S C I EN C E
O F VA L U E
N A TU RA L ECON OMI C LA W
Y
H EN R Y
fi
A WI E
B A L T I M OR E
WI LL IA M S
W I L ' I N S CO
.
C O PY RI G HT
BY
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1 920
PR EFAC E
About thirty years ag o I acc i dentally stumbled
upon one o f the most important truths in the
world o f science ; the key to natural law in the
social and economic world ; the key to natural
laws that control the growth o f civilization To
unlock the door of science with the key was a
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work of research into millions of facts a work
almost without end
S ystems o f finance and political economy have
been built around a false premise and no matter
h o w logically a writer may have reasoned he could
not arrive at a right conclusion from his false
starting point n o progress w a s m ade in unravel
ing industrial problems or in abolishing a slavery
of labor sm e e the time of Aristotle
The thinking world has been chasing solutions
of labor and capital money and wealth fo r cen
turi e s only to see o ne nation after another rise
to wealth and power to fall in ruin and barbarism
Taking a wrong starting point we travel ever
so far and in any direction but never at any right
conclusion ; such h as been the case with our social
and industrial problems
The wrong starting point i s found in saying
labor is the Caus e of the Va lue of goods and o f
Prop erty and th e market p rice i s ma d e by ad din g
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P RE FACE
4
up various costs of labor from producer to con
sumer The self evident fact i s in plain sight
namely instead o f labor being the cause of value
labor cannot be employed in any line of produc
tion unless value will attach t o the product in
the market unless more value will so attach
than w as spent as cost for labor Va lu e i s the
The occupation of labor i s a
Ca us e of L ab or
result of market values The common mistake
i s found in treating labor a s a cause of value
treating value as an effect of labor in spite of
millions o f self evident facts to t h e contrary
S ome years ago the Austrian S chool o f P olitical
E conomy discovered the prevailing theory of
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value w as wrong and asked the question
if
labor is the cause o f value what then is the cause
of the value of labor ' Will y o u chase value
around a circle like a cat chasing its tail ' The
Austrian S chool produced a new theory of value
seeking to find a cause o f value outside of labor
in what they called marginal utility but with
no more success in solving problems than the
theories they attacked because value i s itself a
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fi na l
c au s e .
L abor works because value will attach to a
product from s om e outside source and it is not
permitted t o work unless m o re val ue will attach
t o a product in the market than the cost of such
labor The self evident true premise i s j ust the
reverse of the accepted theory V alue is the
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PR
E ' A CE
5
primary economic cause while labor i s but one
of its principal effects V alue has no cause the
human mind may conceive ; it is o ne o f the great
inscrutable creative powers of the Almighty under
the control o f natural law like heat light elec
tri city and life itself ; we cannot discover its
cause
V alue is the cause of labor in all its many
occupations I t has created the intelligent la
borer from the savage and it has developed
civilization as a living organism under a super
hum an plan o f which man has ever been un c o n
scious V alue directs the way labor must go
th e way capital and wealth must develop its
laws come t o us in the circulation of money
I t may not be clear to the mind j ust how a
natural law m ay compel labor to work at tasks
it does not like to work out a plan for the general
good when it seeks only t o gratify its selfish
desires But when we recognize the circulation
of money as being value in action under the
control of natural law it is not difficult to s e e
that without money labor will starve in a civilized
community that the control over money by nat
ural law directs labor in the way it must go
The capitalist and employer has no such power
o ver labor as he i s given credit fo r having ; he has
no mine or cave or mint from which t o draw
unlimited supplies of money to pay impossible
wages which are limited and controlled by n atu
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PR E '
A CE
ral law The employer must sell something that
labor sends to market to get money to pay labor
and sell it to the mass o f consumers who are
mainly the mass o f laborers What an employer
will have labor produce is not decided by his
own will and caprice ; he has no control over the
market price at which a product may sell except
to a very limited degree What labor may pro
duce in great quantity and variety is decided by
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the world s markets and by the circulation of
money among consum ers in each country P rices
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in the world s markets being under control of
natural law it follows that prices in lesser markets
are under similar control but with more room
for variation
V ast systems of natural law establish a general
sea-level of prices and general rates of wages
according to a standard of living which is the
basis of ev ery civilization S uch laws cover a
world of facts and are like laws of gravity that
establish the weights of all things on the surface
of the earth and hold the sun and planets to
their courses
The reader is no t directly interested in the great
general scheme of progress fo r the human race
during centuries o f the past and for centuries
of the future but he is deeply concerned with
the laws that fix the terms of his daily life laws
which distribute money upon which his daily
life depends
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PR
EFAC E
7
The individual finds his f amily life tied up to
s ome general plan for the good of mankind he
is forced t o suffer wars panics hard times disease
poverty vice crime and insanity because human
law fails to harmoni z e with the natural order
and he wants to know how the nation to which
he belongs may conform its own system of law
to the world system of ci vili z ation
Because physical science has been quite suc
ce ssful in discovering and applying natural law
there seems the best of reasons to expect that
science will discover and apply natural economic
law but to this day all such efforts have resulted
in total failure and no discovery of a single law
for natural order in the social world has been
established
After natural economic law has been disc overe d ,
the failure on the part of physical science b e
comes clear for the simple re ason that e conomic
laws relate to living things to growth and move
ment of a social organism while physical laws
d eal with the activity of non living matter and
forces
In th e physical world for example a natural
law fixing the weight of one cubic foot of any
substance will give each minut e particle of it the
same prop ortion of weight but such i s not the
case with living things ; there is no such fixed
relations between life and the substance with
which l ife wo rk s
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R FA CE
8
P E
In the s o cial worl d prices are like w eights an d
are under the control of a natural law like gravi
t ati o n ; yet the price of any class of goods may
change in either direction and must be permitted
to change in either direction and must meet
demands fo r changes in the living organism
There is fo r example a natural law governing
the length of human life which p robably controls
the birth rate By this law we calculate life
insuran ce with great ex actness and kn ow almost
to a day when the last mem ber of a class of one
hundred thousand insured will die but we are
helpless to say when any one of that group may
die
G eneral economic laws govern great masses
of facts which divide into classes und er other
laws pri ces for each class of goods and different
lines of goods and wages for different classes
of labor seem outside the law but are on th e
whole under its control
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N ew Y o rk Ci ty , M
arch,
19 2 0 .
C O N T ENT S
CHAP TE R
1
A W o rl d D i sease
11
CH A P TE R
L ab o r
an d
N
a tu r a l
27
L aw
CHAP TE R
T h e C os t
of
a nd
43
4
I n t e res t
53
CHAP T E R
C r e di t M
3
L iv i n g
CH A P T E R
Pr o fi t
2
5
oney
69
CH A P TE R
C i r c ul a t i n g M
6
oney
92
CHAP TE R
7
C ou n t e rfe i t Ci rc ul a t i on
1 10
CHAP T E R
8
1 27
CH A P TE R
9
B ank i n g
1 39
CHAP TE R
W hy M
oney i s
Pa r as i t e
10
St ri n g en t
163
CH A P TE R
11
Ev o lu t i on— A T h eo ry
of
'o y -Ce ll s
D e v e l op m en t b y
175
9
10
CON T EN T S
CH A P TE R
L and l o rdi sm
19 4
CHA P TE R
T he
W ay Out
12
NA TU R A L ECON OM I C L A W
C HA PT E R 1
A W ORL D D I SEASE
Two very common sayings are used to excuse
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our faults What we don t know can t hurt us
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and We cannot lose what we never had but
in the most important affairs of life what hurts
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most is what we don t know and we lose most by
not getting what we never had It becomes
extremely difficult fo r a new science to tell the
’
people what they don t know and explain to
them how th ey may get what they never ha d in
the history of the world
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When the C zar s G overnment in Russia w as
destroyed together with its police system courts
and laws its O ppression and tyranny the people
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—
were seeking they knew not what trying to
recover what they never were permitted to hav e
from the good things in l ife
The world was surprised at the quick re vo l u
tion in Russia overturning the autocracy of the
C zar with s o little loss of life surprised at the
failure of the ruling class with an army in the
field to defend its power and privileges
The world re j oiced along with the wild re j oicing
of the Russian people at the prospect of creating
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NA TU RAL EC O N O M I C L AW
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a new and beautiful world where misery had been
the l o t of tens of millions for centuries to see
liberty and plenty for its people with the O p
p o rtunity to plan each life along lines of j ustice
and happiness
In a short time the whole scene changed in
Russia and the world outside of Russia stood
aghast at unf oreseen results for something more
than the old ré g im e o f the C zar had fallen ; the
structure o f civilization was torn apart the savage
was no longer under the control of law and order
It is doubtful if any student of politics could
have predicted the quick change of events in
R ussia after the first revolution the civil war
that followed from counter revolutions seeking to
put fatal theori es In practice
What is the protective influence surrounding
civilization that prevents looting of we al th mur
de r an d wholesale crim e '
What gave way in R ussia to unloose the Bar
barian brute in a vast population to permit
thousands to die from murder and starvation
and as many more from disease th at otherwise
would not have appeared '
The G overnment of L enine was not without
a great ideal which it hoped to realize although
it must swim in blood o f the common people to
reach an end for G overnment The ideal was
to abolish pri vate pr o perty to make one common
plan fo r the government o f the whole world
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A
W O RL D D I SEAS E
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which has been the religious ideal from the begin
ning of an organized church and system of
religion
The ideal of L e ni ne l sm was to secure the rule
although it would put
o f the moneyless man
an ignorant brute in power and give reign to
all the thieving and murderous instincts of the
dormant savage What had fallen out in Russia
was the long age institution of private property
up on which the circulation of money and the
pr ogress o f mankind i s based by natural law
It was n o t the rise o f L enine and T ro tz k y to
power that destroyed private property in Russia
it was the abuse of pri vate property under the
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C zar s G o vernment the failure of private property
t o carry forward i ts b e n e fi c e nt functions for the
welfare of the masses ; it w as a concentration of
wealth to a small class of absurdly rich property
owners
A few in R uss1 a realized it was not the mere
rule of an aristocracy that was destroyed but
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no one realized that a world s civilization was in
danger of the torch that priva te property with
its roots buried deep in the past was t o be torn
o ut of the living body of the social organism
A few fanatics in Russia as in other coun tries
preached a religion for the worker promising
wealth with ease and luxury by taking wealth
from the rich and they found the ground pre
pared for a new religio us crusade and for a new
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NA T U RAL ECON O M I C LAW
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form of government with an army ready for the
men w ho had courage t o seize the power
A civil war against private property fills the
world of property owners outside of Russia with
a fearful distrust in their own working classes
a fear that a similar crusade o f religious fanatics
cannot be kept from spreading over all other
governments and the greater the wealth the
greater the danger
F anaticism in Russia is not led as many sup
pose by ignorant and brutal men ; on the con
tr ary it called out leaders w h o had devoted their
lives to a study of economic theory ; men who
were university graduates and library rats ; men
without business experience who spent years in
the study of false and fatal theories of human
aff airs
There were many in Russia who owned small
tracts of land and other pro perty and the fanat
ics who sought t o abolish capitalism feared the
small owners would rush to combine with those
of great wealth and would restore the capit alistic
system O n this account there was a wide perse
c uti o n and execution of all unbelievers against
the new religion who owned property or who
did not work with hands and muscle for daily
wages M urder by wholesale and famine which
starved hundreds of thousands came to Russia
a s it has in o ther re l igl ou s w ars
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A W ORL D D I SEASE
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The civilized world outside o f Russia trembles
in fear not so much about what is taking place
in that distracted land because its misery should
make all other people recoil from a like e xp e ri
ment but in fear that other attempts at abolishing
profits o r experiments i n G overnment ownership
will have identical results
It is the chain o f events in Russia all have
reason to fear ; the chain that once starting can
not be stayed until bloody revolution and its
evil consequences have run their course of murder
and pillage when unbelievers in a new religion
have been silenced o r destroyed
C an this tidal wave n o w pulsing among the
laboring classes in all countries be held back
in time ' C an reforms that will satisfy the de
mands for the future and satisfy the natural
order be instituted in time ' o r will the wealthy
classes seek to hold the old order of unj ust dis
trib uti o n until civilization i s buried in o ne com
mon grave of anarchy '
The question in the m ind of every student of
today is why the first revolutionary government
of ' erensky having the approval of a vast ma
r
i
of
R
ussian
people
could
not
maintain
its
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power with a great army in its control ' Why
it was overturned by a mere handful of fanatics
led by a few sailors and soldiers '
When a people hold a common belief concern
ing any fundamental instituti on , and by that
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NAT U RAL EC O N O M I C LAW
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belief demand the institution shall be abolished
as was the case with the wealthy class in Russia
when property as the source of power has lost
its usefulness in the body politic vast changes
may come from forces that seem o f no importance
at th e time
A people come to belie ve a false theory about
property on account of the contrast between the
idle luxury of the rich and the hard lot of the
toiling millions on account of the failure of
wealth to relieve the distress of common people
and they seek to destroy wealth which seems to
be the cause o f poverty among laborers
N o one who h as made a study of S ocialism and
its theory of capitalism will deny that the present
government of L en ine is putting such theories to
a logical conclusion and to a practical application
I n the affairs of government
In seeking to
abolish capitalism the theory makes no distinction
between the small owner and the millionaire ;
property as an institution 1 s attacked and if the
small owner stands in the way he must be ex
terminated
L enine and T ro t zk y have many faithful de
fenders i n other countries who recognize that
owners will fight t o retain their property The
small owner will fight harder than the few rich
and therefore they excuse the rivers of blood
that flow in Russia and the famine that kills
more than t he w ar It i s the small owner who
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NATU RAL E C ON O M I C L AW
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h as
been responsible for the downfall of civili
z ati o n in the past
The same evil is now threat
e ning all the world
and a j ust distribution of
wealth to millions of small owners is the true
remedy
A dmitting the concentration of wealth to a
millionaire class is an evil that will destroy civili
z ati o n ; it does not follow that we cannot secure
a natural and j ust distribution and must make
fatal experiments in government ownership
T h a t the m illionaire class must be abolished
may be admitted ; in fact must be admitted if
our civilization is to be saved but ruthless changes
of wealth can do no good and must work harm ;
we can only cure a long standing disease as fast
as the patient may return to normal health
A rise of the savage to civil life came from the
institution of private property and from the fact
that some land w as more fertile than other land
which would give an easy living to its owner
but this difference in fertility i s wholly ignored
by socialist theories although all pro gress and
all life human animal and vegetable depend s
upon it
When it was discovere d that a simp l e cultiva
tion of the soil would greatly increase supplies
and gl y c more than the cultivator could himself
consume property took its root in the land ; th e
land owner became the lord of the e arth and
slaves captured in war was the first labor to
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A W ORLD D I SEASE
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forced to work the land for a master and
employer
N o matter how much capital and machinery
a people may use its us e will depend upon the
fact that only a small part of total labor need
to work upon the fertile land and supply all the
people with a living that half the total labor
may be employed at other work
The problem of the world h as always been
to find work for the labor set free from providing
its own living When it was clear that fertile land
under cultivation would give the owner a living
without work and would allow a surplus living
with which t o employ other labor it followed that
only fertile land would be used and a margin
o f fer tility w as established which became the
foundation o f civilization
L ands must produce more than the living of
the labor that improves and cultivates them
and poorer lands will no t be cultivated ; hence
the labor cut o ff from the land must either work
for the owner of fertile land work poor land or
m i grate
The land lord controlled no t only the labor
on his own land but also the labor th at must live
upon the surplus and thus slavery w as i ntroduced
by forcing savages t o become laborers and provide
an easy living fo r the property owner
P rivate property h as its birth in slavery war
and murder and is based upon the fertility of
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NA T U RAL ECON O M I C LAW
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soil but natural social law was no t then in power
and mankind w as sub j ect to the law of brute
creation where the strong will take the life and
living from the weak
It w as a long time in the history of the world
before any advance was made above land —owning
laws and governments ; the church and state were
all based upon the power given by land owning ;
the chiefs of state and church were rich landlords
while all the labor w as slave usually a conquered
people and even merchants and educated classes
were long held as slaves
The owner o f the land could no t consume all
the surpl us living by his own demands could
not u s e it all by employing surplus labor to
improve hi s land Trade was developed to sup
ply the rich land -o wning class with a higher
standard o f living and thereby trade became a
basis fo r the advance for civilization by making
a better standard o f living the hope of enslaved
laborer
The first natural law t o assert its power is
found in the cost of surplus labor to the land
owner which cost creates a s e a level price for
a living a cost level for all prices both for goods
and capital
When the landlord employed labor t o build
or other w ise improve h is land the product of
this surplus labor had a cost of two units of
living ; it cost the living of the labor working the
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A WO RLD D I SEA S E
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fertile land and a li ving fo r the other labor cut
o ff from the soil ; this fact made a price for goods
and capital consists of two units of living or
two units o f money cost when money is limited
to buying a living
The landlord had an enormous surplus he
wished to exchange it fo r goods from other lands ;
and a cost o f two units o f living for other goods
forced him to sell h is s urplus at a l o w price and
from this market price profits were created The
low cost of surplus living from fertile lands meas
ure d by tw o times cost in other goods made trade
and commerce profitable and introduced money
which could then pay fo r itself out of the gains
or difi e re n ce in costs from a variety o f products
When money w as introduced the power of the
landlord over labor was divided with merchan ts
with money lenders and with other employers
because the natural law forced a price fo r surplus
labor equal t o tw o units of living When the
landlord could not himself employ surplus labor
he had t o pay the gain to other employers by the
sale of h i s surplus at a price which gave two
units of living and gave t o other employers the
same profit from labor the landlord himself
received when i m p ro vm g hi s o w n land
In whatever form changes o f government ap
p e are d in the past from war o r religion land
owning w as at the foundation seeking to change
the ownership of property from one class in power
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NA TU RAL E CONOM I C LAW
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to the class seeking power The modern labor
movement is the same force at work seeking
control over property for the power it confers
uniting millions by the hope that they at last
will obtain the property and the power we
confers on it s owner
T here i s a natural law working at the fo un da
tion of every war and revolution a law Seeking
t o change the ownership of wealth seeking to
lift the mass o f the people to a higher standard
by forcing ownership to include m o re classes of
people and to widen distribution until millions
of families shall en j oy the blessings of wealth
N ature makes it plain to a stupid man that
he can live with the least labor where the land
is fertile and where the climate i s favorable
ivilization
concentrates
population
on
belts
of
C
the most fertile lands in the most favorable
climates where the le ast work will pr ovide the
most abundant living
When money was introduced s o that a people
must buy its living with money the natural law
limited the quantity of money that buys a living
and forced money to divide labor into great classes
one of which provided the total living setting
free o ne class with its living supplied from using
the most fertile land
T w o units of living had to be provided one for
the worker on the land and a surplus for the
worker cu t o ff from the land and thereby w as
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A W O RLD D I SEASE
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created a sea-level standard price for all goods
at two units of living permi tting o ne unit of
living to measure what we call profit and be
equal to half the cost of living for the Whole
people
Here is where confusion in theory originates
on account of the Single labor cost of goods and
the double cost of the same goods when two units
of living must be supplied
If o nly the labor directly pai d for producing
goods is considered it leaves other labor without
hope of getting a living L awyers governm ent
servants doctors writers printers actors artis ts
and the like would not be able to live unless the
retail price of goods carried the money to buy
a living for the workers who do not produce what
they consume
When labor working in factories on railways
street cars and the like claims all the money in
wages which the public may pay for goods or
service ; such claim becomes impossible because
the wages of other labor must be included in the
market price and must be s eparated from the
cost by taking o ff what we call profit which is
but a measure of wages for other labor
When the socialist theory asserts that profits
may be included in the wages of the work er and
when it seeks to have organi zed labor lift its
wages to include profits it puts other labor out
of work and puts the money out of circul ation
that would pay oth e r labor
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NA TU RAL E C O N O M I C L AW
24
The false wage theory of L en ine In Russ1 a I s
the main cause of his failure to start industry
His radical attempts to pay the factory worker
the whole selling price of the factory product
and destroy profits of capital succeeds only in
destroying the wages of othe r labor along with
idle factories and ruined industry
The railway factory and farm improvements
of a country consume vast quantities of past labor
that has been crystallized into what we call
capital but capital demands present labor not
only to O perate it but to keep it in repair to
rebuild and improve it and to create new forms
of capital
How is the city consumer who depends upon
capital construction and capital operation to buy
his living with money unless the selling price
of goods will hold the money in the city which
its po pulation must use to buy i ts living
The selling price of any labor product must
b e high enough above its own cost to include at
least o ne other cost of living for the labor that
has i ts living Supplied Buying from the market
what labor sends to market demands that enough
money must be provided to buy tw o equal shares
The money price in the market must carry the
money with which all people buy goods ; each
class of goods must carry enough money to market
them and carry the wages of other labor not
paid for producing good s '
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NA TU RAL E C O N O M I C LAW
26
labor each day ; such is the power and importance
of capital
“
—
But the S ocialist asks
S hall the owner of
capital enj oy the advantage of all this power
without paying the past labor that produced
capital ' The owner must pay labor according
to nat ural law but it cannot pay present labor ;
it can only pay t h rough the distribution of wealth
C apital has little power over present labor and
that little consists in getting a living from present
labor without working by taking a part of th e
surplus living from fertile soil
C apital must pay labor but must pay j ust as
any buyer in the market pays for any labor
—
product b y buying it at its market price In
selling capital at a profit the natural law e xpects
the demand fo r labor to become so gr e at that
wages will rise to a point where a surplus in wage s
will permit laborers to become the chief buyers
of capital as they are the chief buyers of goods
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C HA PT E R 2
L ABO R
AN D
N A T U RAL L A W
When a nation suffers from strikes wars revo
l uti o n panics and hard times when millions can
find n o work when money refuses to circulate
its people are made painfully aware of the fact
that a higher power than government is in control
over the great issues that make or break a nation
When a people suffer from some violation of
economic law many will be exempt and fo r that
reason we seem to be without law in the social
world for we think of natural law as being a
system of exact relations between all of its parts
without exception to its rule
N atural law which governs the growth of living
species from the lower forms of life is now creating
a higher man by means of what we call civiliza
tion creating a new organism we call the body
politic and such natural laws for living things
differ radically from natural physical laws g o v
erning the n o n-living world
There is a very important difference between
natural law in the physical world and the same
law in the living world The purpose of creating
material things has been fulfilled no more ma
te ri al s are to be created every chemical combina
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NA TU RAL ECON O M I C LAW
28
tion for all time i s provided fo r forces and sub
stances therefore have found fixed and unalterable
relations
In the world of living things o n the contrary
the D ivine purpose has not been fulfilled and
changes are in constant demand We are born
liv e and die in countless numbers and it may
be that changes from birth and death are to
bring forth an immortal man w h o will live an
immortal life in the ob j ective world
N o man may doubt that his life and well being
so far as material comfort is concerned , depends
upon a daily supply of money to buy what he
needs but we are so familiar with daily spending
that it passes without a thought when in fact
it is the greatest miracle of all time
