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    D. Issue of Goods Warrants and  "Creation of Money" .
If a goods warrant issued in Denver by a small association and circulating freely in that town at per, should stray to New Orleans it would hardly be accepted there save at a discount. Here we are not concerned with such instances, teut exclusively with the instance where the goods warrant is discounted in its place of issue. What are the possible causes of such a discount?
       To answer this question, we must be clear as to how discount may be avoided. If the centers issuing the goods warrants hola marketable goods, e.g., foodstuffs, then in no locality doing a fair amount of business, would the discount last longer than a day. Suppose that in such a locality the market rate of the goods warrants had dropped from a dollar to 90 cents, In such case everybody requiring foodstuffs would naturally secure a dollar goods warrant for 90 cents and tender the warrant to its issuer, the provision dealer, in payment of 1 dollar's worth of goods. The purchaser thus easily saves 10 cents. Even uneducated housewives would soon discover the possible gain and hence within a few hours the warrants, together with their discount, would have passed out of circulation and have returned to the issuing centre. If speculation were the cause of the drop in the market rate, the speculator who acquired the warrants at par and passed them on cheaply, made a bad bargain. He only benefited the purchasers of foodstuffs. Hence speculators are powerless 139 against a system with the warrants of which goods and services in daily demand may be acquired at any time. That the demands should be also defensible from the moral viewpoint, is not at all necessary. There are people, especially in England and in the United States, who look askance at those who frequent restaurants and theatres. Nevertheless goods warrants accepted in keu of money in restaurants and theatres, are welf covered because there is a constant demand for what these institutions offer,
     From the above considerations it follows what may entail a discount on goods warrants in the locality wherein they are issued namely if they cannot be at any time eschanged for goods or services in daily demand. The American unemployed who want to finance house-building with goods warrants (see Annals, 1933, no. 2), should ponder this. It is true that they have on their side popular prejudice where to Governments even have frequently succumbed, accorting to which a house or a piece of land offers better security for credits -including the credits granted by banks of issue- than the goods stored in them.
              The kind of security, however, which tells in ordinary credit operations, plays a subaidiary part in goods warranb credita, as compared with a quite different kind of security which, in its turn, is of no consequence in ordinary credit operations, namely the assurance that the goods warrant may be at any time exchanged for goods or services. Indeed, the issue of goods warrants does not , economically speaking, properly represent a credit operation, even if for the moment it cannot dispense with the legal form goveming such an operation. Their issue is, where practicable, characterised as a loan subject to a usuiruct charge (location louage, hire) and not as the raising of an interest yielding loan in warranb (that is, no mutuum, emprunt, advance). In reality, goods warrants are more closely related to theatre tickets, cloak room counters, or railway tickets than to a gold certificate, such as used to circulate in the United States and was treated aa money. That is, the technicd aspect in goods warrants preponderates over the monetary aspect.
           Hence, economically speaking, the issue of goods warranb should be regarded less as the grant of a loan than an isaue of counters, travel tickets, etc., which have dso to be returned if they are to serve their purpose, without their owner being properly a debtor. An excellent name for banknotes, which did justice to the economic-technical aspect in them, was that invented in Sweden in 1661, namely "transport-note" (Transport-Zettel). (Roscher.)
         The recognition of the true nature of. goods warrants intro. duced into the general monetary circulation, involves new tealcc for legislatures, Legislation, from that of Rome to that of modem times, has hitherto not loolced upon goods warrants as a juridical
140 ENDING THE UNEMPLOYMENT AND TRADE CRISIS
fact sui generis. Consequently, the present, really unsuitable legislation must be, for better or worse, applied to goods warrants. The most appropriate, in the circumstances, is our loan legislation, although, economically, the iasue of goods warrants does not represent the grant of a loan.
          Goods warrants are likely to have a history similar to insurance, For centuries the insurance of (say) strips was arranged by the insured selling his strip to the insurance company for perhaps 1.000 gold pieces, and at the aame time arranging for its repurchase at 1.100 gold pieces, should it safely arrive. This indirectly created a premium of I 00 gold pieces. Traders therefore made the best of the concepts "purchase" and "safe" until, later, insurance came to be regarded as a legal institution sui generis and was eventually governed by special legislation.
           To furnish a further example from a different legislative domain. The English cooperative building societies (which have thus far financed the building of a quarter of all dwellings in England) were legislatively only provided for specially in 1836, after they had been placed in the Act of 1793 under "friendly societies " and previoualy even under  "common law societies".
          When special legislation for goods warrants cornes to be introduced (which our time is certainly not capable of doing), it will be useful to remember the old banks of issue. Goods warrants are private notes, teut without the senseless undertaking of the banks of issue to exchange them at all times for legal tender. Our legislators have also hitherto misapprehended the nature of banks of issue. Their viewpoint was that of Heilfron, as espressed in his (none the less highly valuable) work Geld-, Bank- und Börsenrecht (Monetary, Banking, and Stock Exchange Legislation), 2nd edition, p. 36. There he formulated as follows the prevailing conception: "The privilege of issuing notes furnishes the bank concerned with the possibility of securing for itself capital by the issue of banknotes, for the delivery of which it has to pay no interest to the seller."
            But no privilege however extensive, with the exception of a forced currency, can "secure capital" to a bank of issue. It can only permit existing capital, which cannot be transferred as a whole, to be transferred piecemeal, in accordance with the denominations of the notes, or, to speak more correctly, to aid in transferring them. The economie effect is nevertheless so great that it makes the impression of a "creation out of nothing" (See Bendixen's weighty chapter "The Creation of Money", in Geld und Kapital (Money and Capital), 2nd edition, p. 47.) Many people to-day still believe in the feasibility of economically creating something out of nothing, and it is therefore not strange when they demand that the excercise of such a far-reaching and 141 dangerous power should be strictly reserved for the State, just as among the ancient Romans, the exercise of magic—in which men then generally believed—was a State privilege. Indeed, during these last few years a new espression has been coined to espress this power, strictly reserved to the State, of creating capital out of rothing in the legal form of credit money: «Kredithoheit des Staates» (Credit Sovereignty of the State), whereby the parties concerned by no means intend to describe the prosaic power to raise, in emergencies, forced loans, but rather the right to resort to this mysterious power of «creation».
           That which the inventors of "credit sovereignty" but dimly apprehended, is a fact clearly enunciated by Adam Smith. In the chapter "Of Money", in his Wealth of Nations, he states: "A prince, who should enact that a certain proportion of his tases should be paid in a paper money of a certain kind, might thereby give a value to this paper money, even though the term of its final discharge and redemption should depend altogether upon ''the will of the prince"..." (p. 366).
