Spencer Heath Archive

Item 1070

September 26, 1934

To the Editor of the New York Herald Tribune:

Mr. Whidden Graham, in your issue of last Saturday, inquires as to the exact nature of the transaction “when money is sent abroad.” Here is the answer:

What is called “money” in large scale transactions is not money or currency in any literal sense but merely a record kept by banks. This is a record of the effects of previous transfers of actual wealth or services. This record expresses a right to receive wealth and the present extent of that right; it is a record of what is called credits.

These credits are based upon concrete wealth that has been delivered but for which no concrete wealth has yet been received. They are therefore the titles to undelivered wealth. They stand as indicators of uncompleted exchanges of wealth.

Any so-called “movement of money” is an exchange of ownership of bank credits. A “transfer of funds from New York to London is also and no less a like “transfer” from London to New York. This means that A who was entitled to receive wealth in New York to the amount of his dollar credit in New York has become entitled to receive wealth in Britain to the amount of his sterling credit in London. At the same time B who was entitled to receive wealth in London has now become entitled to receive wealth in New York.

Any change in the numerical ratio of the exchange of credits reflects a change in the desirability of possessing and using actual wealth as between the two places.

Wealth in use is capital. It is the tools worked with and the materials worked on by workers including “managers.” The increase of wealth from such work pays all wages and profits to workers and managers and interest to those whose credits have made the tools and materials available.

Any decline in the increase from using tools and materials (as by taxation, restrictions, obstructions, etc.) is a decline in wages, profits, and interest. Where such decline occurs less tools and materials are employed and less credits are required for making them available. In such place “funds” (credits) decline and are transferred (at a numerical disadvantage) into other funds where decline, if any, is less or is less anticipated. When any widely traded commodity is allowed to move freely in international trade all currencies are stabilized (practically) in their relations to one another in terms of that commodity. At present there is no such commodity.

Very truly yours,

Spencer Heath

 

420 West 116th Street

New York City