The delight in spending money is the chief
delight by which mankind has moved upward
and forward in the rise of civilization S pending
money is the motive power of progres s N ature
neglects n o lure that will make the market more
attractive to the spender with the full knowl
edge that when spending becomes a passion
producing will take care o f itself
The most importan t fact to get clearly in mind
as we look upon the world is to see that spending
’
money is the most important ob j ect in a man s
life ; without spending he dies or becomes a
savage S pending money consists of two great
quantities which we may well call the money
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LABO R
NA TU RAL
AN D
29
L Aw
for the rich and money for the poor M oney of
the poor only comes to the man who works and
comes as daily wages it consists in a supply of
government coined or printed primary cash The
money of the rich on the other hand does not
call for work or wages ; it i s money earned in the
past the value of which has been crystallized
into capital that pays interest rents or dividends
The owner of capital finds a great quantity
of money at his command in the banks of a
country by which he may convert past labor
or value of property into the cash that will buy
anything in the markets
O ne kind of money means a living for the
spender by working for that living while the
other kind of money means a living by the spender
without working exchanging the work o f p ast
labor into a living derived from the present labor
A living is a thing of primary importance and
the money that buys that living is under the exact
control of natural law The O peration of natural
law for the circulation of governm ent or cash
money needs therefore our first attention
The method by which money is forced to act
its part in securing a living fo r workers is quite
simple A unit o f money is a unit o f value and
buys goods at an equal value ; dollars worth o f
money for dollars worth of goods
The cash of any country n o matter whether
it is gold o r paper h a s the same general law
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NA TU RAL ECONOM I C LAW
30
b ehind
its value ; it goes into circulation on being
p ai d o ut to labor of eve ry description from ditcher
to C ongressmen and is then collected from that
l abor by the sale o f goods and services consumed
in living it i s money devoted to buying a living
b y working and can buy nothing but the living
Wh en a fixed quantity of money keeps repeat
ing its movem ents by being paid to laborers as
wages and spent for goods over and over again
that money thereby establishes a system of meas
uring wages for labor and prices fo r goods
C ash
m oney in such case i s obeying a natural law
fo r all we can understand about a natural law
is that it comes down to us as a system which
m easures equal forces and equal units in equal
times for certain ends
It is held however that units of money are
no t accurate measures because costs of living
change and because prices vary in every possible
way but the whole quantity of money is a
m iraculous measure and all the more wonderful
b y allowing changes in prices and wages creating
different foods which the body politic r e qul re s I n
its rise from a lower to a higher standard of
civilization
When money is paid out to labor a s wages the
fertility o f soil will determine a certain division
in that money ; labor will not be employed and
paid with money unless the soil it works will
produce more than its cost o f living M oney
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LAB OR
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NA T U RAL LAW
31
c annot be paid to other labor from the surplus
of fertile land unless the product will sell for two
u nits o f living o n e unit fo r the labor working
the fertile land and another unit for surplus
labor
When money measures wages and prices the
natural law establishes a standard fo r all wages
by a standard cost for all living but leaves classes
of wages and classes of prices free t o move above
or below an established standard like waves o n
the fluid ocean rise or fall from winds of demand
above or below sea level
When a quantity of cash i s being paid o ut in
wages and collected from labor in buying a living
that quantity will exactly measure the daily cost
of living for all the people and measure a daily
The function
W age to balance that cost of living
o r circulation of cash i s s o limited
by natural
law that it can only pay itself out in total w ages
which e q ual total cost o f living and u s e all the
cash in so doing over and over again
M oney cannot come into u s e until savage tribes
have a settled existence learn to cultivate the
soil to trade by barter with other tribes The
natural laws that govern the rise in species up to
m an controls until higher laws can begin t o
develop a social organism by which the brute
enters into a spiritual and civil manhood Tribal
government must arise before value will appear
to give strength to the tribe by making living
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NA TU RAL ECON O M I C LAW
32
easier from cultivating the soil and from trad
ing with other tribes
When money appears it will automatically
divide slave labor working the fertile land into
tw o classes o n e class providing all the living and
the goods consumed in living while another class
w ill work at other occupations
M oney paid in wages seems to make no dis
tinction between laborers yet when wage money
i s spent in the market it will be found that half
o f it w as paid to labor working fertile land while
another half w a s paid t o labor o f other kinds who
buy the surplus from the fertile land By this
d ivi si on of money into two parts the soil provides
tw o units in cost of li vm g and fixes a margin of
cultivation or fertility by making half the money
cover the cost of all the living and the other
half create a selling price above that cost from
which profits arise
When the whole quantity of cash is turning
over as wages and is collected from the sale of
a living it follows that half the money is one
cost of labor and half i s another cost ; two dollars
I S paid to two classes of labor one dollar being
cost of l i vm g fo r tw o the extra dollar being
credited t o the fertile land
When the market i s reached the two dollars
become a demand for living that h as a cost of
only o ne dollar to supply and money m easuring
this demand will establish a s e a level price for
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N A TU RAL
E C O N O M I C L AW
e xtra supply of cash and to distribute the extra
cash to other labor that must buy the surplus
but must find other work to obtain the money to
buy its living
When the S ocialist attacks profits and would
abolish them the fact should be called to his
attention that he would abolish the inherent
difference in soils mines and other natural
resources an impossible undertaking
—
The body politic is a great mass man having
immortal life while its units of human life come
and go by birth and death in countless numbers
The mass man has a cost of living which it is
the business of money to measure , making the
living of each hum an depend upon the mass living
The mass man demands steel for railways
machinery lum ber and building material chemi
cals and countless goods that no individual con
sumes but which are nevertheless a cost of living
for the body politic charged up in the ma rk e t
price of goods which each individual pays for
When o il carries a tremendous profit from a
great difference in fertility of oil wells such a
profit only carries money because it can take the
load the easiest and thereby distributes the money
to the consum ers of other goods
The body politic demands a certain quantity
of oil wheat coal steel and the like for the
organic living and a part o f the total money is
used for e ach ne e d
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LAB OR
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NA T U RAL LAW
35
The mass-man must have material fo r its living
in quantities that change every day and therefore
the limit in quantity of cash money forces de
mand to change from one commodity to another
by changes in prices and profits and thereby keep
the correct proportion in variety of supplies for
the social organism
The money t o buy wheat will pay for a given
quanti ty each year at a standard price and should
the crop be short the same wheat money will pay
a higher price for a short crop but should organic
needs demand an increasing supply of wheat the
price will rise by taking money that was buying
something else the price o f which must fall
What can be more simple and clear than the
simple manner in which cash measures the cost
of living ' What can be more stupid than the
explanation given fo r changes in price by saying
all prices and wages are regulated by a natural
law of demand and supply
D emand and supply is the actio n and reaction
of a given quantity of money paying wages that
buy a living and reacting in prices fo r that living
but it is always equal and always opposite and is
n o t a natural law but a truism a mere balance
of equal force
If a child were to ask what makes a railway
train go and the parent should reply it was by
action and reaction and the child would then
ask what makes the railw ay tr ain sto
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NA T U RAL ECON O M I C L AW
36
“
it meets the same reply
action and reaction
of course the child would be puzzled and could
not understand so also are we all puzzled by
the use made o f supply and demand for e xp l a
nations that do not explain
Wh e n the public wants to know what makes
wheat rise above a previous price the answer
is demand and supply What makes it fall '
“
D emand and supply
Why do wages remain
— “
low fo r common labor ' Answer
D emand and
supply
When a law is proposed an ignorant
— “
press will shriek
Beware y o u are meddling
with the great natural law o f demand and supply
it is the reply to all complaints to all problems
Is it any wonder the whole world is going mad
w ith the failure o f i ts intelligent classes t o give
the first glimmer o f intelligence about social laws
about changes that must s oon take place braying
like an obstinate mule concerning a so c alled
law of demand and supply '
Ruskin saw the need o f light when he said the
present ignorance o f the press concerning eco
no m l c questions and the readiness with which
trivial explanations were accepted was the great
est disgrace to the intellect in all history
N o matter what quantity o f government or
cash money a nation may have it will act as
a measure of the cost o f living and then its func
tion ends The quantity of money may be s o
l ow that only half the people will have work ; it
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LAB OR
NA T U RAL LAW
AN D
37
may be s o poor in quality that trade will languish
when it might be prosperous The money a
government mus t use will flo w in the channel
prepared fo r it without regard to human caprice
or politics
If the money o f a nation is properly employed
and is o f equal units o f value its circulation will
fix its own limits and should that quantity be
doubled the greatest quantity will measure the
same living by lifting prices of goods all around
the circle o r by putting more labor at w ork t o
increase supplies at the o l d level of prices
The method by which a given quantity of
government money fixes its own limits o f c ircu
lation is quite simple but it calls up most im
portant forces connected with the life of the body
politic
In the United S tates fo r example at this tim e
1 9 19 the total supply of government money i s
about five billion dollars and the total number
of wage earners about forty fi ve millions and
this supply may be used as the best illustra tion
availab l e
In the United States the circulation of govern
ment cash ta kes place by paying o u t a su m of
one hundred million dollars every day in wages
t o about forty fi ve million laborers scattering
that money far and wide over the entire country
It i s quite evident that the hundred million
dollars paid o ut in one day cannot be collected
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NA TU RAL E C O N O M I C LAW
38
the same day from total labor by the sale of a
living If w o rk is to be continuous a supply or
quantity of primary government money must be
on hand to keep paying a hundred million dollars
day by day until the spending of forty fi ve mil
lion laborers will release that s um day by day
to be used the following days and close the circle
of rotation
The five billion dollar quantity of United
S tates cash takes about fifty days to saturate the
demands fo r living money among all the people
it takes about fifty working days for the firs t
’
day s supply to travel completely around the
circle
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While it appears that o ne day s supply of cash
is taking i ts time to travel around the circle the
fact is that no time I s g iven but the quantity is
made so great as to have a supply on hand at
all times to instantly buy goods and to instantly
pay labor without waiting
By not allowing cash any time to circulate
it is forced to confine its functions to a simple
channel of establishing a base standard of living
and a base rate of wages that will buy the total
living M oney to supply raw material to build
capital to distribute wealth and crea te a surplus
for investment must consist of another quantity
known as bank credit
The circulation of standard cash becomes the
base for all activity in the body politic E ach
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N AT U RAL
L A BO R A N D
LAW
39
advance from a lower to a higher level comes from
creating a higher living standard fo r the mass
of the people j ust as one species becomes higher
than another in the scale up to man by having
a higher standard o f living prepared for it from
lower species upon which it liv es
The importance of no t allowing cash any time
fo r circulation must be kept in mind because
units o f cash in human hands become vital
units of life in the body politic and although
cash h as no time given it to circ ul ate it pulsates
with life like units of pro toplasm in any highly
developed species
The mind must get the fact clearly established
that cash money measures daily exi stence meas
ures a life force for the body politic which we call
—
V alue and which is required day by day to
provide a living fo r the social organi sm j ust as
protoplasm endowed with life sustains our own
bodies
A daily sum of money pays for a daily ex
p e ndi ture of human life and measures that human
life by a daily consumption of goods taken from
the market s
The purpose of money i s not to merely allow
a people to live for unless they conform to a
plan of civili z ation nature will sacrifice human
life by millions before an acquired standard of
civilization is given up and before a return to
barbarism will be permitted ; the species i s what
nature seeks to preserve not the individual man
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N A TU RAL
40
E C O N O M I C LAW
M oney is someth ing vastly greater than th e
mere units of exchange for goods which our parrot
like authorities assume it to be A unit o f money
in the hands o f a S pender is superhuman for
then it is a unit of social life endowed with
a consc i ous purpose ; it creates markets and a
standard of living
I n the very beginning of tribal existence before
money appeared the power to seize upon the most
fertile lands became the most important power
ever put into human hands and has so remained
to this day The wars of civilization were fought
to secure rich lan d s and other na tural resources
and slavery arose t o supply labor when a sav age
would no t work unless he w as made a slave
The moment land was put under cultivation
its fer tility j umped by leaps and bounds ; a p o p u
lation could then largely increase and profits
from slaves taken in war soon created a wealthy
class of land owners but when money appeared
the power o f the landlord was divided with
merchants employers and money lenders and
bankers soon became ruling powers on account
of their control over money
In early tribal days when commodities were
bartered and beads or cattle were used in trade
a s token money such commodity money was not
money in the sense we n o w us e that te rm but
it is no t easy to make the difle re n c e clear
R eal money did n o t appear until shipping and
commerce made trade extend beyond the local
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NATU RAL
42
E
C O N OMI C LAW
because time is consum ed in exchanging a surplus
of one kind fo r another A ship had to carry
goods from o ne port to another and credit must
be established between goods the ship carried
and the capital the ship itself represented estab
li shi ng a connection between present and past
labor a connection between ancestors and the
living which must be carried on to posterity
To make credit effective gold and silver played
important parts because they supplied a material
existence fo r an immaterial and abstract value
’
or bankers credit While credit will be taken up
in a separate chapter it is necessary before going
into the more complex relations of money to
understand the very important part that a unit
of money plays in organizing the body politic
We cannot separate units o f money from th e
connection they must have with capital Unless
this connection is explained it will appear th at
cash government money is a mere creation of
law instead of being the most important product
of evolution that h as ever appeared on earth
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C HAPT E R 3
T H E C OS T
O'
L I V I NG
A n oil well producing one-fi fth of a barrel
each day is pumped with profit ; the labor cost
is not t o o great for such poor soil producing oil
but another well may flow ten thousand barrels
each day and have a labor cost per barrel fifty
thousan d times lower than the well on poor land
and bear in mind oil is in cluded in our total cost
of living
This difle re nce in cost o f oil and all other
goods as they appear in our markets arises from
the fecundity of nature and therefore no human
law fi x mg costs or fixing selling prices can do
other than disturb the natural health of the body
politic T he difficulty between labor and capital
has its source in obstructing the natural regulation
of prices and thereby interfering with the natural
he althy functions of the body politic
The market concentrates all classes of goods
into one great reservoir so that each class must
bid for a limited amount of money coming from
wages of labor Total wages of labor and total
prices of goods must balance but the wages of
labor producing any o ne class of goods can never
be made to balance with such cost or with the
market prl ce of any particular class
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N A T U R AL
44
E C O N O M I C LAW
Wages of school teachers lawyers doctors
government employees and others must be c ar
ried in the selling price of goods loaded upon
goods as a price above cost for unless the market
price above cost will carry the wages of secondary
labor no money will circulate with which that
labor can be employed
In a great pool we c all the market e qual
bushels of wheat must sell for equal sums of
money although the wheat from a field producing
fifty bushels per acre will cost onl y one-fi fth as
much as wheat from a field producing ten bushels
per acre
The most fertile oil wells and wheat fields
will not supply the whole market ; hence poorer
lands are called into use at higher costs permit
ting the poorer lands to add to the supply so
that when the whole crop of wheat and o il and
other commodities are pooled th e market will
establish a s e a level price of two times labor
cost although particular barrels of oil or bushels
of wheat may sell for a hundred times its labor
cost
It should be quite clear that an employer of
labor or land owner must pay a living wage
before labor wil l work the land and land of a
lower fertility cannot command labor
The
natural thereby law forces into us e lands that
will produce more than th e living of its cultivators
and cuts o ff other labor from making its living
upon the land
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TH E
C O S T O F L IVI NG
45
U nless the market was governed by som e
“
standard of cost and unless the money offering
“
standard cost
to buy wil l send prices above
to create a margin of profit there would be no
cir culation of money no trade production would
then be l imi ted to supplying the land owners
with slave labor leaving surplus labor to starve
or population to remain poor and sparse
The first action of natural law reg ulates the
quantity and circulation of cash so as to establish
a standard cost for the market and a standard
price above this cost ; and it secures this standard
by forcing into use the most fertile lands so
that only a part of the total money will supply
the total living
A standard cost of living becomes the basis
of civilization and a nation remains at a low
savage level when the standard of its l iving does
not advance by multiplying the quantity and
variety of goods it will consum e The higher
standard of civili zation comes from creating more
and more capital which increases the quantity
and variety of goods and creates new appetites
and desires to consume them
S tandard cost measured by the circulation of
money is a very simple process based upon the
fact that labor when forced to work the most
fertile land must have its living as the prime
neces sity of existence and the rotation of cash
is automatically lim ited b y the cost of living an d
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NA TU RAL E CONOMI C LAW
46
thereby fixes a cost of living which becomes
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standard cost for the whole market
N atural law comes down to mankin d in the
form of exact measures which create exact stand
ards the advance from lower to higher forms of
so ci al life is governed by standards of measure
ment and our problems arise wholly from some
interference of human law with the natural stand
ards for cost and for market price upon which
progress is based
When cash is being paid to labor it me asures
labor cost and it cannot become an exact measure
unless each unit is of exactly the same value not
only fo r present time but for future time within
reasonable limits Units of cash measure like
any yard stick may be used to measure endless
yards of every kind of material the same units
are used over and over again with no loss of time
so that the total supply of money paid out to
labor will return and be used over again
It is not a difficult task to measure a definite
quantity of labor and goods when a people must
spend money in order to live The chief desire
of mankind is to enj oy life and any people will
spend more and more money for a better and
better living until all the power o f labor and
capital is exhausted in providing the best possible
living
The primary quantity of cash in any country
is o ne that will pay a standard rate of wages an d
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TH E
COS T OF L I V IN G
47
buy a standard living fixed by the civilization o f
the time
The quantity o f cash divides automatically by
using the fertile land takin g the least cash to
produce the greatest quantity of goods and save
both labor and money which must then be de
voted to the production of capital t o develop
other natural resources of metal and mineral that
capital must consume
O wners of the fertile lands soon disco ver that
the surplus they obtain will be very much greater
than they can spend in personal luxury and it
becomes a profit wherever lands can be improved
with capital or where trade and commerce may
be extended
When a land owner employs surplus labor to
improve his land or as his person al servants his
building labor will cost him two units of living
one for the lab or that produces the living and
another for the labor at o the rw o rk hence it follows
automatically that the cost o f secondary labor is
always two times the standard o r average l iving
The fact that the employer must pay tw o times
the cost of a standard living sets a limit upon
fertility so that no land will employ labor unless
its fertil ity will return two times the cost of labor
at the minimum wage rate
A margin of cultivation once establi shed divides
the quantity of cash into two equal parts allowing
only one-half to produce tw o times the living for
half the labor and sets aside one half as surplus
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48
NA TU RAL ECON O MI C L AW
When money divides into two equal parts one
half the money will create the Whole livin g and
the other half becomes wages for surplus labor
that must buy the surplus from fertile soil and
can only do so by creating capital and by improv
ing lands
With the cost of living using the cash day after
day it is not material whether a part of the oil
supply is produced at fifty thousand times the
profit of another part for it is necessary to keep
the whole supply o f oil at price which will permit
lands of lower fertility to supply the whole body
politic with oil
Having soils a thousand tim es more fertile
than the margin of cultivation requires should
rapidly increase wealth and capital and when
machinery and capital are added to goods wages
and standard of living will advance rapidly
When capital is newly coming into existence
it is distributed as a gift from fertile land to
merchants land owners and money lenders If
this gift would come to an end when wealth is
first created and if the whole people were after
wards given an equal opportunity to obtain a
share of the accumulated capital then the gift
of billions to fortunate or lucky owners would
prove itself to be a blessing in whi ch the industri
o us would share
Unfortunately human law operates to prevent
ac cumulate d w e alth from bein g distrib ute d the
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NA T U RAL EC O N O M I C LAW
50
mental problem M oney measures a proportion
of vital force attaching to material thi ngs in prices
of goods and in wages of labor
M easuring force in connection with materials
enables us to apply science to mechanics and
accomplish wonderful results In measuring
weight we seem to be measuring a substance j ust
as measuring a price seems to be measuring a
commodity but weight in fact is a force of
gravity and price in fact is a force of value both
are governed by natural law whi ch we recogni z e
in weights but do not so recognize in prices It is
taken for granted when a man parts with money
to buy goods he is governed wholly by his ap
petite and by a desire for goods but money is
spent to build great bridges railways steam
shovels and other forms of capital for future use
and for which there is no animal appetite without
such an expenditure for capital a higher being
than an animal man could not develop
A man having a surplus of money above hi s
living will spend it to bring him an increase of
money the same as he will employ labor on fertile
lands to get more money than cost The investor
“
gets his increase of money from the time use d
when compared with the use of cash that cannot
“
charge for time consumed
We know that by a law of gravity a stone will
roll down hi ll and change its level because a
force pulls it toward the center of the earth and
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THE
C O S T O F L IVING
51
as simple as this roll ing down hi ll may appear
the pressure that pulls a stone down causes all
movements of force and material in our universe
and is the physical basis of all life as well as of
all mech anical activity
D oll ars of money move by a pressure of the
same kind from a pull of value o r social gravity
which governs all industrial or spiritual activity
governs all development of science education
capital work and wages The pressure by which
money moves is a simi lar difference of levels like
that by which a stone rolls down hill a difference
we k now by the name of profit a difference b e
tween cost price and pri ce above cost
Unl ess there is a difference of level between
cost and price above cost there could be no distri
b uti o n of goods from the lands where labor
works trade and commerce could not come into
existence N o matter ho w complex civi lization
may b ecome With cities factories steam com
m uni catio n and electric comm unication its com
pl e xity is controlled by pressure from costs an d
prices above cost over the entire economic field
the same as gravity works over the whole physical
and chemi cal field by simi lar differences in levels
E ach and every dollar to become an exact
measure must be equal t o every other dollar at
any place and for future as well as present time
and yet a dollar will have no social force unless
it can move and it will not move unless it has
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NA TU RAL EC ON OMI C LAW
52
a p rice above cost to make it mo ve ; it must sell
for more than cost before it will circulate
The puzzle which prevente d an explanation of
money as a measure is found in the fact that
each dollar must have a fixed standard value
but yet must have power to change that value
before it will circulate but it gets this addition
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in prices by g i v mg value to time where goods
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must take time to move from producer to
consumer
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Time consumed adds to the value of a stand
ard dollar when measured separately by a circula
“
tion o f credit money
Time saved by the labor
of the past for the benefit o f the present genera
tion is added to each dollar so that it may sell
for more than it cost Why are dollars of interest
s o important that cash cannot circulate without
them move or perform its functions unless units
of interest create a pressure or difference of level
for money ' Working is tiresome A man will
Shirk hard work and seek an easy living without
working The laws of nature take advantage of
this desire and create interest dollars which enable
a man to live without work and thereby creates
an addition to the val ue of cash which pays only
for present labor
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C HAPT E R 4
PR O ' I T
AN D
IN TERES T
most astonishing fact the future historian
wil l discover concerning the present tim e will
be a terrible wave o f red anarchy and revolution
comi ng from the failure of governments to solve
its most elementary labor problems
T he writer of the future will s e e an enormous
accumulation of inherited wealth crying aloud
to be distributed to every man a fund intended
to relieve the world from want fear and anx iety
to abolish poverty and secure permanent prosper
ity and yet for centuries it created only trouble
