The following extract from a speech recently delivered by Thomas F. Bayard in the United States senate shows that a voice for Liberty is sometimes heard in the halls of power:
I argued and voted against the coercive principle which compelled any citizen of the United States, any person in the United States, artificial or natural, any set to citizen who had their money invested in bank stocks or not in bank stocks, to take any obligation of the government perforce and under compulsion. I believed then, and I believe now, that, whenever it is necessary to accompany your demand for credit by a threat, you weaken that credit and do not strengthen it. I think it is a symbol of weakness, and not of strength, for the government to make either its demand notes or its bonds an enforced legal tender upon anybody. It did not add one silver to the value of the treasury notes issued in time of war. It did not prevent their depreciation one penny when disaster threatened the government that issued them and its credit was threatened to be weakened by disaster. Your bonds are not to be made stronger, they are not to be held with more confidence, by fixing upon them any feature of compulsory acceptance by the banks, or by individuals, or by anybody, foreign or domestic. It is a mistake to suppose so.
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Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts
8/24/17
A Second Chapter on Usury.
All statutory laws that interfere with voluntary trade between individuals must be wrong. Therefore, so-called usury laws cannot be defended on any principle of justice.
Again, all such laws are unwise, because they attempt to deal with results. O. W. Holmes says that “it is useless to medicate the symptoms.” If we wish to remove a wrong, we must find the cause, and attack that. History, experience, and reason are in accord in teaching us that usury cannot be regulated by any laws limiting the rate per cent.
The foundation of interest is debt. Therefore, when we all become Bible Christians and “owe no man anything,” usury will be no more. But it may be truly said that we can never get out of debt so long as usury prevails. Here seems to be an unsurmountable difficulty; but a lawyer of some note in this State told me that all this could be righted by less than ten lines of legislation. What we demand, and all we demand, is the abolition of class legislation.
Greenbacks do not constitute scientific money; for, while they stand to represent wealth, there is no tangible, actual wealth back of them to redeem them, in case the holders wish to realize, and close the transaction. For selling goods for money is only one-half of a transaction. All trade, let us remember, is exchanging goods for goods. But the point I wish to present here is this: while all credit money implies a debt, there is a vital difference between the greenback and the national bank note. The former does not constitute an interest-bearing debt; the latter does. Here we see hundreds of millions sucking interest from the productive portion of the people, for no good purpose and for no good reason. I hope and trust that the Greenback party soon become strong enough to remedy this matter.
Let us look at another class of interest-drawing debts, which can be easily wiped out. The people of any city can carry their city debt in their pockets in the form of credit money, just as well as to borrow the money and pay interest. Some of the Western cities are doing this. It is a hopeful indication.
Again, if the people can pay for all the railroads in the country every ten years and virtually give the same to the railroad corporations, can they not, pay for them once and own them, and thus stop all that drain of interest? But the great difficulty, after all, is to convince the live, active business man that interest is wrong in principle and bad in its results. The impossibility of meeting its demands ought to satisfy any thinking man that it cannot be right. One penny put at compound interest at six per cent would bankrupt the whole solar system in less than two thousand years, in all the planet were solid gold! Well, then, why does not interest eat us all up? Simply because A goes into bankruptcy to-day, B tomorrow, and thus through the whole alphabet many times in a year. In other words, interest necessitates failure.
If a man owns two good houses in Boston, he can live in one, and live on the man who lives in the other. Can that be just right? Look through all our cities, and see the land, the buildings, and the vast quantities of goods, on all which somebody is paying usury in the form of rent, profit, and interest. Another panic must settle a large part of those demands.
There are many reforms, improvements, and methods of education that demand our consideration, but we want money to work with. Isaac Butts, in the “North American Review” for January, 1873, said, in speaking of the various corporations: “They are wrongfully abstracting from the pockets of the people millions upon millions every month.” This must be reformed first.
Then?
Again, all such laws are unwise, because they attempt to deal with results. O. W. Holmes says that “it is useless to medicate the symptoms.” If we wish to remove a wrong, we must find the cause, and attack that. History, experience, and reason are in accord in teaching us that usury cannot be regulated by any laws limiting the rate per cent.
The foundation of interest is debt. Therefore, when we all become Bible Christians and “owe no man anything,” usury will be no more. But it may be truly said that we can never get out of debt so long as usury prevails. Here seems to be an unsurmountable difficulty; but a lawyer of some note in this State told me that all this could be righted by less than ten lines of legislation. What we demand, and all we demand, is the abolition of class legislation.