           The banknotes of almost all countries represent actually such a paper money to-day and are, properly apeaking, no longer banknotes whose value depends on their flowing back to the bank. So long as the intensity of the reflus to the bank is decisive for the value of a note, its legal nature is that of a goods warrant, as some economists, among them Bendixen, have rightly surmised. (Das Wesen des Geldes (The Nature of Money)  3rd edition, p. 77.) This recognition throws new light on the goods warrant as welf as on properly supported banknotes; but it would lead us beyond the framework of this paper to enter into particulars on the subject. We may, however, mention that when once a banknote is regarded as a goods warrant, we can see why it should not be covered by frozen possessions, such as houses, namely because the holder of a goods warrant of a low denomination cannot possibly claim a house on this ground. (Apposite and by no means obsolete remarks on this topic will be found in Roscher's National-Oekonomik des Handels und Gewerbefleisses)
           The possibility of forthwith exchanging at its face value a goods warrant for goods or services in daily demand, never mina what its market rate at the time, is therefore decisive for its circulating capacity. This point is so important that we shall illustrate it by a further example.
         Suppose a theatre that pays the actors' fees and other expenditure items in theatre tickets. This was not uncommon with West American itinerant theatre companies in orden days, about the time when the Pacific Railway was opened, and occurs even to-day here and there. The company arrives (say) in   142 the morning in a small country town where there are many theatre lovers, teut which, as in Western Arnerica generally, disposes of very little ready money. In the circumstances, the actors help themselves and the inhabitants by making during the morning all sorts of purchases, for which they pay with theatre tickets. In the course of the day the tickets circulate in the locality and are eventually retained by those desirous of attending the performance. In the evening the theatre-goers present their tickets which are then clipped by the sttendanb.
                  It might certainly happen that, for instance, no one accepted the dollar tickets at a higher rate than (say) 90 cents. It ia nevertheless possible, and even probable, that the tickets mediated many transactions, if only among business acquaintances. The baker, who was perhaps the first to receive a dollar bill from an actor, passes it on to his tailor to whom he has long owed a dollar for repairs, and even adds 10 cents. to induce the tailor to accept it. In his turn, the tailor pays his carpenter an outstanding account, perhaps also adding 10 cents, and the carpenter retains the ticket because he had long looked forward to attending a theatrical performance. By the evening, the tickets have undoubtedly reached those who desired to see the play, and by 9 p.m. the tickets, with their possible discounts, have disappeared from circulation.
             The above example shows that an inflation through goods warrants—to which subject we shall later return—is impossible, however ill-intentioned the theatrical manager might be. Suppose the company, instead of issuing tickets for 500 seats which the playhouse accommodates, issued 5.000. Great crowds would swarm round the theatre booking office in the evening and the value of a dollar ticket among those at the rear of the queue would sink to a few cents. Many ticket-holders would suffer, because they could not get into the theatre. The general price level in the locality would, however, remain quite unaffected.
              All would be different, of course, if the tickets, like the historie greenbacks, were subject to general compulsory acceptance. Then the 4.500 people for whom there was no room in the theatre, would next morning make purchases with their tickets, and the price level would necessarrly rise in proportion. It is remarkable that in the whole post-war literature on monetary questions the d istinction is almost never drawn between means of payment with general compulsory acceptance and without. It is, on the contrary, characteristic of this literature  that it applies statements relating correctly to forced money, forthwith and uncritically to every kind of means of payment. A century and a half back such confusion would have been impossible, but in a few post-war standerd works the expression forced currency 143 does not occur at all, although they have much to say about inflation.
                 Our example teaches us a further lesson, namely the advan. tages of decentralisation. If perchance all West American theatres had belonged to one big company and the aub-manager at Denver had issued too many tickets resulting in the tickets selling at a discount, the company might easily have come to argue mistakenly: "We are issuing too many tickets. At Denver they are already selling at a discount. We must therefore everywhere reduce the number issued." This would quite unnecessarily reduce the number of theatre-goers end, equally unnecessarily, the company would have its takings reduced, But if the theatres were not controlled by one company but by many, a theatre in Santa Fe would not reduce the number of its performances because there is a discount on theatre tickets at Denver.
           These reflections apply quite generally to paper currency, only that an understanding of the effects of a centrally organised paper issue, possibly even with compulsory acceptance, is not as easy as an understanding of the finances of theatres and theatre trusts. But our example also suggests that the issue centrally of forced paper currency may well lead to inflation in one portion of the economy whilst another portion is at the same time severely suffering from deflation. The co-esistence of inflation and deflation is, indeed, symptomatic of the economie life of all countries issuing forced paper currency. (Already Adolf Wagner noted this in 1868, in his Die russische Papierwaehrung (The Russian Paper Currency.), p. 13.) In our time Dr. Rittershausen seems to have been the first to direct attention to this. (Neubau des deutschen Kreditsystems (Reform of the German Credit System), Berlin, 1932.)
         The supply of a country with means of payment may also be compared to the supply of a large and hilly park with water. If the gardener is restricted to using only one large and fixed water pipe, then it is inevitable that the hills should remain dry and the valleys become swampy. To-day the central banks of issue of all countries typify by their very existence such a pipe and are therefore a serious obstacle to finding work for the unemployed. They ought to disappear, not excepting the 250 years old Bank of England.
               Attention may also be called here to a very simple expedient wherewith in times gone by some States protected the parity of their paper money, even against small fluctuations common in normal circumstances, and which could be to-day also advantageously applied to goods warrants. This expedient consists in the issuer only accepting means of payment other than his own paper at a discount. It seems that this expedient was first introduced in Prussia after the Napoleonic wars. 144 Act of 7 April 1815 provided that half the taxes should be paid in Treasury warrants. For every taler of Treasury warrants missing, even if paid in gold or silver, a fine of 2 groschen was imposed. The result was that already in 1816, the Prussian Treasury warrants stood a little above per on the German stock exchanges, although seeing the politica! and economic conditions then prevailing a discount would have seemed more likely. In the principles and business provisions for a Work Supply Bank suggested in a previous Section, arrangements were also made for smart money when means of payment other than goods warrants were paid into the Bank.
           Historians may be also interested in the following observation. The Prusaian Minister Von Stein was led to the issue of Treasury warrants through reading in Adam Smith the passage above quoted: "When a prince, ...". Stein's biography by Pertz contains detailed statements on this subject, which are particularly interesting for our time, but which cannot be discussed in this paper.

E. Is a Homogeneous Circulating Medium the Ideal ?
Uniformity in monetary circulation is certainly advantageous; teut it must not be bought at too high a price. Germany, for example, possessed in 1870, over 30 private banks of issue. In addition, 2 railway companies and several States issued paper money. Altogether, about 120 different kinds of paper money are said to have been then in circulation. At the time it was also customary for interest coupons to circulate for a while as money. Complaints concerning the heterogeneity of the means of payment were frequent, particularly in the reports of chambers of commerce, where special attention was paid to them. When, later, the Reich banknote became more and more the principal means of payment, satisfaction was universally espressed among traders.
            But the numerous centres supplying means of payment possessed a certain advantage recognised only by the few: monetary crises, such as we are experiencing in our age, were less frequent and at all events not so catastrophic as to-day. Interest, even on long-term loans, iseldom exceeded 4 %, and bills could be sometimes discounted at 2 % at the private banks of issue. More particularly, wages-money was easier to raise than to-day.