from its concentration
The red anarchist sees clearly enough that
property should in some way relieve the world
from poverty for otherwise civili za tion is an
admitted failure but he along with s o called
authorities and government Officials fails to see
how Simply the laws o f nature would use the
inherited wealth and compel its distribution to
millions of families
It is quite plain to the man in the street that
if he inherits an estate he may live upon it with
out working either by selling it for money or
from the income if it is suffi cient fo r that purpose
T he
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53
NA TU RAL EC ONOM I C LAW
54
The great inheritance we call capital may not
only descend to private owners but if it passes
to an ever increasing number of owners the
inheritance would s o increase the income of com
mon laborer as to bring about its o w n dis tri
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b utio n
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The income to capital measures more than an
easy living for its owner Its most important
function is to measure an amount of wealth each
year to balan ce its income and the greater the
income the greater should be the share of labor
from the distribution of wealth
S oci alists realize in their z eal for the welfare
of common labor the benefit from our tremendous
accumulation of wealth se e clearly it should rai se
the standard of living for the great mass of the
people
B ut the theory of S ocialism is unable to separate
the value of land from the value of labor or sepa
rate property in land from property in labor and
therefore it wholly mistakes the method by which
wealth would be naturally distributed and believe
vainly that government ownership abolishing
private property will in some mysterious way
bring about the good results they h Op e for
Before we can solve the most simple problem
it is necessary to be able to state the problem
itself and to s o state it that all men may se e it
alike and not have a theory about it one may
change to suit his own convictions or beliefs
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P ROF IT
AND
I N TERES T
55
L et it be admitted as S ocialists claim that
wealth now owned by a capitalist class was pro
du c e d mainly by the common labor of the past
and was never paid fo r that present owners
secured wealth as a gift and have no claim by
which they can establish a better right to it than
a gift
If it is admitt ed that wealth coming newly into
existence becomes a gift to its first owner under
the natural law such a gift does enormously
encourage the rapid production and accum ulation
of wealth and thereby in the end will j ustify
the gift to its first owners
A gift of capital to a small class of owners is
the real bone of contention in all labor disputes
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is at the bottom of the world s unsolved problems
between labor and capital O wners will not
admit the gift and produce silly arguments about
brains and ability bestowing wealth upon a better
class which only intensifies the feeling of wrong
and prolongs an endless discussion
G ranting in the United S tates that two hun
dred billion dollars of wealth was a gift to a class
of less than o ne mil lion families out of mo re than
twenty million that gift sho uld have been a
blessing in disguise by quickly increasing wages
and by giving a higher standard Of living but
it Should subsequently be distributed to twenty
million fami lies
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56
NAT U R AL
E
C O N O M I C LAW
The problem properly stated is wealth b e co m
ing a gift should not remain as a gift after it must
be reproduced by labor but it should then be paid
for in such a way as to permit labor to acquire
each year as much wealth as it must reproduce
We have a natural distribution of goods which
dOe s not allow them to concentrate to a few
families but disburses them to the mass of people
ninety fi ve pe r cent of the annual production
being bought and consumed by the laboring class
while not five per cent of accumulated wealth
goes to labor as a class
The natural plan by which goods are kept in
c hannels of wide distribution should point to the
natural law whereby capital shall have a simila r
wide distribution
When goods are being bought by great masses
of people the money to buy w as previously dis
tributed as wages in such quantity as would
balance the goods or otherwise the goods would
have no market ; the rich could not consume them
The distribution of goods demands a market
price balanced by an equal quantity of money
to make them liquid and that money must be
paid in such way that a j oint ownership will
arise for total goods and total money Two
e qual owners of goods appear one being labor
which has in hand the total cash to exchange for
the goods the other being owners of the goods
who seek to recover al l the cash D istribution
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NA T U RAL EC ONOM I C
58
L Aw
in the annual supply of capital and the owners
of capital a half interest in the money to buy
and distribute a fixed portion each year
But here value of land then comes into play
being able to take a w ay a part of the money for
capital A cost for land is paid in advance of
building and by s o doing the cost of land prevents
capital from obtaining its standard price of two
times c ost and prevents an accumulation of
capital money that will balance the quantity of
capital each year
If land could be consum ed and reproduced the
same as goods the cost of land could be paid in
advance and the price of land would hold money
the same as a similar price of goods L and can
have no cost in money and the attempt to give
it a cost is to deprive capital o f the money it
needs to make it liquid and to deprive labor of
the increase in w ages to buy capit al
The governments of the world have learned by
costly experiments how to supply a quantity of
standard cash having equal units of value ; which
will circulate under natural law with man unable
to interfere
G overnments however cannot coin circulate
or give value to credit money it must evolve
along with capital and supply a quantity that
grows as wealth accum ulates C redit money
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depends upon the time past labor is able to
save the present generation by an accumulation
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P ROFIT
AN D
I N TERES T
59
of wealth but the supply of credit can be inter
fe re d with by human legislation
The first great mathematical problem solved
by primary money was to establish a base line
by creating a margin of fertility below which
the savage must live but giving a hi gher life for
all w ho will cultivate the soil a base line to con
serve labor and permit half the money to pay
labor for all the living and force half the money
to employ other labor O n account of this base
line hal f the vital force of labor is se t aside for
a continually advancing standard of livi ng which
means an evolution of higher and higher types
of social organism
By having half the money as surplus trade
develops by being able to take half the money as
profit and distributes a better living by increasing
th e quantity and variety of things t o be consum ed
P rofit from goods is eaten up very quickly
if nothing more is being produced than a living
It is soon discovered that building ships and
havin g caravans to trade between populous na
tions will greatly increase profits and will create
a rich class if lands are im proved with slave labor
if houses and palaces appeared if armies are
maintained to protect cultivated lands if cities
developed with capital and commerce ;
A merchant spending profit money to build
a ship instead of eating it up will find he has
doubled hi s profits the gains from the Ship will
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NAT U RAL EC O N O MI C L AW
60
not only return its cost but will return the same
profit as if it was secured from a stock of mer
ch andis e
A rate of profit will appear upon which
the success o f ship building and other enterprises
will depend ; if the ship will return its cost money
in one year it will earn one hundred per cent upon
its o w n cost
A merchant having a profit of one hundred per
cent ; being able to borrow money at twelve per
cent may rapidly increase his fleet of ships with
borrowed credit until he discovers a limit in
profit which will cut the one hundred per cent
rate until his fleet will pay a common or stan d ard
rate
The next important step in the arithmetic of
money follows the circulation of cash for although
cash money buys the living it could not ci r ciI l ate
until after credit appeared so that each dollar
of cash could add the pennies of interest by which
it circulates o r sells for more than cost and to
measure interest w as the second success of math
e m ati c s in natural finance
Profit af ter supplying the basic living of the
body politic creates new base lines fo r capital
a base line establishing a rate of profit s o that
when capital will earn more than the base rate
it will develop rapidly L ands must be so
fertile as to be above the base line before they
will be Improved with capital therefore cities
develop because profit from goods will concentrate
in the small area when a city grows
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P R O FIT
I N TERES T
AN D
61
By permitting interest money to buy a living
without working credit is thereby given its ut
most power to circulate and is made more desir
able than cash which must be earned to buy a
living The whole circulation and value o f money
is made to depend upon units of interest and
the n interest will represent a new difference of
levels or a new margin of fertility for t he pro
duction o f capital similar to the margin of fertility
for goods
A base line for profit is created j ust the s ame
as the base line for cost of goods and it measures
a price of two tim es cost fo r capital The capital
base line consists of the total cash profit taken
from the sale o f a living being always fixed at
half the cash spent for living o ne half the cash
then becomes a base quantity of profit money
which will afterward create one o r more dollars
of credit fo r each dollar o f cash profit
M oney for b uilding and improving land must
be advanced before it can be returned by the sale
of capital
C ommerce will develop a rate o f interest that
carries goods from producer to consumer and a
commercial rate of interest will be much lower
than profits obtained from capital which will
therefore have a great stim ulus to create new
capital pay ing four or more times commercial
interest each year
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NA TU RAL E C ONOM I C LAW
62
When a ship will earn one hundred per cent
a year it could pay fifty per cent interest and
return the loan at the end of a year if ships had
to be reproduced each year they would be com
p e l l e d to earn o ne hundr e d per cent s o as to return
the cost and interest each year But a ship will
last many ye ars and if its rate of profit is high it
will h ave a high fecundi ty so that a family of
shi ps will grow from the profit one ship may co llect
to build other ships but as the number o f ships
increase the rate of profit must fall because
total profit is limited to half the money spent
fo r a living and cannot rise above that sum
If ships and other capital grow in quantity
until they take up all the profit from goods the
rate of profit will be fixed by the amount of
capital over which the total profit must spread
If total capital h as a cost equal to half the cash
or equal to total profit the rate will be a hundred
per cent and a ship or other capital could double
itself each year but as soon as it doubled th e
rate would thereby be cut in half
C apital not being consumed as fast as labor
may build it will accumulate until it is many
times greater than the total amount o f profit
money because profit money is limited to half
the cash spent for living
S ince capital will last more than a year the
profit from a ship above its wear and tear may
accumulate as credit and can be used to increase
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P ROFIT
IN TERES T
AN D
63
the quantity of ships until a limit will be reached
wher e the fall in the rate of profit and rise in
rates of wa ges will prevent any further increase
in the accum ulation o f wealth
When total capital collects a hundred per cent
in one year a base rate is established by which
the total cost of capital is equal to total profit
or equal to half the cash spent fo r a year as cost
of living The rate of interest which must cover
all the Cash will then be fifty per cent and thereby
out each profit dollar in half to double the number
of cash dollars that can collect interest making
every dollar of cash collect fifty cents of interest
while half cash is collecting o ne hundred per cent
profit
If a merchant sells goods that cost one thousand
for two thousand dollars his profit will be one
thousand for one thousand that is cent per cent
bu t to spread the one thous and dollars profit
over two thous and dollars o f selling price cuts
one hundred into fifty cents interest and a fifty
per cent rate can be paid illustrating h o w a
measure of interest takes place by natural law
C apital earning a hundred per cent profit will
itself create a rate of interest at fifty per cent
and that rate of interest would then create a
standard selling price for capital at tw o times
its cost to balance an equal standard price fo r
commodities at two times cost again illustrating
the basic measurement upon which all commercial
and industrial activity depends
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NA T U RAL EC ONOM I C LAW
64
When accumulated capit al i s equal to the cost
of goods fo r a year its rate will be a hundred
per cent but will drop to fifty per cent when the
accumulation ri ses until total capital equals two
times the cost o f goods consumed in a year and
will fall t o twenty fi v e per cent when total capi
tal ac cumulates to four times the cost of living for
one year
When the rate of profit is very high and the
rate of interest equally high at fifty per cent
only the very highest grade of fertile lands will
command money to build at that rate and must
collect profit faster than interest will consume it
or capital will be considered a failure
The desire of men t o double their wealth every
year at cent per cent profit will greatly stimulate
the growth of Wealth ; but the margin of cultiva
tion will begin to d emonstrate how natural law
governs the growth of wealth by the fall in the
rate fo r when total wealth greatly exceeds the
cost of living fo r any one year the fall in the rate
comes by total profit being forced to spread thinly
over a vast bulk of wealth
If all land could produce profits as great as
one hundred per cent the limit in quantity of
p rofit acting against an increasing accumulatio n
of capital would bring capital into competition
fo r the limited amount of profit and would cut
the rate o f profit s o that the same limit in wealth
would follow no matter h o w fertile the soil or
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NA TU RAL EC O N O M I C L AW
66
eeping the fact in mind that the quantity
of capital grows until it is about ten times the
annual cost of living it should be plain that its
own cost o f maintenance might consume the whole
of its income and then production and c o nsum p
tion of capital will balance and wealth reaches
its limit in quantity
Another fact to keep in m ind is that d ollars
of profit must spread in thinner layers over a
vast c apital by a decline in the rate ; tot al
profit is absolutely limited by the sum labor
must spend for its living that any sum labor
may save to become a bank deposit cannot create
a market for goods
C apital reaches its goal in quantity when it
consumes all the income it can collect by its cost
of maintenance and for this reason wealth may
grow to an immense total without being distrib
ute d to labor
Wh en consumption and production of capital
balance the income is being consumed as f ast
as it is paid at which time new wealth will not
be created but the ol d wealth on its fertile loca
tions should be subj ect to constant ch ange in
harmony w ith the progress of civili z ation
When c apital accumulates in gre at quantity
while wages remain at a minimum level wealth
is forced to concentrate to merchants manu
facture rs bankers and landowners who get capital
as a gift from fertile soil or other natural resources
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P
ROF I T
I N TERES T
AND
67
Had the natural measure fo r capital no t been
interfered with permitting capital t o sell at two
times its cost its distribution would have been
provi ded fo r and labor would have secured its
share of the total w ealth in a market similar to
the one distributing a living
When the cost o f land was permitted to take
up all the margin of fertility then capital lost its
quantity of money to buy a standard amount each
year at a standard price o f two times cost The
rise in cost of land forced buildings to sell at one
time cost instead of tw o times and prevented the
wage rate from rising above the cost of living
If a builder must pay a cost fo r land in advance
of building that cost fo r land destroys any
profit from the sale o f capital above cost by which
wages m l ght advance When land has a cost
money to buy capital cannot get into the great
stream that pays wages and therefore capital
remains the prope rty of a ri ch class w ho receive
it as a gift
Had capital been permitted to sell a t its natural
price then land would never have acquired a price
and fertility of location would merely have created
greater quantities of capital upon the most fertile
ground as civilization advanced or collected a
higher rate o f profit from the better location
To build to the utmost advantage on the most
fertile locations capital must build into th e air
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NATU RAL EC O N O M I C LAW
68
instead of sprea d ing over more ground an d the
rent wil l increase when the buil ding grows to
twenty floors above th e street or until cost stops
the ris e in height
If a lan d owner is permitted to take all profit
above cost by a rise in the value of lan d he
may d emand five mill ion dollars as cost of land
in advance of a five million dollar building and
e xpect the builder to supply the buil ding without
o
h
rofit
which
will
t do
e
n
p
If c apital is to b ecome liqui d it must se c ure
its own quantity of credit money to buy as much
capital as labor can reproduce each year at two
times its cost and keep in circulation the quantity
of cre dit money the capital mar ket deman ds
Pro p e rty in l an d need hav e no value or cost
in money and could not have such value or cost
if the impro vement upon the land was perm itted
to sel l at it s natural pr ce of two times cos t an d
allow profit in buil d ing to take up the a d vantage
o f lo cation
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C HA PT E R 5
C R ED I T
M O NEY
“
If I were to ask What h as be e n of the most
absorbing interest to the human race in the rise
of civili z ation ' the probab le answer would be
“
making profit money from production and tra de
over which wars hav e been fought an d savage
r a c es were brought in contact with a higher
'
life
The answer would not be correct the most
passionate interest in the min d of m an, of a
sav age even before trade and commer ce d evelops
an d which continues to be the mo st passionate
interest now is to learn about some mysterious
being h e calls G od an d his fear and duty towar d
th at G od
’
D iscussion concerni ng a man s soul concerning
a life after death a philosophy of things greater
than the material has been the mo st absorbing
study of the thinking mind in all time
The reader familiar with history will readily
admit that wars over religious Opinion have been
as bloo dy as murderous and have engaged more
of the populations of the world than all other
wars and no war has been waged b ut some k ind
of a G od was c alle d u pon to assist in overcoming
th e enemy
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NATU RAL EC O N O M I C L AW
70
The people of the world in the rise from bar
b arism have been as passionate in changing the
kind of god they worshipped as they have been
in changing the kind o f government under which
they suffer and the two passions advanced to
gether from a lower t o a higher form of god and
from a lower t o a higher form o f government
C hurches were built embodying the highest
form o f architecture The worship of religion
was at the base of sculpture and painting ; it
had much to do with inventing the alphabet with
the introduction of writing and printing while
unbelievers in an established religion were as
severely puni shed as were thieves murderers or
criminals
The evolution o f a higher form of god has been
as distinctly under the control of natural law as
has been the evolution of species from lower to
higher forms or the evolution o f the social organ
ism to higher and higher types and the connection
between the material and spiritual is never for a
moment lost t o sight by laws of evolution
The only difference I can find in the action of
material over spiritual forces is a mere preponder
ance of one or th e other at certain stages of
development ; at one point the material forces
have control for a time only to surrender that
control to spiritual forces at anoth er time but
at no time do either material or spiritual act
without each other or without combining
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CRED I T M O NEY
71
S piritual forces have as much to do with the
development of species in organic life as have
the material forces that assemble the material
and build the form fo r it is the sp iritual that
supervises the plan that determines the form
and develops the higher and higher usefulness
of the form bringing into existence the higher
consciousness that inhabits the higher form of
body in the advancing species
In our modern civili zation the preponderance
of spiritual in one cas e or material in the other
will be found in what we call capital structures
which spirit forces control while the mere assem
bling of material and supplying food is under
material control The spirit governs by what w e
may call the type of our civili z ation which we
transmit to posterity and inherit from ancestry ;
the material maintains the type Without control
over its form structure or progress
A study of the body politic as a great living
organism which covers the whole surface of th e
earth including its soil and climate with all its
vegetable animal and human life is a v astly
greater study than the biology of any single
species
In a single organism the minute actions of
single cells defy a microscope whi le in the bo dy
politic the hum an being when spending money
is acting under the same law as that whi ch ani
mates a single microscopic cell and as a r e sult
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NA T U RAL EC O N O M I C LAW
72
life cells are multiplied a million fold a nd we
should be able t o classify and analyze the m and
discover their laws
The bodily structure of society consists of what
we call capital in farms roads towns and cities
and instead of trying to discover how an organ
in a single species O perates we have in a city an
organ t o observe having similar functions and
obeying identical laws
The roads rivers and O ceans together with
railway systems connecting the cities are the
great veins and arteries o f the social organism
by which blood its food and raw material carry
ing living cells of human life circulates over the
whole earth and its electric lines and telephones
become vital lines o f nerve communication
N atural economic law controls the form and
usefulness o f every social structure be it a simple
dwelling o f the laborer a great factory or lines
o f communication and trans portation
the loca
tion and building o f cities as well as the develop
ment o f agriculture
M an is forced to build according to a plan for
the development o f the human race centuries in
the future and this action o f economi c law is
automatic entirely outside of human control or
control by human legislation
N atural economic forces move according to a
plan by laws that govern the value and circula
tion o f money and this power over money is one
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NAT U RAL EC O N O M I C L AW
74
with credit money inherite d from the past to
determine the plan and form of the social organ
ism but neither w ill act without the other
The difference between the material food supply
and raw material consumed daily and the spirit
ual c apital or bodily structure is that one supplies
the daily life while the other holds the hereditary
structure and plan o f posterity for the future
The circulation of money holds in its grasp
not only the material life of a nation d ay by day
but also holds its S
piritual life and its future
progress It should no t be difficult to s e e that
problems o f industry being both material and
S piritual must be the most complicated of any
that science h as to deal with
The connection between the material and the
spiritual h as prevented any real solution of social
or industrial problems When we fail to follow
the natural order in our legislation and in our
distribution of wealth the currency will at once
register that failure by a faulty and cripple d cir
culation o f credit or spirit money creating debts
like creating disease to overcome some loss in
circulation
The problems of circulation are difficult to
explain for they are based on paying interest
and credit money is in fact a spirit money Its
units have no bodily o r material existence it is
merely a book account in a bank and circulates
as a check or form of speech and it may be con
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CRE D IT MO N EY
75
verted into cash o r material money on demand
it performs its purpose and is cancelled by cash
We are in the habit of believing the spiritual
to be a separate existence above and outside of
the material while as a matter o f fact it is the
main guiding force o f the living and material
S piritual advance is under the control of natural
law to the s ame extent that physical growth is
controlled by law they are inseparable ; as closely
connected as force and matter
In the structure of the body politic the influence
of the spiritual is quite plain for beauty efficiency
and utility of the highest order are the constant
des ire of mankind The difference between an
ugly poorly located buil ding and a useful and
beautiful one adapted to its location has its spirit
influence upon a people
I n the development of all the useful arts
beauty combined with efficiency and utility is
ever being sought and however fashions may
seem to reverse this natural order it is only as
we sin by ugliness and materialism that we
discover the ways of righteousness
It should be quite plain th at the structure of
the social organism must be fitted to a spirit
plan and must be able to change and advance
according to that plan The spiritual concerns
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man s life both in this world and his immortality
but how is a spirit form of every p art of the social
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NA TU R AL ECON O M I C LAW
76
structure to have its effect upon the hum an form
and make changes in that structure '
When the natural law makes it more profitable
to build according to a general plan for beauty
then ugliness gives way in every field to art and
structure changes are more and more spiritual
as profits created from spirit money compel such
changes B ut how do such changes reach down
to individual life '
The capital structure of the body politic must
somehow include both the spiritual and material
s o that it may react upon the human body and
mind and secure the required changes th at will
develop the higher man according t o a plan
civilization is expected to work out
The spirit plan makes it more profitable to
build for a high utility and beauty alo ng with
health than merely to build as any man may
choose The plan o f civilization which develops
a higher soul has in V iew a constant advance in
the standard o f living for the people and accor d
ing to this higher living the human structure is
expected to become more and more in harmony
with the spirit forces that guide civilization
The common standard of living is quite distinct
from what we are in the habit o f considering as
the standard found among the rich which others
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seek to imitate the natural standard not for
any man o r class considers th e future immortal
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CRED IT M O NEY
77
mass man it is a standard fo r the body politic
that consumes railways cities and factories
S ociety develops its roads and railroads to
increase the standard o f living over the whole
world fo r future time It establishes cities upon
a few great locations that remain city locatio ns
as o ne civilization is succeeded by another
Travel and transportation are important parts
of a living as well as food and clothes s o is amuse
ment in theatre and dance and higher soul
desires arise after we solve the easy problem o f
having an abundant supply o f food
C apital by its development must conform to
a certain plan and it develops o n every side by
adding to and changing the standard of living
to a higher and higher civilized type E ach type
of social organism or type of nation is founded
upon a standard of living which the growth o f
capital and wealth has brought about fo r the good
of the common man and no t fo r the exclusive
benefit of the rich as many writers seem to
believe
History teaches th at nations rise from bar
b arism to wealth and power only to fall bac k
into barbarism again that populations grow in
density only to fail when wealth is abundant
In the modern world o f science and mechanics
it is easy to point out how capital adds to the
qu antity and variety of go o ds and helps to sup
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N AT U R AL
78
E C O NOM I C L AW
port a much denser population and supply a better
living to a vastly greater number of people
But in the modern world great difficulty is
found in distributing the better living which
capital stands ready to provide ; vast numbers
are constantly out of employment and other
millions fail to get wages to buy a better living
The connection between the capital we a c cum u
late and inherit from the past and the food we
provide and consume every day is a connection
between spiritual an d material found in the daily
living
Th e failure of civilization arises when the
spiritual fails when credit money is confined to
the goods market and when it merely makes a
