Mencken on the Two Types of Democracy

Mencken on the Two Types of Democracy

Thomas Allen

    In 1926, H. L. Mencken (1880-1956) wrote Notes on Democracy in which he expressed his views on democracy and related issues. He was a journalist, satirist, and critic and a libertarian and one of the leaders of the Old Right. In his book, he describes the two types of democracy, pages 79-85. Below is an overview of his discussion of the two types of democracy; my comments are in brackets.
    [Representative democracy and direct democracy are the two types of democracies that Mencken discusses.]
    Mencken states, “Sovereignty is in him [the lowly Christian, i.e., the inferior man], sometimes both actually and legally, but always actually. Whatever he wants badly enough he can get. If he is misled by mountebanks and swindled by scoundrels it is only because his credulity and imbecility cover a wider area than his simple desires.” Continuing, Mencken writes, “The precise form of the government he suffers under is of small importance. Whether it be called a constitutional monarchy, as in England, or a representative republic, as in France, or a pure democracy, as in some of the cantons of Switzerland, it is always essentially the same. There is, first, the mob, theoretically and in fact the ultimate judge of all ideas and the source of all power. There is, second, the camorra of self-seeking minorities, each seeking to inflame, delude and victimize it. The political process thus becomes a mere battle of rival rogues. But the mob remains quite free to decide between them.” Occasionally and miraculously, the mob chooses the relatively honest and enlightened. More often, it chooses the thieves “because their words are words it understands and their ideas are ideas it cherishes.” Nevertheless, the mob “has the power to throw them off at will, and even at whim, and it also has the means.” [As the lowly Christian is now a minority of the mob in most democratic countries, if Mencken were to write this today, he would need to use another descriptor of the mob. Possibly, he uses “Christian” because he has a low opinion of Christians.]
    Mencken contends, “A great deal of paper and ink has been wasted discussing the difference between representative government and direct democracy.” Many of these pundits conclude that representative government is full of defects. “Not only does it take the initiative in law-making out of the hands of the plain people and leave them only the function of referees; it also raises certain obvious obstacles to their free exercise of that function.” Being scattered and unorganized, the people are unable “to formulate their virtuous desires quickly and clearly, or to bring to the resolution of vexed questions the full potency of their native sagacity. Worse, they find it difficult to enforce their decisions, even when they have decided.”
    Liberals cry over this fact. Their remedy is usually a “purer democracy.” That is, they propose “the recall, the initiative and referendum, or something else of the sort, and so convert the representative into a mere clerk or messenger.” Thus, they place “the final determination of all important public questions . . . in the hands of the voters themselves.” Only the voters “can muster enough wisdom for the business, and they alone are without guile. The cure for the evils of democracy is more democracy.” [As witnessed in the United States, as the qualifications needed to be a voter has been lowered, the quality of government has declined. As the quality of government has declined, its power over and control of the people have grown.]
    Mencken notes that more democracy has never cured the evils of democracy. He adds, “Certainly no competent historian believes that the citizens assembled in a New England town-meeting actually formulated en masse the transcendental and immortal measures that they adopted, nor even that they contributed anything of value to the discussion thereof.” Mencken remarks that this “notion is as absurd as the parallel notion, long held by philologues of defective powers of observation, that the popular ballads surviving from earlier ages were actually composed by the folk. The ballads, in point of fact, were all written by concrete poets, most of them not of the folk; the folk, when they had any hand in the business at all, simply acted as referees, choosing which should survive.” Likewise, “the New England town-meeting was led and dominated by a few men of unusual initiative and determination, some of them genuinely superior, but most of them simply demagogues and fanatics. The citizens in general heard the discussion of rival ideas, and went through the motions of deciding between them, but there is no evidence that they ever had all the relevant facts before them or made any effort to unearth them, or that appeals to their reason always, or even usually, prevailed
over appeals to their mere prejudice and superstition. . . . Some of the most idiotic decisions ever come to by mortal man were made by the New England town-meetings, and under the leadership of monomaniacs who are still looked upon as ineffable blossoms of the contemporary Kultur.” [What would one expect from Puritans?]
    Nevertheless, “the difference between representative democracy and direct democracy is a great deal less marked than political sentimentalists assume. Under both forms the sovereign mob must employ agents to execute its will, and in either case the agents may have ideas of their own, based upon interests of their own, and the means at hand to do and get what they will. Moreover, their very position gives them a power of influencing the electors that is far above that of any ordinary citizen.” [Thus, incumbents usually win elections.]
    Mencken adds that “both forms of democracy encounter the difficulty that the generality of citizens, no matter how assiduously they may be instructed, remain congenitally unable to comprehend many of the problems before them, or to consider all of those they do comprehend in an unbiased and intelligent manner.” [This inability to comprehend in an unbiased and intelligent manner is also true of most members of Congress and State legislatures.]
    Continuing, Mencken remarks that “the great masses of Americans of to-day, though they are theoretically competent to decide all the larger matters of national policy, and have certain immutable principles, of almost religious authority, to guide them, actually look for leading to professional politicians, who are influenced in turn by small but competent and determined minorities, with special knowledge and special interests.” [Liberals and progressives consider the people intelligent and competent enough to decide who will govern the country, at least until they elected Donald Trump, but they consider the people too stupid and incompetent to govern their own lives. The people need enlightened liberals and progressives whom they have elected to govern the country to govern their lives.] By this means, the plain people were shoved into World War I. “They were, in overwhelming majority, against going in, and if they had had any sense and resolution they would have stayed out. But these things they lacked.” [The same thing happened with World War II. Roosevelt maneuvered the people into war that most did not want by maneuvering Japan into attacking U.S. territory.]
    In conclusion, the difference between representative democracy and pure democracy is more apparent than real.