Greenbacks do not constitute scientific money; for, while they stand to represent wealth, there is no tangible, actual wealth back of them to redeem them, in case the holders wish to realize, and close the transaction. For selling goods for money is only one-half of a transaction. All trade, let us remember, is exchanging goods for goods. But the point I wish to present here is this: while all credit money implies a debt, there is a vital difference between the greenback and the national bank note. The former does not constitute an interest-bearing debt; the latter does. Here we see hundreds of millions sucking interest from the productive portion of the people, for no good purpose and for no good reason. I hope and trust that the Greenback party soon become strong enough to remedy this matter.
Let us look at another class of interest-drawing debts, which can be easily wiped out. The people of any city can carry their city debt in their pockets in the form of credit money, just as well as to borrow the money and pay interest. Some of the Western cities are doing this. It is a hopeful indication.
Again, if the people can pay for all the railroads in the country every ten years and virtually give the same to the railroad corporations, can they not, pay for them once and own them, and thus stop all that drain of interest? But the great difficulty, after all, is to convince the live, active business man that interest is wrong in principle and bad in its results. The impossibility of meeting its demands ought to satisfy any thinking man that it cannot be right. One penny put at compound interest at six per cent would bankrupt the whole solar system in less than two thousand years, in all the planet were solid gold! Well, then, why does not interest eat us all up? Simply because A goes into bankruptcy to-day, B tomorrow, and thus through the whole alphabet many times in a year. In other words, interest necessitates failure.
If a man owns two good houses in Boston, he can live in one, and live on the man who lives in the other. Can that be just right? Look through all our cities, and see the land, the buildings, and the vast quantities of goods, on all which somebody is paying usury in the form of rent, profit, and interest. Another panic must settle a large part of those demands.
There are many reforms, improvements, and methods of education that demand our consideration, but we want money to work with. Isaac Butts, in the “North American Review” for January, 1873, said, in speaking of the various corporations: “They are wrongfully abstracting from the pockets of the people millions upon millions every month.” This must be reformed first.
Then?
Apex.
6/9/17
The Redemption of Money.
If we can fully determine what redemption is, we shall accomplish a great work for human progress. A promise to pay, written on paper, is generally considered redeemed when it is exchanged for coin. This is not always true. If I take a banknote promising to pay one dollar, so far as I am concerned, the note is redeemed; but, if the note is yet outstanding against the bank, it is not redeemed.
If A gives B a note promising to pay one dollar, and B passes that note to C, and C returns it to A, just so soon as A receives it at its full face value, that note is fully redeemed. The great difficulty, in connection with the redemption of paper money, consists of this,— that the promise to pay implies a promise to pay coin; whereas, by right, it should be considered a promise to pay value equal to gold, or silver, whichever may be taken as the standard of value.
In commerce scarcely anybody wants gold, but everybody wants value equal to gold.
If a gold dollar will buy ten yards of cotton cloth, and a bushel of wheat will buy a gold dollar, can there be any difficulty in exchanging wheat for cotton cloth?
Let us remember that, although an absolute standard of value is impossible, a comparative standard is indispensable. We want something of value by which to compare, count, and exchange all other valuable things.
How much fog, mud, and moonshine has been waded through by the would-be teachers of political economy, just because the above truth has not been clearly seen!
Primitive people, as a rule, believe the false and do the wrong. And even when the true thing has been discovered, they are almost sure to start for it in the wrong direction. This is eminently true in regard to money.
Let me repeat,— everybody wants value. Now, if A, B, and C can exchange their goods on the base of a gold valuation, what is the necessity of the gold itself?
Gold always has a marketable value, which is well known. Now, let business men make their exchanges on the value of gold, and not on the gold itself. Then they can use their own credit as money, and redeem their promises to pay by receiving them, and thus, by mutually acting together, they can be independent of the money-lender. For, be it understood that borrowing money, as a good business transaction, is but an exchange of credits. Will the people ever get over the stupid and barbarous notion that money is something of itself?
Our paper money atthe present time (November, 1881) is at par with gold because the government receives it. If A owes B $1,000 and C holds all the gold, how can A pay his debt? Is A has made the promise to pay the gold itself, he must go to C and hive him a bonus for the gold. That is the nature of usury, or interest. But if A, being solvent, has promised to pay B $1,000 in value equal to gold, the debt can be easily cancelled.