gift of capital to a small rich class and fails to
pay a rate o f wages above the cost of living by
which the mass would rise above the material
into a beginning of spiritual life from owning
property
It is not a difficult problem in mathematics
to work out the quantity of credit money any
given nation should have fo r its healthy normal
development The quantity of credit is base d
upon a proportion between total cash which
buys a living and total wealth from which all
higher d esires arise
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CRED IT MONEY
79
The proportion of wealth in any country is
always a fixed per cent o f the annual cost of
The quantity of credit is based upon the
l iv mg
amount of cash that must be spent each year as
cost of living and as the standard of living in
creases the quantity of both cash and credit must
increase wi th it
It is plain that capital should in some way
supply its own money t o the general circulation ;
it should draw upon a revolving sum to pay its
own costs and the cost o f new building pay its
own dividends and profits
It is not easy to explain the circulation of
credit mon ey in relation to primary cash explain
how the credit circulation is kept separate from
the cash circulation and i s cancelled on being
exchanged for cash
D uring the time a separate quantity of credit
money is kept in circulation and before it is
exchanged fo r cash and cancelled it will perform
certain functions that are as important as the
work done by cash A man will have a bank
credit calling for a certain sum to be paid him
in cash on demand and he may either exchange
his bank credit fo r cash and consume it by living
without worki ng o r he may buy property from
another who then merely takes his place at the
bank where the cr e dit and the property will
merely change owners
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NA TU RAL EC O N O MI C LAW
80
The exchange of bank credit fo r property ap
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pe ars like swapping j ack knives without s pe c1a l
influence upon the general circulation of money
but on the contrary it h as a most important
influence fo r it provides a permanent circulation
of credit money each year without which modern
the failure
c ivilization could no t be carried on
to buy and consume wealth brings about the
downfall of nations from a concentration of
wealth
If a man would sell his property he must find
a buyer with money a buyer with surplus credit
“
We cannot have o ur cake and eat it to o
A
man cannot buy property w ith the cash he must
use to buy a living If there is to be a permanent
ci rculation of credit money that will pass prop
e rty from one generation o f owners to another
it must come from a bank check circulation
The owner o f a bank account secures his credit
either by what is called saving from wages or
from profits in business above all costs of living
The public has s o long been in the habit of
considering the capital o f a country as the ex
c l us ive property of a rich class that it is diffi cult
t o explain j ust how a failure to circulate credit
money is responsible fo r this condition and how
a correct circulation of credit under natural law
would supply the laborer with a surplus from
whi ch he would become a bank d ep ositor and
a buyer an d consumer of capital
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82
NA TU RAL E C O N O M I C L AW
total wages and will increase as wages rise or
decrease as wages fall
It is taken fo r granted that wages may rise at
the expense of profits in all transactions where
profits appear but such is not the case ; total
profits cannot be reduced by a rise in total wages
but must increase as wages rise and include half
of total wages
E ach dollar rise in wages should create one
half dollar of profit money by which the total
consuming power I S Increased permitting oth er
buyers than laborers to appear who spend credit
or profit money and if unwise legislation reduces
total profits in order to increase special wages
for organized labor then for each loss of one
d ollar in primary profit t here will be a loss o f
two dollars in general wages and the burden of
such loss usually falls on the poorest paid and
largest class of laborers
Banking depends upon a power to coin or
create a secondary circulation of credit that is
never cancelled but is always reinstated by a
new credit taking the place of one consumed
S econdary bank credit howev er has never been
permitted to get into the general circulation b ut
has always been used to create debts that could
not be paid bringing about many kinds of
financial and social distress
The quantity of permanent credit is based
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on the cash profit cancelled during a year s time
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C RED IT MONEY
83
and i s expected to equal and balance the total
amount o f cash spent during a year The limit
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in total bank deposits payable on demand
fixes the upper limit to wages whereas cash sets
the limit to minimum wages
Bank credit becomes a liquid currency when
bank deposits once being spent are reproduced
by the sale of capital at its standard price of
Bank deposit dollars cannot be
tw o times cost
used over and over again like cash when once
used they are cancelled and must be newly created
F ailing in this respect credit disappears from
circulation after it creates a limit in debts that
cannot be p aid
The natural law will create new credit each
year to replace the sums labor is expected to
invest in capital and such new credit must arise
from a sale o f capital at an established standard
price of two times cost the profit from th e sale
of capital being based upon the fertility of soil
or location
S ome locations will collect many times as much
profit each year on each hundred dollars cost of
capital as other locations but there is no lack
of fertile locations which may collect a greater
rate of profit than the rate of interest s o that
capital may always be sold at its natural standard
p rice
When capital is permitte d to improve fertile
locations with no cost of land to interfere two
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N A T U R AL
84
EC O N OM I C L AW
tim es the rat e of interest will naturally force
capital to sell at two tim es cost which creates a
secon d ary profit to e x actly balan ce the primary
profit from th e sale of a living
T he deman d for labor to build to the limit of
rent at eve ry lo c ation woul d exhaust the labor
m arket , forcing wages to t he maxim um limit
M aximum wages w ould overstep the quantity of
c ash which c oul d only pay half the ma xim um
r ate an d d eposit c redit would th e n be for ce d into
the wage circulation to meet a deficien cy of cash
The natural law secures a credit cir culation by
a s ystem of measurement that is v ery comple x ,
involving thr ee scales of measuring at the same
tim e so as to establi sh a rate of interest upon
which the enti re circulation must finally rest
The natural measureme nt of capital at two tini e s
its cost has always been interfere d by laws which
ermit
fertile
lands
to
sell
for
money
thereby
p
c o nv erting the profit inten d ed to d evelop cap ital
into a cost fo r th e land
By th e first scale or simple measurement cash is
h
u
s
e
ai
d
out
to
labor
an
d
forces
into
fertile
e
t
p
lan d s C ash go ing into circulation is paid to two
tim es as many consumers as nee d to pro duce the
living and when the c ash is Spent it will autom a
tically establish a selling p ric e for the living at
two time s cost The flui d money will allow any
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C RE D I T M O N E Y
85
particular commodit y to g et a price either above
or below the standard the measurement being
used only to establish a base line for prices and
a basic cost for all production either of goods
or c apital
The moment c ash establishe s a stan d ard marke t
price of two times cost the second S cale imm e di
ately measures out profit money from the fertile
land by the p rice above c o st being made e qual
to half the total cash Spent for a living
Profit ari ses wholly from the fact that labor
which has been s e t free by using only the most
fertile lands must be saved to be employed at
other work ; otherwise the mere pri c e above co s t
becomes a damage rather than a benefit
If natural law did not provide and o ffer some
other field for surplus labor than to merely dis
tribute a great er quantity and variety of living
the g ain from profits would be of doubtful benefit
and th erefore a third scale of measurement is
re quire d
It soon appears to the m erchant s in selling
goods that th e quantity sold at the least cost
will create a profit by sale in quantity thereby
gaining a sum which represents the wages spent
by the labor not calculated as a p art of the cost
of goods
Profits investe d in capital become a d ouble
g ain b ec ause cap ital Te turns its own cost and
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NAT U RAL ECONOM I C LAW
86
pays interest besides the fertile lands that grow
capital are therefore in great demand and cities
grow with astonishing rapidity upon a few select
locations over the civilized earth because con
sumers concentrate there and vast quantities of
goods may be sold at the least cost fo r distribution
C ommerce e stablished a rate o f interest for the
use of credit money before coined m o ney or
capital appeared and a new measure arose for
fertility that may be improved with capital
and thereby completed the scale of measurement
when interest was set aside from profits If for
example the rate of interest is twenty—fi ve per
cent before capital appears thi s rate will represent
the cost o f money to bui ld capital wholly inde
pendent o f its cost I n labor A rate o f interest
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at twenty fi ve per cent means that time has '
entered into financial calculations and a new and
secondary circulation of money has made its
appearance which must have more than one
’
year s time to return the cost of capital
If the land t o be built upon can collect no more
than twenty fi ve p er cent profit when th e rate
of interest is twenty-fi ve per cent it will follow
that the cost will never be recovered and fertility
at that location is too l o w to be improved
The builder must have an equal field in whi ch
to borrow with the merchant who not only pays
the cur rent rate of interest on the cost of his
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CRED I T MON E Y
87
goods but w ho gets back his investment the
moment the goods are sold M oney invested as
c apital must not only collect th e current rate of
interest but must also collect the principal within
a given tim e whi ch is fixed by the rate of interest
The difference between the return o f money
invested for capital purposes and money buying
goods is a difference in time the merchant may
recover his principal one or more times each
year besides interest and profit but capital must
have a term o f years
A rate o f intere st at twenty-fi ve per cent
establishes a time during which the principal of
capital must return in addition to interest and
no matter how low the rate may fall below twenty
five per cent the fall merely extends the time of
returning capital money leaving capital itself as
a clear gain to its owner by its collecting profit s
of no less than two times the rate of interest
At twenty fi ve per cent interest four years
must elapse before the interest will equal the
principal and to return th e principal within the
same time capital must collect fifty pe r cent
profit each year
When capital sells for tw o times cost the profit
from its p roduction and sale will be the same as
the profit from the sale of goods and the wages
capital pays above a living should balance the
cash wage that only buys a living
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NA TU R AL E C O N O M I C L AW
88
The rate of profit is divided into two equal
parts by making the rate of interest half the rat e
of profit O ne -half o f the profit is permitt e d to
pay the cost of capital j ust like one half the c ash
is permitted to pay the cost of goods and the
division of profit into tw o e qual par ts forces into
u s e the most fertile lands to get the required profit
Any S ingle class of goods can get as mu ch of
the total c ash as its particular demand can attract
against all other demands and any particular
location can get as much of the total profit as it
may attract each location has its limit in profit
fo r the capital that may I mprove it j ust as other
fertile land h as a limit in its productiveness
When capital is beginning its development th e
profit derived from cheap constructio n will be
high because there will be little cost for land and
t otal profit on living will establish a high rate of
profit upon a small quantity of capital to thereby
greatly stimulate building if land values did not
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quickly rise to destroy the builders profit
In the early development of new capital and
following the growth of science the rate of
profit is very high and will like the atuo m o b il e
business permit the capitalist owners to develop
tremendous plants and accum ulate gre at wealth
f rom profits and with no loss to labor or to other
capital
It will be admitted without argum ent that
the growth of the automobile industry in the
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NATU RAL EC ON OMI C LAW
90
base rate of profit becoming ten per cent with a
base rate of interes t at five per cent
When a small cost of capital can collect one
hundred per cent on a fertile location and interest
is five per cent there is great inducement to
build at greater cost to profit from the higher
selling price to tear down and replace the cheap
structure with better ones that will collect more
gro ss rent and sell for a much greater sum of
money C apital should increase in quantity very
rapidly as the rate of interest declines and would
do so if its profit was not taken up by a rise in
cost of land which destroys the advantage of
fertility upon the best locations
When total capital reaches about ten times th e
annual cost of living it will be consuming by
its own co st all the profit it can collect from the
sale of goods and unless wages will rise so that
rent is directly paid from capital money wealth
will become a burden to its owner ; capital will
fall in rui n and serious trouble is at hand for a
whole nation
O ur land laws do not now permit capital to
sell above a cost fixed by a minimum rate of
wages because the cost of land takes up the
price of capital above minim um wages and
capital cannot therefore create a quantity and
circulation o f its own money by selling at two
times its labor cost
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CRE D IT MONEY
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The remedy will come when we force capital
t o sell at its natural price with land acting as
the foundation fo r capital without having a money
value We will accomplish this result by simply
refusing to make loans with land value as security
lim iting all loans to the cost of building and make
all securities payable like bank deposits in cash
on demand and have such payment protected by
the required reserve for each corporation or
structure
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C HA PT E R 6
C IRC U LATI NG
M ONEY
many thousands o f years the human
animal remai ned stupid to the sublime moving
picture of the changing seasons we may only
guess but finally t he great miracle of spring
summer autumn and winter the growth of
vegetable life under his feet and the perils of
wild animals did impress the human savage and
he began t o cultivate the soil to tame wild ani
mals and make a step in a long chain of progress
When the soil was stirred with a crooked
stick its yield w as increased and mankind began
directing certain natural forces that before were
undirected by human hands By directing forces
of growth a man could obtain advantages for
himself that another man did no t get from the
free supplies o f nature population could largely
increase above what nature undirected would
supply with a l ivm g
There arose for the benefit of certain tribes
o r classes of men
a new fecundity of the ear th
that w a s to become the source of a new and
higher type of mankind enabling the race to ad
vance step by step as more and more o f the earth
w as explored and cultivated and as more an d
How
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92
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C I RC U LA TI NG MONEY
93
more natural forces were directed for the benefit
of mankind
The rise of intelligence above that of the brute
is based upon gains of an easy l I vm g that come
from directing labor to produce an increase that
would not appe ar without intelligence The
power to direct natural forces however slight
c o ntained germs o f all the higher mental and
spiritua l powers of man fo r the power to direct is
a Spiritual power higher than any o f the physical
or V ital forces that animate the world
A lthough the greed of the savage was the
found ation for subdui ng the powers o f nature
although an easy living to some with slavery for
many was at the base of a pyramid for higher
powers o f intelligence than the brute yet by s o
founding the advance of man upon savage greed
it could not fail fo r thereby w a s planted in the
mind of s avages a dawning intelligence a growing
sympathy fo r the oppressed and a love for all
mankind
If we could discover a law by which minute
particles of protoplasm bring about a great variety
of living forms it would doubtless be found that
each unit besides being alive had also the power
to appreciate the fact of it s being alive and by
combining and organizing such units the j oy or
appreciation of living w as increased for an organ
i ze d collection of cell life
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NA TU RAL E C O N O M I C LAW
94
The protoplasmic uni ts are compelled to com
bine in certain ways determined by laws of
growth which limited the j oy they might receive
but p e rmitted them to secure more and more
satisfaction as they developed into higher and
higher organisms
In a S imilar way when savages uni te into tribes
the tribes soon began to cultivate the soil The
first simple organi z ation of savages creates
another so cial unit a unit of gain in a higher life
not only for the tri be itself but a gain that is
co mmunicated by the tribe to each member ; th e
tribe is more powerful than any savage and any
member of a tribe is more secure than a sav age
unattached to a tribe
Belonging to a powerful tribe gave security
and pers onal pride to each of it s units ; it gave
birth to a new kind of appreciation of li fe a
tribal life E ach member could no longer act
in utter savage selfishness but had to consider
whether or not the tribe would approve or con
de m n his acts a new consciousness of life was
born a tribal consciousness
With the tribe li fe began a dawning ap p re
c i ati o n of a higher type of social organism which
was for the benefit o f a higher individual man
The gains that came from the fecundity of nature
upon which the power of the tribe w as base d
were gains that made differences and distinctions
between individual members of the tribe
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C I RC U LA TING M O NEY
95
The wealth that arose represented a gain in
social power ; it became a measure of wha t the
individual could procure on account of the tribe
to which he belonged over and above wha t
otherwise he might procure without the help of
that simple organism
The uni t of tribal power became a unit of
value attaching to wealth that accumulated and
although wealth became the means of setting
apart o ne class of the same people fro m another
and became a cause of advancing one nation or
tribe greatly beyond the power of other nations
yet a nation could no t advance unless the living
for its people was made easier and happier
S ocial power was contained in units of money
s o that the whole vital force may be used to de
ve l o p all the parts of a greater life for a whole
people Uni ts of money become like living units
of protoplasm building up millions of forms of
living things each of a higher order containing
more organi z ed uni ts of appreciation or conscious
ness of life than the lower forms
M oney acts like living protoplasm in the social
organism I ts S ingle uni ts m ay be distributed
to vastly different kinds o f life within the whole
j ust as uni ts of protoplasm creates myriads of
different living things necessary to the higher
types
The dollar of money creates a wheat crop rye
or corn or cotton crop by having certain units
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NAT U RAL E C O N O M I C L AW
96
of profit or units of a higher appreciation of
life to distribute and while we may recogniz e
wheat v alue as being distinct from corn or rye
yet the unit of value in the dollar has no such
difference
The power to direct the fertility of the soil
S O that it will produce its right proportions of
wheat rye and cotton as well as thousands of
other things i s held in the power to direct dollars
of money to employ labor with m oney to buy
material and to build according to a certain unit
of profit that money carries which determines
j ust what amount an d what kind of production
may be carried on fo r the general welfare
The fact that labor will not be employed with
money or that goods or capital will not be pro
du ce d unless each dollar of cost has added to
it a certain amount of profit greatly compl icates
the problem of its circulation
When a ship is built it is found to have an
hereditary life whi ch is to say it was developed
by a process of evolution from a hollow log whi ch
was its ancestor and it improved by slow stages
E ach advance from a hollow l o g to the modern
palatial steam and electric Ship was controlled
by the small element of gain that money would
give to every dollar of commerce
When the steamship as we now have it ap
r
the gains that were required to create
e
a
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p
it from the hollow log did not disappear but
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NAT U RA L EC ON OM IC LAW
98
'
We d epend upon an accumulation of wealth
from th e past upon an accumulation of knowl
edge an d intelligence from the past upon institu
tions of government education religion law and
order inherited from the past ; these we reproduce
in the whole body politic according to laws of
i nhe ritance as each family must reproduce itself
in its children and depend upon laws of heredity
This heredity reproduction not only of the
wealth we possess but of the education we must
preserve and improve ; the arts and in d ustries
must not be forgotten
The whole body politic mus t be repro d uced
according to an hereditary plan and keep im
proving upon that plan the circulation of
money d emands the reproduction of all we get
from the past which we must improve and trans
mit to posterity an d for that reason circulation
of money is not easy to explain carry ing out this
superhuman this D ivine and most intricate plan
' eeping the fact in view that tomorrow morn
ing we inherit billions of wealth fro m the past
but must produce each day what we consum e
in living it Should not be difficult to keep separate
in the mind the fixed capital that may be sold
by its owner for a future living from the goods
that must be provided as fast as they are con
sum ed
This separation of past labor from present
l abor , future living from present living inherit
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C I RC U LA TING MONEY
99
ance from life itself is provided for in having two
distinct and separate circulations of money cash
money and credit m oney cash being confined
to merely paying for and buying the living day
by day while credit converts past labor or
capital into cash when it would be spent to live
upon
It is not easy to explain ho w two separate kinds
of money can move side by side each dollar
being of equal value and yet be held in different
channels that do not interfere but such is the
case and it makes the complication and mystery
of money
P robably the most difficult single fact to get
clearly in mind about the circulation of money
is that cash money consisting of all government
coined paper or gold is a primary money that is
confined to a very narrow channel o f buying the
living each day and of measuring the cost of
living
O ther buying must take place with credit
money which governments have no power to
coin no con trol over its quantity its value or
circulation it being held outside of human inter
ference by natural law
A supply of government money will regulate
the quantity of credit by the amount of interest
it will pay on each dollar o f cash collected from
the cost o f living and by a rate of interest whi ch
divides d ollars o f p rofit int o smal l er unit s
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NA TU RAL EC ON O M I C L AW
1 00
The difficulty in realizing j ust why cash is
strictly confined to buying the living for all the
people rich and poor why it i s limited to m e asur
ing the cost of production comes from the fact
that no good reason appears fo r such restriction
It seems to any man that he need no t spend
all th e cash he receives fo r living but may a c
cumulate cash and buy anything with the surplus
Although one man may accumulate a small cash
surplus millions cannot do with all the cash
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A total quantity o f cash is coined by a govern
ment to be paid o ut in daily wages as cost of
labor and only as much will be paid each day as
will be spent ; what is paid one day cannot be
spent the same day therefore the total quantity
will divide into sums of daily wages until pockets
are saturated and until as much is spent each
day as will pay fo r living the following day
The market demands a quantity o f cash that
will be able to pay o n the spot a quantity of
cash to balance the supply o f goods in store s o
that no time will be consumed by waiting on
a circulation of cash
The whole quantity divides into about Sixty
’
’
days supply an d while one day s cash i s being
used fi fty nine days will collect in pools waiting
i ts turn t o pay wages and buy a living and any
man may accumulate a small part of this pool
of cash
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NA T U RAL EC O N O MI C LAW
1 02
The moment the government inflates the cash
currency banks will inflate credit five times
greater and keep the same relation between the
quantity o f cash and credit ; hence disaster follows
inflati o ns of government money seeking to supply
cash for all purposes
The circulation o f money is as intricate as
the circulation of living corpuscles in the blood
and like the blood there are two distinct systems
one flowing through the arteries and veins giving
a daily supply of living material to the body
and another in the lymph and cellular tissue which
corresponds to liquid credit
It should be quite clear that m odern civili z ation
ca nnot survive if it Should lose its vital m o ney
circulation All panics periods of hard times
and the fall of empires result from some derange
ment in the vital supply of money some inter
fere nce with credit that destroys the value of
inherited wealth and interferes with th e great
purpose of civilization
It has been p ro p osed to do without money to
p rovide som e system of labor checks by which
present labor would get all the money and nothing
woul d b e paid for the accumulated labor of the
past ; every such attem p t must wreck civili z ation
N o man has ever been wise enough to explain
how a steam locomotive or a great turbine engine
may be bartered for potatoes and corn and no
system of barter or arbitrary e x change can fit
into o ur complex org anism
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C IR CU LAT ING M O NEY
1 03
Circula ting mon ey ' How easy to say ' How
common and vulgar app ear the plain facts
C irculating money ' It is as If one were to say
“
I se e many things in colors and forms in clouds
and Sk y in flowers and trees
but yet was
wholly unconscious of the great blessing of mortal
sight to man so are we unconscious of the bless
ings of money
I look upon a forest in autumn on a mountain
when the fros t has painted its leaves I look upon
the s e a and note the res tless waves with th e deep
reflection of the heavens they carry and I need
no t explain even to myself nor understand the
divine e cstasy I feel
But alas for huma n poverty and misery ' I
cannot look upon the circulation of money and
know th e power of that circulation for the hap
i
n
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of
m
n
and
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o
t
seek
meaning
its
full
a
t
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p
purpose and seek to discover its laws
O n my left hand are wide fields where useful
human labor performs tasks that ought to be
j oyful and I take one dollar from milli ons to
spend in a miraculous market that spreads o ut
all about on my right
Taki ng one dollar in the m o rm ng I spli t it
into smaller uni ts and with tw o pennies I b uy
a morni ng pap er giving me a sight of the whole
world without thought or labor on my part I
pay five pennies for a street car rid e of mi les
while many thousands are working th a t I may
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NA TU RAL E C O N O M I C LAW
1 04
ride swiftly in ease and comfort with no e ffort
from me and unconscious of the labor in my
behalf
S imple S pending seems to be the b e g m nm g and
ending of a v ulgar use of money earned with
hard labor while in fact it is the most important
link in a long chain of evolution whi ch ends with
a market more wonderful than all the gardens
where thousands of goods a p pear
o f the world
as if from seeds planted in the fields of Heaven
D ollars are indeed wonderful seeds that instantly
bring forth into the market what the heart desires
seeds planted with great care not by man but
by that M aster Workman who makes the lilies
“
grow
Though they toil not neither do they
spin
When a man spends money to buy goods it
is as if the things he buys came forth into his
hand at the command of money at that instant
created direct from the hand of G od without
time or labor coming from a great organism of
which the individual is unconscious
The spender of money holds in his hand a
creative power which is only to be compared with
the creative power of G od that calls life and
obj ects into earthly existence by the mere exercise
of creative intelligence ; money is the intelligent
creative power of G od placed in human hands
There are many conflicting and silly theories
“
about the money power and about the power