               Then the Reichsbank, with its imposing privileges and the high denominations of its notes, of which the lowest was for 100 marks, was established. (This is forgotten to-day.) Parliamentarism, which was then only in its infancy in Germany, painfully illustrated its unripeness by passing § 3 of the Bank Act, where the groundless prejudices of the few Members who were esteemed experb in monetary matters, became authoritative 145 for decades in the economic life in Germany. Fancy prohibiting notes under 100 marks to a country like Germany. Bismarck, who at the time was greatly preoccupied with foreign affairs, resisted for a few years the proposed innovations, with their tendency to unify and centralise monetary matters. Accordindy, the Reichsbank did not open its doors before 1876. Almost immediately afterwards a shortage in means of payment broke out, only comparable with that of to-day. In 1873 already, the crisis began with a terrible panic on the Stock Eschange, grew worse year by year, and apparently reached its climax in 1878 to judge by the number of public auctions. As many hold, the first good year thereafter was that of 1889.
         America found itself in a similar predicament after the Cvil War of 1861-1864. During that war the private banks-of issue were pardysed by an annual tas of 10 % on their note circulation an Act that. by the way, is still in force. The prevailing money shortage led in many localities to an open rebellion of the workers.
An economy has only the choice between reconciling itself to a certain inconvenience due to the multiplicity of means of payment, with the advantage of being welf supplied with money and work, and possessing a homogeneous legal tender and suffering from a shortage of money and work. I think that's good enough to take through a few stages of the (spectral w)ring.....
       An economy has only the choice between reconciling itself to a certain inconvenience due to the multiplicity of means of payment, with the advantage of being welf supplied with money and work, and possessing a homogeneous legal tender and suffering from a shortage of money and work.
 the Dutch have a saying like that to denote something complete.
An economy has only the choice between reconciling itself to a certain inconvenience due to the multiplicity of means of payment, with the advantage of being welf supplied with money and work, and possessing a homogeneous legal tender and suffering from a shortage of money and work.
Nor should we over-estirnate this inconvenience, as primarily only tourists and shopkeepers are affected thereby. But the latter emphatically prefer to sell much for somewhat cumbersome means of payment, rather than to sell very little for uniform means of payment. Furthermore, it is probably true that in 1869 one could travel through Germany, with its 120 kinds of means of payment, for 4 weeb with less inconvenience pecuniarily than would be experienced in a 4 days' journey from London to Costantinople to-day, when the currency charges 7 or 8 times and this in a most inconvenient mannen

F. Security against Inflation of Paper Money.
In order to discover whether a means of payment has an inflationary tendency, attempts have been made during the postwar period to ascertain whether the volume of goods produced and marketed fluctuated proportionately with the volume of paper money issued. If that appeared to be the case, the danger of an inflation was discounted. Milhaud had also to examin" this criterion and was able to show that his purchasing certificaies withstood that test. It may be noted, however, that owing to the uncertainty of the underlying facb (which are scarcely evet ascertainable statistically), the criterion itself is dubious. On the other hand, a far simpler criterion exists, one whch has 146 proved reliable for decades and even for centuries, namely the discount in a free market or, what amounts to the same thing, the price of bars of precious metal in the open market.
      The attitude of Governments, of public opinion, of a large section of the scientific world, and above all of "practical men" towards an open market in precious metals distinguishes perhaps more definitely than any other mark our own age from the ages that have preceded it. Here is a subject for the sociologist! Fundamentally, this attitude is connected with the passing of traditionalism which for some decades no longer dominates the governmental policies of most countries. A Government influenced by traditions knows that however great the economic distress, inflation cannot provide resources which could not be secured more advantageously, more conveniently, and with greater justice in other ways and with less danger for the Government. The Govemment has learnt this from the bitter experience of its predecessors and its neighbours. Nor does it believe —just because it has a tradition—in "the altogether different and wholly unprecedented conditions", which the man without a tradition scents everywhere. It knows, on the contrary, that in every land and at all times the economic laws are just as immutable as the laws of nature of which they form an integral part. A Government basing itself on traditions that are sufficiently old and embrace public life as a whole, forms with its people a naturel alliance directed against the inflationists and coin-debasers who have always existed and will always exist. In a country with such a Government—bad as it may otherwise be—it is considered the primary right of the people to refuse to accept suspicious means of payment, paper ones especially. In a country so govemed, science, which is the proper guardian of tradition, will not fail to brand the suppression of that popular right as despotie, indeed as an action which, in given circumstances, releases the individual from his duties as a subject. Verily, a Government which inflates is morally no better than that of some chiefs on the Congo who made raids on theirsubjects and sold them into slavery.
             We find it difficult to day to realise the mentality of such a ruler a ruler who protects the critics and the men of science when, alarrned by the imminence of an inflation, they raise their voices in protest, and does not rather imprison them. A concrete illustration is perhaps in place here. Adolf Wagner, in his day one of the most esteemed economists and a professor at Dorpat, was able to publish in 1868 his work Die russische Papierwaehrung (The Russian Paper Currency) at Riga, on Russian soil, in which work he condemned in scathing terms forced currencies, without the Government of Alesander 11., the noble "Czar liberator", exiling him to Siberia. On p. 27, Wagner 147 states: "From what precedes, we learn what a baneful financial resource the issue of paper money may become in the hands of an unscrupulous Government. What, by comparison, are the most exorbitant taxes and forced loans and the most extensive applications of force, which a Government might posses for carrying these two measures into effect ? A forced paper currency represents a far more powerful and yet far simpler screw for extorting the wealth desired, since. through the medium of the processes of production, marketing, and price control—that is, by means of the ordinary economie laws—it places the wealth of the people at the disposal of the Government, indeed playing it into its hands"
          Roscher cites this passage approvingly. Subsequently, Adolf Wagner settled in Prussia, a country often decried as despotically governed, but which has played a most honourable part in financial history and where certainly economie traditions ruled traditions that were still powerful in Bismarck's time. Here it is not a question of the class prejudices entertained by the nobility, the church, etc., which the word "tradition" first sugggests, but of something far more important. The world has perhaps known financial legislation as honest as that of Old Prussia, but not more honest. This is illustrated by the fact that the right of the people to refuse dubious paper money was recognised, and this not only tacitly but expressly. Prussia's rulers knew that here was the real re-insurance of the State against inflation. Hence neither during the Revolution of 1848 did Prussia introduce compulsory acceptance for notes, nor a forced currency (as other Governments did), nor was paper legal tender during the wars of 1864, 1866, or 1870. Already on the occasion of the first issue of notes under Frederick the Great in 1766, the King pointed out both in the Gesetzblatt (Law Cazette) as wdl aa in an edict addressed to the Supreme Gurt of Appeal that the acceptance of notes in private dealings was optional. After quite brief experiences of a forced currency during the Napoleonic wars, an order of 7 September 1814 definitely revoked the forced nature of the currency. This was confirmed on 1 March 1815 When in 1846, new bank regulations appeared, § 33 provided that the acceptance of notes should not be compulsorY. In the coinage treaty of 1857, under pressure from Prussia, all German States even undertook not to introduce any inconvertible forced currency. The Act of 30 April 1874, which created the Reich Treasury notes (Reichskassenscheine), expressly declared in § 55 that they were not subject to compulsory acceptance. Similarly, § 2 of the Bank Act of 1875 provided that the Reich banknotes were not subject to compulsory acceptance in private dealings. Indeed, even the Rentenbank Act of 1923 rejected 148 the compulsory acceptance of Rentenbank notes in private dealings. (State pay offices in Prussia and, later, in Germany generally were bound to accept them.)