Copyright © 2017 by Thomas Coley Allen.

More political articles.

Newton on the Trinity Doctrine

Newton on the Trinity Doctrine

Thomas Allen

    After an intense study of the Bible, Isaac Newton concluded that the Trinitarian doctrine was wrong. “The doctrine of the Trinity means that there is one God who eternally exists as three distinct Persons — the Father, Son, and Holy Spirit. Stated differently, God is one in essence and three in person. These definitions express three crucial truths: (1) the Father, Son, and Holy Spirit are distinct Persons, (2) each Person is fully God, (3) there is only one God.”[1] Newton summarizes his argument in “Twelve Articles on God and Christ.”[2]
    1. 1 Timothy 2:5: “For there is one God, one mediator also between God and men, himself man, Christ Jesus,”[3] and 1 Corinthians 8:6: “yet to us there is one God, the Father, of whom are all things, and we unto him; and one Lord, Jesus Christ, through whom are all things, and we through him.” From these verses, Newton concludes that there is only one God, who is the Father, and not a triune God, i.e., Jesus Christ was not God Himself, God absolute. [According to Colossians 1:15, Christ is the image of God.] The man Jesus Christ is the mediator between God and man. Moreover, God is everliving, omnipotent, omnipresent, and omniscient. Jesus Christ is not. [See Matthew 24:36 for Christ’s lack of omniscience, which is discussed below. Also, his lack of omnipresence is discussed below.]
    2. Colossians 1:15: “who is the image of the invisible God, the firstborn of all creation”; 1 Timothy 1:17: “Now unto the King eternal, immortal, invisible, the only God, be honor and glory for ever and ever. Amen.”; and 1 Timothy 6:16: “who only hath immortality, dwelling in light unapproachable; whom no man hath seen, nor can see: to whom be honor and power eternal. Amen.” From these verses, Newton concludes that no human has ever seen God as He is invisible. Only God is immortal and eternal. Jesus was visible and died [or did only part of him die?]. [Furthermore, being “the firstborn of all creation” also conflict with the Trinity Doctrine because being the firstborn, Christ is not eternal.]
    3. John 5:26: “For as the Father hath life in himself, even so gave he to the Son also to have life in himself:”. From this verse, Newton concluded that only the Father, God, has life in Himself, and He gave the Son life in himself. This implies that God the Father existed before the Son. Thus, the Son is not eternal.
    4. Matthew 24:36: “But of that day and hour knoweth no one, not even the angels of heaven, neither the Son, but the Father only.”; Mark 13:32: “But of that day or that hour knoweth no one, not even the angels in heaven, neither the Son, but the Father.” John 5:19-20: “Jesus therefore answered and said unto them, Verily, verily, I say unto you, The Son can do nothing of himself, but what he seeth the Father doing: for what things soever he doeth, these the Son also doeth in like manner. For the Father loveth the Son, and showeth him all things that himself doeth: and greater works than these will he show him, that ye may marvel.” Revelation 1:1: “The Revelation of Jesus Christ, which God gave him to show unto his servants, even the things which must shortly come to pass: and he sent and signified it by his angel unto his servant John”; Revelation 5:3: “And no one in the heaven, or on the earth, or under the earth, was able to open the book, or to look thereon.”; Revelation 19:10: “And I fell down before his feet to worship him. And he saith unto me, See thou do it not: I am a fellow-servant with thee and with thy brethren that hold the testimony of Jesus: worship God: for the testimony of Jesus is the spirit of prophecy.”; and Revelation 19:13: “And he is arrayed in a garment sprinkled with blood: and his name is called The Word of God.” From these verses, Newton concludes that only the Father is omniscient; the Son lacks this divine essence (does not know the day or hour). However, the Father communicates the knowledge of the future to His Son Jesus Christ, as only he is worthy of that knowledge. Thus, “Jesus is the Spirit of Prophecy and Jesus is the Word or Prophet of God.”