What a monstrous barbarism is the arbitrary limitation of money!
And yet money must be limited, to be good money, until people shall find a way to redeem their notes, other than by swapping them for coin.
If A gives B a note promising to pay one dollar, and B passes that note to C, and C returns it to A, just so soon as A receives it at its full face value, that note is fully redeemed. The great difficulty, in connection with the redemption of paper money, consists of this,— that the promise to pay implies a promise to pay coin; whereas, by right, it should be considered a promise to pay value equal to gold, or silver, whichever may be taken as the standard of value.
In commerce scarcely anybody wants gold, but everybody wants value equal to gold.
If a gold dollar will buy ten yards of cotton cloth, and a bushel of wheat will buy a gold dollar, can there be any difficulty in exchanging wheat for cotton cloth?
Let us remember that, although an absolute standard of value is impossible, a comparative standard is indispensable. We want something of value by which to compare, count, and exchange all other valuable things.
How much fog, mud, and moonshine has been waded through by the would-be teachers of political economy, just because the above truth has not been clearly seen!
Primitive people, as a rule, believe the false and do the wrong. And even when the true thing has been discovered, they are almost sure to start for it in the wrong direction. This is eminently true in regard to money.
Let me repeat,— everybody wants value. Now, if A, B, and C can exchange their goods on the base of a gold valuation, what is the necessity of the gold itself?
Gold always has a marketable value, which is well known. Now, let business men make their exchanges on the value of gold, and not on the gold itself. Then they can use their own credit as money, and redeem their promises to pay by receiving them, and thus, by mutually acting together, they can be independent of the money-lender. For, be it understood that borrowing money, as a good business transaction, is but an exchange of credits. Will the people ever get over the stupid and barbarous notion that money is something of itself?
Our paper money atthe present time (November, 1881) is at par with gold because the government receives it. If A owes B $1,000 and C holds all the gold, how can A pay his debt? Is A has made the promise to pay the gold itself, he must go to C and hive him a bonus for the gold. That is the nature of usury, or interest. But if A, being solvent, has promised to pay B $1,000 in value equal to gold, the debt can be easily cancelled.
What a monstrous barbarism is the arbitrary limitation of money!
And yet money must be limited, to be good money, until people shall find a way to redeem their notes, other than by swapping them for coin.
Apex.
Capital: What It Is and What It Is Not.
Dear Mr. Tucker,— Your comments on my letter in a recent issue call for some response, as it is clear you have not yet got full possesion of the idea you characterise as “unmitigated bosh based on pure chimera.”
Let us pass over the first four and the seventh of your points, for a while, and consider the fifth and the sixth.
You say: “We quite agree with Mr. Smart that ‘accumulated thought and experience are capital,’ but we utterly fail to see why ’things that perish almost as fast as they are produced are not capital!’”
I am glad you admit that “accumulated thought and experience are capital.” You admit, then, that capital is not necessarily material. And you will admit, consequently, that thought and experience (knowledge) — being capital, and being productive — are a force; that, when combined with the simple action of brain and muscle (a purely natural force), they aid the latter, labor, in production. Good!
Now, let us suppose an untutored savage in the wilds of Africa or Australia, who knows just enough to break off a cudgel in the forest to defend himself with or to knock down an animal for food; suppose him carried into civilised lift and taught some useful art by which he can supply himself with previously undreamed-of comforts,— all his capacities developed. From being merely a natural element or organism, possessing dormant or undeveloped capacities and wants, he has now, combined with these, capital, and has become a civilized Man.
Thus far you will agree with me.
Now, let us suppose a piece of uncultivated land in the midst of a jungle, remote from civilization, possessing all kinds of capacity for animal, vegetable, and mineral production, but yielding nothing valuable; suppose a railroad taken in there, axes, ploughs,— in short, all the appliances of civilization. The land will be cleared and fenced and cultivated, and will soon be smiling with abundant crops. From being merely a natural element or organism, possessing dormant or undeveloped capacities and wants, it has now, combined with these, capital, and has become a civilized piece of land,— a farm, or a mine, or a garden.
Now, what difference is there between the two cases? In the one case we have a human savage converted into a civilized man; in the other a land savage converted into a civilized farm.
If the culture invested in the Man is capital, as you admit, why is not the culture invested in Land capital in just the same sense?
And is it not just as proper — or rather, just as improper — to call the material organism, Man, capital, as it is to call the material organism, Land, capital? or any other natural elementary substance, such as wood, stone, coal, or iron; or any animal creature?