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NA TU RAL EC O N O M I C L AW
1 06
poisoned from the lack of free flowing air to his
lungs
The scientist will say to himself as he looks
“
over the tables
This room is nothing but a
cell among a collection of similar cells called a
building on Broadway which is only a dirty chan
nel between collections of similar groups of cells
“
called buildings
The city of N ew Y ork , what
is it ' A diseased kidney of the body politi c
and these people B ah 'they are microbes floating
in the food supply , coming here to gather fat
'
and waste time little insignificant corpuscles
“
'
Philosophy number two misnamed religion
is represented by the reformer who would compel
every one to live according to a pattern which
his o w n narrow and egotistic self would impose
The reformer sees nothing in the gay and happy
throng at the dinner but a place to propagate
what he calls vice and sin
He is a reform
parasite that finds delight in living upon disease d
tissue of the body social ; he would abolish win e
and song and destroy woman ex cept for the mi lk
s h e may give to the child sh e alone may supply
This class of reformers are mental eunuchs to
whom vice and sexual excitement brings mental
j oy Being denied the delights of normal j oyous
association with the happy se x they seek to
abolish some form of conduct and their own
abnormal sex passion leads to world wide perse
c uti o n and m u rder in th e name of religion an d
reform
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C IR CU LA TING M ONEY
107
S itting on a park bench I have noticed o n
bright pleasant days a fashionable limousine with
its woman owner drive near the benches and
stop in all the pride of wealth and social position
where the most persons could admire her Tak
ing a paper bag in her hand she would scatter
bread crum bs to the sparrows that flocked about
on the drive and then depart with the j oy and
satisfaction of good work done returning the
ne xt plea sant day to the same task
To my mind this woman is a type of modern
reformers although in her case the disease is in
its mildest form vice reform drink reform
socialism anarchi sm S pitting reform dog mu z
zli ng and their kindred are all manifestations of
the same erratic sexual disease of which the
eunuch is the physical type
The reformer is infected from an impulse of
the gre at nerve system of the social organi sm
which acts up on his weak nerves weak mind
and Shallow soul
T h e nerve development of the body politic
reaches a point in its growth where it can make
the individual feel the pain which the masses of
people are forced to suffer from hum an in j ustice
To ease this pain from th e suffering of others
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which greatly interferes with a reformer s egotistic
contentment with hi s selfish personal j oy he
adopts o ne o r another scheme of reform with
the belief pleasing to his selfish l ife that h e is
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NA T U RAL
1 08
E
C O NOM I C L AW
helping t o relieve the misery o f others By mak
ing a S peech asking an investigation organi zing
hundreds of futile and silly associations reformers
seek to escape the pain and the greater duty o f
understanding the true conditions of their fellows
who suffer
O ur reformers and reform societies rise up in
their mental limousines proud o f the work they
are doing when they scatter a few bread crumbs
t o the twittering sparrow s and easing their own
pain they return to their selfish personal enj oy
ments satisfied
At most o f the tables are the people who live
and practice the third philosophy o f life which
i s chiefly t o be happy and j oyful t o make others
s e e the good o f living in o ur good o l d world
They seek happy associates love children and
good living seek bright faces even when found
with wine woman and song
“
The real philosophers of j oyful living sing The
moving finger writes and having writ moves
ou ;
such people are human in j oys and trials
but carry o ut the d ivi ne purpose which is to be
happy yourself and being so make others happy
At the dinner the philosophers o f j oyful living
make the best o f the present moment n o t realizing
perhaps that the present moment is always the
immortal time Immortality is found in present
happiness ; present time is the immort al time ;
tha t only i s mortal which h as become the past
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C HA PT E R 7
C O U N TER FE I T C I RC U LAT IO N
the imagination o f a story teller the secret
of creating a human being was discovered by a
scientist who was able to bring forth from his
laboratory a man of intellig ence and great phys
ical power b ut he could not endow this creature
with a soul
T he story deals with the career of F rankenstein
a man without a soul who delighted in doing
h arm to those who trusted him He found his
happiness in the misery of others ; it was his
selfi sh pleasure to inflict pain upon those to whom
he w as most indebted for favors
When empires rise to power and greatnes s
after a people toil in slavery for centuries when
inherited wealth should bring comfort and happi
ness the people in their dismay find the blessings
they expected from wealth turn into evil I n
stead of spreading comfort and ease broadcast ,
wealth begins to impose burdens of over w ork
an d po verty that did not exist before it was
created
S omewhere in the laboratory where empires
are born there comes into wealthy nations a
Frankenstein with superior intel ligence and phys
i cal power, who seems to take comfort and c ase
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C O U N TERFE I T C IRCU LATI O N
111
away from the common people deny th em the
happiness wealth brings and turn the gains they
struggle d to create into engines of misery and
want
The greater the wealth the more temptation
for the Frankenstein monster to loot The
ri chest nations are the first to fall to go back
to barb a rism from an increase of p overty in spite
of great wealth on every side
A F rankenstein monst er has always appear e d
in history to wreck every civili z ation of the world
un til our own times ; working amid poverty and
misery in cities where wealth is most abundant
and where its display by the rich creates the
utmost discontent among the poor
The church the military power and courts
of law had to have some control over wealth
and it s income To advance a people higher
than savages power was given to the state to
the church to c ourts and to a class of rich prop
in some strange
e rty owners and this power
m anner , became a monster of evil no one could
master and w hen the time came to curb the
power of family wealth the nation failed and its
dec l ine and fall followed
With wealth concentrated to a few rich families
to estates o f kings and lords to rulers of the
church and army the people become helpless
It was as if an actual devil had taken the reins
o f p ower fro m the h an ds o f man and w as ad
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1 12
NA TU RAL
E
C O N O M I C LAW
ministering the state for the inj ury it might inflict
upon a helpless mass of laborers
M odern civilization in spite of its science
machinery railways factories telephones steam
and electricity its system o f education its laws
and courts its congress and parliaments its
v oting and debating has not escaped its Franken
stein o u the very contrary its vastly greater
total o f wealth gives greater power to the owners
while suffering an d discontent becomes a rising
tide to finally destroy the nation
The experience o f history points with direct
warning to one cause that wrecked all other
empires and to one con dition tha t was responsible
fo r their fall ; the cause w as the concentration of
income property to a small and rich class of
owners with labor entirely out o fi from such
ownership and this condition somehow brought
about an ever increasing difficulty in finding work
at living wages fo r millions o f permanent poor
F latter ourselves as we may with modern
institutions with applied science and mechanics
with steam and electricity with church and state
governments and education democracy or repub
lic we are doing nothing to prevent the same
catastrophe from the same cause w e face the
same poverty among millions that brought ruin
t o every nation in the past
The evils o f unj ust distribution are generally
admitted by stu d ents of th e sub j ect , an d many
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NA TU RAL
1 14
E CO N
O M I C LAW
in wages above the s um labor must spend every
day fo r a living Unless wages will provide a
surplus to buy a share o f wealth labor can have
n o S hare
The most popular remedy fo r admitted evils
i s t o abolish private p roperty by substituting
government owne rship, t o make the most danger
o u s experiment o n the living body o f the social
organism ever attempte d in the history o f the
world a s Russia n o w abundantly demonstrates
Unable t o explain h o w the glutted wealth may
be widely diffused ; o r why it concentrates t o a
small class o f owners it i s proposed to abolish
entirely the o ne great civilizing power found in
private ow nership o f proper ty ; it is proposed to
put the body politic o n the dissecting table where
the most ignorant o f quacks are t o perform a
maj or surgical operation certain t o be fatal
T o concentrate all income property t o o ne
corporation called the government Will forever
close the door to the circulation o f money Prop
e r t y can never be sold and S pent t o bring about
t he higher level o f wages which modern civili
z ati o n demands such procedure will only hasten
the day when poverty and distress will bring
it s train o f evils t o a whole people t o end in
anarchy and universal ruin
The problem o f a rich class arises from the
apparent fact that as far a s any man may j udge
the rich receive n o Special favors from laws of
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CO U N TER FE IT C I RC U LATI ON
1 15
the land A rich man apparently buys his
wealth in a market where every man has an equal
opportunity to gain the same money w h o failed
to do s o because he was inferior in education
brains o r money making ability
A natural law always seeks to apportion wealth
with substantial equality to all the people a s
it apportions other benefits o f nature but that
truth never entered the mind o f man nor appeared
in the literature o f the sub j ect hence ' it was but
natural to assume the rich to be a superi or class
with n o law in their favor
A number o f years ag o a clergyman w as found
guilty along with others in C hicago fo r printing
and passing counterfeit money and when he was
asked to explain by a newspaper man h o w a
man o f G o d and a teacher o f morals and religion
could engage in an enterprise o f that kind he
made the following answer '
“
I did n o t believe it w a s wrong or sinful t o
put a counterfeit in circulation if it could n o t
be detected fo r if it passed the same a s good
money I w o ul d th e n have been doing a benefit
by giving my country a greater supply o f money
and although I gained wealth fo r myself the
people would have more money fo r business and
labor would b e better employed
“
What harm would I have been doing by in
creasing the supply o f money ' The country
needs more money needs more rich men I
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NA TU RAL ECONOMI C LAW
1 16
could have built houses and factories given money
to the churches that need it badly and helped
the colleges and libraries
The fact that counterfeit money gave the
clergyman wealth without earning it was of no
consequence in a coun try where men may become
millionaires overnight ; and the further fact that
labor must somehow earn the wealth that someone
gives away in benevolences and charity seems
quite absurd to the man who j udges facts by
appearances
The argument for maintaining a rich class in
every country has always been the same kind ;
the rich spend money t o give labor work they
buy and build capital fo r otherwise labor would
not be employed ; they carry o n works o f b e ne vo
lence and charity that the governm ent refuses
or is unable to do and no one is expected to
lose by the wealth the rich accumulate
The adulation of the rich man in press on
the stage in pulpit and in fiction is but a return
of the Old flattery of kings and their royal favorites
It w as not wise to oppose the king with his power
to punish and reward and it is no t wise to oppose
the rich man w h o h a s a similar power today
The modern millionaire has more power more
gifts to bestow to his favorites in public and
private life and to members of congress than
the government ; he may give away presidents of
great railway systems create directors o f banks
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NA TU RAL EC O N O M I C LAW
1 18
with marked c ards or loaded dice w h o may be
deft at that game but should be credited with
little else than a gift o f gambling
While a country i s newly developing its land
i s g iven away without cost
and billions are
bestowed by a rise in value of land ; then the
newly created capital must be distributed as a
gift t o it s first owners but the benefits are ex
p e c te d to g o to labor at a later time
After the natural resources o f a country have
been improved with railways cities towns farms
factories and mines that same capital must be
rebuilt once in fifteen years without adding to
the total wealth and without increasing the
quantity o r variety o f goods it then becomes a
vital matter whether or no t labor shall again
repeat the first gift o f wealth to its owners
without gaining any benefit fo r itsel f
Capital i s built the first time without a supply
o f money fo r that special purpose and therefore
i s charged t o labor a s a loss by compelling labor
to pay tw o times the cost o f i t s living but after
capital accumulates a s past labor and must be
rebuilt then it h as its own money and this capital
money i s intended to bring about diffusion o f
wealth among the millions
C apital in rebuilding h a s it s own supply of
money but when capital money fails to circulate
banks are compelled to put counterfeit into cir
culation fo r unless labor is partly employed with
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CO U N TERFE IT C IRC U LATI ON
1 19
counterfeit tens o f thousands will be always o ut
o f work under o u r present land and debt laws
E ach billion dollars o f government cash will
turn over s ix times a year and pay Six billion
dollars a s cost o f national living creating three
billion dollars profit t o capital upon which debts
are based E ach six cents o f interest i s expected
t o circulate o ne dollar of cash during o ne year
and pay that dollar in wages over and over again
but when interest creates a debt which promises
t o retur n money in the future borrowed money
becomes a counterfeit which consumes the interest
With three billion dollars profit each year
paying about six per interest each o ne billion
dollars Should support fifteen times its o w n value
of capital but debts may be created o f eight billion
dollars fo r each o n e billion dollars o f interest and
the debt money becomes counterfeit preventing
a wide distribution o f wealth by substituting a
dormant dollar o f debt fo r a live dollar o f good
credit money
The dollar debt puts into circulation i s only
Spent once but continues t o draw interest year
after year ; hence debt money buys once fo r the
rich and fails t o return t o buy wealth fo r the
laboring class
“
If I were to s ay t o any property owner There
i s a cloud upon the title to your property because
it w a s purchased with counterfeit money he
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NATU RAL EC ON O M I C L AW
1 20
“
would answer The money buying my property
was identical with other money with money that
buys goods and you Should be put into an insane
asylum or be in j ail fo r teaching a doctrine of
that kind undermining the sacred right to
property
Because a man buys property with money in
general circulation does not settle by any means
the question of whether o r not it may be a counter
feit which has not been detected like other coun
te rfe it money getting into circulation
If cash could be counterfeited with success
the false coiner might soon become a millionaire
getting good money for the counterfeit and turn
it quickly into property and build factories r ail
ways office and apartment buildings
C as h must be fixed and limited in quantity
the same dollars must be used over and over
again and counterfeit cash would quickly in
crease the quantity so that sooner or later it
must be discovered and the guilty coiner punished ,
if it was not detected it would saddle its cost
upon the public by increasing prices a loss labor
woul d be compelled to shoulder
Credit money on the other hand i s not fixed
in quantity the government h as no power to
coin or circulate it each d ay it comes newly
into use and each ni ght it is cancelled and when
counterfeit credit appe ars it cannot be s e p arat e d
from the genuine
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NA TU RAL ECONOM I C LAW
1 22
The power to charge unsuccessful capital as a
loss t o labor i s the thin edge of the wedge whereby
counterfeit money gets power to circulate fo r
if a natural law charge s the failures o f capital
to labor in a higher cost o f living then the human
l a w m ay be s o framed that successful capital
becomes a loss t o l abor carried in the higher
cost o f living
Ten thousand dollars is advanced fo r an e xp e ri
ment in building upon a location that seems
fertile it mu st collect from the sale o f a living
it s cost o f ten thousand dollars with interest
fo r unle s s it does collect tw o times the rate of
interest each year it will no t be a success
A s suming it h as been properly located and
built it will collec t above cost o f maintenance
and repairs o n e thousand dollars each year t o
return the money consumed in building o r ten
per cent and another thousand dollars interest
at ten per cent in ten years twenty thousand
dollars o r tw o times co st will have been collected
If the builder borrows ten thousand dollars
co st money he may become the owner o f the
building without debt at the end o f ten years
and h i s creditor being paid twenty thousand
dollars could buy the same building a s an invest
ment paying ten per cent
The builder however is in the business o f
producing and selling buildings as a m anufa ctur
ing propo s ition he i s no t expected to wait ten
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CO U N TERFE IT C IRC U LATI ON
123
years o n one building paying its cost to get
money fo r another and if a successful building
will return tw o times it s cost in ten years the
annual interest from ten buildings will create
the same money once every year
L abor cannot wait ten years or one year t o
be paid fo r buildings it may create and if it i s
paid such payment must come from the sale
of buildings in a market supplied with money
to buy them the same a s the commodity market
finds money to buy goods
If paym ent fo r capital may be postponed ten
years then it becomes impossible t o pay labor
fo r it each year and some scheme must be put
into practice by whi ch money can wait ten years
D ebts provide the avenue which evades payment
to labor fo r the capital it supplies year after
year
When the builder must pay ten thousand do l
lars in advance fo r a location half the income will
be taken in advance to return the cost o f land
and thereby debts destroy the rotation o f credit
by which labor may be p aid fo r the capital it
produces
If capital mu s t collect tw o times the rate o f
interest o n it s cost then banks will anticipate the
return of cost money Profit from selling capi
tal at tw o times cost will keep the banks sup
plied with credit money that will turn over once
a year
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1 24
NA T U RAL EC O NOM I C L AW
A natural law supplies money without waiting
ten o r more years t o collect that money from
consumers a supply which i s created by a market
price o f two times cost but if land i s permitted
to take one time cost then capital must sell at
it s cost
There are many grades of fertility seeking
capit al to develop them ; from farm lands that
will support one hii ndre d dollars per acre of
capital to the best locations in a great city
where an acre will support a building costing
ten million dollars to sell for twenty millions
A small rate of interest creates a low cost for
capital on fertile sites and Should make men
desperately anxious to build almost anywhere in
the civilized world if the market will buy
capital at the standard price of tw o times cost
In a natural capital market the extraordinary
demand upon labor for buildings and material
would exhaust the labor market and force the
rate o f wages from a minimum standard which
buys a living to a maximum standard which
will allow labor t o buy it s Share o f wealth
S elling capital at two times cost will keep in
continuous circulation a great volume o f genuine
credit money based on higher wages L abor need
n o t wait nor the builder wait on money i n a
market where capital sells at its standard price
L and owners control fertile locations while
bankers control credit money If a lot will sup
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NA TU RAL ECONOM I C LAW
126
actually paid it i s given a preferred lien upon
the total value o f land and building combined
The law gives the owner o f the mortgage a
preferred lien upon the money a property may
sell fo r because the lender has postponed his
claim upon money and waits the impossible
return of that money H ere i s where the human
l a w interferes with a natural law which will n o t
postpone payment but would anticipate it
The banker learns from experience that post
n
n
f
o
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the
payment
o
large
sums
will
not
p
g
produce the money but will increase the demand
fo r money the debt promises t o pay and as a
result when property i s forced t o sell in such a
market it rarely brings more than its debt and
the owner o f the debt must take the property
because there i s n o other buyer fo r it
The accumulating demands upon money by
debts t o be paid in periods o f from five t o
twenty years soon begin t o segregate the de
mands upon money into tw o great cycles when
debts fall due ; namely in period s o f ten and
twenty years giving tight money and hard time
periods every ten and twenty years at which
time debts must be liquidated in large numb er
s o that business may continue wi th the credit
money thus se t free
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C H AP TE R
8
G OL D
In many ways gold h a s been o ne o f the most
interesting sub j ects in the world no t only because
it i s used fo r money but before it w as SO used
there w as a fascination about it among savage s
a s well a s civilized men
Poetry fiction love and war are interwoven
with threads o f gold It i s sometime master over
the soul o f a man and sometimes it holds the
destiny o f a nation in its gilded embrace Whether
gold s o interesting in other fields may
o r no t
hold that interest when we seek t o trace i t s
power and mystery in field s o f finance i s doubt
ful but the importance o f finding the p o wer of
gold in the growth o f civilization will be admitted
G old i s an intricate sub j ect fo r inve stigation
o n account o f a connection between cash and
credit labor and goods which gold w a s able
t o establish
G old i s a sort o f S piritualistic
medium through which a certain past life o f a
people represented by capital i s made to live
again through the circulation o f money to b e
come an hereditary gain from ancestors acting
in a body politic
H o w to illustrate the mediumistic power o f
gold i s a hard problem fo r we cannot appeal t o
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12 7
NATU RAL EC ONOM I C
1 28
L Aw
that fascination by which it takes the center of
the stage in art commerce and literature but
must be content with handling common facts
The gold bug must be handled scientifically
but it is something more than a metal ; it is mu ch
like a gold bug it is a metal and a medium with
spiritualistic p owers ; there is something super
natural about it a medium between the work
of the living and the spirit of workers no longer
living
A parallel could be established for a Short
distance between go l d as a metal and the carbon
which is a basis for all growth of vegetable and
animal life for without carbon we could not
imagine h o w life could ac quire a material body
Y e t gold is difi e re nt in the body politic
If
we somehow could connect carbon with cells of
protoplasm that builds up the hum an body we
could then have an illustration of units of mon ey
or gold building the capital of society by repeat
ing the birth of an ancestral past and improving
upon that past
The importance of gold to mankind is based
upon the time labor must consume in supplying
a people where money buys the living If a
savage people could live without cultivating the
soil as birds and fishes live gold would be the
same a s another yellow pebble
When different kinds of goods are very pl e nti
ful and cheap at places far apart and other goods
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NAT U RAL E C O N O M I C L AW
1 30
S hipping developed as a carrier of goods over
the easiest roads over rivers and oceans When
a ship leaves a home port with surplus goods to
trade for other surplus time labor and a ship is
being consumed by the voyage
D uring the time of travel goods are waiting
to be exchanged and both goods and the ship
may be lost at sea at which time gold is able to
make good such l OSs by its being held at some
safe place where it may build another ship
The mystery and power of gold is found i n its
ability to represent any kind of goods in travel
to act for a missing half in every t rade and to
re p resent a ship or any other capital
The
real importance of gold has never been cor
re ctl y explained although thousands of v olumes
have been written about gold and its connection
with trade
The failure to ex plain gold in its capacity to
’
insure all kinds of value ari ses from a false theory
of trade devoid of common s ense having no
f acts to sustain it a theory employing such
“
“
phrases as free trade a nd free competition
as if trade could be other than free trade or as if
comp etition could possibly be free
M aking an illustration of trade to i nclude all
th e facts is far from being simple To give an
illustration as simple as may be ' suppose a ship
takes on a cargo of apples to sail to another port
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an d return with a cargo of oranges suppose
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GOLD
13 1
one apple will exchange for ten oranges where
they are in great abundance and one orange will
trade fo r ten apples in a like fertile territory
The very important fact to get firmly in the
mind in regard to this exchange is that apples sell
fo r ten times cost measured in oranges and
oranges sell for ten times cost measured by
apples for the cost of an apple is another apple
exactly like it and the same i s true of an orange
The shipper would take apples and sell them
s o that he could return with ten time s as many
oranges and if he could sell the oranges he would
have his profit but not in any commodity as
present theory asserts when it says trade is a
mere exchange of goods for goods A ccording
to theory profit will n o t arise with the perfect
exchange of commodity fo r commodity under
free trade and with free competition
The shi pper takes all the apples his ship will
carry and buys all the oranges he can carry
for the return voyage and thereby secures a
profit from the sale of apples and will get another
like profit when the oranges are sold
He does not take his profit in apples or oranges ,
nor do any o f the men who work upon the ship ,
but you may say the money they get will buy
other goods buyers of apples and or anges make
and sell other goods and hence at last the whole
exchange is goods for goods with all profit can
celled a s the classical th e ory o i free trad e ho ld s
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NA TU RAL EC O N O M I C L AW
132
But when other goods are produced and sold
the same rule is found ; they are produced in
great abundance to be sold where they are scarce
s o that every sale m akes a profi t and such profits
accumulate they do not cancel each other and
the more trades the illustration embraces the
more absurd the prevailing theory becomes
’
It ought to be as plain as a pike stah that the
men who sail ships and the men w h o build Ships
do not impose their labor upon those w h o work
the fertile lands they are no t a burden but earn
their own living like the labor whose goods they
consum e
The p rofit obtained by selling oranges and
apples above cost does not in any way affect the
ex change if all prices are equally advanced to
Profit must pay for ships
create such profit
and goods lost at sea and how would that be
possible if trade was nothing but an exchange of
goods for goods and did not include an exchange
of capital for goods '
The men who work o n a ship and the men who
build ships must be paid o ut o f the earnings o f a
ship which means out o f the value of a S hip and
they cannot be paid out of the value o f goods
but can be p aid o ut of the profit that arises from
selli ng goods at prices above cost when such
higher prices are p aid in the end by capital and
not b y goods
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NAT U RAL E CON O M I C LAW
1 34
the oth er hand has a permanent value not s o con
sumed the part consumed is replaced each day
SO that its value will remain fixed and permanent
Where does a ship get a value in present money
which may last a hundred years in the future '
Or a building get its value ' A railway building
or a ship must c ontribute something to th e stand
ard of living for the present generation from
travel shelter amusement education or leisure
C apital collects j ust what it contributes to th e
better living of a people and the cash interest
it collects will create its own credit money th at
should buy and distribute wealth among th e
people like cash buys and distributes goods
The value of a ship or other capital must b e
given to it by money se t aside for that purp ose
and such value cannot be given by the same
money that puts value Into goods G oods sell
above cost so as to carry the germ or profit dollar
that will then create the money upon which the
value of capital depends
This brings the explanation back to the plac e
where gold is held to insure th e loss from a ship
going down at sea or the loss of a cargo If e a ch
cargo and ship had to have a quantity of gold set
aside to balance its value so as to insure it against
loss then gold would have no po w er to represent
