Complete Works. Lysander Spooner
the State Comptroller, (or Superintendent of Banks,) as security for the redemption of the currency; and that when these mortgages come to be sold, the lands often fail to bring the amount of the mortgage. And the question has been asked, whether, under the system here proposed, the mortgaged property might not prove insufficient, as well as in New York?
The answer is, that the mortgages in New York may have proved insufficient for either or both of two reasons.
1. They may have proved insufficient, because the lands, being sold for specie, at a time when specie had mostly left the country, could not bring what was not to be had—that is, specie. But this is no proof that the lands were not, in ordinary times, and under an abundant currency, a sufficient security; but only that, when specie has gone out of the country, lands are affected like all other property, and will not, any more than other property, bring their true value in specie.
But under the system proposed, the absence of specie would occasion no contraction of the currency, and no depression in the price of lands. And therefore a mortgage, that was sufficient at one time, would be sufficient at all times. No forced sales would be made; but the mortgages would run (if only the interest were paid) until the final winding up of the bank. If the interest were not paid, the bank would take possession, and apply the rents to the payment of the interest. Or, at worst, they would sell the property. And it could always be sold advantageously, because, there never being a scarcity of currency, property in general would never be depressed.
2. The other reason, for the failure of the New York mortgages, may have been fraudulent appraisals.
The facilities for fraudulent appraisals are much greater under the New York system, than they would be under the system proposed, and for these reasons.
Under the New York system, all that is necessary to get a bank in operation, is, that mortgages, satisfactory to the State Comptroller, or Superintendent of Banks, should be deposited with him. And he accepts the mortgages on the simple appraisal of men, appointed by himself, or satisfactory to himself. This being done, the currency is then issued, and the public receive it, because the State has thus virtually certified that it is well secured.
Now, it is evident that all that is necessary to get up a swindling bank, under this system, is simply to secure the approval of one man—the Comptroller, (or Superintendent of Banks,) who knows nothing of the land himself—to the appraisal of the land mortgaged. If but this one man can either be cheated, or be induced to become himself a cheat, all the other consequences follow; because the currency is then issued under his authority, and is received by the public, on the strength of his virtual indorsement.
Now, as it cannot be a very difficult matter to cheat this one man, or perhaps to induce him to become himself a cheat, in such a case as this, it is evident that the system affords little security for the sufficiency of the mortgages.
But under the system proposed, no such facilities for fraud would exist, because the credit of the bank would not rest upon the certificate of any one man, nor upon any indorsement of the State. The State would not indorse the currency at all, any more than it now indorses the notes or mortgages of private persons. Each bank would, therefore, have to stand on its own merits, subject to the scrutiny of the whole community.
Chapter IV.
Practicability of the System.
The system is plainly practicable, provided the currency will pass.
The only question, then, is, whether the currency will pass? Whether men, if left to do as they please, will buy and sell it, in exchange for other commodities, as they now buy and sell gold and silver coin, and bank notes, in exchange for other commodities?
To answer this question, it is necessary to ascertain what it is, that makes any thing pass as a currency.
What, for example, is it, that makes gold and silver coin pass as a currency?
The answer is, that five conditions are necessary to make any thing pass readily as a currency. First, that the thing should have much value, and yet be of small bulk and weight; secondly, that it should be divisible into small parcels; thirdly, that the quantity and quality of each of these parcels should be accurately measured, and then reliably marked upon the parcels themselves; fourthly, that these parcels should be convenient for being manipulated, counted, transported, &c.; and, fifthly, that the currency should have a publicly known market value.6
These are the only conditions, that are necessary to make any thing pass readily as a currency.
The paper currency proposed—the mortgage stock currency—fulfils all these conditions. First, it would have much value in small bulk and weight. Secondly, it would be conveniently divisible into small parcels, that is, parcels as small as one dollar. Thirdly, the quantity and quality of these parcels would be accurately measured, and reliably marked upon the parcels themselves. Fourthly, the parcels would be convenient for being manipulated, counted, transported, &c. And, Fifthly, the currency would have a publicly known market value. Its market value, in comparison with other commodities, would certainly be as well known, as is the market value of gold and silver coins, or bank notes.
There is no reason, then, why it should not pass, as a currency—at its market value—whatever that may be.
Its market value may be greater or less than that of gold and silver; but this would not prevent its passing, at its market value. Indeed the market value of any thing is only that value, at which the thing will sell readily in the market. So that, to say that a thing has a market value—a publicly known market value—is equivalent to saying that it will pass as a currency, provided it be convenient in all other respects.
Secondly.
But would this paper currency be as much in demand, in the market, as gold and silver coins now are? That is, would it sell as readily as the coins now do, in exchange for other commodities?
To answer this question, we must ascertain why it is that the coins are in demand at all, as currency; why it is that they have a market value; why it is that every man will accept them in exchange for any thing he has to sell.
The solution of these queries is, that the original, primal source of all the demand for them, as currency—the essential reason why they have a market value, and sell so readily in exchange for all other commodities—is because they are wanted, to be taken out of circulation, and converted into plate, jewelry, and other articles of use.
If they were not wanted, to be taken out of circulation, and wrought into articles of use, they could not circulate at all, as a currency. No one would have any motive to buy them; and no one would give any thing of value in exchange for them.
The reason of this is, that gold and silver, in the state of coin, cannot be used.7 Consequently, in the state of coin, they produce nothing to the owner. A man cannot afford to keep them, as an investment, because that would be equivalent to losing the use of his capital. He must, therefore, either exchange them for something that he can use—something that will be productive—yield an income; or else he must convert them into plate, jewelry, &c., in which form he can use them, and thus get an income from them.
It is, therefore, only when gold and silver coins have been wrought up into plate, jewelry, &c., that they can be said to be invested; because it is only in that form, that they can be used, be productive, or yield an income.
The income, which they yield, as investments—that is, the income, which they yield, when used in the form of plate, jewelry, &c.,—is yielded mostly in the shape of luxurious pleasure—the pleasure of gratified fancy, vanity, or pride.
The amount of this income we will suppose to be six per centum per