Chapter 7

We hear much about a "stable currency" and an "honest dollar." It is a significant fact that those who advocate a single gold standard have for the most part avoided a discussion of the effect of an appreciating standard. They take it for granted that a gold standard is not only an honest standard, but the only stable standard. I denounce that child of ignorance and avarice, the gold dollar under a universal gold standard, as the most dishonest dollar which we could employ.

I stand upon the authority of every intelligent writer upon political economy when I assert that there is not and never has been an honest dollar. An honest dollar is a dollar absolutely stable in relation to all other things. Laughlin, in his work on "Bimetallism," says:

Monometallists do not--as it is often said--believe that gold remains absolutely stable in value. They hold that there is no such thing as a "standard of value" for future payments in either gold or silver which remains absolutely invariable.

He even suggests a multiple standard for long-time contracts. I quote his words:

As regards national debts, it is distinctly averred that neither gold nor silver forms a just measure of deferred payments, and that if justice in long contracts is sought for, we should not seek it by the doubtful and untried expedient of international bimetallism, but by the clear and certain method of a multiple standard, a unit based upon the selling prices of a number of articles of general consumption. A long time contract would thereby be paid at its maturity by the same purchasing power as was given in the beginning.

Jevons, one of the most generally accepted of the writers in favor of a gold standard, admits the instability of a single standard, and in language very similar to that above quoted suggests the multiple standard as the most equitable, if practicable. Chevalier, who wrote a book in 1858 to show the injustice of allowing a debtor to pay his debts in a cheap gold dollar, recognized the same fact, and said:

If the value of the metal declined, the creditor would suffer a loss upon the quantity he had received; if, on the contrary, it rose, the debtor would have to pay more than he calculated upon.

I am on sound and scientific ground, therefore, when I say that a dollar approaches honesty as its purchasing power approaches stability. If I borrow a thousand dollars to-day and next year pay the debt with a thousand dollars which will secure exactly as much of all things desirable as the one thousand which I borrowed, I have paid in honest dollars. If the money has increased or decreased in purchasing power, I have satisfied my debt with dishonest dollars. While the government can say that a given weight of gold or silver shall constitute a dollar, and invest that dollar with legal-tender qualities, it cannot fix the purchasing power of the dollar. That must depend upon the law of supply and demand, and it may be well to suggest that this government never tried to fix the exchangeable value of a dollar until it began to limit the number of dollars coined.

II. BY M. W. HOWARD.

The term, "a standard of value," so often used, is erroneous and misleading. There can be no fixed standard of value, and the student who wishes to delve into our financial problems should clear his mind of such a fallacy at the very threshold of his investigations.

Money is a commodity; it is regulated by the same laws of supply and demand which regulate the price of corn, cotton, wheat, land, labor, etc. If the wheat crop is short, wheat will be dear; if abundant, it will be cheap. So with money. If the money supply is not sufficient to meet the demands of business and commerce,--if the money crop is short, in other words,--the money will be dear; it will command too high a price, its purchasing power will be too great.

On the other hand, if the money supply is abundant, sufficient to meet all demands upon it,--in other words, if there is a bountiful money crop,--it will be cheaper; it will not have such a large purchasing power; it will be worth less when measured by our labor, our lands, and the products of our labor.

I oppose the single gold standard because it makes the money crop short, gives us a small circulating medium, and hence enhances the value or price of money.

We have a certain demand for breadstuff, which is constantly increasing as our population multiplies; suppose that we cease producing corn, and find no substitute for it, would not the price of wheat be greatly enhanced, providing there is no increased wheat production? So with the money supply. There is a certain demand for money, ever increasing as population grows. How shall we meet it? By producing more money, or by destroying one-half of that which we now have, by eliminating one-half of the base of future supplies of money?

The latter is now the policy of this government, and as a consequence the price of gold has been greatly enhanced, and its purchasing power has increased each year, and will continue to do so.

The advocates of the gold standard call this "honest money." Their idea of honest money is money that ever increases in purchasing power because of its ever-increasing scarcity.

My definition of honest money is: "A sufficiently large circulating medium, whether of gold, silver, or paper, to bring down the price of money so that we shall obtain fair prices for all labor and products." Then as population increases and as the demand for money becomes greater, let the government meet that demand from time to time by enhancing the money supply.