the value of ships at sea or what they contain
When a Ship is successful not only is no gold
taken but the owner of th e ship will pay for the
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GOLD
13 5
use of the gold the same as if that gold was itself
a commodity entitled to its profit from a price
above cost and on that account the same gold
may be used over and over again like the ship
itself
E xperience will prove to the gold owner that
he may multiply his profit by having the same
quantity of gold insure as many ships and c o n
tents as may safely be done ; for with the same
gold giving security t o twenty times its own
value it may collect a profit equal to five or more
times the annual rate each year and it thereby
creates four or five times as many dollars of
credit as there are dollars of gold
When gold is able to insure twenty times its
own v alue it th ereby cre ates another quantity of
gold that has no material existence creates a
spirit power o f gold sailing with the cargo or ship
at sea and this fact permits credit money to
multiply cash so t hat there may be five times the
quantity of credit there is of cash
C redit money buys and sells past labor which
h as no material existence it d o e S not therefore
demand a money having a material body but
as soon a s a ship is lost at se a or goods are lost
then spirit credit money must create material
money to equal present labor with which to re
place both ship and goods
The value of gold does in some measure depend
upon its material quality j ust as carbon ha s it s
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NA TU R AL EC O N O M I C L AW
1 36
pecul iar quality , separating it from all oth er chem
ic al elements but gold does not depend upon its
color or glitter
Surpl us goods sell at prices above cost and
while gold cannever be i n surplus when use d a
s
money it must sell above cost which its pro d uc
tion at mi nes enables it to do and it is therefore
like al l other commodities
G old when exchangi ng like other goods will
s ell for a like profit as a commodity but while
other goods are consumed and the value o f them
is restored by new goods gold is not consumed
but i ts value is permanent like that of capital
It gets this permanent value because it can re p
resent a commodity in trade and collect interest
money by becoming the m i ssm g half of com
m o ditie s in every trade where time an d distance
interv ene
G old gets its power over money and its basis
of credit because o f its dual nature to become
either capital or goo d s at any time
When gold insures a ship at se a it o fle rs a value
of g old as a commodity equal to the value of a
Ship and these values are made equal by the fact
that a gold dollar can collect the s ame interest
from the cost of living as can a dollar invested in
a ship
The ship i s past labor and when it sells it must
sell for money that will buy the servi ces of pres ent
How is it
l abor , money to buy goo ds or leisure
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NA TU RAL EC O N O M I C
138
LAw
stant exchange of cre dit money for cash dollar
for dollar
To get a quantity o f credit money that is not
cancelled to remain equal with a quantity of
cash SO that it may have the same value in buy
ing capital each unit of credit money i s given its
value by pennies o f cash interest for one year
which s um of interest i s collected from the cost
of living
The ability o f gold to insure ten or more times
its value h as the effect o f creating that much
S pirit gold for ten o r more times the quantity of
reserve gold i s promised to be paid The same
gold represents ten o r twenty times itself in trade
and this is surplus spirit gold that becomes credit
money
The power o f gold is no t found in its peculi ar
qualities as a metal although it is universally
desirable o n that account S avage people will
gladly exchange any surplus they may have for
its value in gold but the higher the civilization
the less influence has the glitter and color of gold
G old holds a peculiar quality in being the only
substance in commerce that is both a com
m o di ty and capital at the same time by whi ch
it becomes a money metal ; it can become a
commodity any place in the world to exchange
fo r any kind o f goods and it can become capital
in any market of the world to collect interest by
insuring ten or m o re times its own value in goods
or capital
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C HA PT E R 9
B AN ' ING
The O ldest business in the world and the most
successful is the banking business ; it is also the
most essential and needs therefore to have a foun
dation that will not give away supporting as it
does all other lines o f endeavor
With banking in trouble every enterprise
comes to the brink of disaster and when banks
“
are shaky the whole business structure w o b
bles F or this reason the natural law must be
as closely followed by the banks as the human
law will permit and the success of banking de
pends upon following the rules laid down by a
power infinitely above the human law
Banks are so carefully guarded by natural rules
that when human law establishes mortgages post
p o ning money t o a future time banking is pro
vi de d with a counterfeit currency that will sup
ply money as long as new debts can be created to
consum e interest
The path banking takes to the road of success
is not hard t o find or describe fo r it is the simple
one of not permitting it t o postpone the payment
of its debts into a distant and uncertain future
by mortgage but t o maintain deposits payable
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NA T U RAL EC O NOM I C LAW
140
on demand and kee p them at par and on a cash
basis all the time
N o matter how great or small the capital of a
bank within reasonable limits be it ten thousand
dollars or ten million it will be equally successful
under the rule C ompetition hard times and
falli ng prices will not directly interfere with su c
cess as it will with other lines of business
D oes not this fact of banking success point a
moral and contain a lesson from which other li nes
may profit ' If a study of the basic rule of suc
cess fo r banks is a rule other lines fail to follow
how great would be the gain by adopting the
banking rule in every business '
F ollow the rule of a cash business and notice
if you can call to mind any failures from com
petition hard times o r l ow prices where there is
n o mortgage and where every demand upon the
business to pay its obligations is met with cash
A cash basis under the rule fo r banking does
not demand a supply of money from the busi
ness ; o n the contrary it may be equally suc
c e ss ful if n o t a dollar of it s own money is e n
gaged A ctual suc cess depends upon h o w much
greater may be the amount of other money than
its o w n capital a bank is able to u se
The money owned by any bank will scarcely
earn enough to pay room rent at the location
it requires ; a bank must borrow from five to
twenty times its own capital ; the greater its
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NA TU RAL ECON O M I C LAW
14 2
having created this money it proceeds to loan
it on bonds mortgages and other long time future
payments which destroys its regular turnover
each year
Banks secure deposits o f ten times the cash it
need keep o n hand and is able to pay cash to
any depositor w h o needs the money If a debt
postpones payment that should be payable on
demand then capital money fails to return to
circulation until the debt is paid when it should
turn over once every year and would do s o if all
loans were payable o n demand
Banks are not permitted to postpone the pay
ment of deposits ; trying t o do SO ends the career
of that bank and therefore statute law knowing
disaster from experience allow banks no choice
in the matter P ayment on demand must be
made o r the bank must g o out o f business
The human law that keeps a bank on a cash
basis requires it t o keep o n hand a certain sum in
actual cash at all times which is a fixed p ropor
tion of its total deposits payable in cash
The natural law fixes the sum of cash that will
keep credit equal to cash at about ten to o ne ;
that is to say o ne dollar o f c ash cancelling checks
a l l the time will permit the bank to meet the
d emands of ten times that amount o f deposit
credit
The amount of reserve cash for each particular
bank dep ends up on the nature of its business and
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B AN ' IN G
143
bank l aws recognize this fact S avings banks
have a reserve in cash as l o w as o ne dollar in the
hundred while reserve banks that suppl y other
banks with cash in critical times need about one
quarter of its liquid capital one dollar to four
of deposits
A bank cannot count as capital i ts marble
building at the center o f business its costly bur
glar proof vaults o r its expensive and ornate
furnishings These are no t the things that make
a bank able to pay on demand are not banking
capital in fact fo r only the cash on h and in
actual money will permit a bank to remain safely
on a cash basis
To get a clear distinction between the rule
that makes a cash business a succ ess and failures
in other lines o f business it may be well to com
pare banking methods with corporation fi n an c
ing using for that purpose one o f the greatest
corporations in the world and a very successful
one The United S tates S teel C ompany
The United S tates S teel Company has in round
numbers a capital o f fi fteen hundred million do l
lars upon which it earns interest and dividends
which capital is equal to deposits o f that sum
due to investors money of the public the corpo
ration uses in its business like deposits of a bank
The deposits of capital however may divide
into three or more layers according to an amount
of fat that w as found ne cessary t o prote ct each
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NA TU RAL E C O N O M I C LAW
144
layer so as to secure actual mon ey from the public
in financing and promoting the enterprise
Three classes of owners have three different
legal kinds of capital invested whereas the law
will not permit a bank to make such inviduo us
dis tinctions among its depositors ; three different
claims upon the money value of capital are strati
fi e d by three kinds of securities one being pr e
ferred above another
In a total of fifteen hundred millions Uni ted
S tates S teel capital the first layer is protected
by tw o outer layers of fat and it consists of six
hundred and twenty millions dollars in bonds a
preferred royal class having a divine right to
steel money in advance of money paid in by
other owners
After the royal owners come the barons
another layer close to the king but of less di
vinity who may claim their money after royalty
h as been paid viz preferred stock three hundred
and Sixty million dollars and next in order comes
the bourgeois the common herd of owners who
hold common stock calling for slightly more than
five hundred million dollars and wh o get what
may remain after liquidation
Without criticizing the stratified securities of
this concern which is contrary to the rule of
banking a rule all corporations must obey or
finally fail let the reader picture what woul d
happen to banking if it was permitte d to stratify
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NA TU RAL E C ON O MI C LAW
14 6
It would quickly become apparent however
that ten per cent or less of the entire sum on de
posit would call fo r actual money each year
leaving ninety per cent that might be m anipu
lated allowing sales to be made on what is called
margin and by putting up ten per cent in cash
a buyer m ight call a deposit his own to speculate
with as is done with stock certifi cates
The fact that ninety per cent of all deposi t
accounts are waiting their turn to be paid and
the whole sum is called once in ten or twenty
years violent financial panics would gather in
ten and twenty year periods from such s pe cu
lation
This parallel between what is called an open
market for capital and a cash market will demon
strate that banking would be impossible if its
funds were at the hazard of a competing market
Banking is the best and safest business in th e
world the most respected because it follows a
natural l aw and has a closed market where no
speculation is pos sible and where every claim for
money is equal an d is paid on demand M ay not
all other lines of business follow the s ame rule '
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H OW
B
AN ' S
A RE
PLANTE D
A N D GR O
W
Banking is difficul t to describe although it
keeps simple accounts of a cash business between
It is difli cul t to
its depositors and borrowers
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B AN ' ING
1 47
describe because it maintains a great c o -operative
balance between hundreds of millions of accounts
all over the world and a ten fold greater account
of past labor which capital brings into present
markets
When a settler in a new country for example
builds his log house the ac count between his
labor and the house he occupies is very Sim ple
the forest supplies the lumber the fertile land
grows the surplus living giving him spare time
to build and improve his land In later tim es
when life h as become much more complex houses
are supplied with unlimited hot and cold water
by turning a tap with unlimited light by turning
a switch with telephones baths heat elevators
and the like four hundred fami lies m ay live in
one house and then no human calculation can
keep the account between a laborer an d the house
he lives in but natural law makes such accounts
automatic through a system of banking
When we see natural automatic accounts out
of balance the rich living in idle luxury and mil
lions of laborers unable to find work false con
cl usio ns arise from the very comple xity o f the
sys tem and right conclusions are only possible
when we learn the natural law
Banks were no t born into the b o dy politic
fully developed as they now appear but have
come to their present state by a slow process of
d evelopment from small beginnings starting
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NA TU RAL EC ON O M I C LAW
1 48
perhaps from saving a loss of time in barter
mark ets with a crude token money like sav
ages now use
The present deposit loan and discount banks
are very ancient institutions as history marks
time ; the origin of modern banking is lost in
tradition but it is certain that banking came
from a combination of cash and credit before
coined money appeare d
The early banker w as an insurance agent who
gamble d on the chanc e o f a ship being lost at
or a caravan of goods being attacked by
s ea
thi eves the banker agreeing to make good any
l o ss for a sh are of the profit and he thus became
a silent partner in every business in which his
funds were engaged
The stock in trade of the early banker w as
that of a gold or silver smith and dealer in prec
ious stones M oney did not appear as a standard
coin until banking had been in existence for some
hundreds of years and it is important to remember
that credit money was the beginning and cause
fo r coining gold and silver
When a banker supplies gold he supplies the
mi ss ing half of goods that must appear in every
trade S hipping could then go forward to com
f
l
a
trade
when
it
had
but
hal
the goods the
e
t
e
p
trade re quired and by thus supplying half the
v alue of goods the owner of the gold could claim
half the profit and thereby interest developed
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NA TU RAL EC O NOM I C LAW
1 50
number of laborers it may profitab ly employ
upon total wages paid upon the tim e it will take
to have wage money move completely around its
circle to be spent and again paid to labor
It takes time to earn money by labor to earn
and spend money and return it to the place from
where it started It is labor time that determines
the quantity of cash which will be required to
meet all demands and it is very strange that
students o f the money question seldom observe
this fact
’
’
O ne day s supply of cash must equal that day s
c ost of living and be paid to all k inds of labor in
wages ; it goes into pockets and unless a quan
tity is on hand to p ay labor the following day
the supply would fail The quantity of cash
must be able to pay total wages day by day until
pockets are sa turated and until as much cash
is spent in cost of living as will provide for the
next day This quantity of cash e quals about
fifty days wage money
’
With fifty days supply of cash on hand and
’
only one day s supply being used each day there
’
will be forty-nine days supply waiting to be
used in pock ets or in pools at banks A fifty
day supply of goods will accumulate in stores to
’
balance the fifty days quantity of money ; o ne
fiftieth of the cash and one fiftieth of the goods
will exchange each day
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B AN ' ING
151
’
A fifty day supply of cash with onl y one day s
supply passing from hand to hand is the most
important element in banking bec ause it permits
’
forty nine days supply to be waiting its turn to
be u sed day by day Banks mobilize thi s spare
money and use hal f of it as reser ve to supply
ban k checks which are in many ways a better
business money than cash
If labor is being paid but once every two weeks
cash will lag between such pay days and return
in a gre at swell for several days after ; merchants
buying goods in advance to sell in sixty days
wil l also create tides in the flow of cash
The banker gets his stock of cash by m o b il izm g
the lagging cash in the hands of merchants land
owners and others who are primitive bankers
making small loans to men they know personally
The first duty of a new bank in any town is
to secure the best business location it can find
where it will reach its customers with the most
convenience the same as a meat market or gro
cery ; the banker has credit to sell which th e
butcher and grocer use to buy foo d or other
goods
The only inducement the banker off ers to the
owner of lagging cash is to deposit it with hi s
bank where he will keep it more conveniently and
return any or all of it when called for allowing
the dep ositor the convenience of issuing a bank
’
check calling upon the bank to pay the depositors
money to whoever he d esires to pay
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NA TU RAL
1 52
EC O N O M I C
L AW
The b anker never fixes a time when the entire
sum he owes will become due and payable or
when a bank will liquidate its debts fo r if it did
the bank itself would then be out of business
The first important fact connected w ith banking
is found in the offer of the bank to return any
part of each dep o sit when called for by che ck
The bank , moreover will not give a depositor
any security for the money he may deposit and
loan the bank while requiring the utmost se
curity from the same depositor S hould he borrow
his own money instead of checking it out T he
“
bank in effect says to any depositor '
If you
doubt the ability of the bank to p ay any or all
of your money at any time j ust come an d ge t it
and take it away
T he payment of any part of a d e posit on p re
senting checks by the owner or by anyone h e
desires to pay inflates the currency by the
amount of ch e ck money in constant circulation
b ut such inflation does not advance prices
When a depositor can ge t any part of his money
on deman d he will never call fo r more cash than
he needs from day to day allowing checks to pay
all bills except the cost of living
A natural law governing the circulation o f
cash put s a very narrow limit on the need f or
cash each day but supplies fifty times as much
This law permits
as may b e used each day
che cks to ent er the daily circulati on and to do
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NA TU RAL E C ON O M I C L AW
1 54
’
the banks forty thousand dollars will represent
the moving money The greater the number of
depositors who bring spare cash to the bank the
better within reasonable bounds for if one man
deposited the whole sum and could call for it on
demand he would have the bank at his mercy and
coul d make it suspend business at his pleasure
F orty thousand dollars of spare cash becomes
’
the foundation of the bank s business and it will
be called back into active circulation every fi f
ty days in common with the remainder of the
primary cash But when checks g o into use
they supply all the needs fo r money except to p ay
the cos t of living Banks be ing re quired to re
turn the cash t o circulation that can no longer
lag receive other cash then beginning its lag
to replace it and the banker finds he has forty
thousand dollars cash on hand practically all
the time
A s soon as the bank collects and mobilizes
S pare cash in any community all demands for
loans will come t o the bank that before were
poorly supplied b y individuals who could only
loan it once while the bank may loan it five or
more times
Merchants come fo r loans to cover the time
goods take before they reach the consumer ;
manufacturers come for money to buy raw ma
t e rial and meet payrolls all of which demands
are known as commercial loans using cre dit for
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B AN ' ING
1 55
short periods thirty sixty ninety days and
six months
C ommercial credit will soon establish its own
channels and use a certain amount over and
over again as goods and raw material are pro
du c e d and consumed over and over again
If a bank had no other depositors than the ones
who bring the spare cash upon whi ch all its busi
ness depends it would be a poor bank indeed
fo r it could not then supply demands from com
merce no t counting greater demands from
capital
When the lagging forty thousand doll ars has
b een deposited the advantage is all with the
’
banks creditors ; the bank owes forty thousand
dollars has contracted heavy expenses and has
no income
I t would so on be forced to qui t busi
ness if it could not loan forty thousand dollars
of cash four o r fi ve times and increase its deposits
in order to do so
After f orty thousand dollars has been loaned
once the deposits become eighty thousand b y
the loans b ecoming new deposits while the bank
will have the same forty thousan d dollars o n
hand to create a check circulation that supplies
credit money
F ort y thousand dollars loaned at eight per
cent would bring an income of but thirty two
hundred dollars a year not enough to pay the
rent and a bank must keep expanding its loans
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NA TU RAL EC ONOM I C LAW
1 56
and deposits if it expects to pay expenses and
make money
The business limit of any bank is found in its
ability to pay deposits in cash o n demand and
as it cannot increase its cash above the forty
thousand dollars that lags in circulation that
sum will fix the total amount o f deposits it may
take
’
The limit o f a b ank s deposits is ab out ten
times as many dollars credit as there are dollars
of lagging cash so that a bank may keep building
up deposits until they are about ten times the
reserve cash This limit o f ten to one is no t an
arbitrary limit fo r each bank ; it is a b alance
b etween cash and credit for all b anks
E ach bank will discover its o w n limit to loans
and deposits depending upon the active o r dor
mant use o f its credit A commercial b ank will
have eight to ten times as much deposit credit as
cash ; a savings bank will average a hundred
dollars of deposits to o ne o f cash while building
and loan associations may go higher
The banker discovers his own li mit by the call
the
o f his depositors upon his reserve cash ;
greater deposits grow the greater the demand
upon reserve cash and when deposits and loans
are in excess the cash begins to leave the bank
to go into outside circulation When the limit
is passed he must contract loans and restore a
safe b alance between cash and deposits A t such
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NA T U RAL ECON O M I C LAW
1 58
When a land and building boom comes to an
end by a rise in cost o f land local banks find most
of its credit tied up in real estate operations and
a pani c usually follows a boom because co m
m e rc ial credits have b een sacrificed to meet
speculative demands
I n the early days o f development when a few
men secure the most fertile locations without cost
when capital is cheap and profits great there was
no danger to banks in loaning money to build
upon and improve lands for the high rates o f
profit create new bank deposits faster than
capital consumed them
When the quantity o f capital however in
creases its demand upon the commodity and
labor market b ecomes enormous with the rate
and the cost fo r land rising
o f interest falling
making building loans by banks so exceedingly
dangerous that few b anks dare venture into that
field
A fall in the rate of interest will extend the
time given the income t o pay the cost o f capital
to return the money loaned for building A
’
rate o f ten per cent gives ten years time while
deposits are payable o n d emand and banks
should b e able to collect loans in practically the
’
without waiting more than a year s
s ame way
time
Total credit money is limited it must b e re
newed every year and it is this fixed lim it in total
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B AN ' I
NG
1 59
credit which banks often experience to their terror
without seeming any wiser on that account
There is the same limit to the number of times
total bank deposit may be loaned when loans are
not paid as there is to the number of times the
cash reserve may be loaned to create the deposit
account
The limit to mortgage loans bonds and other
investments is fixed by the total amount of in
te re st collected each year which can be paid o n
the debt The limit in interest money will soon
be reached when debts are not paid and keep
accumulating a panic comes over night because
bank checks in large quantities go o ut of circula
tion
A ssume for example the total cash upon which
all credit is based is o ne billion dollars and it
turns over six times during a year paying wages
and buying the living and thereby creating half
—
that sum in profit money p ro fi ts o f three billion
dollars
O nly half thi s profit may become interest and
when debts collect o ne billion dollars interest
each year no more debts may be created and
the cost o f land will then prevent all building o r
rebuilding because no money to pay that cost
can b e borrowed
When a country reaches its debt limit the cost
o f land becomes most disastrous for as long as
debts may grow the cost of land may b e paid by
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1 60
E C O NO M I C
NATU RAL
LAW
creating a debt B ut when debt l imi t is reached
all money fo r building goes out o f circulation
because no money can be had to pay fo r land in
advance of building upon it
When capital has borrowed all the money it
can give security for the demand for loans from
capital does not therefore come to an e nd but
becomes more and more insistent especially
when banks seek to have loans paid
B anks finding no credit available for co m
merce when fixed debts absorb the interest
money then developed a new scheme to relieve
credit stringency known as rediscounting mer
chant bills or piling new debts upon O ld debts
that could no t be paid
Rediscounting commercial paper means that
the loan first made to m erchants is used by the
b ank before it falls due to become security fo r
another loan by which the banker gets inflated
money to make a new loan b ecause he has no
credit
T o redisco u nt merchant bills means that the
rediscounting bank must be given the right to
print paper money when the limit in commercial
credit has been exhausted I t is held necessary
to keep the new money out of the general circu
lation to prevent an inflation by which each
dollar of new cash would become the b asis fo r
fifteen dollars of new debt
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NA T U RAL EC O N O M I C LAW
1 62
Fertile lands poorly imp roved
held for
advance in value and powers of governm en t
are used at all times and at all places to bring
about an advance in value o f land for the benefit
of a few owners without regard to the effect upon
the publi c
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C HA PT E R 1 0
W H Y M ONE Y
Is
ST RI NG ENT
I n seeking to discover principles from millions
o f facts no field of research in the world o ff ers
the difficulty found in a tight money market ;
in no other field are the facts treated with more
contempt in no field are foolish and lying
theories given greater prominence
Nineteen out O f every twenty famili es in the
United S tates experience the fact of tight money
almost every day of their lives but know nothing
at all about the cause of it ; they know money is
hard to get and easy to part with
When millions of laborers are suddenly without
work the fact that money is stringent becomes
the chi ef news o f the day but in ordinary times
people are not willing to admi t they find money
scarce although they will admit most of their
friends and acquaintances are worried about
money
I n hard times no foresight on the part o f a
business man can prevent tight money the loss
o f markets
prices for goods All
o r falling
suffer ali ke when masses of labor is out o f work
from no fault o f its own There is scant sym
pathy for labor when it suffers from the chronic
tightness O f money which keep s thousands con
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NAT U RAL EC ON O MI C LAW
1 64
out o f work I t is pointed o ut to the
workmen from pulpit and press that if any man
really wanted work and was willing to do any kind
Of work willi ng to hunt it and travel and seek
and seek he would find work it being unthink
able that work could not be found in such cases
Why should such different points o f View sepa
rate the laborer from the b usm e ss man farmer
The man without money is
o r manufacturer '
o ut o f work whether a business man o r laborer
and is the most helpless creature in the world
more helpless than an animal that can lick up a
l iving from the bounty of nature
The fear of becoming an outcast is uppermost
’
in every man s mind when his supply o f money
must be spent as fast as it is received B eing
’
without money is a night mare to a man s soul
and haunts his dreams A man will not adm it
to another a fear so deadly to his peace and happi
ness not even admit to him self that he or hi s
family his wife and children can be in such grave
danger as h e finds among the very poor
It IS not the pro spect o f physical suffering or
even death that brings about a sickening fear of
being without money it is to fear a loss of friends
associates fear of losing the culture and family
life that is the basis of enduring happiness
S tringent money is hard to describe ; it is as if
loaves o f bread became scarce by a power o f
e vil that in fiendish delight gave to a favored
tinu al l y
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NAT U RAL EC O N O M I C LAW
166
.
