London, 22 April, 1949 My Dear Von Beckerath I Hope Much That You Have Been Able to Find a New Post. Financial Worry Is a Sad De
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London, 22 April, 1949 My dear von Beckerath I hope much that you have been able to find a new post. Financial worry is a sad deterrent to thinking on comparatively academic subjects. (J.Z.: From 1947 onwards B. was already entitled to an old age pension, but until the currency reform that would have had very little purchasing power and even afterwards. I believe that his pension came only to about 130 - 150 DM a month, which would not have left him much after paying normal rent. Luckily, he lived in rooms of a house owned by friend and so, probably, got a very favourable deal from his landlady, probably a former sweetheart, with whom and her sister he remained on friendly terms to the end, except during his last days, when they deprived him of his revolver, he had kept for the day when pain would become unbearable for him, the handgun that came close to putting an end to Hitler. - Our world is still of a kind that does not offer men like him sufficient financial sponsorship to allow them to work full time, in healthy conditions, on their main and self-chosen task. He does not have masses of fans, like the pop heroes have, although he offers the whole of mankind so much more, objectively. He, too, needed an Ideas Archive and Talent Centre - still not existing today. - J.Z., 9.5.03.) Thank you for your letters. I am much interested in your proposals for dealing with German inflation. I must have time to think them over. Yes - Greene said a lot of good things; but I doubt if they had not been said before him. So far as I know Bishop Berkeley preceded him in 1710 when he asked in "The Querist" many fundamental monetary questions. (I have not yet seen that text, either! - J.Z., 9.5.03.) I will not enumerate his questions: you will find them quoted in "Free Banking" when you receive it. John Gray, in his "Lectures on "The Nature and Use of Money" (Edinburgh, 1848), developed James Mill's principle that production is the cause of demand. Gray pointed out that the compulsion to use gold in exchange contradicted this principle, since it compelled demand (the possession of gold) to be the sole cause of production. Gray proposed a sort of mutual bank system in which a bank should issue to the producer money equal to the value of the goods he had produced. When the goods were sold, the money should be paid by the buyer to the bank, which should then issue a delivery note to the producer, authorising him to deliver the goods. Any goods remaining unsold after a certain period must be bought by the producer at his original price. I have mentioned Gray in "Free Banking" on p. 196 et seq. In your letter of April 14 you argue that in times of crisis the public would use your notes to buy goods. It seems to me, however, that you overlook the necessity of the shops to replenish their stores from the wholesalers. The main reason for the breakdown of trust in a crisis is the fear of general bankruptcy. Consider the 1929 crisis in New York. The cause was an epidemic of speculation. The ordinary public had bought shares in every sort of industry, and had greatly inflated the price of those shares. Then suddenly they began to fear that prices had become too high, and they began to sell. Prices fell, and a panic ensued, in which everybody tried to sell. Many were unable to meet their obligations, and there was widespread bankruptcy. It seems to me, that at such times, lending will be diminished. Even sound buyers will hold back, in the hope that prices will fall still further. Hence although your notes would be used to buy the goods in the shops, few fresh notes would be issued until mutual trust were re-established. (J.Z.: He describes this crisis as if it had not also and mainly been a means of payment crisis, one of monetary despotism, with its numerous false banking practices, with all too many bank accounts being frozen and unavailable for turn-over credits. Precisely shop foundation money would have been able to pay wages for unemployed to employ them again. And their spending in the shops would have led to orders for new goods, and these new goods required additional workers. All the stocks of ready for sale goods and services, or a large enough part of them, could have been turned into short term loans for wage payments [gradually, not all at once!] and thereby the sale of these goods and services would have been assured. The money shortage could have been very rapidly turned into a quite sufficient currency supply. Normal production and consumption could have gone on. That would have also restored the capital market. Only on the capital market some speculative investors would have suffered great losses, while others, still able to pay, would have gained enormous bargains. So what? That would merely mean that titles to capital assets would largely have changed hands. Whether a factory, a worker works in, is owned by company A or B is of little interest to him. His continued job is, and that he is paid for it in a useful enough means of exchange. When the ownership changes this has usually little effect on his life. But when neither company A nor company B know any longer how to continue to achieve orders and sales and to assure 1 them, and to pay for all expenses, including profits, and thus keep the whole production machinery going, then the worker has good reasons to get worried - and to take up the study of the money question and of monetary and value standard alternatives. Like hell he will! Neither will the company directors. Both will rather scream for subsidies or handouts. It would not have meant that the businesses and factories and shops would have to close down because they could no longer sell enough. No business would have had to shut down, except those of e.g. some bad financial advisors and some bankers and brokers would no longer be trusted. On the contrary, the previous boom could have been extended into a still greater and permanent one, but unsound businesses and unsound business and banking practices would have been discontinued, as soon as possible, instead of being wrongfully supported with funds that should have been available for short-term turnover-credit [objectively they do not need any capital funds!] or that were wrongfully taken from taxpayers. The Central Banking system almost totally failed to supply sufficient and sound currency to keep normal production and sales going. It was itself all too much involved in flawed capital investments and speculations and based on the fallacies of "capital asset currency". The monetary freedom solution was not technically impossible. It was merely outlawed, also largely unknown and unappreciated. The vast majority of the monetary experiments, that did take place were very flawed. And the same flawed ideas on monetary matters still spook in most heads. Later, somewhere in "The Individualist", Meulen pointed out the existence of a list of about 150 different crisis theories, I believe in the "Zeitschrift fuer das gesamte Kreditwesen". I have never seen that list yet and it should be permanently published, together with all the pro and con of each of these theories, most of them ignoring most others, and with all the additional theories that have been advanced since then. The economists have not yet provided us with this service. They rather ride, each of them, or schools of them, their own crisis-theory hobby horse. No systematic scientific approach to the matter seems to exist, as far as I know. I do admit to very limited knowledge of economics! Only when this has been done, can one finally come to decide whether e.g., both of the above hinted at theories contains some truth and how much and to what extent they are still incomplete or flawed. - J.Z., 9.5.03.) 2. In your letter of April 1 you recommend the greater use of options, or contract buying. This system is now extensively used among persons of credit, wholesalers and the larger shops. The ordinary wage-earner, however, has little credit, since he can provide little security that he will fulfil his contract to buy. I doubt if the system could be extended much among wage-earners. (J.Z.: That's M.'s way of misunderstanding B.'s "order-system" for coming-up consumer requirements, to be paid for, at least by workers, usually in some form of currency or the other, when the time comes, not by credit. I have my own doubts on the system but would not call it an "options" system, rather a personal obligation or, as B. said, personal "commitment" system. Contracts are involved, as in every buying. But the decisive aspect here is the ordering in advance, of goods and services wanted in the future, in instalments, over a period, which would allow the providers to make sounder calculations on their possible and already contracted sales, instead of merely speculatively producing for the general market, without knowing whether and to what extent this market would actually buy the goods or services offered then. As I already hinted at, in notes to B.'s letters, a commitment to certain shops or shopping centres, to spend weekly or monthly a certain minimum amount there, could already be a pretty good substitute for an ordering system.