Do you not see my meaning? That the productive property or potentiality possessed by any material substance — animate or inanimate — is invested in it, precisely as it is invested in a man’s brain, and is of precisely the same kind. It is capital in the only correct sense of the word; it is stored-up labor in a higher sense than that of the political economists; and neither the man himself, nor the creatures he has civilized, nor the land or things he has civilized are capital.
Have I made this point clear?
As my letter is already long enough for your space, and as I do not wish to confuse this primary question with the other questions included in our discussion, I will leave them for the present.
We are discussing a vital principle,— the corner-stone of Socialism.
Let us pass over the first four and the seventh of your points, for a while, and consider the fifth and the sixth.
You say: “We quite agree with Mr. Smart that ‘accumulated thought and experience are capital,’ but we utterly fail to see why ’things that perish almost as fast as they are produced are not capital!’”
I am glad you admit that “accumulated thought and experience are capital.” You admit, then, that capital is not necessarily material. And you will admit, consequently, that thought and experience (knowledge) — being capital, and being productive — are a force; that, when combined with the simple action of brain and muscle (a purely natural force), they aid the latter, labor, in production. Good!
Now, let us suppose an untutored savage in the wilds of Africa or Australia, who knows just enough to break off a cudgel in the forest to defend himself with or to knock down an animal for food; suppose him carried into civilised lift and taught some useful art by which he can supply himself with previously undreamed-of comforts,— all his capacities developed. From being merely a natural element or organism, possessing dormant or undeveloped capacities and wants, he has now, combined with these, capital, and has become a civilized Man.
Thus far you will agree with me.
Now, let us suppose a piece of uncultivated land in the midst of a jungle, remote from civilization, possessing all kinds of capacity for animal, vegetable, and mineral production, but yielding nothing valuable; suppose a railroad taken in there, axes, ploughs,— in short, all the appliances of civilization. The land will be cleared and fenced and cultivated, and will soon be smiling with abundant crops. From being merely a natural element or organism, possessing dormant or undeveloped capacities and wants, it has now, combined with these, capital, and has become a civilized piece of land,— a farm, or a mine, or a garden.
Now, what difference is there between the two cases? In the one case we have a human savage converted into a civilized man; in the other a land savage converted into a civilized farm.
If the culture invested in the Man is capital, as you admit, why is not the culture invested in Land capital in just the same sense?
And is it not just as proper — or rather, just as improper — to call the material organism, Man, capital, as it is to call the material organism, Land, capital? or any other natural elementary substance, such as wood, stone, coal, or iron; or any animal creature?
Do you not see my meaning? That the productive property or potentiality possessed by any material substance — animate or inanimate — is invested in it, precisely as it is invested in a man’s brain, and is of precisely the same kind. It is capital in the only correct sense of the word; it is stored-up labor in a higher sense than that of the political economists; and neither the man himself, nor the creatures he has civilized, nor the land or things he has civilized are capital.
Have I made this point clear?
As my letter is already long enough for your space, and as I do not wish to confuse this primary question with the other questions included in our discussion, I will leave them for the present.
We are discussing a vital principle,— the corner-stone of Socialism.
W. G. H. Smart.
[Nothing but the above letter was needed to clinch our statement that Mr. Smart’s socialism is an incoherent structure. We print it because we do not wish to be in the least unfair, but we really have not the patience to follow the writer in his absurd hypotheses and indiscriminate analogies. For instance, his statement that “the productive property or potentiality possessed by any material substance” alone is capital, when he has previously supposed no capital to be contained in “a piece of uncultivated land possessing all kinds of capacity for animal, vegetable, and mineral production;” or, his identification of “productive property or potentiality with “stored-up labor,” as if there was no such thing an a natural productive force independent of labor; or, his confusion of man with capital, as if the word capital had not been set apart, in contradistinction to labor, to denote all productive forces and aids to productive forces outside of the laborer, man, and for the express purpose of affording a convenient terminology to be used in discussing the relation of man to wealth; or, finally, his starting out to explain to us why “things that perish almost as fast as they are produced are not capital,” and then making it the conclusion of his letter that capital is stored-up labor and that “neither man himself, nor the creatures he has civilised, nor the land or things he has civilized are capital.” Upon which Mr. Smart asks us if we see his meaning. Well, we frankly confess that we do not, unless he means that men and animals and land are “things that perish almost as fast as they are produced.” But it is useless to ask you, Mr. Smart, what you mean. You probably think that you mean a great deal, but as a matter of fact you do not mean anything at all. You have not the faintest idea of the nature of capital. The A B C of political economy is unfamiliar to you. You have long been an earnest student of the industrial question; you have thoroughly acquainted yourself with many important phases of it; you are constantly saying many good and true and useful things about it; but you have never yet planted yourself upon an intelligible basis, and that is why nobody can ever understand Mr. Smart. — Editor Liberty.]
