It was just a little less than thirty years ago, at the time the dollar was devalued, that Franklin D. Roosevelt announced as the objective of government policy a dollar that would over the years purchase the same quantity of goods; that is, a dollar whose value in terms of purchasing power would be stable. The ideal was that you could invest dollars today—in bonds, notes, savings accounts, insurance—and be sure that those dollars would be worth just as much in the market twenty or thirty years hence.

Yet it is obvious to everyone that this objective has not been attained, and is not likely to be attained. In respect of spoilage, or deterioration, a bundle of greenbacks is different only in degree from a head of lettuce.

When coinage was developed by the Greeks about seven hundred years before Christ, the minting appears to have been done by the temple authorities.… The temples, we may assume, had a tradition of pure coinage, since only a pure metal, like an unblemished sacrifice, would be acceptable to the god or goddess. In the case of the Jews, the purity of the metal was elevated into a moral question. The Mosaic law forbade adulterating goods or tampering with weights and measures. Thus the devout Jew was forbidden to wear garments of mingled wool and linen; he was forbidden to sow his field with mixed seed, or to crossbreed, say, an ass with a mare. While concerning metals the prohibition is not explicit, we may assume that alloying metal was likewise forbidden. The Mosaic law also laid down the principle of honest weights—a moral achievement with which the world has not yet caught up. “Just balances, just weights; a just ephah and a just hin, shall ye have: I am the Lord your God”—so ran the Mosaic command (Lev. 19:36).

Now the devout Jew was also required to pay the temple dues of half a shekel a year. The temple half-shekel was a weight of silver. We have no record of Jewish half-shekel coinage except for a small amount struck during the days of the Jewish Revolt and the final destruction of the Temple by Titus in A.D. 70; but we may gather from the fact that around the temple there were money changers, that the temple authorities did not allow the Jew to pay his temple dues of half a shekel except in coin containing pure metal.

Among the Roman Caesars and secular authorities, such moral prohibitions did not exist, either upon the maintenance of the purity of the coinage or upon its weight. Both were subject to change at the edict or whim of the emperor. The denarius as originated by Julius Caesar was a coin of practically pure silver equivalent to ten pieces of copper; whence its name denarius, meaning ten of copper. The coin had not been long in circulation, however, before succeeding Caesars found it expedient to alloy the coin with an increasing amount of copper while retaining its legal tender value. This, of course, meant a profit to the imperial mint. The emperors, always pressed for revenue, became adept at adulterating the money. By the time of Gallienus Caesar the silver denarius had been so debased with copper that the silver was only a thin wash. Thereafter it was converted to a copper coin pure and simple. No longer subject to debasement by alloy, its value was reduced by reducing the size and weight of the coin. The denarius became so small that it resembled a pebble, which the poor, whose garments apparently were not equipped with pockets, often carried about in their cheeks.

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In addition to debasing the coinage, the Roman emperors introduced certain practices which have become familiar in recent years: having variable exchange rates and purchasing powers according to various political purposes. Denarii could legally be tendered at a certain rate in discharge of commercial debt, but at another rate—a lower one, of course—for taxes; while for foreign trade it had a third rate, its bullion value. In imperial payments the same accounting prevailed in reverse order; thus silver denarii were paid to the legion at the rate of one to ten of copper whereas for the public the rate was one to sixteen. Later, when the denarii became little more than copper, pure metal coins were struck for army pay and debased coins for other purposes. The imperial mints deliberately mixed a certain proportion of plated coins among the more honest, and all had to be accepted at the official rate.

The inevitable results of these practices were a continued inflation, a disappearance of good money, and what would be called in these days a balance-of-payments problem. The high-living Roman ladies demanded silk from China which sold literally at its weight in gold, spices from India, ivory and peacocks from Africa. Good gold and silver had to be shipped out in increasing quantities. Meantime, the empire was no longer expanding, and the government was running out of slaves to send to the silver mines of Spain and the gold mines of the Balkans. The government increased the minting of debauched coinage for domestic trade. The ultimate effect was economic disintegration. This went along with social decay and political and military impotence. Speculation in commodities drove prices higher and goods into hoarding. The final stupidity of the Roman emperors was to establish a system of price ceilings. It was in A.D. 301, just before the final collapse of the Roman Empire and its division into two halves, that the Emperor Diocletian issued his famous price-fixing decree as the last measure of a desperate sovereign.

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Only portions of this decree have come down to us—fragments here and there turned up by archaeologists—but enough to reveal it as one of the most unusual documents in history. The discovery of parts in the farthest corners of the empire confirms its widespread application, and the language of the preamble reveals in words most explicit both the terrible degree of economic collapse and the basic superficiality of Roman economic philosophy. The decree, by the very completeness of the list of articles whose prices it regulated, must have been felt in every village and countryside in the imperial domain. The prices of all articles of trade, from a measure of beer and a bunch of watercress to a piece of genuine purple silk and bars of pure gold, and of services, from the shaving of a man or the shearing of sheep to the fees of a lawyer for presenting a case, were set out in detail.

The price-fixing decree of Diocletian was a failure and was abandoned within five years. From the economic crisis of the third century, largely induced by a corrupt money, the Western Roman Empire never recovered. By the fourth century money had fallen to the degraded position of “ponderata,” when it was customary to assay and weigh each piece offered in payment. And by the seventh century, the weights themselves had been so frequently degraded that it was no longer possible to make a specific bargain for money. There was no law to define the weight of a pound or an ounce and no power to enforce the law had one existed. Under these circumstances money became extinct. Nor, we are reminded, was it the only institution that perished; all institutions perished. There was no government except the sword; there was no law; there were no certain weights and measures; exchanges were made in kind, or for slaves, or for bags of corn, or for lumps of metal, which men weighed or counted to one another, holding the thing to be sold in one hand and the thing bought in the other.