                Havenstein, Schacht's predecessor, was responsible for the break with the old tradition. Havenstein put through the Act of 1909, which made the acceptance of Reich banknotes compulsory, and the same Havenstein created later, with the aid of this Act and in conjunction with a war order of September 1914, the greatest inflation of all time.
           Unfortunately, through the Dawes Acts of 1924, the compulsory acceptance of paper money waa again ordained and therewith Germany was deprived of its best criterion as to whether there was inflation or not. Here we may remark that cases of refusal to accept non-inflated paper money are markedly absent where there is no compulsory acceptance. During the German Bank Enquiry of 1908, only a single case of this order could be definitely cited, a case which occurred in 1876 in Munich. (Protokolle der deutschen Bank Enquete von 1908, volume 1, p. 192.) Old Prussia cen also claim the honour of having on several occasiona recognised in time certain social evils as due to deflation and to have neutralized them through the creation or tolerance of additional means of payment of a non-inflationary character. For example, in 1848, owing to a shortage of means of payment, a considerable proportion of the working classes could not be paid their wages and serious political and social dangers loomed ahead. Thereupon the Prussian Government, by the Act of 15 April 1848, established 13 loan offices with 11 sub-agencies, and these issued loan warrants. (See L. Feuchtwanger, "Die Darlehenskassen des deubchen Reichs (The Loan Offices of the German Reich), Berlin, 1918.) These warrants were placed from the first on a taxation basis, that is, every, citizen was entitled to pay his taxes with these warrants taken at their nominal value, regardless of the market rate at the time being. Although altogether only about 7 million talers were issued and the monetary circulation was therefore scarcely raised by a hundredth part, the effect was most gratifying, and, on the whole, the workers received their wages. (Here should be noted that, contrary to a widespread prejudice, the workers constituted then almost as large a proportion of the total population as to-day.)
The Prussian Government however, was not content with the establishment of loan offices, and, by its "Normative Provisions" (Normativ-Bestimmungen) of 15 September 1848, permitted the establishment of private banks of issue. That by means of legally unforced notes or loan office warrants an inflation might be engendered, never occurred to any noted politician or writer of the time.
           Not even as late as 1907, when a monetary crisis broke out, 149 were the old traditions forgotten in Germany. The then President of the Reichsbank, Koch, was not the kind of man to be misled by cries such as "crisis through speculation", and the like. He clearly recognised that the crisis was due to a shortage of means of payment and acted accordingly. First he saw to it that Germany should have the best cheque legislition in the world, where the clearing cheque received special attention. (Not to be confused with the English crossed cheque.) He then arranged for the introduction of the postal cheque ayatem in Germany. After which he induced the Federal Council (Bundesrat) to increase the number of Reich Treasury notes of amaller denominations. Already shortly before the depreasion, which he saw coming, he had carried his point that 20 and 50 mark banknotes should be issued, contrary to the old Bank Act which, unwisely enough, permitted only the issue of banknotes of 100 marks and over. We see here how Koch, within the limits set him, endeavoured to multiply Cermany's means of payment. He died at the opening-of 1908, all too soon for Germany. He was succeeded by Havenstein, and two years later Germany saw introduced the compulsory acceptance of its paper money.

It may not be amiss here to call attention to the following historical facts. Napoleon 1. owed his authority at least as much to steadying the currency as to his victories. He never ceased repeating that under his rule there was no fear of a forced currency and won over thereby the working and the middle classes In 1850, shortly before Napoleon III. had himself proclaimed emperor, he rescinded the forced legal tender for banknotes introduced in 1848 and made himself thereby popular among those who were afraid of inflation. But on 11 August 1870, he permitted the re-establishment of the forced currency (a wholly superfluous measure, as events proved). Three weeks later he had lost his throne and his liberty. What turn the history of Europe would have taken if William II. had opposed the forced legal tender introduced by the Act of 1909, it would be difficult to say. That through an edict in 1807, famous in the history of Prussia and directed against a forced currency, Frederick William III, not only saved the Prussian economy, but also his throne, appears certain.
            The policy of the Cerman Government overthrown by the Revolution of January 1933, was also destitute of the realistic spirit that had formerly animated German monetary policy Whilst on the rural marketa, owing to the money shortage; tobacco had been long bartered for pigs and vegetables for soap, as in Africa, Chancellor Bruning, invested with dictatorial powers, deemed it expedient to intensify the general money shortage by an order of 6 October 1931 (Reichs-Gesetzblatt, 150 p 562). Thereby the Reich Minister of Finance was empowered to prohibit all economic self-help involving the issue of emergency money, on pain of the severest penalties. This Minister, Dietrich, then issued the order of 30 October 1931 (Reichsgesetzilatt,  150p. 669), which was so flagrantly inconsistent with what the economie situation demanded, that it is here reproduced:—
# 1.
For the purposes of this Act and irrespective of whether the documents shall have been already declared emergency money by other legal ordinances, the following shall be deemed emergency money
         1 stamps, coins warrants, or other documents, made out for a sum of money and utilised in economie dealings as a substitute for money issued reapectively by the Reich the Reichsbank, the German Rentenbank, or a private bank of issue, even when they are made out in sums not involving the payment of money
         2 cheques or other ordera intended or suitable for being used as a means of payment in economic dealings and made out by filling in printed forms, when in these forms already at the time of their issue a defined or definable sum of money or a defined or definable quantity of fungible objects is indicated cheques or other orders shall be deemed equivalent to such documents as in substance serve the same economic purpose, even when they do not satisify the requirements of the Civil Law regarding cheques and orders (e g, compensation cheques, rye orders);
           3 documents made out in other calculating units than money shown in figures, insofar as they are intended or suitable for use in economic dealings as a means of payment or exchange (Ware warrants, building shares, barter slips).