    5. God the Father is immovable and fills all space. All other beings, including the Son, can move from one space to another. [Acts 1:9-11 describes the resurrected Christ moving from earth to heaven with a promise that he will return from heaven to earth in the future. Thus, being able to move from one place to another, Jesus Christ cannot be omnipresent. Moreover, the “Jesus in his humanity” argument the Trinitarians like to use to explain away Jesus’ lack of knowledge and other divine traits cannot be used here because he had already shed his human shell. God’s omnipresence is discussed further below.]
    6. Moreover, all worship due to God the Father before the advent of Christ is still due to him. Christ does not and did not come to diminish the worship of his Father.
    7. Therefore, prayers should be directed to the Father in the name of the Son.
    8. 1 Timothy 6:8: “but having food and covering we shall be therewith content.” From this verse, Newton concludes that Christians should thank the Father alone for their creation and for providing them with food, raiment, and other blessings. All prayers of thanks or requests should be in the name of Christ.
    9. Moreover, Christian should not pray to Christ. Christ will intercede if Christians pray to the Father.
    10. Ephesians 5:20: “giving thanks always for all things in the name of our Lord Jesus Christ to God, even the Father.” From this verse, Newton concludes that all that is necessary for salvation is to direct prayers to the Father in the name of Christ. Praying to any other is not necessary.
    11. Calling angels and kings god does not violate the first commandment. [See John 10:34, Exodus 21:26, Deuteronomy 1:17, Psalms 58:1.] However, giving worship due God to angels, kings, or others does violate it.
    12. 1 Corinthians 8:6: “yet to us there is one God, the Father, of whom are all things, and we unto him; and one Lord, Jesus Christ, through whom are all things, and we through him.”; Matthew 5:35: “nor by the earth, for it is the footstool of his feet; nor by Jerusalem, for it is the city of the great King.”; John 1:29 “On the morrow he seeth Jesus coming unto him, and saith, Behold, the Lamb of God, that taketh away the sin of the world!”; John 1:36: “and he looked upon Jesus as he walked, and saith, Behold, the Lamb of God!”; and Revelation 5:9-10: “And they sing a new song, saying, Worthy art thou to take the book, and to open the seals thereof: for thou wast slain, and didst purchase unto God with thy blood men of every tribe, and tongue, and people, and nation, and madest them to be unto our God a kingdom and priests; and they reign upon the earth.” From these verses, Newton concludes that there is but one God, who is the Father. Christians “are to worship the Father alone God Almighty and Jesus alone as the Lord the Messiah the great King the Lamb of God who was slain and hath redeemed us with his blood and made us kings and Priests.”
    Newton summarized his belief as follows:

And we are to believe in one God, the father, almighty in dominion, the maker of heaven & earth & of all things therein; & in one Lord Jesus Christ the son of God, who was born of a Virgin, &; sacrificed for us on the cross, &; the third day rose again from the dead, & ascended into heaven, & sitteth on the right hand of God in a mystical sense, being next unto him in honour & power.[4]