III. BY WHARTON BARKER.

The true test of an honest dollar is its purchasing power, and that dollar, and only that dollar, is honest that does exact justice between creditor and debtor. The gold monometallists harp on the injustice of a depreciating dollar, but they ignore the injuries inflicted by an appreciating dollar. They tell us that a depreciating dollar defrauds the creditor, but just as a depreciating dollar defrauds the creditor, an appreciating dollar defrauds the debtor, and it is not one whit worse to defraud the creditor by obliging him to accept a depreciated dollar from his debtor than to defraud the debtor by obliging him to pay in a dollar made artificially scarce and dear.

An appreciating dollar works injustice to the debtor just as a depreciating dollar works injustice to the creditor, but an appreciating dollar is many fold more injurious to trade and industry, for while the depreciating dollar taxes the creditor for the benefit of the debtor, the appreciating dollar takes from the debtor, from producers in general and the industrious classes, and gives to the creditor classes, the drones of society, a larger and larger share of the products of labor, which of necessity discourages industry. Under a depreciating standard the recompense of the producer becomes greater and greater, the creditor classes receive a smaller and smaller portion of the products of labor, the profits of industry increase, and consequently production is encouraged and trade and industry are stimulated. But under an appreciating standard the recompense of labor becomes smaller and smaller, and the share of the products of labor absorbed by the creditor larger, which tends to discourage industry and stifle enterprise.

IV. BY ARTHUR I. FONDA.

The value of any commodity is measured by what it will exchange for. It is in fact its purchasing power, or power in exchange. This in substance is the concrete definition of value given by all economists, and they all unite in stating that value is determined by the supply of a commodity relative to the demand for it; all other factors affecting value being secondary and acting through their effect on either supply or demand.

Since both the supply of and the demand for every freely produced commodity is variable, and since a true standard of value, like a true standard of weight or length, must be invariable as regards that which it measures, it necessarily follows that no single freely produced commodity can be a true standard of value. But while it is true that every single commodity must vary in value, it is also true that all commodities taken together cannot do so. This principle is also accepted as correct by all economists.

It is evident then that a true standard of value can only be found in a composite unit containing a definite quantity of every commodity, or practically speaking, a definite quantity of each of a large number of the most important commodities. This is what is known as the "multiple standard," or the "commodity standard," and has long been in use by economists in the form of tables of index numbers to show fluctuations in general prices, or what is the same thing, changes in money values.

The only function of money is to facilitate the exchange of goods. In doing this it acts directly as a circulating medium, and the demand for it for this purpose, relative to the supply, determines its value; for money, whether of coin or paper or both combined in one circulation to meet one need, is subject to the same law of supply and demand which governs all commodities, and which indeed is as universal in the economic world as the law of gravitation is in the physical world.

Incidentally the value of money fills the important function of serving as a measure of the values of goods transferred without the direct use of money, both immediate and deferred. This, however, has no effect on the demand for money or on its value.

The people are accustomed to regard money as of constant value, and an honest money must necessarily conform to this belief. If money varies in value, the people are deluded, and many are wronged if they are unaware of the fluctuation. If they become aware of it,--as they generally do by a bitter experience,--they are confronted with an uncertainty that is most detrimental to any business or enterprise. Imagine what our business would be with our measures of weight, length, and capacity all variable! Yet such a condition would be less disastrous than a fluctuating money value when it became fully known that it was so.

The _demand_ for money varies from many causes, chief among which are changes in the quantity of goods exchanged, the extent to which other credit instruments take the place of money in such exchanges, and the activity of money, or the extent to which it is hoarded, all of which are entirely beyond control. The _supply_ of money, however, can be controlled, and to maintain money at a constant value the supply must be constantly adjusted to the ever-varying demand, so that its general purchasing power may remain the same. The test of a constant money must be a constant general level of prices; and this must be judged by the prices in the open market of those principal commodities which would be selected to constitute the standard of value, the quantity of each being proportioned to its importance in trade.

The only function of gold and silver in a monetary system is to _limit the volume of the money_, either by their scarcity when freely coined, or by the laws limiting their coinage. And as this limitation of the supply bears no definite relation to the demand for money, the value of the money necessarily fluctuates. Our industrial system is constantly growing more sensitive to even slight changes in money value, owing to the greater diversification of industries and the greater division of labor, and the need for preventing such changes is constantly growing more imperative.

