would have therefore also to undertake jobs for which they were not trained. For a time there would be only « work of Belgians for Belgiana n, and not work for the world market.
      To the degree, however, that business circles outside Belgium could be induced to join the system, production could provide correspondingly more than a bare subsistence wage.
     With a view to properly appreciating the effects of the system of placing orders, we shall make the following supposition. The textile workers of the isolated State are to be dismissed becauae of lack of employment in the textile industry. They decide to create employment for themselves by each ordering textiles to the value of one month s wages and this in the shops where they regularly deal. The aggregate wages for the month amount to (say) 100 million. The shops, therefore, receive orders to thia amount. The shops work with a margin (say) of 20 million. Their orders to the wholesalers are therefore for 80 million. Suppose that the wholesalers margin is 30 million. Then the factories will only receive orders for testiles for 50 million. The textile industry will then inform the textile workers that there is work, but only for half of their number; the other half will not be required.
       After the workers have recovered from their surprise at the disappointing results of the orders they placed, they will change their tactics. In placing their orders at the shops, they will say: "We are placing orders for 100 million; 'but only on condition that you place orders for the same amount. You may order for 80 million from the wholesalers, but you must also place orders for another 20 million. Moreover, you must somehow arrange that those who receive your orders, proceed similarly and produce satisfactory evidence of having done this. We demand that the full amount of our orders be passed on and that your orders ahall entail labour orders amounting to 100 million.  (By deliberately choosing with whom to deal, a people can effect greater social changes than by the bloodiest revolution.).
        If the workers proceed in this way, they will probably not entirely succeed in securing a full 100 million worth of labour to the textile industry. But the labour market as a whole would benefit by 100 million, and not a few of the textile workers would find employment in other industries. The guaranteeing of the orders placed both as regards
a) the disposal of the ordered goods, and
b) the passing on of the orders, so that the total amount involved in the orders should be felt as a demand on the labour market,
represents an important economic function. Decades will no doubt elapse 'before this system is so developed, as is to-day the
92 ENDINC THE UNEMPLOYMENT AND TRADE CRISIS
payment by instalments system, the discounting of bills, or mortgage loans. A beginning might be most conveniently made by those factory workers whose employers are engaged on mass production. The orders of these workers could be entered on set forms. E. g., the orders might be placed through the workers' cooperative societies, a pr«edure which would greatly allay theworkers apprehensions. Most of the cooperatives, too, ,have order forms, supervision, etc., and their members readily fall in with such arrangements.Suppose a worker orders a 5uit of clothes at a store, say either in the textile department of his cooperative society or at another sales establisment.
His order form might read as follows:—
I ) Firm accepting the order .......................................
2) Nature of order as to kind, quality, size, etc. ..
3) Last price to be paid by the person ordering
4) Statement IU to installment ................................
5) Employers address, branch of factory, etc.
6) Other particulars ..............................
7) Declaration of person ordering: "I undertake to accept this order form when receiving payment~ due to me, up to the amount of (insert sum agreed upon under 3.) in lieu of ready money "
Should the worker not call for the ordered goods, the firm that received the order would forward the order form to his employer who, when the next wage payment falls due, would place it into the worker's wages envelope. After that, there is no doubt that the order will be honoured.The system can here only be barely sketched. A detailed description would fill a volume, not because the system is complicated (which it is not), but because it is widely applicable and because the parties ordering might escape through many loopholes unless the legal basis is comprehensive and carefully elàborated.
         For all intents, there is nothing novel in the principle of placing orders and in the reflux of paper money after the execution of an order. The old private banks of issue, first and foremost the Scotch, habitually applied it. if not always in a form clearly rec ognisab le by us. Freq uen tly the collateral securities were the real ones. That the "reflux principle" and also the mutual responsibility of clients of a bank of issue as a "payment partnership"  were already clearly realised by Adam Smilh, follows from the chapter "Of Money" in his Wealth of Nations, particularly from the paragraph commencing with the words: "Whoever has a credit of this kind..." (Vol. 1, p. 329 of the World Classics edition.) Formerly, the poorer sections of society were not included among "persons ordering", partly because their intellectual status was too low and partly because their requirements involved only a bare subsistence standard and therefore could be calculated and ascertained long in advance. 93 regularity in sales, which may be secured as regards the well-to do classes by the system of placing orders, was assured, without such a system, for the poorer sections of society in the eighteenth century by their wretched standard of life as well as, frequently, by their being restricted to deal at certain shops.
       Bendixen, probably the last exponent of the principle of the old bank of issue, states definitely: "Only sold goods can form the basis for the creation of money." (Wesen des Geldes (Nature of Money), 3rd edition, p. 83.) Whether a monopoly, such as that of a Railway, justifies the issue of paper money without a precedent sale of the monopolised goods, Bendixen did not inquire into, because his subject, that of the German Reichsbank, did not suggest the problem. The gap has, however, been filled by Zander's Eisenbahngeld.
     There is for us here no tangible difference between "sold" and "ordered" (does that sound like a start on the way to equating and harmonizing what one earns with what one needs, sells, orders, and deserves altogether?). One difference as against the teachings of the old bank of issue theory is expressed by the fact that we propose here the inclusion of the poorer sections of society among those who deliberately apply the principle and desire to become its upholders. Surely, it does not argue an overwrought optimism that the poorer sections of society should gradually come to understand that he who orders goods and takes care that the order is passed on uncurtailed, orders opportunity to work and that he who orders his own livelihood, creates a demand on the labour market esactly equal to producing this livelihood. We thus place orders and secure work for others; but others also place orders and secure thus work for us. We become indebted to the extent of the orders we place, and we acquire aaseb to the extent that we receive orders. We pay with our assets, and it is the business of the bank so to break up and standardise the assets by means of goods warrants that they can serve as means of payment. We are bound to accept the bank's goods warrants to the extent of our indebtedness. The person ordering frees himself from his indebtedness by calling at the shop for the goods he ordered and handing over therefor the goods warrants which he had to accept in lieu of money. Instead of a cover in specie, as demanded by an old prejudice, the shop goods serve as cover. The forced currency which modern prejudice insists on is replaced, on the one hand, by the indebtedness created by the order placed and the undertaking, on the other hand, to allow his own debt to count against him in settlement.
            It ought to be one of the tasks of economists to convey these necessarily somewhat abstract maxims to the poorer sections of society by means of apposite explanations and illustrations, as some decades back they did this for our manufacturers and merchants.

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