having contributed its true proportion to the per
manent poor
n
for
example
we
have
millionaire
to
each
o
e
g
,
}
on
e hundred thousand o f the population
there
would have been selected o ne millionaire by
natural law to fall to the bottom o f the social pit
even kings
an d that will be true o f all classes ;
are not exempt The common laborer is more
numerous among the poor only because o f the
greater proportion o f common labor among a
hundred thousand people
M oney starts on the trip around t he circle from
“
’
the top whi ch is to say from the market the
business man handles it first splits it up and
passes it along the li ne to finally pay what is le ft
to labor after deducting more important ex
penses labor getting money last according to what
is most needed by th e market and without re
gard to any w h o may need work or wages
The stringency that is of importance is o ne that
seems to have been entirely neglected by finance
writers but is the one that must be relieved if
labor and distribution problems are ever solved ;
it is a stringency O f credit responsible for keeping
nineteen out O f twenty families in every country
short in the daily supply of money going to them
T O be able t o appreciate to what extent money
is stringent it is only necessary to compare the
markets we no w have in the most prosperous
times with a natural market and a permanent
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W HY
M ON EY
I s ST RI N G
ENT
167
pro sp erity we should have at all times Wh en
l ab or s hall buy all that labor may send to the
market at a price such a market will create then
competition will become impossible labor will
ne ver be out of work wages must rise to the
highest point the market can pay and profits
reach the same high le vel
I t ought to b e self evident that a natural
market is o ne that will b uy all that labor can
send to it ; any other plan creates a surplus the
market cannot buy If there is a surplus why
is not labor p ermitted to buy it and why not buy
all of it '
T he sum of money failin g t o circulate and
therefore stringent cannot p ossibly b e any part
of the cash because cash has no way o f avoidi ng
circulation no way o f becoming stringent ; it
c ir culates as fast as natural l aw will permi t , and
usually turns ove r six times a year while credit
is only expe cted to turn over o nce a year
The exact sum stri ngent can b e e asily c al cu
lated on the pre sent basis of produc tion C ash
circulates without b eing stringent ; henc e it is
not taken into cal culation ex ce p t as it will
me asure the amoun t of credit failing to cir culate
The quantity of credit used e ach day in com
merce although an enormous sum is not a part
o f the stringent circulation but it b ecomes strin
n
g ent duri g panic and hard time peri o ds
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NA T U RAL EC O N O M I C LAW
1 68
credit supplies the machi nery by
Which cash profits are exchanged for credit that
is cancelled once a year but banking is expected
to supply a permanent circulation O f credit based
upon the time taken to cancel commercial credit
during the year ; a credit not cancelled but used
like cash in paying wages to buy wealth like cash
buys the living
C ollecting cash pro fits and exchanging them
for credit will cancel a certain amount O f bank
checks each day j ust like cash itself is redeemed
each day buying a living A s cash has a sixty
day supply on hand to represent stores of good s
Waiting to be consumed so credit must have a
quantity o n hand to repre sent stores o f capital
accumulated from the past
’
The l ag g m g cash above the day s supply is able
to keep a lagging quantity of credit redeemable
in cash o n demand waiting to be cancelled and
it is this sum o f lagging credit that o ught to b e in
general circulation
C apital represents past labor ; therefore its
credit money has no cost O f living to pay it can
wait and fo r that reason its period o f waiting has
been so far extended into the future by debts as
to destroy a most essential quantity O f capital
money
C redit money with no cost O f living to pay is
not expected to buy a living I t is expected to
circulate and pay a wage above the cost o f living
C ommercial
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NA TU RAL
1 70
E CO NO M I C
LAW
the accum ulation o f wealth the advan ce Of scien ce
and culture
C apital and machinery are intelligently di
re cte d by natural law to multiply the power of
labor from ten to twenty-fi ve fold and when
confined to providing an animal living will send
an over-supply o f goods to every mark e t
The curse of civilization has e ver b een a diffi
culty O f finding employment fo r surplus labo r
and a market fo r surplus goods Whi le capital and
credit money keep advancing the standard of
living The human law prevents the natural
order which would distribute wealth so as to
keep labor fully employed with advan cing wages
to balance the advance in civili zation
The desire fo r food and shelter is easily satis
fi e d and when once suppli ed makes any surplus a
sheer waste with food to ro t in the fields unless
the demand fo r wealth em ploy s surplus lab or
There is an insatiable demand fo r wealth whi ch
pays an income and if this demand had a money
—
supply the market would then buy all the goods
and capital whi ch labor and mac hinery could
send to market
If the earth and its natural resources was made
“
into an Open s hop for labor with every fertile
location producing o ne hundred dollars worth of
capital fo r every ten dollars of income ; if capital
was able to sell in its market at two times cost
then a circulation of money mus t aris e to buy
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W HY
MO N E Y
Is
S T R ING E N T
171
everything labor could produce each year and buy
at a profitable price
“
A n O pen shop earth demands the ful l devel
o p m e nt o f every location in cities o n farm s in
mines and forests according to fertility u sing
the most fertile before the less fertile is im
proved holding in reserve lands that will always
provi de for an increasing population
There are a great many varieties o f capital in
towns cities farms factories railways and
electric power H ow does it come about that
the supply o f capital can never become surplus
and glut the market the same as goods
I n the supply o f commodities from farm o r
mi n e the most fertile land will produce at the
lowest cost and cost will rise rapidly as the mar
gin Of fertility falls A fall in price o f goods will
at once destroy the profit o n the poor lands whi ch
will then cease to produce and force labor to find
other work
B ut fertility o f soil for the growth o f capital
works the other way around C apital fertility
is many tim es greater than fertil ity O f soil fo r food
and raw material O ne acre in the center o f a
great city is a million times more fertile in creat
ing pro fit than land in grass that will sup p ort
only flocks and herds
C apital has every grade o f fertility from an
acre growing a building costing fifteen milli on
dollars to the poorest lots that w ill support but
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NATU RAL
1 72
E C ON OM I C
LAW
a hundred dollars of capital to improve them
I n every case the cost O f capital is the same
without regard to differences in fertility o f loca
tion because capital cost is measured by a rate
of interest and not measured by its cost in lab or
and material
E ach ten dollars O f income should support o ne
hundred dollars Of cost of capital whether o ne
acre will develop capital costing fifteen million
dollars or another acre will only demand o ne hun
dred dollars cost of capital The difference in
fertility of soil is levell ed by the difference in
cost o f improvement
N ot only is the cost o f capital held to the same
plane without regard to differences in fertility
o f location but profit from the sale of capital
is equally held to the same level ; each o ne hun
dred dollars o f capital cost will sell in its natural
market f o r two hundred dollars because the
rate of profit is always tw o times the rate o f in
te re st which measures the cost
The rate o f interest measures the same cost
Of capital o n e ve ry fe rtil e acre over the civilized
world and uni tes the whole world into one single
organism E very hundred dollars o f capital
whether o n a most fertile or on a poor location
will have the same cost and selling p rice which
fact should hold wages to the same standard
over the whole civilized world regardless o f the
cost o r a selling price o f commodities
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NA T U RAL EC O N O M I C LAW
1 74
Altho ugh the natural law pro vides the money
to p ay wages at the highest rates human law will
n ot permit the natural demand to create its
natural supply no r will the human law permit
the supply o f capital to sell at two times its c o st
A cost for land rises to destroy the fertility o f
each location by taking up all the profit ab ove
the cost o f living preventing capital from selling
ab o y e a cost fi x ed by th e lowest rate o f wage s
and w ill no t allow capital to sell in its natural
market at its stand ard price
A cost for land changes the earth from an open
where an insatiable demand fo r wealth
sho p
would send wages to the highest limit into an
earth closed against any rise in wages above the
c o st of living and closed against the distrib ution
of we alth among lab orers
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C HA PT E R 1 1
PARAS ITE E VO LU TI O N A TH E O R Y OF D E VELO P
MEN T B Y 'O Y -CEL L s
—
B efore describing the changes that must b e
made in our ways o f doing business and before
outlining a great program of construction which
will bring permanent prosperity it is necessary
to e xplain how o ur separate industries and efforts
must conf orm to a general plan fo r the advance
ment of all mankind
H uman law permits individuals to use power
over lab or fo r selfish ends contrary to the general
plan of social evolution but such laws interfere
with the natural functions o f the social organism
j u st li ke a disease interferes with individual
health and we must learn how to avoid diseases
o f the social organism if we would solve our
social p ro blem s
I t has long been the hope o f students o f hi story
to discover why nations rise to a certain level in
wealth commerce and power and then either
decay b y a lingering disease or die a violent death
from revolution war and anarchy
I f history coul d be dissected and each period
b e divided into its particular typ e O f social
organism there would be disclosed a p arallel o r
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1 75
NAT U RAL EC O N O M I C LAW
176
similarity between the development of species
in vegetable and animal life and a development
o f species in social growth
S avages leave their caves and trees to unite
into tribes that live in huts and tents where the
family is g l ve n a slight protection from wild
animals and from the elements This cell like
protection fo r the tribe will compare to the loose
c ells O f protoplasm l n the sea that get food from
the flowing se a water passing through cells and
walls but which have no o rg anl ze d functions o r
organs
B eginning with savage tribes there would be
a very long mi ne I n history before the next great
step was made bringing forth a much higher type
comparable to the line separating the vegetable
from swimming and living things in the se a
Whe n the tribe learns to cultivate the soil and
to domesticate wild animals into flocks and herds
it takes o n a fixed or vegetable existence and
acquires a social body that may develop functions
and organs for a higher type
Af ter learning the advantage o f cultivating
fertile lands and easy living on that account
the advance becomes very rapid from an e vo l u
tion standpoint although famine revolution
wars and pestilence wipe out millions in short
periods the increase in subsistence from culti
v ating the land keeps adding rapidly to the hu
man population in favorabl e latitudes
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1 78
N
ATU R A L
ONOM IC L AW
EC
anim al lif e prepared in advan ce to s u stain the
p eculiar requirement s of each human unit b ut
in addition to supplies of vital food in all lower
organic forms there was stored in the mountains
and plains and beneath the surface de p osits of
material that w as to become the b ody o f a new
so cial organism in its f arm s towns citi es shi ps
rail ways and f actories ne w f orces were at han d in
stea m electri c it y and other po wers of me ch anism
Railway systems fa ctorie s shi ps towns and
c itie s are living thi n g s that m e n d o n ot c re at e
alth ou gh they b uild them
All of the factors o f
production distribution an d so cial power are o r
g anize d into o ne great li ving b eing w e m ay call
—
a M ass M an who n ever dies
W ho is imm ort al
While million s of livi ng units or cells are b orn
and di e each ye ar
The first sim ple form of o rg ani c life in the
world of living things has but a slight cell stru cture
without function s or organs it cann ot move b ut
i s washe d ab out by the waters It has no s ense
of taste o r smell hearing o r see ing
o f feeling
T he first demand up on sim ple f orms is t o devel o p
s ome s ens e of touch b y w hi ch it m ay f eel its w ay
es cap e danger an d distinguish its fo od a de lic ate
feeling or se nsitiveness to touch develo p e d all
over the Outer surface Of the b ody
F rom this sense Of to u ch by materi al c ont act
S eeing b eing a
the other senses were develo ped
se ns e also of t ou ch bu t no t a m ateri al to u ch
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PARAS ITE E V O LU T I O N
1 79
whi ch at first could only separate the light o n
the surface from the holes in the ground that were
the secure habitation o f the earth worm ; other
senses o f hearing smelling and tasting were in
their regular order produced fo r new species
according to a general plan
To secure its food se a water flo w ed through a
c hannel in a simple body containing a small per
cent of nutriment compelling the whole activity
of the b ody to pump sea water al l the time to get
enough food to live an d reproduce the sim plest
form of organic life
S imple tribes are like such cell structures that
only s eek food and only reproduce but they have
the power of reproducin g the tribe on account
of its protecting the famil y and providing an
e asier living fo r all its members
I n the as cent from the most simple forms to
mank in d each o f the types form a link in a con
tinuo us line of ascent an d each such lin k in the
chain develo ped some special p art that w as to
b ecome a living human b eing and was necessary
to that end maki ng each such link indispensable
to the end o f the chain where man appears
There w as therefore some essential cells that
did not change with each type some central im
mortal cells tha t coul d not die no r rest nor sleep
but must work and remember all that transpired
in the past to again incorporate past gain into
each new structure and thi s cell is admitted to b e
the uni cellular protoplasm having immortal life
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1 80
N
AT U R AL EC ON O M I C LAW
The imm ortal part Of each person has no p ast
an d no future the past is stored in the heredit ary
structure it b uilds while the future is held in the
hand o f the Mighty Power that plans while only
the present concerns the immortal man
I t is quite beyond the power of the human
min d to trace the work o f this immortal cell unit
of protoplasm o r spark of living vitality that
does no t die o r change in a million years of
progress it is m i cro sco p l c I n Si ze but quite infinit e
in its power and cap acity
B ut looking upon the whole plan extending
as it has over al most endless time creating million
species to express living activity there can b e
no doubt that a M aster mind and a M aster
Workman w as in charge o f this development in
some way similar to that by which we create the
lesser work Of building living forms of factories
ships and railway systems
Although the mi nd fails to grasp the causes
at work in the vast field Of organic species there
is a difference when only o ne organism including
m an is being evolved in plain sight and its hi story
—
has b een recorded in all its principal st ages the
hi story o f each nation
The same natural laws and a sim il ar immortal
cellular cause has had control over the species o f
social organism The fundamental standard Of
li ving and the fundamental growth of new func
tions and organs make advances in the social o r
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18 2
E C ON O M I C
NATU RAL
in the air
L AW
and on the land making a great diversity
of living in different parts of the earth prep ared
especially fo r the needs o f the hum an organism
With the food supply on han d only a sp arse
population could live at ease on lan ds best suited
for huntin g o r fishing and in creasing pre ssure
from growing population forced new populations
to migrate and to begin the cultivation of soil
and tame wild animals to work fo r them
I n the soil ready to enter into the materi al
b ody of the social organism the precious metals
were early appreciated fo r their future importanc e
with supplies o f mineral and metal the soci al
organism must us e in its material structure
We may ask why all this w orld turmoil thr ough
mil lions of years when one k ind of life w as ceas e
lessly destroying other life and why thr ough
te ns of thousand of years of history millions of
hum ans were engaged in killing each other only
to evolve a higher standard of living than that of
birds an d b easts that seem well satisfied '
T he lif e that gives activity to any f orm will
lose its desire and wil l p erish unless the j oys of
living overcome the pain the long advan ce from
lower to higher types was to gather a stronger
hold upon the desire to live in this material world
by vastly incre asing its j oy and ha ppiness over
its pain and misery
The gro sser appetites for food multiply as
higher types develop but whe n man is reached
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PARAS I TE
V O LU T I O N
18 3
E
me ap p etites are re fined and dem an d quality
where only quantity ha d b een called for E ach
j oy is lik e a vibrati on on a string of a musical
in strument that moves along what we cal l a nerv e
C o untl ess new strin gs o f nerves were developed
to play their music of j oy and warn us by increas
ing pains that life was in danger at the first
app roach of harm
What has b een developed in governm ent
education t he fine arts or useful arts
reli gion
ma chines steam and electricity was but to create
a c om m on st an dard o f j oy in li ving create new
nerve lines for the whole people which add enor
m o usl y to the desire to live to s ecure a j oyful
li vin g common to all m ankind
B ut is this the end ' I s a man only to consider
j oy and hap piness ' Whatever answer we may
b e inclined to make we know Of no man o r clas s
of men who wil l resist j oy unless they are them
The
se lv es dying an d have no desire to live
pu rpo se o f lif e where j oyfuln ess exists means a
pre paration for imm o rtali ty one life after an
other up on this e arth
What c ivili zation would bring fort h is a m an
fit for earthly immortali ty where d eath means
o nl y that yo u th may b e con st antly renewed b y
an other period of living with a more highl y de v el
o pe d personali ty that wil l hel p along the super
hum an plan by l iving o ne life after another on
thi s e arth
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1 84
NAT U RAL
E C ONOMI C
LAW
H ow does the j oy o f living develop com merce
manufacturing government religion education
and culture all of which seem so remotely con
’
ne cte d with a man s desire to enj oy himself which
forces upon labor great toil and sacrifice ' B y
creating parasites who get most o f the good
things and force others to work fo r the sponger
and thereby develop civilization
A s soon as savages learned to till the soil
its fertility gave a power to live without work
The j oy Of living at ease and watching another
man do all the work soon b ecame an overmaster
ing passio n for certain men who Were able to
enslave other men to work for them
The men who became commanders of workers
and took all the surplus fo r their o wn j o yful
living were what we c all par asite s who live by
fastening upon the body Of the worker forcing
that worker to give most o f the luxury an d j oy
of life to the parasite commander ; these parasites
enormously increased the number o f good thi ngs
the workers were forced to provide
The world made its first advan ce and c ontinues
to advance from classes of parasites who fasten
themselves upon the workers seeking an easy
and luxurious living fo r an idle class B y getting
the best living and all the leisure the parasite
class had the first advantage from any new form s
of food the worker was o bliged to provide and
havi ng had leisure the p arasites al so could develo p
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NAT U RAL
18 6
LAW
E C O N O MI C
F rom this parasite control over produc tion and
distribution all the functions and organs of the
b ody politic farms factories towns and cities
and finall y all the workers themselve s are able
to obtain most o f the advantage s that at first
were only enj oyed by a smal l parasite class
The parasite seems to Obtain command over
the worker by its ability to attach to s ome non
vital part o f the structure but to a p art that is
of the utmost importance in creating j oy whi ch
part consisted o f an accumulation of fat set aside
as a reserve from which the j oyous sen sations
and a p petites arise
The parasite lives o n select fat ce lls that some
how control the pleasure nerv e cente rs Or influe n ce
them to play upon the nerves such fat cells b eing
a reserve o f vital force from which the whole
b ody enj oys rest from work and recovers its
muscular and vital power they are the reserve s
of hope o f love and amb ition an d unless th e
worker will increase the supply of fat over the
amounts consumed by parasites it will have no
rest o r j oy in living
F at de p osits control the organ s of vitality and
fecundity and regulate the supply of energy t o
all parts of the b ody give pleasure to all appe tite s
and control the pleasure of the fi ve senses, he nce
such fat is of the most com p elli ng im p o rt an ce in
the advan ce of mankin d
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PARAS ITE E VO LU T I ON
18 7
The owner of capital whi ch is a fat depo sit
from its coll ection o f interest money is able to
live without work but is no t necessarily a parasite
Units o f interest money are the vital cells the
parasite controls and such units may b e an d are
designed to be o f the greatest importan ce to the
happiness o f mankind B ut whi le one class of
fat is thus essential to all the j oys of living its
owner may divert it and introduce a disease
parasite to b ecome a disease buil ding fat instead
o f spreading j o y over the whole b ody
Wh en the j o y o f living is postponed the fat
deposi t will not increase the reserve energy but
will consume itself I n merely piling u p more
diseased fat such disease cells are seen in interest
dollars giving vitality to a debt whi ch b ecomes
the cause o f all manner Of other diseases which
the b ody seeks to avoid
It is qui te difficult if no t im possible to ob se rve
the tastes and mann ers o f a microbe under the
microscope but when the field of vision is multi
pli ed by some mil lions o f diameters in the so cial
organi sm the tastes and manners of a p arasite
millionaire or other parasite class is more easily
recorded
The rise o f the rich as a class makes the
romance o f history for thi s class b ecame the
foundation o f kin gs and dyn asties the owners of
capital and wealth the comman ders of armies
the controllers o f the fertile lands owners o f all
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NAT U R AL EC O N O M I C LAW
18 8
labor could produce ab ove its own livi ng M anu
facturing and commerce developed to supply rich
land owners merchants and b ankers with classes
of goods the workers could no t then hope to
enj oy b ut which in later times have given a
common luxury to mil lions of people which k ings
did no t have a century ago
The commanding savage as soon as a tribe
Obtained a settled existence secured the b est
lan ds b ecame a noble and made other savages
conquered in war his slaves instead o f taking
their lives as was the savage rule of warfare
B y for c ing slave lab or to develop the best
lands and to do other work to serve the luxury
Of a parasite class the total living enormously
increased in both quantity and variety pop ulation
grew fast and furiously ex pending itself by ince s
sant wars over the rich lands wars between
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parasite classes
A rich man s war and a poor
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man s fight
Slave lab or under the lash of p aras ite com
manders developed ship ping and commerce made
great estates upon rich lands built towns and
cities where art and industry flourished invented
machines improved harb ors discovered science
and made inventions S laves were warriors
teachers merchants painters artists and archi
te cts fo r the exclusive benefits of parasites but
later to b enefit the whole social organism
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NA T U RAL E C O N O MI C
1 90
LAW
trading grow to minister to appetites that m erely
The organs
e n j oy the physical delight s o f living
of se x an d repro duction are at the b ase of all
the hi gher desires responsible for the love of
children for the establ ishment o f the home for
ord er for law and g overnment fo r education an d
reli gion for music and art for love and honor
Gi ve the parasite commanders a control over
the j oy cell s they may direct the appetites may
dire c t the sexual and reproductive fun ctions
thereby the para site has command over the
deve lo pment of species over the food supply
for each hi gher type
I t is quite plain that one class of parasit es is
m o st b eneficial and it may b e taken for granted
that by the n command life is made easier and
m ore j oy ful for the vast b ody o f workers although
p arasites live without working
Parasite commanders must themselves b e di
re cte d along a fixed line if the natural order is
to prevail although they only seek to g ratify
their own desires but se lfi shl y they may interfere
with a general plan an d when they do s o interfere
they b ecome di sease b reeding f orces to endanger
life and force the other cells to fight such parasite
growth
We have no evidence of good parasite control
ove r the appetites and reproductive organs that
are vitally important to the healthy b ody but
we are b ecoming daily more familiar with what
is kn own as disease breeding germs and microb es
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A ASI T E E V O LU T I O N
P R
19 1
di sease germs are so minute that a thou
sand of them cover but an inch yet they are s o
deadly that millions o f human beings may p erish
in a week if they multiply and feed upon the
Vital cells T he scientific world is rapidly a o
c umulatin g a great store o f facts concerni ng
dis ease b reeding microbes but we madly crave
of the health and j o y
and desire a knowledge
prod u cin g kin d so that we may have a serum to
inj ect health and j oy into the body rather than
ej ect a mil der disease to pre vent a more f atal
mal a dy
D iseas e germs seem to have the function of
holding the developing and j o y inspiri ng cells
to their partic ular line of work and unless the
j oy makers keep to their task the disease makers
will destroy the entire sp ecies an d force a new
st art in evolution
D isease germs have p owe r to change health
tissue into o ther forms that bring dissolution an d
death by diverting the f at cells from their re gular
fun ctions but they may only do so when the other
memb ers of the j oy famil y fail miserably in their
duty
T he rise in civili z ation from the lower savage
types to the more and more highly civilized
and cultured came from chan ges in th e standard
of livin g which included highl y developed foods
art , architecture travel electricity and the n e ce s
which
sary work f or vast supplies Of capital
T he
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NATU RAL EC O N O M I C LAW
192
created functions fo r the organism thereby b e
coming a higher species
E ach advance from lower to higher type was
made at a heavy sacrifice o f lif e am ong the co m
m o n people b ecause it had to come b y conflict
with parasite classes that were a constant menace
to each new advance Although a class of para
site comm anders would make a new type much
more able to live yet parasites so resist a change
to the next higher that disease had to bring
ab out the defeat o f O ne parasite class and allow
an other to replace it for the next step of evolution
The first great parasite class was military
ap pearing as a protection to the whole b ody
but so on developing its special germs living in
glory as spongers without adding to the general
welfare and efforts had to be made to curb the
military structure and fighting against the mili
tary caste came as a disease Of militarism which
must be destroyed to make the state immune
The most imp o rtant truth recently develop e d
concerning germ diseases is that the di sease
develops its o w n permanent cure in those who
survive by making changes in the blood by whi ch
man becomes M une fo r all future time to its
more deadly effects
The present m il d diseases o f childhood for
example like measles and chicken po x were at
one time terrible scourges o f death among thickly
populated savage tribes and the suffering Of our
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C HAPT E R 1 2
LANDL O RD I SM
If
the reader could go b ack int o history an d
trace the evils o f property in land in C hina
I ndia E gypt G reece and R ome ; into feudal
E urope and down to modern times with its wars
slavery the fall o f empires its crimes poverty
and misery its mystery would remain for the
land system o f every country was the b reeder
o f every parasite class which civilization w as
forced to b attle and then endure
The world is being confronted b y a new stand
ard of living after centuries Of change Parasite
classes introduced steam power electricity fac
tory systems and telephones created new appetites
and desires among millions demanding hi gher
wages and greater markets The diffi culty is
growing greater all the time to find employ men t
fo r mil lions so that they may live at any standard
al though the world is burdened with wealth
The O pposing forces in o ur civilization cannot
compromise the activity of production railways
factories and lines o f distribution demand mil
li ons upon millions Of consumers to satisfy the
machinery o f modern civilization wages must
rise to supply our markets with consumers and
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LAN D LORD I SM
19 5
consumers must buy capit a l or civilization will
fall
B y the laws and habits Of every people land
was always recogni zed as being the only real
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property real estate all else was subj ect to
decay while the land remained a part o f the
imperishable earth and when it w as bought and
sold it became more desirable than any other
property ; it was the least suspected o f evil whi le
creating practically all the troubles Of civilization
from parasite classes that thrived upon the fer
tility o f farm forest and mine
Unless land is treated as private property it
will not be cultivated o r improved the profit
from its fertility provides an easy living and the
land owner becomes an impelli ng force that
brings about the change from savage to civil
life L andlordism created slavery try anny wars
poverty and crime
L abor pro ducts must be private property if
money is to circulate that will in crease and
distribute a higher standard of living The
problem to be solved is to retain the benefits
Of land owning and yet prev ent land itself from
having a value in money based upon different
locations o r differences in fertili ty Of soil o r mine
The value Of capital is not measured like the
cost Of living by its being directly exchanged fo r
an equal value in concrete money o r by having
a quantity Of standard money to b alance an equal
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NA T U RAL EC O N O M I C LAW
19 6
store o f goods waiting to be sold ; capital is meas
ure d by the amount o f profit it may take from the
sale Of goods at a standard price in the market
The money to build capital must b e advanced
from some source and cannot be returned until
a sum equal to its cost has been collected in profits
taken from sales o f goods and ten o r more years
may pass before profits will return the cost of
capital The power to control advance money
fo r building will solve o ur problem of private
ownership and avoid the evils of property in
land as we experience them now and in the past
If the circulation o f money is limited to that
particular purpose ; if no money may be had to
buy land and if land canno t become security
for the future return o f its own cost ; if security
fo r money advanced to build must come wholly
from the improvements upon the lan d then in
that case land owning can do us no harm
Every government should regard the circulation
o f money as being its most important duty and
each government should provide as much money
to develop lands o r build capital as the fertility
O f the land will return wit hi n the interest period
If a supply o f money to improve land was
looked upon as being o f equal importance to
the fertility o f land itself a great advance would
be made in government and I n the solution of
social problems fo r all the benefits of capital
would then remain while land itself would have
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NA T U RAL EC O N O MI C LAW
198
a cost for land to take any part Of the money
holding all the income to return money advanced
fo r purely building or capital purposes with no
money to pay for land
It is not expected that G overnments should
loan money o r o w n capital but merely act as
trustee for the borrower and for the banking
system All loans must be made payable o n
demand and the capital created must e arn
interest on two tim es the loan and two times
its cost
A loanable fund fo r commerce is required equal
to the entire su p ply o f goods passing from the
producer to the consumer which is revolving fund
to be repeatedly loaned o n the commercial market
to distribute the living to the whole people
N O matter how great the quantity and variety
o f farm products o r manufactured goods there
should b e no difficulty in meeting all demand for
money to market goods the profit from sales Of
goods should supply commerce with all the credit
money it has any use for
Whe n lands must be improved with capit al
at great cost in many cases railway systems
canals harbors factories mine s roads cities
and public utilities the cost each year for new
