Away from Freedom by Vervon Orval Watts

Author:Vervon Orval Watts [Vervon Orval Watts]
Language: eng
Format: epub
ISBN: 978-1-61016-110-7
Publisher: The Foundation for Social Research
Published: 1952-11-06T16:00:00+00:00

The gold standard prevented inflation

Yet, although credit in free markets arises mainly out of production, producers do not ordinarily measure it in terms of bushels of wheat or tons of coal. They state it in terms of the monetary unit in which they price their goods—so many dollars, francs, or pesos. In modern times, when free to choose, they make silver or gold their standard. They state their prices in terms of such standard money, and they prefer to be paid in it or in claims that are readily exchangeable for it. In international trade, gold is the standard, even when governments forbid it in domestic trade, at least between sovereign nations. (The United States has largely destroyed the monetary usefulness of silver by its manipulations of the silver market on behalf of the silver producers.)

Under the gold standard, the banker has another function in addition to that of recording credit transactions and serving as agent in clearing, transferring, and advancing credits. He acts also as a merchant in gold, or a keeper of a warehouse for gold.

Soon after governments (e.g., those of the United States and England in the 19th Century) began to enforce the contracts which bankers and producers made in terms of standard money, the bankers’ purchase orders (banknotes and checks) replaced almost all others. “Trading stamps,” streetcar tokens, “coupons good only at our store,” and occasional “due bills” payable in service or merchandise were instances of purchase orders not convertible into gold at a fixed ratio; but people used these forms of purchase orders for only a small part of the total trade in most countries prior to 1933. When producers were free to choose their own currency, they used mainly one that was readily convertible into standard money at stable, predetermined rates.

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