    Moreover, Newton believed “that there is one everliving omnipresent omnipotent (invisible) God the creator of heaven & earth & (of), all things therein . . . [and] therefore to acknowledge . . . one God infinite eternal omnipresent, omniscient & omnipotent (. . . the creator of all things most wise, most just, most good most holy;) & to have no other Gods but him.”[5]
    Newton also notes that in several places Christ confesses his dependence on the will of the Father. He also confesses that he himself is less than the Father and the Father is greater than he and calls the Father his God. [According to John 5:19, 30; 10: 29; 14:28 and 1 Corinthians 11:3; 15:28, the Son is subordinate to the Father. In John 14: 28, Jesus even admits that the Father is greater than he is: “for the Father is greater than I.” Thus, this conflicts with the Trinity Doctrine that the Father and Son are equal. It also leads to the question if the Father is the God of the Son, then who is the God of the Father? Also, how can God have a God?] Moreover, the Son confesses that only the Father has knowledge of all future events (Matthew 24:36).
    Furthermore, Newton contends that “word” (“logos”) as used in Chapter 1 of John should be understood in its ordinary, everyday use and not in the mystical way Trinitarians explain it. John was trying to avoid Jesus being seen as a mere man or as the supreme God. John attempted to avoid these extremes by referring to him as the “word.” He intended that “word” be understood in its ordinary, everyday use. When John wrote, “word” was used in the sense of the Platonists [that which is spoken] when applied to intelligent beings.
    Moreover, Newton does not believe that Jesus had a human soul as such. He finds no evidence or mention in the Scriptures of him having a human soul. He was the word incarnated, and by the word itself, he was made flesh and took on himself the form of a servant.
    Also, only the Father is God almighty. However, this does not limit the power of the Son, who does whatever he sees the Father doing. Nonetheless, all power is originally in the Father, and the Son has no power in himself; he derives his power from the Father, for the Son professes that he can do nothing of himself (John 5:19). [The Son’s admission that he is inferior to the Father conflicts with the Trinity Doctrine of three coequals.]
    Moreover, in all things the Son submits his will to the will of the Father. Such submission argues against the Trinity Doctrine of the Son being equal to the Father. [How could and why would an equal submit to an equal?]
    The union between the Son and the Father, Newton understands to be like that of the saints with one another. It is in agreement of will and counsel. It is a unity of purpose.
    Newton believes that “God is one not only in essence (as in Trinitarian Theology) but also in person.”[6] God is the Father; the Father is God. The two words are synonymous.
    Newton declares that there is only one God, who is the God of the Patriarchs and the Christians. He is the father who has life in Himself and who has given the Son to have life in himself. Moreover, the Father is the author of life to all intelligent beings, the Almighty (universal monarch, that is, the supreme and universal governor of the Universe), the maker of heaven and earth and of all things therein visible and invisible.
    As for Christ, Newton declares that he is Lord, who has received life from the Father and who was slain for us, rose from the dead, and ascended into heaven. To express his being next to the father in dignity and dominion, he sits at the right hand of God the Father. Christ will come again to judge and reign over those who remain alive in the flesh and the dead whom he will raise again to life and reward according to their works at his coming. He will establish his kingdom, for he must reign till he had put all things under his feet, the last of which is death.
    “For Newton, the unity Christ shared with the Father was moral rather than essential.”[7] Nevertheless, although Christ is not very God in the Nicene sense, “Christ is divine in origin (literally the Son of God) and that he pre-existed his birth by Mary.”[8]
    Newton believes that the Father alone is the invisible God of the Bible. God is the first cause and consequently eternal and omnipresent. Thus, He is always invisible, present at all times and in all places, and knows everything that everyone does, says, or thinks. Being everywhere at once, He does not move from place to place. He is void of external shape or bounds, intangible, and invisible, whom no human has ever seen. “Because God is by nature invisible, Trinitarian theologians were wrong to discuss God’s substance.”[9]
    Unlike God, who is always invisible, Christ was visible and will be visible again. Newton writes, “The son can do nothing of himself but what he seeth the father do John 5.19. The father judgeth no man [visibly] but hath committed all judgment unto the son, that all men should honour the [visible] Son even as they honour the [invisible] father, John 5:22,23.”[10] Thus, he distinguishes between the invisible Father and the visible Son. [If the Father and Son are of the same substance as the Trinity Doctrine claims, then no such distinction should exist.]
    According to John 5:26 (“For as the Father hath life in himself, even so gave he to the Son also to have life in himself:”), the Father has life in Himself, but the Son does not; he gets his life from the Father. Thus, the Son is subordinate to the Father. Newton concludes that the God of the Patriarchs and the Christians is the Father who has life in Himself, and He has given to the Son to have life in himself.
    Being omnipresent, God is everywhere at once throughout space and time. About space, Newton writes:

Absolute space, of its own nature without reference to anything external, always remains homogeneous and immovable. Relative space is any movable measure or dimension of this absolute space; such a measure or dimension is determined by our senses from the situation of the space with respect to bodies and is popularly used for immovable space, as in the case of space under the earth or in the air or in the heavens, where the dimension is determined from the situation of the space with respect to the earth.[11]

