Monetarily, We Are Already In The Next System…

…We Just Don’t Act Like It.

Jesse A. Myerson

1. The Old System

Fifty miles southwest of Dallas, in the small agricultural community of Cleburne, a group of Texas farmers assembled in August of 1886 to demand the Next System.

The current “crop lien” system was intolerable: a farmer could only get a harvest-time cotton gin or any other necessary equipment from one person: the local merchant. A white farmer would call him “the furnishing man,” a black farmer simply “the Man.” Not having lots of cash handy, the farmer would take out a mortgage (“lien”) on his forthcoming crop. Since the merchant had a monopoly on credit in the area, he could make loans at whatever interest rate suited him—perhaps 25 percent. Many was the farmer who left a merchant’s counter praying to high heaven his crop would command a good enough price at market to service his debt to the Man.

Year in and year out, heaven declined to heed farmers’ prayers: the price the harvest commanded dropped and dropped and dropped. This deflation (general drop in prices) was a result of the gold standard to which the value of money was pegged: while the size of the population rapidly expanded, the size of the money supply remained steady. This grew the farmer’s debt in more than one way: not only did the lousy income force him to borrow more at higher interest the next year, but deflation also magnified the real cost of the previous year’s loan, which now had to be paid back in dollars that were harder to come by. Every dollar the merchant got back was worth more than when he’d lent it. Year after exhausting year, farmers would go deeper and deeper into debt, until, at last, the banks foreclosed on their land. If they could afford the rent, farmers became tenants. If not, they would join millions of others as farm hands.