Apex or Basis?
“Apex” says that it is a barbarism to pay interest on money. That is another way of saying that a state of society in which wealth is not universalized is barbarous, since, in our present stage of evolution, those who have no capital of their own will be glad to borrow from those who have, and to pay interest for the use of the capital.
For it is really capital that is borrowed, and not money, the latter being only the means for obtaining the former, as money would be worthless if it could not be exchanged for the capital needed. We see already that as the loanable capital of a country increases the rate of interest diminishes, and when the accumulated wealth of the world becomes large enough, no one will pay interest.
But to denounce the payment of interest to-day, and (if it could be done) to forbid the man of ability, but lacking means, borrowing the capital he needs, or, in other words, using his credit, would not tend to universalize wealth and so destroy usury; but, on the other hand, it would discourage the production and accumulation of capital, since one of the principal incentives to that production is the use of capital to increase production and add to one’s wealth. It is onvious that, unless the use of capital added to the productiveness of labor, no one would wish to borrow, and no usury could be had. It should not be forgotten, in considering this question, that, in the last analysis, reducing things to their simplest, individualized form, the possessor of capital has acquired it by a willingness to work harder than his fellows and to sacrifice his love of spending all he produces that he may have the aid of capital to increase his power of production. For example, two men work side by side; one consumes all he produces, the other saves part of his product; in time the latter has saved enough to enable him to build or buy a tool, by the aid of which he accomplishes four times as much work as before, and is able to go on adding to his accumulation. The one who has not saved, seeing the advantage of the use of capital, naturally desires to obtain the same benefit for himself, but, not liking to save and wait until he can create capital, he proposes to borrow a portion of the capital of the other. By means of this borrowed capital he can quadruple his product, and is very willing to give a part of his increased product to the neighbor who has befriended him. Would he not be a mean sneak if be were not glad to do so? By the use of the borrowed capital he is not only enabled to pay for the advantage gained, but, by his greater power to produce, he can, in a short time, buy his own tools and no longer be forced to borrow.
Although our present system of business is vastly complicated, and we sometimes seem to borrow money merely, the actual transaction being kept out of sight, yet the case supposed is the real basis of all just payment of interest. I believe there will be a state of society in which money will not be necessary, but that state cannot be built up by commencing at the top. We must build from the foundation, understanding things as they are as well as knowing how they ought to be.
The question is asked,— and it is a very important one, and, simple as it is at bottom, a complex one as it stands,— what is money? It would simplify this matter very much if all would agree to call coin, or money having value as merchandise, money, and paper or representative money, currency, or notes. It is plain that the representative money is that which must be and is principally used in this country and in all commercial countries. Coin money derives its real value in exchange, and as a measure for ths exchangeable value of other products, from the fact that it costs labor to produce it, and, although government laws may foolishly try to make it pass for more than its cost value, they never succeed in doing so. No government ever has succeeded in over-riding natural law, though they may and often do obstruct the operations of Nature’s laws to the great detriment of Nature’s children.
The remarks that follow are not intended to debar “Apex” from answering his opponent in these columns in his own time and way, but simply to combat, from Liberty’s standpoint, such of the positions taken by “Basis” as seem to need refutation.