#2
( I ) Forbidden are —
     1 the manufacture, issue, circulation, and acceptance of emergency money,
     2 the manufacture, isaue, circulation, and acceptance of printed forma for cheques end orders of the kind indicated in # 1, no 2,
     3 the invitation to acquire emergency money and printed forms for cheques and orders of the kind indicated in # 1, no 2, as far as the invitation is made publicly or through dissemination of writings or other statements,
     4 declaration of readinesa to accept emergency money, as far as this declaration ia made publicly or through dissemination of writings or other statements
(2) From the prohibition, according to per 1, shall be exempted the passing-on and the acceptance of emergency money, as far as these acts serve the purpose of withdrawing the emergency money from circulation
# 3
       (1) Emergency money of the kind indicated in # 1, nos I and 3 end already isaued prior to the coming into force of this order, the isauer— and emergency money of the kind indicated in # I, no 2, and already issued prior to the coming into force of this order, the party indicated— shall withdraw from circulation and destroy within a period not exceeding ono month after this order shall havo come into force Emergency money  151 issued prior to the coming into force of this order and which is not withdrawn from circulation within the time specified in the preceding sentence, shall become invalid after the expiration of this period insofar as it shall not have been declared invalid pursuant to other legal ordinances at an earlier point f time Claims arising out of legal relations governing the issue and acceptance of emergency money, shall remain unaffected
       (2) Emergency money iasued after the coming into force of this order chall be deemed invalid.
# 4
( I ) Any one contravening the provisions of # 2, 3, shall, without prejudice to any proceedings taken pursuant to other provisions, be liable to a fine up to ten thousand Reichmarks, in lieu of which in case of non-recovery, imprisonment up to six weeks may be imposed.
(2} Emergency money, whereto the action described in per I refers shall be seized and withdrawn. The moulds and other requisites necessary for its production shall be liable to seizure and withdrawal. Their seizure and withdrawal shall be deemed lawful, even when the objects do not belong to the producer or to a participator.
# 5
Claims againat the Reich for indemnification are not established bv this order.
# 6
This order shall enter into force on the day of its publication
Berlin, 30 October 1931
The Minister of Finance,
H DIETRICH

         That the Finance Minister ahould have prohibited the issue of Wara warranta, building shares, and similar "means of payment", which were supposed to be "covered" by houses was natural, although no fresh legislation was required for this. But that he should have confused means of payment without a sufficient reflux: with others of the type of Milhaud's goods warrants, illmtrates the mesaure of economic insight possessed by that Covernment and explains why, under its rule not even half the productive apparatus of Gerrnany was profitably exploited. Nor did the Government of that day show the least trace of an understanding that unemployment is not a problem in dispensing charity, but one of organiaing the country socially, or, more correctly, monetarily, and that hence the re-employment of the workless did not demand sacrifices of the people, but only a little thought on the part of our highest official economie adviaers, which, however, was unfortunately not forthcoming. What a difference between the reckless utterances of a Dietrich and others, and the words spoken by Adolf Hitler on 30 January 1934: "The German people", he said, "comprises millions of honest folk who are unemployed, although anxious to work. 152 It comprehends millions who are intellectually and manually highly proficient and trained. Its vast masses also yearn for higher ways of living and learning. And, lastly, its veil offers the possibility of increasing the quantity of foodstuffs and its raw materials that of augmenting its output of commodities. It is therefore a problem of intelligence, will, and determination to reconcile this call for products with the possibility of producing them".
In truth, the danger, even for the best-intentioned and most resolute statesmen, the most determined to grapple with the scourge of unemployment, is that, being unauspectingly prisoners of hallowed conceptions which appear unchallengeable, they overlook the dangers inherent in a forced currency end, at the same time, do not appreciate the ease of escaping an inflation by holding fast to a free exchange rate and to a free market for precious metals. Indeed, they are, on the contrary, encouraged to believe that a free market rate impedes the re-employment of the workless.
                 A paper money which no one is compelled to accept at par is, what English experts call, "foolproof" against inflation. Even blunders cannot produce an inflation, for when in the open market paper depreciates, the debtors of the issuing centre immediately take advantage of this, secure depreciated paper money, and re-pay their debts therewith to the iasuing centre at par. Thus the depreciated paper money is withdrawn from circulation, and the issuing centre and not the general economy suffers. Apparent exceptions only prove the rule. In 1931 and 1932, for instance, some municipalities in Silesia financed the construction of a few highways by issuing goods warrants to the labourers. At the same time they declined to accept these warrants, to an unlimited amount and at their face value, in payment of taxes. The sufferers were the shopkeepers who had accepted the warrants from the labourers at their face value, teut themselves could not purchase anything with those warrants. To enact special legislation against this , as unfortunately happened, was quite unnecessary. The current legislation against fraud and that relating to municipal loans, would have entirely sufficed. In order to escape punishment, the issuers would have had to prove that they could not have foreseen the result.
         The following observations on compulsory acceptance are apposite in the above connection. The right to refuse suspicious means of payment must have for its complement the obligation of the public pay offices to accept st their face value State banknotes, State paper money, etc., even if these stand below par. But this protection against inflation may be considerably strengthened. It might, or rather should, be legialatively provided that the civil list of the head or heads of the State should be paid 153 exclusively in paper money. Where Milhaud's purchasing certificates may bc used for the payment of taxes, they should be allocated first and foremost to civil list payments. One could, indeed, proceed much further along this fine and pay with these warrants all civil service salaries exceeding three times the average income. Thus the most intelligent action of the population would be induced to take an interest in preserving the parity of the circulating paper tokens and be inclined to keep a close watch over them. In such a case, too, the high salaries paid would arouse less envy and would be less exposed to reduction in times of unrest.
              The same simple device capable of preventing the inflation of State paper money, also rules out any inflation of the purchasing certificatea proposed by Milhaud. Should anything happen that might leed to inflation in the case of a forced currency the same cause, when there is a free market rate for paper money, would merely leed to a discount, compelling the issuing centre to stop issuing further supplies of purchasing certificates. This would constitute a more effective barrier against escessive issues than any legislation or than any supervisory authority besing itself on statistics of production.
               No discount cen be created, save when there is a market for the goods warranb. The eatablishment of such a market should be furthered in every way. The existing Stack Exchanges are perhaps not equal to the task of promoting an effective demand for goods warrants. Should this prove to be so, some merchants or banks might undertake this function and announce at very brief intervals the rates at which they are prepared to sell or buy the warrants.
          From a communist or even a popular viewpoint, the objection might be raised to this new type of money market that it would throw the gates wide open to speculation. But speculation, in the sense conceived here, could only be carried on through eliminating the market, be it by deceiving it or by placing it in fetters. Economic history affords no example in proof of the opposite contention.

