The Natural Economic Order/Part IV/Chapter 5 F

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Part IV, Chapter 5 E The Natural Economic Order
Part IV. Chapter 5. How Free-Money will be Judged. F. The Speculator
written by Silvio Gesell, translated by Philip Pye
Part IV, Chapter 5 G
1929.



F. The Speculator

By the Free-Land reform we were prevented from speculating in building sites, mines and farming land, and now by the Free-Money reform our business in securities and produce has also been snatched away. Wherever I plant my foot, I am on quicksand. And that is called progress and justice! To deprive honest citizens of their livelihood by invoking the assistance of the State — the State that I have served so faithfully, witness my decorations and titles I call it simply spoliation.

I recently launched at my own expense news of serious trouble between two South-American republics (their names I have forgotten) and of possible complications with foreign powers. Do you imagine that the news made any impression on the Stock-Exchange? Not the slightest! The Stock-Exchange has grown incredibly thick-skinned. Why, not even the news of the occupation of Carthage by the Japanese has been able to rouse it; the general indifference is simply appalling. It may be explicable but it is so altogether out of keeping with the former ways of the Stock-Exchange that it comes as a shock.

Since the introduction of Free-Money, money has ceased to be the stronghold of the investing classes into which they retreated at the slightest alarm. When danger threatened, they used to "realise"[1] their securities, that is, they sold them for money and then considered themselves completely protected against every kind of loss.

These sales were of course accompanied by a fall in the price of securities. which was proportionate to the extent of the sales.

After a while, when I believed that nothing more could be gained, I used to circulate reassuring news. The frightened public thereupon ventured out of their stronghold and were soon busily forcing up, with their own money, the price of the securities which they had sold cheap to my agents. That was something like business!

And now this wretched Free-Money! Before parting with his securities the investor must ask himself what he is going to do with the money he obtains for them. For this money no longer allows him to pause and consider; he cannot take it home with him and tranquilly wait. Money has become a mere halt by the wayside. So people ask: "What will become of the yield of these securities? You say the outlook for them is bad, and we believe you, but is the outlook any better for the money you give us in exchange? What are we to buy with the money? We do not care to purchase Government securities, since others have forestalled us and forced up their price. Are we to sell our securities at a loss, simply to buy others at an exorbitant price, that is, again as a loss? If we lose in buying Government securities, we may as well lose on our own securities. We prefer to wait a while before we sell".

That is the new attitude of the public, and it ruins our business. This confounded waiting! Through it the first impression of our news wears off, the bewilderment passes away and another party has time to spread reassuring news, exposing our exaggerations and lies; and so the game is up. For it is the first impression that tells and must be exploited. Duping the public has become a difficult business.

My working capital, moreover, is invested in this carrion money and rots away in my safe. To carry out my stroke at the right moment I am forced to keep a reserve of money. If I count this reserve after a lapse of time, I find that it has already suffered a considerable depreciation. A regular and certain loss in return for a very uncertain chance of profit!

At the beginning of the year I had a cash account of ten millions. Thinking that I should need it, as formerly, at a moment's notice, I let it lie idle in the form of ready money. We are now at the end of June but I have not yet been able to move the Stock-Exchange to sales on any appreciable scale, so the money is lying there untouched. What did I say ? Untouched ? A quarter of a million of it has already melted away! I have lost, irrecoverably, this large sum, and the outlook for the future has not improved. On the contrary, the Stock-Exchange is becoming more and more thick-skinned. In the long run experience teaches even the most timorous investor that when nobody sells, prices, in spite of gloomy prospects, cannot decline, and that not alone rumours and prospects, but also facts are required to justify a fall of quotations.

How different it was in former times? Before me lies a cutting from the financial column of a newspaper, a model of the reports which I myself used to circulate:

"A Black Tuesday. A panic broke out on the Stock-Exchange today upon receipt of the news that the Sultan was suffering from stomach-ache. Considerable selling orders from provincial customers coincided with great eagerness to sell on the part of local speculators, and under this pressure the market opened in a demoralised and panicky mood. “Sauve qui peut“ was the watchword."

And now? Eternally the same stupid question: "What am I to do with my money? What am I to buy if I sell my securities?" This abominable money! How different it was with the gold standard! Then nobody asked: What am I to do with the money I receive ? Those beautiful securities were sold at the bidding of speculators, for gold. since gold was still more beautiful; investors were happy to see the money again, to count it and let it run through their fingers. When you had gold you were safe; gold could not possibly involve you in a loss, either in buying or in selling, for it had, as the economists put it, its "fixed intrinsic value". This wonderful gold money with its fixed intrinsic value in terms of which all other goods and stocks rose and fell like the mercury of the barometer, how easy it made speculation.

Investors now sit on their stocks as if they were glued to them, and before they sell they always put the same query: "Please tell me first what I am to do with the abominable money I should receive for my securities?" The merry old Stock-Exchange days are no more, when gold vanished the sun set in the heavens of speculation.

There is however one comfort: I am not the only sufferer. My colleagues of the produce exchanges have fared equally badly. Their business also has been ruined by Free-Money. Formerly, the whole production of a country remained on sale up to the moment of its consumption; it was in the hands of the dealers. No consumer ever thought of laying in stores. Gold with its "fixed intrinsic value" was a substitute for all provisions and could never involve us in loss, so anyone who had a reserve of gold had everything that he might need, at his disposal. Why, then, lay in stores for the moth to eat?

But the fact that everything was always on sale made speculation profitable. Here were the consumers with not enough provisions for 24 hours, and there was the whole of supply lying ready for sale in the hands of the merchants, so speculation was simplicity itself: you just bought the existing stock and then waited for demand to come forward. Generally you were sure of your profit.

And now? The goods which were formerly held for sale in the warehouses are now held for use in millions of store rooms, so how can they be brought back to the market? And with what can these stores be bought? Not with Free-Money, for it was to get rid of Free-Money that the consumers bought the stores. These stores are no longer wares for sale: they have became unsaleable property. And even if the speculator could succeed in cornering the new output, prices, because of these private stores, would not rise immediately. For people no longer live from hand to mouth. Before these stores are used up, the news spreads that the speculators have got hold of certain stocks of merchandise, so producers are on the alert and have made up the deficiency before the speculators have been able to dispose of their goods. It must be further kept in mind that the working capital of the speculators in produce is, like mine, ready money subject to the monetary depreciation. Loss of interest, loss by depreciation, storage costs, and no profit — in short we speculators are faced with ruin!

How was it possible to introduce an innovation so injurious to the State? For I, Rockefeller, am the State, and my friend Morgan and I together are the United States. Whoever injures me, injures the State.

According to our experts and professors, gold had a "fixed intrinsic value". In exchanging gold for goods the public could never lose anything. For according to the professors, exchanging is equivalent to measuring[2], and as the result of measuring a piece of linen is the same whether you begin at one end or the other, so in buying and selling goods for gold the quantity of gold must always be the same. For gold has, it cannot be too strongly emphasised, a "fixed intrinsic value"! As long as we had gold, therefore, the public was protected by the fixed intrinsic value of gold from any possible cheating. We speculators who enriched ourselves, cannot have done so at the expense of the public. Where our fortunes came from I cannot explain, but perhaps they were a gift from Heaven.

Alas, that such heavenly gifts should have been abolished by Free-Money!


  1. Nothing demonstrates more strikingly the monstrous illusion under which humanity is living than this universally current expression. For everyone the only real thing is money.
  2. Measure of value. Medium for transporting value, store of value — and illusion of value.