The first error into which “Basis” falls is his identification of money with capital. Representative money is not capital; it is only a title to capital. He who borrows a paper dollar from another simply borrows a title, and not at all that to which it is a title. Consequently he takes from the lender nothing which the lender wishes to use; unless, indeed, the lender desires to purchase capital with his dollar, in which case he will not lend it, or, if he does, will charge for the sacrifice of his opportunity,— a very different thing from usury, which is payment, not for the lender’s sacrifice, but for the borrower’s use; that is, not for a burden borne, but for a benefit conferred. Neither does the borrower of the dollar take from the person of whom he purchases capital with it anything which that person desires to use; for, in ordinary commerce, the seller is either a manufacturer or a dealer, who produces or buys his stock for no other purpose than to sell it. And thence this dollar goes on transferring products for which the holders thereof have no use, until it reaches its issuer and final redeemer and is cancelled, depriving, in the course of its journey, no person of any opportunity, but, on the contrary, serving the needs of all through whose hands it passes. Henco, borrowing a title to capital is a very different thing from borrowing capital itself. But under the system of organized credit contemplated by “Apex,” no capable and deserving person would borrow even a title to capital. The so-called borrower would simply so change the face of his own title as to make it recognizable by the world at large, and at no other expense than the mere cost of the alteration. That is to say, the man, having capital or good credit, who, under the system advocated by “Apex,” should go to a credit-shop — in other words, a bank — and procure a certain amount of its notes by the ordinary processes of mortgaging property or getting endorsed commercial paper discounted, would only exchange his own personal credit — known only to his immediate friends and neighbors and the bank, and therefore useless in transactions with any other parties — for the bank’s credit, known, and receivable for products delivered, throughout the state, or the nation, or, perhaps, the world. And for this convenience the bank would charge him only the labor-cost of its service in effecting the exchange of credits, instead of the ruinous rates of discount, by which, under the present system of monopoly, privileged banks tax the producers of unprivileged property out of house and home. So that “Apex” really would have no borrowing at all, except in certain individual cases not worth considering; and therefore, when “Basis,” answering “Apex,” says that “it is really capital that is borrowed, and not money,” he makes a remark for which there is no audible call.
The second error committed by “Basis” he commits in common with the economists in assuming that an increase of capital decreases the rate of interest and that nothing else can materially decrease it. The facts are just the contrary. The rate of interest may, and often does, decrease, when the amount of capital has not increased; the amount of capital may increase without decreasing the rate of interest, which may, in fact, increase at the same time; and, so far from the universalization of wealth being the sole means of abolishing interest, the abolition of interest is the sinc qua non of the universalization of wealth.
Suppose, for instance, that the banking business of a nation is conducted by a system of banks chartered and regulated by the government, those banks issuing paper money based on specie, dollar for dollar. If, now, a certain number of these banks, by combining to buy up the national legislature, should secure the exclusive privilege of issuing two paper dollars for each specie dollar in their vaults, could they not afford to, and would they not in fact, materially reduce their rate of discount? Would not tho competing banks be forced to reduce their rate in consequence? And would not this reduction lower the rate of interest throughout the nation? Undoubtedly; and yet the amount of capital in the country remains the same as before.
Suppose, further, that during the following year, in consequence of the stimulus given to business and production by this decrease in the rate of interest and also because of unusually favorable natural conditions, a great increase of wealth occurs. If, then, the banks of the nation, holding from the government a monopoly of the power to issue money, should combine to contract the volume of the currency, could they not, and would they not, raise the rate of interest thereby? Undoubtedly; and yet the amount of capital in the country is greater than it ever was before.
But suppose, on the other hand, that all these banks, chartered and regulated by the government and issuing money dollar for dollar, had finally been allowed to issue paper beyond their capital based on the credit and guaranteed capital of their customers; that their circulation, thus doubly secured, had become so popular that people preferred to pay their debts in coin, instead of bank-notes, thus causing coin to flow into the vaults of the banks and add to their reserve; that this addition had enabled them to add further to their circulation, until, by a continuation of the process, it at last amounted to eight times their original capital; that by levying a high rate of interest on this they had bled the people nigh unto death; thus then the government had stepped in and said to the banks: “When you began, you received an annual interest of six per cent., on your capital; you now roceive nearly that rate on a circulation eight times your capital based really on the people’s credit; therefore at one-eighth of the original rate your annual profit would be as great as formerly; henceforth your rate of discount must not exceed three-fourths of one per cent..” Had all this happened (and with the exception of the last condition of the hypothesis similar cases have frequently happened), what would have been the result? Proudhon shall answer for us. In the eighth letter of his immortal discussion with Bastiat on the question of interest he exhausts the whole subject of the relation of interest to capital; and “Basis” cannot do better than read the whole of it. A brief extract, however, must suffice here. He is speaking of the Bank of France, which at that time (1849) was actually in almost the same situation as that described above. Supposing, as we have just done after him, a reduction of the rate of discount to three-fourths of one per cent., he than asks, as we do, what the result would be. These are his words in answer to Bastiat, the “Basis” of that discussion:
Now, this reduction of the rate of discount to the cost of the bank’s service, and the results therefrom as above described, are precisely what would happen if the whole business of banking should be thrown open to free competition. It behooves “Basis” to examine this argument well; for, unless he can find a fatal flaw in it, he must stand convicted, in saying that “when the accumulated wealth of the world be comes large enough, no one will pay interest,” of putting the cart before the horse.