8. Conclusion.
In all order text-books on politica! economy a chapter will be found treating of the cultural significance of metals and particularly of the precious metals as standerds of value. To-day the following reflections on the subject may be germans. Culture does not consist in this that from every open window a loudspeaker should asasil our Bars, nor in that by means of a telephone we may rouse out of his deep at dead of night some acquaintance livring a thousand miles away for the purpose of conveying some unimportant information, but rather in that 154 every one can live his own life, that contracts supersede oppression, that exchange of services replaces slavery, free expression of opinion superfloods adulation, education obviates mechanical training. (This holds also of the armed forces, on which subject such successful generals as the Prussian leaders of 1813, Scharnhorst and others, may be consulted.) That something as purely technical as the use of metals and especially the use of the precious metals as a standard of value, should have cultural effects at all, is not only forgotten in our day, but has apparently become quite incomprehensible. No wonder! By far the majority of individuals living to-day has never seen a gold coin (How about the miners that don't get to see the light of day much to bring that fetish of yours to it, bozo!!), let alone paid with it, not even silver coins, for the copper discs with a slight admixture of silver which now circulate the world over, do not deserve to be called silver coins. People should make sure whether their children still understand the fairy tales in the Arabian Nights, where almost on every page gold coins are referred tot But the last twenty years have seen many more charges in monetary matters than the abolition of gold as a standard of value. The old ideal of a certain school of money theorists, according to which money should be wholly detached from every concrete content and built up as an entirely abstract unit, is realised to-day on the greater part of the globe. Our young people have only had experience of currency units of an abstract character, and they have seen it pass that even Covernment of every land, never mind what its platform, claims the right to "regulate", from time to time the currency unit. The legitimacy of this is not questioned by the press nor therefore by the populatiom only its expediency is discussed. The terminology used in connection with currency charges has gradually become very specious. The expressions employed are as little understood by the generality as is any obsolete ecelesiastical jargon, teut this makes them sound authoritative. Moreover, phrases such as "protection of the people against foreign speculators", are judiciously interspersed and convey the impression to the uninitiated that the incomprehensible portion of the statements finds in them somehow a logical justification. Accordingly, how are the men, and especially the young, of this generation to divine that the abolition of gold as the standard of value means that a cultural treasure of inestimable value has been thrown overboard. (My only but great tiff with Beckerath is that he seems to have no eye for the violence and force used obtaining, that is, mining the bloody stuff, especially since its "raising and appraising" has such a, if not purely abstract, nevertheless bloodlessly symbolic origin. I for one will here once again break a lance for a really  innovative value standard: photosynthesis!!!!!) What facts are to suggest to tbem that they-have become the slaves of narrowminded financial bureaucrats and of certain conjunctural doctrinaires, priests of a science which, as regards experiential content, stands below that of the old augurs and astrologers (who also dabbled in mathematics) ? Why are the real conjunctural economists silent, seeing that they know by experience that trend curves cannot be extrapolated. What is to teach youth that the rehabilitation 155 of gold as the standard of value would constitute the first step in their emancipation and that they will continue in a state of barbarism so long as the determination of values is left to the value-astrologers?
           There is another obstacle to the return to gold aa the standerd of value. The present generation has clearly perceived a fatal error of the order generations, namely the error that gold and silver cen never be universal means of payment or, expressed differently, that never will sufficient quantities of precious metals be at the disposal of mankind to meet all monetary obligations. We have learnt that the whole Civil Law of pre-war days, insofar as it was founded on this conception, was based on a mistake. But inasmuch as in their development men have not yet reached the stage of having two desirable brein cells for the two concepts "standard of value" and "means of payment", they are obliged to make shift with one brain cell for both concepts (as a future anatomy will optically demonstrate). Accordingly in abolishing the precious metals as a means of payment, they abolished them also as a standard of value. Much less have they reached the subtle conclusion that it might suffice to confer a forced rate on gold and allow a free market to all other currency values end to paper money. This would even have restored gold as a means of payment, although not as the universal one end, of course, restored it also as the standerd of value. However the pressure on the economie life through every creditor being entitled to claim payment in gold, would have been removed. A proposal, such as that of Milhaud, to abolish gold only as a means of payment to which a creditor is entitled, teut to retain it as the standerd of value and as a means of payment permissible to a debtor, has therefore immense cultural significance. Here we must also quote H. L.. Follin, as one of the very few who have already visualised the problem. He states: "It is amazing to what extent human relations are ruffled and warped by national monetary practices being dependent on reigning political institutions and by the double function imposed on money of being the common denominator of values and the vehicle for their transmission." (Paroles d'un voyant. )
        No instance is known of an advanced culture, and above all of one which does not exclude the masses, which dispenses with the use of metals and, first and foremost, with the use of the precious metals as the standard of value. Experience and reflection testify that men require a standard of value which is at the same time concrete znd sufficiently stable, admitting thus a comparison of past with present values. For this purpose, as China's past and present indicate, even copper will do and is certainly a hundred times preferable to a forced currency. Without a concrete standard of value, the past, and largely the 156 future, of mankind become uninteresting, and a tradition, without which no culture can exist, becomes impossible. Students of history might be inclined to cite in criticism of the above the highly cultured Homeric age; but that forms no exception. It has been noted that everywhere, centuries before coins were in general use, metals in the form of bars — frequently also as rings or simple vessels — were employed in commerce and helped to compare values. (Concerning what preceded and follows, consult Roscher, Grundlagen der National-oekonomik, § 118 and § 128.) Indeed, Adam Smith's view is by no means groundless that the payments in "cattle " frequently mentioned by Homer, unless referred to as "living", really were made in coins called "cattle" Coins showing heads of oxen—belonging, it is true, to post-Homeric times— have been found in Greece and Asia Minor. Statements in the Bible suggest that at least in the countries adjacent to Troy coins were used long before Homer.
             A traditionless society, one which neither concerns itself consciously with past values nor thinks of bequeathing any to the coming generations, may freely dispense with a concrete standerd of value, such as gold. (In such societies, as on the Congo or in Greenland, long-term credit is unknown. Their religions also place the creation of the world in the immediate past and prophesy the and of the world for the immediate future.) It is also noteworthy how so many semi-cultivated or uncultivated, but not uncivilised, tribes, having no metallic currency, utilise in bartering the "Makuta standerd", a standard which is conceptually identical with our "index numbers standard". (Montesquieu's account of the Makuta standard in use among the negroes of the African coast must have been regarded as sensational in his day and has never ceased to be referred to) The index standard appears thus as a case of atavism rather than of real progress although the idee of an index standerd only developed among us in the nineteenth and twentieth centuries, partly because of mathematical considerations. It may be, however, freely granted that works such as those of Irving Fisher. (The Purchasing Power of Money and The Making of Index Numbers) rank very highly, and have perhaps opened new horizons even to mathematicians.
             That the ancient Makuta standard, once probably world-wide in distribution, has reappeared in our time and is reaching the masses,—e.g-., through the Freeland Free Money Movement—is significant. One is tempted to suppose that it belongs to the order of ideas inherited from the far-off past, ideas which normally slumber in our sub-consciousness and do not dominate us but. which, in certain abnormal circumstances, re-emerge, and this not seldom, in the form of fixed ideas. Such an abnorhal 157 circumstance (nowise only commercial, and very largely psychical, in nature) is the complete disappearance of gold as a means of payment, whilst its stocks are greater than ever their were at any past epoch in history.