capital is expected to equal the cost o f living and
a quantity o f money is provided by natural law
to meet that expense but the way has never been
discovered to use credit for capital as the credit
fo r commerce is us ed
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LANDL O RD I SM
19 9
There is no mystery ab out a revolving fund
o f cash o r credit it must be used O ver and over
again but it needs some elasticity s o it will no t
remain a fixed measure but will allow goods to
incre ase and allow population to grow from thou
sands to millions o f men
M anuf actures can throw almost endless streams
of goods into markets without regard to season
and a form Of elasticity is required
o r clim ate
to permit a limited quantity o f cash money to
keep pace with the expanding markets fo r goods
while prices rise
C ash may revolve as fast as it can be spent
and earned and spent again but unless credit
can be used to expand the volum e o f cash it
could not provide for increasing supplies without
a loss Of price o r take care Of an increasing
p opulation without a decline in wages
E very time cash revolves it measures the cost
of labor but sets aside a surplus from fertility
of soil ; a profit whi ch will equal half the cash
and when cash revolves more than once a year
it will se t aside half its o w n quantity every time
it revolves
Property I n land does not interfere with the
circulation o f cash b ecause it also must g e t its
income from the surplus fertility o f soil it cannot
take any O f the cash money and fo r that reason
its interference is all the more difficult to locate
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AT U RAL
E C ON O M I C
LAW
TO
enable cash to revolve more than once a
year it is necessary to spend the profit it create s
as cred it money and to add that sum Of cred it
’
to the consumer s market such profit will thereb y
generate its own quantity o f credit money as
fast as it is taken from the sale o f goods
When the cost of accumulated capit al will equal
the Sll m spent for a living in o ne year then capital
will collect half that sum as profit and it will b e
returning its o w n cost in o ne year because the
living will sell at tw o times cost and capital wil l
thereby establish a base rate Of profit of one
hundred per cent
Thi s rate Of profit o f one hundred per cent will
make each profit dollar equal t o o ne cash dollar
and each dollar of profit will sell for one dollar
of cash which is to say the money buying a li ving
without work will equal the money that must
b e worked for to buy a living With capital able
to pay for itself once a year the owner will dis
cover that he may rapidly become very rich by
merely S pending excess profits to increase hi s
quantity o f capital which he will do wherever
the fertility o f land is open for capital develo p
ment
The l imit in the total profit b eing half the
revo lving cash must in some way provide more
cre dit money to supply interest and p rofit fo r
the rapid increase o f wealth When the rate of
profit is very high the increase in credit or elas
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NA T U RAL
2 02
E C O NO M I C
L AW
A ccording to this rule there seems to be no
limit to the growth Of capital and wealth except
the limit fixed by a decline in the rate of interest
if cutting the rate from one hundred to fifty will
double the quantity Of capital then cutting the
rate from fifty to twenty fi v e will again double it
Apparently the rate Of interest could be cut
indefinitely be cut to infinitely small rates with
the quantity of wealth growing to infinitely great
proportions but the natural law must se t some
limit to the growth o f wealth and to the fall in
the rate Of interest which is a limit between the
finite and th e infinite in the material world
I t Should be clear as wealth accumulates it
demands labor to maint ain and operate it rail
ways for example when building gather labor
from ag riculture and other fields to change them
into labor fo r railway systems when completed ,
and in doing S O take more labor to O perate and
mai ntain railways than was originally used to
build them
The quantity o f wealth W l l l therefore find its
natural limit when the labor consumed b y re
building begins to lower the standard o f living
in such case the order of progress would be
reversed for then capital would be defeating the
very purpose Of its existe nce and the world would
be going backward inst ead of forward Wealth
must stop increasing where it supplies the highest
possible standard o f living
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LAND LORDI SM
2 03
If capital may be s el fi shl y increased to merely
build great fortunes fo r the rich it may grow in
quantity by enslaving labor without increasing
the j oys or without benefit to the people and in
this particular L andlordism may work tre m e n
dous evil
The natural growth o f capital is an inspiring
picture Of the m unifi ce nce o f natural law and
natural resources for the benefit o f mankind but
the interference with this natural order by the
rise in cost Of land h as ever been the great curse
of civilization
C apital cannot collect its profit from the cost
o f livin g unless it increases the standard of living
creatin g new desires o f every kind not only from
new varieties o f food and Shelter but also from
new social life education government travel and
communication
If mankind is forc e d to work longer hours to
maintain an increased total wealth it will get
little above an animal living but as capital
develops in quantity it must develop the machin
ery that will ease labor will make the life of
labor less monotonous will create more and more
intelligence will give more rest and fewer hours
of work wh ile producing a greater total o f product
Unless wealth provides leisure it will have little
value in promoting a hi gher spiritual life o r higher
culture and on that account leisure becomes the
chief concern of natural law which sets a limit
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NA T U RAL EC ON O M I C
2 04
LAW
to the decline in the rate of interest and a limit
to the growth o f accumulated wealth the rise in
cost o f l and would defeat this Very vital purpose
o f civil ization
L eisures i s something that must be bought and
paid for O ne must live while at ease and live
at the high standard capital is expected to secure
Where is money to buy leisure to come from and
how is that money to be distributed S O the great
mass Of people wil l Share its culture and blessings '
When capital increases in quantity it takes
more and more of the surplus from fertile lands
and calls for more and more labor if it was per
m itte d to grow without limit it would stop at
a point where it would enslave labor and at the
same time give the owner of wealth nothing but
the burden o f managing it while its entire income
wa s being consumed by its own cost o f mainte
nance
To avoid a catastro phy o f that kind the natural
law divides the rate Of profit into equal parts so
that half the income may be s e t aside as a rate
o f interest which will buy leisure and o ne half
f
o
f
rovide
a
money
to
return
the
cost
s
u
m
o
p
capital
I nterest represents a certain quantity o f mon ey
each year Se t aside to buy leisure and it is a
simple matter to calculate j ust how much leisure
interest money is permitted to buy since it is
lim ited by half the profits taken from the cost
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NAT U RAL EC O N O M I C LAW
2 06
li ving reaches its highest level with the highest
wages and this line is determined by the lowest
point in the fall o f the rate Of interest
C apital earning two times the rate of interest
selling fo r tw o times cost will increase in quantity
as the rate of interest falls and the drop in the
rate will open lands Of a lower margin of fertility
to be developed
T hi s increase of capital from
a fall in rate Of interest Should fully employ all
labor and send the wage rate to where the rise
in wages will absorb the selling price o f two
times cost
Two times cost is a double cost so as to provi de
the leisure money that has no cost to the Spender
O ne cost of capital is limited by the money that
will buy a living for those who work and the
other cost will buy a living without working To
keep thi s line distinct one cost Of capital is paid
for in the cash that must buy a living by working
and the other cost is paid with credit money
earned by past labor which has no cost o f living
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lab or problems arise from the fact that the
rate o f wages may stop where it will only include
the money that buys a living and will not rise
to a point where a surplus wage may buy capital
and thereby include laboring men in a leisure
class
A S capital grows in quantity the fall in the
rate of profit is brought ab out by the fa ct that
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LAN DLORD I SM
2 07
the cost of maintaining and building capital is
taking more and more of the surplus labor not
used in providing the living leavi ng less and less
labor to rebuild and O perate capital
If for example the lower limit in the rate of
profit is ten per cent and half this or five per cent
is the lowest rate of interest the calculation fo r
wealth wages and profits in the United S tates
would be as follows '
Taking statistics for the total supply o f cash
in round million dollars and using only millions
as uni ts the measuring cash is found to be five
thousand million dollars o r five billion of primary
money whi ch is lim ited to paying the cost of
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F ive billion cash in the United S tates with its
highly develope d industrial railway and banking
system will turn over Six times in one year and
thirty billion dollars will be spent by labor for
a living w hich co st fifteen billion dollars to pro
duce and will create fifteen billion profit from
which the owners of capital get a living
The fifteen b illion dollars profit collected from
a cost o f living w as mainly spent in the past to
create three hundred billion dollars worth o f
capital which labor must now work hard to
maintain If interest rates are too low the
maintenance o f capital will consume all its rent
leaving no
o r other income by wear and tear
margin fo r living without work or allow capital
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NA T U RAL EC O N O M I C LAW
208
fall in ruin from want o f repair when th e
owner spends the income
If capital is to pay a net income o f five per cent
there must arise an additional fifteen billion
dollars o f profit outside the cost o f living and
this profit must come from the sale o f fifteen
billion d ollars of capital each year for thirty
billion dollars to creat e a new profit from the
sale of capital at two times cost equal to the
p rofit from the sale o f a living and two times cost
When the rate o f pro fi t falls to ten per cent
it no t only measures a total capital ten times
as great but it measures the consumption o f
capital at one tenth the total showing that thirty
billion dollars worth must be produced and sold
each year in the United S tates to m am tain total
wealth
If capital had grown according to this natural
law if each location had created ten times its
rent in value Of capital with no land value there
would be no rambling shacks Of cheap buildings
o n valuable locations no ruins of t hr ee and fo u r
story buildings o n locations that Should grow
structures twenty stories high
Where the annual income is fifty thousand
dollars the cost Of building at that lo cation
Should have b e en a half million dollars or ten
times the rent and no building worth twenty
thousand dollars should be permitted to colle ct
tw o hundred and fifty per c ent in rent
to
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NA T U RAL EC O N O MI C LAW
2 10
profits o r rents in crease and therefore wages
cannot rise to b alance the rise in cost Of land
o r rise above a cost o f livin g
Unless wages do rise to include the price of
capital at two times cost the income o f capital
will finally be limited to a sum that will only
pay fo r it s own maintenance and leave the owner
an empty shell H ow does it happen therefore
that in spite o f the r1s1ng cost o f land capital was
somehow permitted a very great development '
When the profit taken from the sale of go o ds
is much higher than the sum required to maintain
a small total o f capital and when half the income
wi ll no t be taken by the owner to live without
working then given time the excess profit will
be used to increase the quantity o f capital for
land O wners bankers o r merchants but that
increase will stop when interest falls to its lo wer
level
The b anker may safely loan money to b uil d
o r t o buy land when the income will repay the
loan in o ne tw o or three years S pecul ation in
land will help building fo r when the rate Of in ter
e st is cut in half the price o f land will double
provided it can get an income from a building
that will cover the interest o n its cost allowing
the e x cess profit above interest to support an
increase in value Of land
When a country is developing its m anufactur
ing buildin g railways and increasing its p o pul a
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LAN D LOR D I S M
211
tion real estate booms soon develop from the rise
in price o f la nd brought about by a fall in the
rate o f interest whi ch gives the builder and
spe culator an op port uni ty to borrow money to
cover the cost of building and thereby increase
the quantity Of capital
The cost o f maintaining capital will rapidly
consume the total income when the rate of in terest
is low and as the land value mortgage demands
interest based upon capital selling at two times
cost the time rapidly comes to every country
when capital income will no t pay both interest
and cost o f maintaining it
The principal o f a mortgage can never b e p ai d
because there is no rise in wages by which capital
may sell at two times cost and revolve a quantity
Of money to buy it therefore wealth soon b egins
concentrating to the money lender
The di fference between what the natural law
would give capital when wages are permitted to
rise to equal its price at two times labor cost and
when the cost of land limits the wages to a livin g
must be filled in by the increase of debts until a
crisis and panic appears when debts must be liqui d
ated to allow business to proceed o n a narrow basis
A S w as well said by a candidate for president
“
in discussing an economic question It is a con
dition and not a theory that confronts us so
with the rise in c ost of land the laws making
land private property and laws supporting debts
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NAT U RAL EC O N O M I C
2 12
LA
W
make conditions in the labor and capital marke t
as we find them and how are we to overcome these
conditions '
D ividing lands among cultivators fails time
after time in the history of the world with no
benefit to the cultivators who must have markets
in which to sell their supplies L ab or must have
profitable prices in markets which will create
c apital must have the machi nery to work it
a nd the leisure to develop a hi gher man than
the b rute
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NA TU RAL EC O N O M I C LAW
2 14
any radical change in any existing form o f govern
ment but does call upon us to remove the re stri c
tions that debt and cost of land impose
B illions o f debts consume millions o f dollars
o f cash interest each year and thereby hold out
of circulation the money debt promises to return
to circulation in the future which Should never
have ceased circulating
The natural law requires each dollar collecting
interest to circulate once a year and labor loses
every year the bill ions that debts make dormant
and idle promising to be paid in a future that
never matu res
If the debts o f the world were suddenly paid
the money they promise would b ring tens o f
b illi ons into the market in the United S tates alone
and would seriously emb arrass business with an
inflation o f credit money
B ut to make the billions o f debts payable on
demand will supply the market with credit as
fast as it could be used permitting wages to
advance without inflation and would bring
permanent good times everywhere
I t is however to o uncertain an undertaking
to try and educate the people to change the
present syst em of debts into a new syste m o f
doing business o n a cash basis and wait on that
change to solve o ur problems hence it becomes
the easiest way to leave Old debts alone fo r the
time being and concentrate attention o n doing
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new business o n a pay as you go b asis
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THE
WAY
OU T
2 15
I
The way o ut is to somehow increase profits
b y employing more labor by giving more and
more profit to production to open greater and
greater fields o f activity until the money no w
held o ut by debts is bound to return to general
circulation by building a better and more beauti
ful country to live in Offering a better security
than present debts and thereby make bonds and
mortgages O bsolete
G overnment in the near future must change
radically from its present form its laws need not
change radically but its representatives must
become trustee to guide new expenditure invo l v
ing sums that are only com p arable to the cost
of war
N O o ne will dispute the conclusion that a
trained chemist must command the work in his
s p ecial field but in the more difli cul t field Of
appl ied finance and industrial growth any T o m
D ick o r H arry that happens to be elected to
Office is expected to suddenly become H eave n
endowed with a special fitness fo r government
service
Although men o f trained knowledge and e xpe ri
ence are found in every business an d industrial
field where power is lodged in the hands Of o ne
m an yet in aff airs Of state where more vital
power must be lodged in the hands o f man there
is a minimum o f training o r tech ni cal skil l and
a surprising ignorance , incapacity and egoism
when it is no t corrupt
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NA T U R AL E C O N O M I C LAW
solve pres ent day problems the wage s Of
commo n lab or must ris e enormou sl y not only
to a high standard O f livin g b ut mus t c arry a
sur plus to pay rent and buy capital
S uc h a rise in common wages demand s billions
more money each year be spent in t he w age
ci rcul a tion and b illions cannot get into cir cul a
tion unle ss some plan of sp e ndi ng is p ut intO
action and that plan must find profit fo r every
dollar so spent
I f the people O f the U nite d S tates c an uni t e
sink all former differences Of politics theories of
comp etition free trade taxation monopoly trust
lab or wages and money to save the count ry in
i
a distant war they should not fail to un te ttt
save the coun try from a s im ilar fate wh en that
work will b e a blessing to al l concerned and b e
profitable
We cann ot remove Old and hide-b ound restri c
i
t ons o n business unless there shall come a uni ty
Of purpose to solve o ur problems a purpose to
fi n ally settl e the lab or question when it has been
shown that it will become a Ve ry profitable
TO
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It would seem an easy task to Call up o n debts
t o return the mone y t h ey promise to pay and
to prevent new debts being contracted in the
future becaus e each debt is secured by two times
D ebts cannot be paid in
it s value o f capital
cash and the credi t by whi c h they mi g ht b e
paid is no t on hand
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NA T U RAL EC O N O M I C LAW
2 18
price of capital ab ove cost b efore we solve the
labor problem
N ew buildings and Im provements upon land
runm ng into tens of billions Of dollars must be
s o financed that they will force what is now a
cost for land into the selling price of an improve
ment upon the land
Applying this r ule to present buildings few
structures have a labor cost equal to the value
of the land under them and a mere change
abolishing debts wo uld at once transfer present
land value into a higher selling price o f a building
where the building value w as equal t o the land
value
I n cities mo st of the valuable building sites
are encumbered with disgraceful ruins represent
ing a very much lower order Of growth like that
of a reptile compared with a man This type of
building must be repla ced with new structures
allowing each site to grow all the building its
fertility or fecundity will supply with Vital profit
Third Avenue for example I n the city Of N ew
Y ork from the B owery to the B ronx nine miles
o f business structures has no more than a score
Of bui ldings that represent the fertile power o f
each site to grow capital and such an avenue
must be completely reco nstructed before the land
value may change into a higher selling price of
its buildings
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TH E
WAY
2 19
OU T
This is j ust an example o f one street to illus
trate that N ew Y ork C ity must be rebuilt from
its cellars and what applies to N ew Y ork C ity
applies to every city and town and to the country
extending in a wide circle surrounding every city
to mines and to other natural re sources
The new building program provides the work
and more work that will cure the ills o f labor and
capital and in View of this enormous task it
should not be a difli cul t problem to find work
for all the labor in the world at the maximum
limit to wages
When an estimate is made Of j ust ho w present
owners are t o bui ld beautiful buildings o n the
site o f ugly ones and receive more rent for each
one hundred dollars spent many difficulties arise
in problems of administration and finance
The first problem concerns the small narrow
lots now occupied by thr ee four and five story
tenements that must give way to modern steel
and elevator buildings each of which require an
acre o f ground for the required height to give
ample light to give room for approaches and
beauty of architecture
The owner of a small lot must no t interfere
with the greater buildin g that will include his
site any more than he may interfere with the
improvement Of the street in front Of the building
which is for the benefit o f the property o n either
Side
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NA T U RAL EC O N OM I C LAW
220
T he
modern street improvement w as changed
from being a private im provement in the hand s
O f ab utting owners into a public improvement
over which the abutting owne r had no control
but the abutt ing owners were require d to pay
for the stre et improvement because it increased
the value Of each property
I n rebuilding a city the same rule must b e
followed the owners o f small lots abutting a
stree t th at is to have new buildings line it s sides
m ust not determine the cha racter o f the buildings
any more than they
o n their respective lots
determine the nature Of the street im prorve m e nt
but they must p ay the c o st o f building be cau se
they will get the benefit by owning new struc tures
worth tw o times cost
A city must hav e pow er to combine the sm all
holdings into the Site required be it fifteen or
twenty lots to make o ne building site , and th en
apportion the benefit from the new build ing to
each owner like street im provement benefits are
apportioned ; to give each owner Of the site his
proportionate part o f the ne w structure
The second difficulty is that about seventy fi ve
per cent o f new bu ilding in a city must provide
homes fo r its millions w ho work in the central
busine s s districts , but w ho now live in miserable
tenements N e w homes must provide all the
comforts modern science can give and make
living in the center Of the city as comfortable
for home owners as it is fo r guests at the hotels
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N A T U RAL EC O N O M I C LAW
2 22
M oney to do new building must b e supplied by
city state o r the national government must come
from an issue of securities based upon each
structure the new capital must not only provide
fo r returning its o w n money but also provide
a reserve to redeem securities o n demand keeping
them in all respects equal to bank deposits when
redeemed t o b e again sold to replenish the reserve
When cities were laid o ut and surveyed farm
lands were divided into building lots and each
small l o t was expected to hold o ne family in a
single home with a small front lawn and b ac k
garden
A s population continued to grow from town
to city conditions business made demands upon
the lots near the center o f growth and it was then
exp ected to keep S preading small lots into the
country where unlimited farm lands would supply
space fo r single homes for all the people
C entral business lots sold at rapidly advancing
prices owing to the profits collected from incre as
ing trade and from an advancing standard o f
comfort and luxury The small l o t plan began
to prove a burden rather than the blessing it was
supposed to give forcing new population to crowd
like cattl e into miserable tenements
The development o f science and machinery
the building o f railways connecting cities rapid
transit within them all had a wonderful effect
upon city population it was soon evident central
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THE
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223
OU T
locations could no longer be spared fo r single
homes and the working population was forced
miles into the country away from its work or into
death breeding tenements
A city feeds its own population by m anufactur
ing goods to send t o the country and exchange
fo r food and other supplies it does not live by
trading as is commonly supposed its trade profits
are consum ed by capital which cannot long suffer
loss of time and money from sending its vast
army o f labor over millions Of miles of useless
travel every night and return every morni ng
T O overcome the loss o f labor far from working
place s thousands of families are crowded into
houses built upon narrow lots where the crowding
deprives a family Of the light and air and other
comforts a single lot would have supplied
If a l o t twenty fi ve by one hundred feet is r e
quired for the single family in a small town then
when city apartments rise into the air for twenty
stories or more this unit for each family must
be maintained either by the design of the build
ing or in connection with open spaces and small
parks adj acent
The change from single dwellings for one
family into four five and six story tenements
fo r twenty or fifty families in crowding the p o pu
lation as a city grows is at first profitable for the
house builder because the lots are secured at a
low pri ce but that profit is quickly lost by the
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NA T U RAL EC O N OM I C LAW
2 24
cost o f land an d then such miserable
buildings fail to house the city people
E very city no w faces a distressing housing
problem and must soon adopt mea sures to meet
a serious condition must destroy the present
system of narrow tenements The high cost o f
land does n o t arise from any scarcity o f l and in
a city but arises wholly from not building t o the
height each location pays for with the rent it
collects or should collect
If the land on M anhattan I sland now contain
ing o ne third the population of greater N ew Y ork
C ity was b uilt upon to its econom ic lim it o f
sixt een floors inst ead Of only four the gain in
space would give room and land to waste using
only o n e fi fth the building ground
Steel frame elevator buildings cannot b e given
light air nor beauty of structure unless they have
ample grounds and unless each buil din g is
entirely separated fro m another Among gr ou ps
o f every four such buildings o ne equal space must
be reserved for parking and for additional light
and recreation ground
When the individual owner of a small lot may
de man d any price before ten or more lots can
be secured fo r a site he may se t a wholly im po s
s ible price o n his one lot and destroy all hope Of
profit from a ne w building and thus a o ne little
lan d—owning microbe stands in the way o f the
progress o f a city
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NA T U RAL EC O N O M I C
226
L AW
bui lding is collecting that rent we have in plain
sight a spot where a new building c osting a
million dollars will be able to collect a hundred
thousand dollars or more in rent and give the
public fi ve or more tim es the space fo r twice the
rent
N atural economic law cal ls for rebuilding every
great city and to have improvement extend for
miles outside with small farms on lands now
largely waste
The required m arg m Of profit in the new work
will come when land has no value and when
improvements sell at two times cost ; the new
progress is not expected to succeed as a work Of
charity or benevolence
What is now a value Of land must be incl uded
absorbed and taken up by Improvements s elling
at two times cost and should an owner fail to
S O build he will lose the land value as soon as
the debt system is abolished as soon as a cash
market is established making capital as liquid
as commodities are now
The great awakening must come by c o nstruc
tive work by creating the greatest period o f
prosperity the world has ever seen where the
markets of the world will consume and will
demand all that labor capital and machinery
can supply at a profitable price
I n the b e g m ning the plan of construction will
b e handicapped b y the prevailing low wage rat e
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THE
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22 7
OU T
that cannot pay rents and new building must
therefore be first confined to a class of renters
who now have an income above the wage rate
and who can pay the rents on new capital which
sele ct locations must have
The plan must start along lines of least resist
ance to supply a class of capital now in demand
which cannot be supplied on account Of land
selling at from fi ve to ten million dollars an acr e
Wh e n hi gh priced land is open to the builder
without paying millions Of advance money great
plans for single structures will be executed where
the required rents can be secured from present
income and before the wage rate will advance to
its normal and natural level
Fit round pegs into round holes by making
every parcel Of land grow the particular capital
its location demands for different classes of whole
sale retail and manuf acturing business with
dwelli ngs among them S O arranged that the
workers will live near their work and will also
live near centers of amusement education and
recreation giving to each location its natural
growth Of capital ; that is the great business Of
the coming age
The laboring classes are not to have homes
built as a matter of charity and benevolence
cheap rents to meet low wages for it is the last
class in the world to need favors and privileges
if the la w s are j ust B uilding must be undertaken
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NA T U RAL EC O N O M I C LAW
228
with the full understanding that the natural rate
Of wages wil l permit a laborer and his family to
live where it may enj oy the luxuries and com forts
which modern science and machinery wil l supply
The Old structures first to give way on the most
valuable locations may perhaps be best illustrated
by t w o examples in the N ew Y ork C ity as being
a place where the best ground with the w orst
buildin gs upon it m ay be found in all the worl d
T here are two typ i cally disgraceful blocks in
that city on B roadway immediately south o f the
M etropolitan O pera H ouse fronting B roadway
and S eventh Avenue near the great Pennsylvania
Railway Terminal and bounded by 3 7th 3 8 th
and 3 9 th Streets
E ach of the locations is entirely surrounded
by streets and contain a little more than an
acre tw o hundred by about three hundred feet
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and are now improved by low cheap o ne tw o
and three story buildings and tw o lumber yards
the most valuable land proper ty in the city for
general use
Under a cash plan the city would call u p on
the owner or the combined owners to present
plans for the proper improvement o f the site ,
being Willing and ready to supply the cost pro
vide d the proposed buildings are satisfactory
The owner failing to build the city should have
the power to build from its own plans an d charge
the cost to the property benefited the same as
building a street
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NA TU RAL EC O N O M I C
230
LAW
B esides homes for the workers there must be
a general reconstruction of business and manu
fa c turing as soon as the cost of land is elim inated
and when finances are arranged to supply un
limited money for fertile locations
The cost Of land will go by the simple process
Of forcing the present owners to do the building
by not depending upon a new s e t of buyers to
pay for land in advance of building ; by treating
the present owner Of a mortgage as a part owner
Of the building by exch anging the mortgage for a
better security i n a new structure
The moment estim ates are made for ho usI ng
the population and business Of any section using
the land to its capacity the surpri sing fact
develops that land is not scarce and should not
have a price B uildings suitable to each location
have been scarce and the value of land came from
a scarcity of suitable buildings and not because
of any failures in the supply o f land
M anhatta n I sland for example when p roperly
developed will find land as plentiful almost as
the air with three times as much space for other
uses than buildings fo r light parks and recreation
grounds
When the Sky line of buildings rises to a height
of twenty floors on M anhattan two thousand
acres will house all the families that now live on
the island with a total acreage Of about
one third of which is required for streets
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THE
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Unfortunately the land reform problems have
been treated as being al most wholly agricultural
to Obtain farming and grazing land for actual
cultivators leaving out o f consideration the im
portant lands under cities where half the wealth
of the world concentrates upon an insignificant
part of its surface
L and reform must begin in the central districts
and tenements o f great cities profits from land
all over the world will mobil ize at city locations
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to create and sustain the world s wealth and from
cities the benefits of wealth will rapidly S pread
into the country in wider and wider circles having
a city as the center of consum ption
N atural economic law demands a cash market as
the supreme commercial reform as the foundation
for all culture or art science religion and morals
C iviliza tion has its end in View I n a standard
o f livin g which is both material and spiritual
for the survival Of a man who is fit to live an
immortal life on this earth to live a happy and
hum an life over and over time an d again
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