When the people arrive at a clearer perception of these facts and principles they will understand that the chance production of gold and silver is too clumsy a contrivance to properly control so delicate a matter as the value of money under modern industrial conditions, and I believe they will substitute for the present system a circulating medium of paper money, properly guaranteed, and susceptible of prompt and certain increase or decrease of volume to meet every possible variation in demand, and rigidly controlled to conform in value to a true standard of value, a standard composed not alone of gold or silver or both combined, but of all the leading commodities.

In short, they will separate the standard of value from the medium of exchange, demonetizing both gold and silver as to the latter function, but using both and many other things in conjunction therewith for the former function.

V. BY A. J. WARNER.

From whatever side the question is approached, in the last analysis the value of money of any kind is found to depend upon its quantity, and not upon color, or ductility, or malleability, or any other particular quality of the thing upon which the money function is impressed. There can be therefore, in fact, no other standard of value, or money standard, except the quantity of whatever is used as money. When gold and silver are used, the value of each unit of money depends upon the number of such units, and these in turn depend upon the quantity of the metal from which the money is made. Any cause, therefore, which restricts, limits, or contracts the quantity of any kind of money, increases the value of each unit. On the contrary, causes that operate to increase the supply of money have the opposite effect.

Hence, only that currency can properly be called "sound" currency which is made to maintain stable relations to things to be bought and sold. In other words, general prices are determined by the proportion between money on the one side, and things offered against money on the other side. Such money only is "honest" money.

The whole question, therefore, of money standard is a question of money supply; for, as the price of single things, money being constant, depends upon supply on the one hand, as against demand for it on the other, so, in general, prices depend on money supply on the one hand, and things to be bought and sold on the other. This I believe to be the fundamental law of money.

THE NEW CIVIL CODE OF JAPAN.

BY TOKICHI MASAO, M. L., D. C. L.

Ever since the establishment of the present imperial government in 1868, the one unceasing aim of Japan's foreign policy has been the abolition of the extra-territoriality régime, under which certain quasi-judicial functions are exercised on the Japanese soil by the ambassadors and consuls of the Occidental nations. This anxiety on Japan's part to rid herself of this shameful régime imposed upon her against her will, will not appear surprising when the fact is learnt that one Occidental nation went so far as to call her consul at Yokohama, "Her Britannic Majesty's the Most Honourable Court for Japan"--a name almost enough to imply that Japan was a British province. Extra-territoriality rests upon the assumption that the laws and procedure of the non-Christian nations are so unlike to and different from those of the Christian nations that without the protection of this system the safety and well-being of the subjects of the latter sojourning in the territory of the former would be placed in constant jeopardy. Accordingly in the early seventies Japan came to the conclusion that the only possible way of emancipating herself from the disgraceful yoke of extra-territoriality was to adopt one of the systems of law obtaining in the Christian world and compile a code of law based upon that system, and applicable alike to the Japanese and to the foreigners residing in Japan.

There were three such systems--the Anglo-American, the French, and the Germanic Roman--each offering itself for adoption. Mr. Yeto Shimpei,[2] who became the Minister of Justice in 1872, seems to have had a personal preference for the French system. He called to his assistance some of the most eminent jurists of France and entered upon the work of drafting a code. At the same time he established in Tokio a law school known as the "Department of Justice Annex Law School," in which French law was taught by those same jurists whom he had called from France. About this time there was also established in the University of Tokio a law school in which instruction was given chiefly in English law. It was while teaching in this university law school that Mr. Henry T. Terry (a New York lawyer and an alumnus of Yale College) wrote his memorable book on English law, designed especially for the use of Japanese law students. From henceforth "Terry's Leading Principles of Anglo-American Law" became as familiar to them as are "Blackstone's Commentaries" to the law students of this country.

[2] Those who have followed the course of events in Japan since the beginning of the new era will remember that upon the return of Prince Iwakura, in 1873, from his around-the-world embassy, Mr. Yeto had to withdraw from the cabinet, owing to a difference of opinion between him and the Prince with regard to the Corean problem then pending. Returning to his native province, Saga, he tried to raise troops against the government (to carry out, of course, his own convictions in regard to the Corean problem), resulting in the famous "Saga rebellion" of 1873. Defeated by the government troops, he betook himself to the interior of the country in disguise, was arrested, found guilty of treason, and executed according to law. It is a familiar saying in Japan that Mr. Yeto died a criminal at the hand of his own Penal Code.