Thus, God, being immovable, is coextensive with immovable absolute space. “Just as relative space is measured against the benchmark of absolute space, so all changing creation (of which Christ is a part) is distinguished from the immutable God.”[12] [Being omnipresent, God is everywhere simultaneously. He surrounds every atom and fills all voids between and in every atom. Moreover, he fills all the electrons, protons, and all other parts of every atom.] Therefore, God is absolute and Christ is relative. [This is another conflict with the Trinity Doctrine.]
    Newton holds that Christ should not be worshiped as God. Christ should be worshiped, but not the point of distracting from the proper worship due God the Father Almighty; to do so violates the First Commandment (1 Corinthians 8:5-6). Christ should be worshiped, not as God Almighty, but as a king of kings and lord of lords, who has redeemed his elect with his blood. Thus, God is to be worshiped as God and Christ as Lord.
    Newton notes that the term “God” is occasionally applied to angels and Israelite kings in the Bible as an honorific title. However, bearing the title God does not grant them the privilege of receiving the worship due to God alone. According to Newton, the term “God” is relative in nature. It obtains its meaning not from essence, as in the Trinitarian Doctrine, but from dominion. He explains:

[God] rules all things, not as the world soul but as the lord of all. And because of his dominion he is called Lord God Pantokrator [i.e., Almighty]. For “god” is a relative word and has reference to servants, and godhood is the lordship of God, not over his own body as is supposed by those for whom God is the world soul, but over servants. . . . And in this sense princes are called gods, Psalms 82.6 and John 10.35. And Moses is called a god of his brother Aaron and a god of king Pharaoh (Exod. 4.16 and 7.1). And in the same sense the souls of dead princes were formerly called gods by the heathen, but wrongly because of their lack of dominion.[13]

    1 Corinthians 8:6 (“yet to us there is one God, the Father, of whom are all things, and we unto him; and one Lord, Jesus Christ, through whom are all things, and we through him.”) distinguishes a separation not only between Father and Son but also between God and Christ.
    In summary, Newton believed there is one God the Father, who is everliving, omnipresent, omniscient, and almighty and who is the maker of heaven and earth, and one mediator between God and man, the man Christ Jesus. The Father is the invisible God, whom no eye has seen or can see; all other beings are visible. The Father has life in Himself and has given the Son to have life in himself. Moreover, the Father is omniscient and has all knowledge of future things originally in His own breast. He communicates knowledge of future things to Jesus Christ, for none in heaven or earth or under the earth is worthy to receive knowledge of future things immediately from the Father except the Lamb. Therefore, the testimony of Jesus is the spirit of prophecy, and Jesus is the Word or Prophet of God. Furthermore, the Father is immovable, and no place can become emptier or fuller of Him than it is by the eternal necessity of nature. Prayers are most prevalent when directed to the Father in the name of the Son, and Christians are to give thanks to Father alone. Moreover, whatever Christians are to thank God for or to desire that He would give them, they should ask of Him immediately in the name of Christ. Also, Christians need not pray to Christ to intercede for them; if they pray to the Father correctly, Christ will intercede. Furthermore, it is not necessary for salvation for Christians to direct their prayers to any other than the Father in the name of the Son. For the Christian, there is but one God the Father of whom are all things and one Lord Jesus Christ by whom are all things (1 Corinthians 8:6). Christians are to worship the Father alone as God Almighty and Jesus alone as the Lord, the Messiah, the King, and the Lamb of God (1 Corinthians 8:6, Ephesians 4:5-6, Matthew 5:35 and John 1:29,36). Jesus is the Lamb who was slain and has redeemed Christians with his blood and made them kings and priests.
    [For more details on the above discussion, see Endnote 4.]

Endnote
1. Matt Perman, “What Is the Doctrine of the Trinity?”, January 23, 2006, http://www.desiringgod.org/articles/what-is-the-doctrine-of-the-trinity, downloaded July 29, 2017.

2. “Isaac Newton’s Twelve Articles on God and Christ c. 1710s-1720s,” Keynes Ms 8, King’s College, Cambridge, https://newtonprojectca.files.wordpress.com/2013/08/english-kms8-with-verses.pdf, downloaded July 29, 2017.

3. Quotes from the Bible are from the American Standard Version, which some theologians consider the best translation of the New Testament.

4. Stephen D. Snobelen, “Commentary on Isaac Newton’s Twelve Articles on God and Christ,” https://newtonprojectca.files.wordpress.com/2013/08/english-kms8-commentary.pdf, downloaded July 29, 2017.

5.  Ibid.

6.  Ibid.

7.  Ibid.

8.  Ibid.

9.  Ibid.

10.  Ibid.

11.  Ibid.

12.  Ibid.

13. Ibid.

Copyright © 2017 by Thomas Coley Allen.