        That after some centuries, namely after science had provided it with stable weights, the metallic currency has allowed tnen to forget the concept of an abstract standerd of value and even the terms espressing it in common speech, has been one of its disadvantages. It is therefore perhaps wholesome that mankind is again being led to reconceive that standard. For a long time now the weight unit of gold and silver have been implicitly also regarded as value units. It is as if the concept of a metre had been confused with the always inaccurate metre measures used in shops. However, that mistake was far less mischievous than the diametrically opposed one of the partisans of an index currency who believe that gold must cease to be the standard of value because gold coins, in their way, are not more accurate than the metre and litre measures in shops. Still, compared with the mistake of the indes currency extremists, who desire to embody their Makuta in a special paper money, partly with "depreciation",—that is, by the weekly affixing of stamps,— and partly without, the old mistake was very harmless. But the demand (frequently urged with almost religious fanaticism) that not only should all payments be effected with index money, but also credit transactions,—that is, the exchange of present values for future values,—ranks the new Makuta below the old. The supporters of the new Makuta suffer markedly in a comparison with the Madingo negroes and others, in that the latter were quite accustomed to separate the standerd of value from means of payment and in that among them the fullest freedom reigned as regards the means of payment to be used. Not even the worst negro despot who sold his subjects into slavery, would have dared to establish a monopoly in means of payment. And yet the demand for such a monopoly is specially characteristic of the index currency supporters of to-day. (Compare, e.g., the volume, Absatzstockung und Arbeitslosigkeit und Ihre Beseitigung (Sales Slump and Unemployment and their Removal) Berlin, 1927, where on p 22 we read: "The quantity of cash of giro accounts and of banknotes may only be produced by the currency office..." This volume is roughly the counterpart of Milhaud's volume on the subject. In brief and pregnant form it records the opinions of many modern anti-metallists, together with their pseudo-proofs, conveying thus a knowledge of the system and of the mentality of the partizans of indes money.)
            Since the view is widely prevalent that the introduction of an index money would offer a practical solution of the means of payment problem and since this view already constitutes a 158 serious obstacle to an unprejudiced examinstion of the Milhaud proposals and will probably be increasingly that in the future, we may here employ against it the argumentum ad hominem: how old in reality the concept of a pure goods currency is and also how the mentality of men living in a barbaric society was actually able to produce it.

         Montesquieu's account in his Esprit des lois, book XXII, chapter 8, occupies only about ten lines. Meanwhile much fuller accounts have been published relating to the money of negro tribes, whence we learn that Montesquieu correctly reported the facts and did not deserve Galiani's and Jevons' strictures. That the name for the money among the Madingos means "slave" indicates its origin, but does not prove, as Galiani presumed, that the negroes did not possess an abstract standard of value. In South Africa—e. g., in Loango—the name of the money signified "piece of cotton"; yet the Loango negroes also counted in entirely abstract units. In the "Geschichte der merkwuerdigsten Reisen" (History of the Most Remarkable Voyages) (von Ehrmann, Frankfurt o/M. 1794, 13th volume, pp. 326-327) will be found a careful statement concerning the value in "pieces" of all kinds of goods. On this subject the author quoted by v. Ehrmann, Abbé Proyart, states explicitly: "When it is said that a slave costs 30 pieces, this does not mean that it costs 30 pieces of stuff, but 30 times an ideal value to which the name of "piece", is attached. Thus a single piece of stuff is sometimes valued at two or three "pieces", just as it sometimes requires several articles to form a single "piece " (Histoire de Loango, Kakongo, et autres Royoumes d'Afrique, Paris, 1819, first edition 1776, p. 116.) But counting with counting money does not imply a remote past, as many surmise. The 1879 edition of the Munz-, Mass-, und Geschichtsbuch (Coin, Measure, and Weight Book) of Nobac still published the statement that at the mouth of the Niger it was a general custom to calculate in value units called "slave", but that the value unit had nothing to do with actual slaves. A counting "slave", was valued then at 20.000 Kauri shells, a real one at 4.000 to 40.000. It would be interesting to discover whether eye-witnesses of this type of calculating value are still living and to record their experiences. In Liberia at that time the counting money was called "basket", quite in accord with the language of present-day English cost of-living index statisticians. According to Roscher-Pöhlmarm, (loc. cit., § 118, note 7), similar counting units have been in use among numerous African, Asiatic, and even European peoples. Thus it would be difficult to doubt that money of this kind was generally known among semi-civilised peoples and in pre-historic times. In ancient China, too, there existed not only counting 159 money, as among the negroes, but an index currency fluctuating with the price of cereals, but this was later suppressed. (Ku-Su-Lu, loc. cit.)
         Counting money and, particularly, index numbers are most useful inventions, but the latter are useless for currency purposes. However, for long-term debt contracts index numbers may be helpful. One should not, however, go too far in this respect and should therefore fix an appropriate free limit within which the value fluctuations of gold as compared with the general price level would be ignored. (Perhaps the first 20 %.) To calculate to too great a nicety would be like adjusting a bread knife with a micrometer screw. How indifferent in practice even quite considerable fluctuations in the value of gold are in relation to goods, was convincingly shown by Jevons' A Serious Fall in the Value of Gold (1863), in the chapter headed "Is a Remedy Needful or Possible?"
             The concept of a standard of value is highly abstract, not less so than the concepts of space and time. The concept of a standerd of value as such was first formed, which perrnitted bartering certain commodities for certain other commodities. Already at that stage the concept of a standerd of value arose out of a multiplicity of goods (Makuta). Later, the concept was formed of a stable metallic standard of value, which permitted not only the exchange of present possessions, teut abo the exchange of present possessions for futur ones. The evolution of the brain cells for the concept of the standard of value may have occupied thousands of years.
            However, far more abstract than the concept of the standerd of value is that of means of payment. Its full comprehension becomes only possible at a very late evolutionary stage.

How much more primitive the concept of value is compared to that of means of payment, is already noticeable in animale. Dogs, for instance, are certainly capable of making value distinctions within their diminutive canine world. (This is not surprising, seeing that they can form such abstract concepts as space and time.) But as regards anything relating to exchange dogs have not the faintest conception, although the idea of property as well-as of the acquisition of property—even including the distinction between just and unjust—are congenital in them, just as much as in human beings.
       The dependance of the degree of culture of a people on its system of means of payment (not of its civilisation, but precisely of its culture) has as yet been scarcely examined, but was clear to Goethe, the founder of German culture. It is true that but few passages in his works refer to it, but in those he is quite 160 explicit. In Chapter X of his appendix to the biography of Benvenuto Cellini he probes the foundations of Florentine culture. He mentions expressly "exact housekeeping records, the magic language of book-keeping by double entry, the fairy-like effects ot bill-transactions", and so on. No one prior or subsequent to Goethe has seen in payment by means of bills an important cultural element. Goethe went even further. The nature of non-cash transactions was clear to him, and he considered the idea of sufficient importance to insist on it in his Novelle, where we read: "Let us ride through the town, continued the lady, across the market place where a great number of booths have assumed the form of a small town, of a camp. It is as if the wants and occupations of all the families of the surrounding district were, turned outward, concentrated here and brought into the daylight. The observant spectator sees here everything that man does or wants. For a moment one imagines that money is unnecessary, that every transaction could be effected by barter, and so it is in essence."