Thus, side by side there existed in Tokio two law schools in which two distinct systems of law were taught--the English and the French. The primary object of the Department of Justice in establishing the French law school being to make it a training school of judicial officers, the students of that school were, upon graduation, to render, for a limited number of years, an obligatory service to the government in the various capacities of judges, magistrates, and prosecuting attorneys. On the other hand, the University of Tokio being a strictly independent institution in which learning is pursued for the sake of learning, the graduates of the university or English law school were at entire liberty in their choice of professions. Naturally enough the majority of these did not wish to enter the same service which the graduates of the other school were obliged to enter as a matter of fulfilment of contract. Thus it happened that the bench was recruited from the French law school, while the bar was recruited from the English law school. This state of affairs lasted for about twenty years, during which time there was also established a German law school in the University of Tokio. Those who know something about the rivalry that existed in ancient times between the Sabinians and the Proculians, or even about the rivalry which exists to-day between the Yale method and the Harvard method, between the Waylandians and the Langdellians, can readily imagine what intellectual competition was carried on between these three Japanese law schools representing three distinct systems of law.

After twenty years of assiduous labor the Code Commission submitted a draft of a Civil Code to the two Houses of Parliament in 1890, accompanied by the recommendation from the Bureau of Legislation that the draft might receive the parliamentary sanction in such a manner that it might be possible for it to be put in effect by the year 1893. As might have been expected from the personnel of the Commission, consisting, in its conception, of Mr. Yeto Shimpei and the eminent French jurist Prof. Boissonade, etc., the draft was a genuine French code, being almost a literal translation of the Code Napoleon in all its parts excepting the part dealing with the Law of Persons. The question may well be asked why it took the Commission twenty long years to produce this imitation draft code when we know that the draft of the Code Napoleon itself was completed within the short period of four months. The answer seems to be that the Commission spent almost this entire time in their efforts to reconcile the principles of the French Law of Persons with the Japanese laws and customs bearing on that subject.

As has been the case with many other draft codes this draft Civil Code of Japan was destined to go into oblivion. As soon as it was submitted to the Parliament there ensued a most desperate fight against its adoption. As figuring most prominently among the champions of the opposition I may mention the names of Mr. Kazuo Hatoyama, the present Speaker of the House of Commons of the Imperial Japanese Parliament, and His Excellency Mr. Toru Hoshi, the present Japanese minister at Washington.[3] Inspired by these and other eminent jurists of the English school the entire bar was set against the adoption of the draft code. This was not a case of a bar accustomed to one set of rules and formulas opposing the adoption of a new code for fear that they might be compelled to learn a new set of rules and formulas. On the contrary, the bar was composed of men who had studied law as a science, and science for the sake of science. The spirit of their opposition was very plainly shown by the objections they raised against the code. They said:--"The draft Code was a blind imitation of a foreign Code which itself was far from being free from defects. It abounded in definitions, illustrations, and examples, and presented an appearance more becoming to a text-book of law than the Civil Code of a great nation. It went into too minute details and left too little room for voluntary development of jurisprudence. It incorporated, like the French Code, the law of evidence into the body of the Civil Code, which was totally at variance with the modern theory of evidence, being a failure on the part of the Commissioners to distinguish adjective from substantive law. It made too many innovations upon the Law of Persons hitherto obtaining in Japan. It changed the Family Law of the Japanese from the foundation, which was a gross disregard of the historical principle of jurisprudence," etc., etc., etc. Such were some of the grounds upon which they opposed the adoption of the draft code, reminding one of the fight in Europe between the historical school and the analytical school, between the jurists of France and those of Germany; of the fight in Germany between the Code party and the anti-Code party, between Savigny and Thibaut. Who can say, then, that the Japanese are childish imitators of anything that looks well? The fact is that this sort of conflict between the more conservative and the more radical, the more scrupulous and the more unscrupulous, the more positive and the more speculative, is going on all the time.

[3] I make mention of these two gentlemen as representative of two classes of a fairly large number of Japanese lawyers, viz., those who have been educated in the United States, and those who have received their education in England. Mr. Hatoyama is a D. C. L. of Yale. For nearly ten years (1880-1889) he was a professor of law in the University of Tokio Law School, and during most of this time he was also Dean of the school. Mr. Hoshi is a barrister-at-law of one of the English Inns of Court. For many years he was regarded as the leader of the Japanese bar. Like many distinguished members of the English bar, he is more of a lawyer than of a jurist.