The gold crisis in the United States.
Marx and Engels, who lived through the Revolution of 48, attributed a decisive action on its production to the economic crisis of 1847, complicated by the starvation price of bread, after the bad harvest of cereals. They thought that, as crises of overproduction had periodically shaken the economic world since the beginning of the nineteenth century, it was possible that a general and intense crisis would provoke social unrest in Europe, which would allow the Socialist Party to seize the political power and start the social revolution.
Economic crises, since 1847, have continued to occur and to react on the political world: the crisis of 1867 prepared the fall of the empire, by sowing and poisoning a general discontent in the popular masses who had given credit to the government for the agricultural and industrial prosperity engendered by the railways, the progress of industry and the development of national and international trade.
But since these economic crises had not caused dramatic revolutions, Bernstein and the government socialists mocked the "catastrophic" conception of Marx and Engels and taught doctorally that if the first crises had surprised and distraught the capitalists, those they had learned to suppress them or render them harmless.
And now in the United States, where the skilful organization of the trusts gives the capitalists control over production, a formidable crisis breaks out in the midst of the most extraordinary agricultural and industrial activity.
A disconcerting panic launches the crowd on the banks of New York, which dry up their coffers and close their doors; the mad terror spreads and the banks of other towns suspend reimbursements and payments in gold and make them in checks, not guaranteed by a metallic counterpart.
Industry marching at high pressure is paralyzed; the foremen who cannot find the money to buy the raw material and pay the wages stop work and dismiss the workers. It is estimated that the number of unemployed already exceeds one million.
Agriculture is hit; commercial transactions in the countryside are suspended. On November 2, a telegraph from the northwest to Roosevelt that the farmers of Dakota and Minnesota could not get rid of 150 million bushels of wheat because the buyers had no cash; of the south, the president of the Farmers' Union asks Cortelyou for authorization to issue one hundred million notes guaranteed by a double value of unsold cotton, to help the farmers.
Gold is missing everywhere. Cortelyou empties the State reserves and throws 300 million into circulation, the trustified banks come to the rescue, 275 million are imported and another hundred million are expected. And the crisis continues, spreads and threatens the European nations which, to protect their metallic cash, modify the general credit and disturb trade and industry by raising the rate of discount. In one week, the Bank of England raised it three times in succession.
The crisis whose economic action is not exhausted and whose political reaction has not yet begun, if it unleashes a crisis in production, is not properly speaking a crisis of overproduction.
It is not a crisis of the production of commodities, but a crisis of their means of exchange, a crisis of gold. This kind of crisis is special in the United States; For some time now, every year at this time, there has been a gold crisis there: that of this year is the most intense. There is an interest for socialists in knowing how these crises come about and in wondering if they could not break out in the other nations of great capitalist production.
The financial literature, very active in France, from 1840 to 1860, shows us the Saint-Simonians, the Fourierists, the contractors of great works, the financiers and the businessmen preoccupied above all with "associating", centralizing capital accumulated by bourgeois, artisans and peasants, who kept them at home "unproductive". The brochures of Emile Pereire and the prospectuses of the Crédit Mobilier have, from this point of view, a high historical value.
The hoarded capital was used only for the purchase of land or houses because there were no joint-stock associations; and the rents on the State, being debited only by large bills, were accessible only to the rich capitalists. One of the first and most important acts of the Empire was to make them accessible to all budgets. This decisive measure brought the hoarded capital out of its hiding places and enabled the financiers to centralize it, to "associate" it for the creation of the railways and the introduction of the mechanical industry. This centralization which, in England and in the United States is very advanced, gives to the financiers who manage the mass of concentrated gold and silver a preponderant action on the development of production.
Manufacturers, merchants, shopkeepers and private individuals only keep pocket money in England and the United States, all the rest is deposited in banks from which it is withdrawn as and when needed; depositors pay their suppliers with checks, even for purchases of 20 francs. American workers deposit their savings in banks.
Gold, silver and paper money (State Notes, called Greenbacks and National Bank Notes) which in the United States are not essential for small daily transactions, are centralized in Banks that Morgans and Rockefeller have been trustified. In my study of American Trusts, published in 1903, I pointed out the dangers of this extraordinary centralization, which places almost all the monetary capital in circulation at the disposal of a few dozen financiers.
This colossal centralization has provided this handful of businessmen with the means to achieve during the last decade the phenomenal development of industry and agriculture, to organize production into monstrous trusts, to invade Hawaii, the Philippines , Cuba, Mexico and South America, in search of new fields of exploitation.
This prodigious national and extranational expansion of business could only have been accomplished thanks to monetary capital, which, although excessively concentrated, is nevertheless of insignificant smallness for the numerous and gigantic enterprises which it has set up. . This huge industrial pyramid rests on its top; a shock can upset her balance and throw her down.
Every year, this shock is given with increasing force. Here's how. The banks of the whole country drain during the year the monetary capital of the countryside and the cities and send it to New York, so that it may be at the disposal of the magnates of finance.
But in the fall, when the harvest is over, commercial transactions begin in the countryside, the banks of New York must return the capital received in the course of the year; they run out of cash and risk not being able to pay depositors' checks at open counters. Every year, restitution becomes more difficult because the monetary capital finds itself more and more engaged in enterprises and exported abroad: thus at the moment the Bank of France possesses 75 million in American gold coins. Every year at this time, monetary capital becomes scarce in New York; the slightest concern of the filing public can lead to panic. The money rate goes up. In 1903, it exceeded 20%; this year it reached one hundred per cent. Gold, which is hidden, takes precedence: speculators, aware of the periodic embarrassment, monopolize the gold.
The industrial and agricultural production of the United States, the most colossal in the world, has reached such a stage of development that the monetary capital of circulation has become insufficient. The bimetallists had demanded the unlimited minting of silver; but of all the precious metals, gold alone, by the invariability of its value, can serve as a standard and as the basis of the monetary system. Silver, nickel, copper can only be auxiliary currencies; and the Bank Notes must be proportionate to the metallic cash in order not to be assignats, as are the Panama Bonds which Cortelyou is issuing at the moment. Consequently, one cannot increase the monetary means of circulation unless one increases the quantity of gold; and if we do not increase these means of circulation, monetary crises will continue to occur as in the past