           Since important ideas never occur to one person only, it is not surprising that after the invention of bills of exchange, several thinkers made the attempt to separate the function of the precious metals, and particularly of gold as the standard of value, from their function as a means of payment. A history of this development cannot be furnished here. It may be noted, however, that Proudhon came neer to solving the problem. Unfortunately, Prouhhon misconceived the fundamental difference between an exchange of existing goods, on the one hand, and an exchange of present for future goods, on the other. He saw clearly that the first should be accompliahed by means of some kind of purchasing certificate which need carry no interest higher than that required for meeting the administrative expenses of the issuing centre, but he was not clear on the point that another kind of interest existed, one corresponding to the difference in value of present and future goods and which no monetary system can eliminate. Nor did he see that neither purchasing certificates nor any other paper money could be based on future goods. However, in the business provisions of his people's bank, Proudhon expressly provided for mortgage loens to be contracted with the goods warrants of his barser bank and intended thus also to reduce for mortgages the interest rate to the costs of administration entailed by the mortgage ooerations. His famous debate with Bastiat proceeded on this erroneous assumption. Bastiat spoke always of long-term credit only and defended the interest charged for it with irrefutable arguments. Proudhon, on his part, attacked these arguments with counter-arguments which applied only to turnover credits. And Proudhon also greatly exaggerated the part played 161 by the rate of interest in turnover credits. Whilst in mortgage credit I % more or lesa is of great importance, first and foremost for rent payments, in turnover credit, as an easy calculation will show, even several per cent are of little consequence; in any case, compared to other trading expenses, they play an unimportant part. By his constant demand for "free credit", without seeing that this demand can be only realised in tumover credit, Proudhon did more harm than good to the notion of a real people's bank. Hence Proudhon cannot be considered as a precursor of Milhaud who is entirely free from this misconception.
          One of Milhaud's genuine precursors seems to have been King Hammurabi. In his doctorate thesis, Altbabylonische Marktpreise (Market prices in ancient Babylon) (Kirchhain, N.-L., 1915, p. 6), Wilhelm Schwenzner writes as follows concerning § 51 of Hammurabi's Civil Law: "Similar public-spirited intentions animated Hammurabi, when in § 51 he provided that a debtor unable to repay a loan in money, might repay it in cereals and in sesame according to the value of the silver he borrowed, together with the interest, pursuant to the royal ordinance. " Hence Hammurabi recognised that the Civil Law should not confer on the creditor the right to demand payment in precioua metal, solely because the value of his claim was fixed in metal. Hammurabi further recognised that in some way the proceeds of the debtor's labour (and not his possessions or his person) should be brought into direct relation with the creditor's claim. He therefore declared that the debtor's labour product should become a subsidiary means of payment. (Those who broadly agree that the culture and the prosperity of a country are intimately associated with its monetary policy end its debt legislation, will not lightly reject the suggestion that the greatness of ancient Babylon, which also had a capital like London, was the outcome of Hammurabi's legislative enactments.)
      Some two thousand years after Hammurabi, when his legislation had been long forgotten, Marcus Aurelius discovered the second possible method of how a debt valued in precious metal may be paid without remitting precious metal, namely by clearing. Unfortunately, however, he failed to permit the debtor to clear in those cases where he did not owe anything to his creditor, but to a third party.
          Whilst both solutions were incomplete, they were not erroneous. Two thousand years had to pass again before a correct solution—applicable both to external and internal trading—of the problem was proposed, that is, a solution not menacing the general economie life and capable of being put into practice. Milhaud, in a sense, combines the ideas of Hammurabi and of Marcus Aurelius. The debtor pays with his products and the 162 creditor receives his payment by means of a clearing traneaction, and this is so arranged that he is not dependent on the product of the one debtor. Closely as other authors had approached the solution of the problem, something was lacking in all of them. Most of them confused consumable goods with other goods. Some others failed to include external trading. Still others needlessly aimed at changing the standard of value. A fourth  set believed that the creditor's claim to receive metallic gold should be satisfied, but that it might be postponed for a sufficiently long period. This group thus placed the neceasary separation of means of payment and standerd of value in the realm of time and not of concepts. In actual dealings much may be achieved in this way, as Henry Meulen showed in his reference to the old Scotch banks of issue and their option clause. This solution, however, cannot satisfy the present state of economie science.
        Placed as they are at the and of auch a lengthy development, what is the prospect of the Milhaud proposals being soon realiazed? Proposals so simple, leaving the economie foundations undisturbed, and appealing so little to force! Certain current symptoms suggest that the world is beginning to get weary of violent solutions, that is, that part of the world which has come to know by experience wars, revolutions, blockades, hunger, and trade depressions, and which has come to suspect that all these are somehow associated with defecte in our monetary system. On the other hand, of a large proportion of our youth, it is unfortunately true what Follin says in his Paroles: "A young  generation is growing up threateningly. Whilst aware of the gross blunders of politicians, it ascribes them in the main, however, to the normal practices governing economic dealings, without observing that politicians have always obstructed and distorted those practices. Disdaining to probe the eternal foundations and laws of economie life, they invent a 'modern economy' dominated by the conditions of the economie technique of their time, when it is this modern technique itself which, in order to produce its full beneficial effects, should remain dominated by the economie uniformities true of all time". These words outline the task of the older generation. (Translated by G. Spiller, London.)

RAILWAY MONEY AND UNEMPLOYMENT.         By Dr. W. ZANDER, Berlin.
this happens to be the next article in that same issue An article about the same subject, by the same author can be found elsewhere at this site. Just click your mouse on this line.
 This paper appeared in the first instance in Deutsches Volksrecht (1-5 July 1933) and soon afterwards in pamphlet form (Verlag Sparerbund, e. V.. Berlin W 8, Jaegerstrasse 5940). An outline of the plan had already appeared in the above mentioned review on 17 May 1933.

1.—Present Position.
The German Reich Railway has been seriously affected by the trede depression. Its revenues shrink, And its orders for materials, ek., have had to be reduced in proportion. This, in turn, aggravates the existing depression and the railway revenues consequently drop still lower.
          At the same time the Railway is in an anomalous position. In view of its importance in the country's economie life, it is espected to adopt far-reaching measures to reduce unemployment, such as placing huge orders so as to revive industry, The Railway, however, cen only fulful these expectations to a modest degree because it is doubtful whether its future revenues would suffice for meeting its obligations as regards those orders. Prudence counsels circumspection. Hence the Railway Management inclines to shift the risk involved in placing substantial orders onto the shoulders of the Central Notes Institute ( See the article in the Berliner Börsen-Courier of 11 June 1933 "The Reich Railway and Employment". There it is stated: "The magnitude of the orders to be placed will depend entirely on the decision of the Reichsbank President in view of their being re-financed by our Central Notes Institute") or, what is to-day ita practical equivalent, the State. However, this bank of issue cen only, in conformity with the law and with the demands of a sound currency policy, undertake the financing of any schemes when they are covered by short- term obligations . The Railway is only partly in a position to comply with this condition. Hence the Central Bank is generally obliged to refuse. In fact, the Railway cannot make itself responsible at present for placing big orders. It cen therefore do little to augment employment.

11.—The Plan Outlined.
The Railway is justified in proceeding warily. Cash purchases are out of the question in present circumstances. On the other................