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Poor on Fawcett

Poor on Fawcett

Thomas Allen

    In 1877, Henry Varnum Poor (1812-1905) wrote Money and Its Laws: Embracing a History of Monetary Theories, and a History of the Currency of the United States. He was a financial analyst and founder of a company that evolved into Standard & Poor’s. Poor was a proponent of the real bills doctrine and the classical gold-coin standard and, thus, the quality theory of money. He gave little credence to the quantity theory of money — especially if credit money, such as bank notes, were convertible on demand in species. Also, he contended that the value of money depends on and is derived from the value of the material of which it is made and with paper money, its representation of such value.
    In the latter part of his book, he discusses leading monetary theorists from Aristotle (350 B.C.) to David A. Wells (1875). Most of the economists whom he discussed were proponents of the quantity theory of money. We will look at his discussion on Henry Fawcett. My comments are in brackets. Referenced page numbers enclosed in parentheses are to Poor’s book.
    Henry Fawcett (1833-1884) was a British academic, statesman and economist. He was a professor of political science at the University of Cambridge, England. Among his works are Manual of Political Economy (1865), which Poor reviews, Democracy in America (1875), and Free Trade and Protectionism (1878).
    Fawcett writes, that “a bank-note, whether issued by a State establishment or by a private firm, is simply a convenient form for bringing into practical use the credit which may be possessed by the Bank. . . . A banker, therefore, whose credit is good can circulate a great number of his notes in his own neighborhood; his notes being willingly accepted by those to whom he is known. . . . It is manifestly to his advantage to issue notes” (p. 376). Using an example, he illustrates his statement. If £60,000 of bank notes are kept in circulation and if the banker keeps legal-tender reserves equal to £20,000, he has £40,000 at his disposal to invest. In England, the circulation of bank notes is placed under various restrictions. Fawcett investigates the effect on prices that the removal of these restrictions would have. “[T]he effect which would be produced entirely depends upon circumstances” (p. 376). If “there is no change in the population, or in the commercial condition of the country[,] . . . [and if] an increased issue of notes were added to the money circulation of the country, prices would manifestly rise; because there would be now more money in circulation to carry on the same amount of buying and selling which was previously conducted by a smaller amount of money” (p. 376). However, if “the additional notes which are issued simply cause a corresponding amount of bullion to be withdrawn from circulation, it is manifest that no effect is produced on prices” (p. 376). Continuing, Fawcett states:

[G]eneral prices depend upon the quantity of money in circulation compared with the wealth which is bought and sold with money, and also upon the frequency with which this wealth is bought and sold before it is consumed. If more wealth is produced, and an increased quantity of wealth is also bought and sold for money, general prices must decline, unless a large quantity of money is brought into circulation. . . . In fact, if there should be an increased production of wealth, if there should be more buying and selling, or if any other circumstance should occur the effect of which is to require the circulation of a larger amount of money, the value of money must rise; or, in other words, general prices must decline, unless an increased supply of money is forthcoming, so that a larger amount may be brought into circulation (p. 377).

    Next Fawcett discusses bills of exchange. If bills of exchange ceased to be used, then the money supply would have to be increased to replace the bills of exchange. Thus, “bills of exchange, in many classes of transactions, are a convenient and complete substitute for money” (p. 377). “Consequently, if it were not for bills of exchange, one of two things must happen: either the money in circulation must be increased, or the money already in circulation must become more valuable, since a greater amount of money will be required to carry on the trade and commerce of the country” (p. 377). Therefore, whether an increased issue of bills of exchange affects prices cannot be answered affirmatively or negatively. “All that can be said is this: if the buying and selling now carried on by bills of exchange were effected by money, then one of two things must occur, — either more money must be brought into circulation, or general price most decline” (pp. 377-378). Fawcett concludes, “The influence, however, which is exerted upon prices by bills of exchange is not due to any thing peculiar in the nature or form of a bill of exchange: it is not the bill which produces the influence, but the influence is produced by the credit which is given. The bill is not this credit; but is simply a testimony or record of its existence” (p. 378).
    Poor responds that Fawcett errs in his example. All £60,000 of notes would be returned for redemption within 60 to 90 days of the issue for gold coin or the equivalent to coin. Explaining how this would happen, Poor writes:

If the banker discounted bills representing merchandise, his notes would be returned to him by their makers in their payment. If he discounted those that would not be paid, then the notes issued would have to be presently taken in by him, by paying out a corresponding amount of his reserve. The debts created by their issue are to be discharged by their use, or by that of coin. Every note issued, therefore, must have a provision of an equal amount of capital for its discharge, and must be discharged by such provision. Its value depends upon its capacity of being discharged, of being retired from circulation. If it could never be discharged, it could have no value. Such is the law of all convertible currencies. Notes get into circulation upon the credit of the issuer; but it is always upon the assumption that means, their equivalent in value, are first provided for their redemption. Without such confidence, no one would take them. The basis of their circulation is not credit, but capital. Credit is but another word for confidence that such capital exists, and can always be had when wanted (p. 378).