No more fittingly can we close this comment on the failure of the Romans to cope with money than by quoting the words of one Antoninus Augustus, cited by Del Mar: “Money had more to do with the distemper of the Roman Empire than the Huns or the Vandals.” The paradox of history is that in the eastern half of the Roman Empire after the second capital was established on the Bosporus in the fourth century, a different monetary tradition governed which was marked by a strong moral sense of the responsibility of government toward money. The Eastern Roman Empire came again under Greek influence as it had always been largely Greek. In Athens, nine centuries before, had occurred the first official debasement of money of which history gives record. Solon, the noted lawgiver, had come into power as a compromise candidate during a great commercial crisis resulting from land speculation and an accumulation of mortgage debt. Solon, like Roosevelt in a later period in history, attempted to meet that crisis by a series of monetary manipulations. He solved the farm problem by a decree abrogating all the farm debt; then, to assist the distressed mortgage holders he allowed them to write down their obligaions by paying them off in drachmas of reduced weight. The drachma was officially devalued by 26 per cent. The device seems to have been successful for a time, but evidently it revolted the Greek conscience, for thereafter magistrates were required to include in their oath of office the promise not to tamper with the coinage. From then on a tradition of pure coinage and maintenance of the weights and standards became traditional among the Greeks. When Constantine established his principal capital in Byzantium this Greek influence came to the fore, and among the Constantine reforms was the establishment of a new monetary system based upon the gold coin subsequently known as the bezant. It is a remarkable tribute to the genius of the Byzantine Empire that this coin was never debased in the course of 700 years, and it is to the purity of this coinage that many students of Byzantium attribute the remarkable vitality and vigor of that empire. The German historian Gelzer may be quoted: “By her money, Byzantium ruled the world.”

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I have dwelt upon the Roman experience with money because we are inheritors of the Roman tradition: Roman monetary practices continue to infect the monetary system to this day.… When the Federal Reserve System was established in 1913, the law permitted the reserve banks to issue currency and deposit credits roughly to the extent of two and one-half times the amount of actual gold held by the banks. In 1946 the limit was raised to permit the banks to issue money and credit to the extent of four times the amount of gold held, and a bill was introduced in Congress last session, and has already been reintroduced this year, to abolish the requirement entirely and thus permit the reserve banks to issue an unlimited amount of money and credit against the amount of gold held.

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The process does not end here. The money or deposit credit which the banks hold at the Federal Reserve banks is reserve to the commercial banks against which they may in turn create deposit credits which, according to the location of the bank or the category of the credit, may range up to as high as twenty times the amount of the reserve carried with the reserve banks. Thus the situation today is that for the banking system as a whole, outstanding monetary claims in the form of currency and demand deposits are of the order of $145 billion, to meet which the Treasury holds a gold stock of less than $16 billion. This is not the end. By what is known as the gold exchange standard, foreign central banks count deposits in United States banks as the same as gold. This is because the Treasury, at least so far, will redeem gold claims presented from abroad at par; that is, it will pay out gold at the rate of one ounce for every $35. This has been an expensive process: it has drained out some $8 billion, or over a third of our gold stock, in the last dozen years. I have not been able to compute the total of monetary claims on the world’s gold stock, but the amount is fantastic.

It takes a keen student and a mathematician to determine just how much the money today is adulterated, for money managers have become adept in developing various devices to conceal the exact status of the currency. Thus, the Treasury figures for official gold stock do not mention that they include $800 million of gold borrowed from the International Monetary Fund from 1956 through 1958. In addition, last year the Federal Reserve and the Treasury entered into a number of so-called swap arrangements by which, in effect, they obtained from various foreign central banks the equivalent of over $1 billion in exchange for a super convertibility guarantee, which means that another billion in gold must be set aside to meet these obligations. These devices are too abstruse for the ordinary citizen to follow, even for some astute bankers.

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Without knowing precisely the extent to which it has been hoodwinked and defrauded, the general public is becoming increasingly suspicious of what passes as money and is showing an increasing eagerness to get rid of money in favor of objects of known worth. Among those substances of actual wealth with the greatest certainty and stability of value are the precious metals, gold and silver. It is paradoxical that the two countries of the world which historically stood for personal freedom and the right of individual property, the two wealthiest countries in the world, namely the United States and Great Britain, are the only two countries in the free world whose citizens are forbidden to hold or to own monetary gold. In the United States this prohibition has been recently tightened and extended to include the holding of gold not only at home but abroad, and the Treasury is beginning to look with suspicious eye at objects of art in gold. Before long they may be looking into the mouths of taxpayers for hoarded gold.

I have long urged the view that a principal cause of social and political unrest in Asia and Latin America has been the depreciation of money, which has been accelerated by the action of governments in withdrawing silver money from circulation and substituting flimsy, depreciating paper money. The process began around the turn of the century and was encouraged by American money doctors who went around the world prescribing various forms of managed money to cure all economic ills.… The United States, which invests billions annually to promote stability in underdeveloped lands, could travel further in this direction if it would by precept and by example encourage these governments to abandon managed money and paper currency and to return to good silver coinage, both as a medium of payment and as a standard of value.—Excerpts from an address by Dr. Elgin Groseclose before The Cosmos Club, Washington, D. C.

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