    Poor continues, “The reserve is not held to meet such notes as occasionally return, such as are assumed to be issued in excess; for the reason that all will return within their appointed periods” (p. 379). Thus, “Mr. Fawcett wholly misconceived the law or nature of paper money” (p. 379). [Poor gives an excellent explanation of the operation of the real bills doctrine. If the principle of the real bills doctrine is adhered to, currency cannot be overissued. It ensures that the currency available to clear, buy, new goods entering the markets is sufficient to clear the market with little or no effect on prices. Here is where the advocates of Social Credit err. Under the real bills doctrine, new goods entering the markets produce the money needed to buy them, i.e., the bill of exchange. Without resorting to borrowing, it also provides the money to pay employees and suppliers before the goods are sold. Thus, the real bills doctrine is far superior to the Social Credit scheme, which requires the government to print and give government notes to the people to close the gap between national income and the gross domestic product. The real bills doctrine closes the perceived gap between the national income and gross domestic product more quickly, accurately, and precisely than does the Social Credit scheme. Moreover, unlike the Social Credit scheme, the real bills doctrine closes the gap without resorting to governmental force or making the people dependent on the government or leading them to believe that they are getting something for nothing. Unlike the Social Credit scheme, which requires about two years to deliver the money to the people necessary to close the gap that occurred two years earlier, the real bills doctrine does so within a few months at most. Furthermore, the real bills doctrine is far superior to the Social Credit scheme at getting the right amount of money at the right place and at the right time.]
    Moreover, according to Poor, Fawcett errs with “his statement that notes can be substituted, as currency, for a corresponding amount of gold; the saving to the country being in the amount of the substitution, ‘because notes, which are simply pieces of paper of no intrinsic value, perform with equal efficiency all the purposes which were previously fulfilled by the gold which is now supposed to be dispensed with’” (p. 379). Poor remarks:

Notes which are constantly being retired from circulation cannot take the place of gold which remains, as currency, unchanged and permanently in circulation. Whether convertible or not, they cannot perform, with equal efficiency, all the purposes which are fulfilled by gold. Their value is representative, not intrinsic; that of gold is intrinsic, not representative. Notes become valueless if their constituent become valueless; the value of gold depends upon nothing but itself (p. 379).

[With today’s paper fiat money, notes have replaced gold. That paper notes and their electronic equivalent “cannot perform, with equal efficiency, all the purposes which are fulfilled by gold” explains much of the monetary and economic problems that the world now faces.]
    In comparing gold with bank notes, Poor writes:

Gold can be used in the arts; notes cannot. Gold can discharge indebtedness to foreign countries; notes cannot. Gold can discharge balances arising in the domestic trade of a country; notes cannot. Gold can be held as reserves by the issuers of paper money, and by society, and for all time; notes cannot in either case, as they are necessarily speedily retired by the use, or disappearance from any cause, of their constituent. Notes are accepted within the country in which they are issued, by reason of their representative character. They can perform only one function of gold, — that of effecting domestic exchanges (p. 379).

[Poor fails to mention that gold, which is no one else’s obligation, can extinguish debt; notes cannot. Notes can only discharge debts by transferring them to another. Moreover, gold can transport value over millennia; notes cannot.]
    Also, according to Poor, Fawcett fails to see “that the less cannot include the greater. Paper discharges gold from use in one particular; but can no more be substituted for it in all the functions which the latter has to perform in the economy of society than a mere promise can be substituted for the performance, or sugar for iron” (p. 379). Poor adds, “Great advantages result from the use of paper money, and in ratio to its use, in the same way that great advantages result from the use of ships and railroad” (p. 380). [Trying to substitute completely paper for gold is the major flaw of modern-day economics and today’s monetary system that will cause their downfall. It is also the major and fatal flaw of all schemes of the fiat monetary reformers. Even worse, is the movement to reduce all money to electronic bytes, as they are even more nebulous and abstract than paper notes.]
    Next Poor comments on “Mr. Fawcett’s theory of the effect upon prices of credit in the form of paper money is singularly unphilosophic and inadequate. With him, the whole thing is a mere piece of mechanism: so much money, so much price; and the reverse. His conclusions are based upon assumptions wholly impossible in themselves” (p. 380). Contrary to Fawcett’s belief that doubling production and purchases while the amount of money remains the same will cause price to fall one-half, “production and consumption cannot be doubled, the amount of money remaining the same; both must, as a rule, proceed in ratio to the amount of money in circulation” (p. 380). Moreover, Poor adds, “Paper money is the symbol of merchandise: the one must be in ratio to the other, as the necessary condition of production and consumption” (p. 380).
    About Fawcett’s belief, Poor remarks:

He [Fawcett] might as well have assumed the commerce of a country to be doubled for the reason that the ships employed carried twice as much as they have the ability to carry. His statements and illustrations are nothing less than contradictions in terms. Credit in the form of money has an effect entirely different from that due to its quantity. ‘If,’ says Fawcett, in effect, ‘one would lift two pounds of merchandise with a one pound weight, he must double, or reduce one-half, the length of one arm of the scale.’ The true object of paper money is to raise the two pounds of merchandise without the employment of any weight whatever. So far as this can be done, can the cost of the operations of weighing be saved, and prices reduced in like ratio; and so far can the coin of a country be employed in the discharge of functions peculiar to itself, and which neither symbols nor paper money of any kind can discharge (p. 380).

        According to Poor, depending on Fawcett’s definition of currency, Fawcett may have erred in assuming that an increase in currency is followed by an increase in prices (pp. 380-381). If currency is capital or the representation of capital, then Fawcett is wrong because “prices must be in ratio to the amount of merchandise fitted for consumption, or in ratio to the perfection of the instruments for its distribution” (p. 381). However, if currency “be neither capital nor the representative of capital (merchandise); if it be that kind of currency which can be substituted for gold, like legal tender [notes],” (p. 381) then Fawcett is right because “an increase of such currency always tends to advance prices in being in excess of the means of consumption” (p. 381). [Although general prices fluctuated under the gold standard, they were much more stable than general prices have been under today’s paper fiat monetary system. {An ostensible goal of today’s monetary system used to be to maintain stable prices.} Under the gold standard, general prices trended upward for years and then downward for years; however, over a few decades, they remained fairly stable with perhaps a downward bias because of improved technology. Under today’s fiat paper monetary system, general prices have trended upward as the monetary unit loses purchasing power year after year.]
    About inconvertible currency [e.g., today’s currency], Poor writes, “People accept an inconvertible currency of government notes, as it will discharge their own debts existing at the time, by virtue of its being legal tender, and from a belief that it will speedily be redeemed by an equivalent in some form. If government be competent to issue it, it would have a high value for a time, even if it were believed that it would not be paid” (p. 384). [No one really believes that today’s currency will be paid, i.e., redeemed in gold or in anything else with intrinsic value.]
    According to Fawcett, a country can increase the issue of its currency without disturbing the finances of the country “if its issue were confined within reasonable limits” (p. 384). “If, for example, the United States, in the late civil war, had issued notes only in ratio to their increased necessity for money, the issue could have exerted no influence over prices” (p. 384). About U.S. notes issued during the war, Poor comments, “The demand for money, measured by the price of the notes issued, exceeded sixteen-fold the amount of previous expenditure” (p. 384). Then he asks, “how could the expenditures of a government be increased sixteen-fold, or even eightfold, without any increase of capital, or fund to draw upon, and prices remain at their old figures? It is the same as to say that a demand multiplied by one per cent equals a demand multiplied by eight or sixteen per cent” (p. 384). Continuing, Poor remarks, “If gold could have been supplied wherewith to meet all expenditures growing out of the war, prices would still have increased enormously, from the excess of demand over supply” (p. 384). About the rise of prices during the war, Poor writes, “Prices rose, therefore, in ratio to the demand; in other words, in ratio to the inflation of the currency” (pp. 384-385).
    In his concluding remarks about Fawcett, Poor writes:

If Mr. Fawcett had paused long enough to ask himself weather [sic] or not a sovereign to be received six months hence had the same value to the person who was to receive it as a sovereign in hand; or whether a government note having one year to run, without interest, equalled in value its note having the same time to run, bearing interest, — the answer, properly made, would have unlocked to him all the mysteries of money. Instead of this, he contented himself with a mild restatement of all the old dogmas, every one of which he accepted without reservation, and every one of which is exactly opposed to the principles upon which money is based. It must, however, be said in his favor, that his style is in agreeable contrast to the incoherent extravagance of Macleod and the fantastic nonsense of Bonamy Price (p. 385).

Copyright © 2017 by Thomas Coley Allen.

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