“Basis” is in error a third time in assuming that “Apex” wishes to “forbid the man of ability, but lacking means, using his credit.” It is precisely because such men are now virtually prohibited from using their credit that “Apex,” and Liberty with him, complains. This singular misconception on the part of “Basis” indicates that he does not yet understand what he is fighting.
The fourth error for which “Basis” assumes responsibility is found in his statement that “in the last analysis the possessor of capital has acquired it by a willingness to work harder than his fellows and to sacrifice his love of spending all he produces that he may have the aid of capital to increase his power of production.” A man who thoroughly means to toll the truth here reiterates one of the most devilish of the many infernal lies for which the economists have to answer. It is indeed true that the possessor of capital may, in rare cases, have acquired it by the method stated, though even then he could not be excused for making the capital so acquired a leech upon his fellow-men. But ninety-nine times in a hundred the modern possessor of any large amount of capital has acquired it, not “by a willingness to work harder than his fellows,” but by a shrewdness in getting possession of a monopoly which makes it needless for him to do any real work at all; not “by a willingness to sacrifice his love of spending all he produces,” but by a cleverness in procuring from the government a privilege by which he is able to spend in wanton luxury half of what a large number of other men produce. The chief privilege to which we refer is that of selling the people’s credit for a price.
“Basis” is guilty of several other errors which we have not space to discuss at length. He supposes that to confine the term money to coin and to call all other money currency would simplify matters, when in reality it is the insistance upon this false distinction that is the prevailing cause of mystification. If the idea of the royalty of gold and silver could be once knocked out of the people’s heads, and they could once understand that no particular kind of merchandise is created by nature for monetary purposes, they would settle this question in a trice. Again, he seems to think that Josiah Warren based his notes on corn. Nothing of the kind. Warren simply took corn as his standard, but made labor and all its products his basis. His labor notes were rarely redeemed in corn. If he had made corn his exclusive basis, there would be no distinction in principle between him and the specie men. Perhaps the central point in his monetary theory was his denial of the idea that any one product of labor can properly be made the only basis of money. To quote him in this connection at all is the height of presumption on the part of “Basis.” A charge that his system, which recognized cost as the only ground of price, ever contemplated a promise to pay anything “for value received,” he would deem the climax of insult to his memory. “Basis,” in donning the garments of Josiah Warren to defend the specie fraud, has “stolon the livery of heaven to serve the devil in.” “Basis” is wrong, too, in thinking that land is not a good basis for currency. True, unimproved land, not having properly a market value, cannot properly give value to anything that represents it; but permanent improvements on land, which should have a market value and carry with them a title to possession, are an excellent basis for currency. It is not the raw material of any product that fits it for a basis, but the labor that has been expended in shaping the material. As for the immovability of land unfitting it for a basis, it has just the opposite effect. Here “Basis” is misled by the idea that currency can be redeemed only in that on which it is based.
But this fertile subject has taken us farther than we intended to follow it. So here, for the present, we will quit its company, meanwhile handing over “Basis” to the tender mercies of “Apex,” and heartily endorsing almost all that “Basis” says at the close of his article concerning the true duty of government, as long as it shall exist, regarding the currency.
For it is really capital that is borrowed, and not money, the latter being only the means for obtaining the former, as money would be worthless if it could not be exchanged for the capital needed. We see already that as the loanable capital of a country increases the rate of interest diminishes, and when the accumulated wealth of the world becomes large enough, no one will pay interest.
But to denounce the payment of interest to-day, and (if it could be done) to forbid the man of ability, but lacking means, borrowing the capital he needs, or, in other words, using his credit, would not tend to universalize wealth and so destroy usury; but, on the other hand, it would discourage the production and accumulation of capital, since one of the principal incentives to that production is the use of capital to increase production and add to one’s wealth. It is onvious that, unless the use of capital added to the productiveness of labor, no one would wish to borrow, and no usury could be had. It should not be forgotten, in considering this question, that, in the last analysis, reducing things to their simplest, individualized form, the possessor of capital has acquired it by a willingness to work harder than his fellows and to sacrifice his love of spending all he produces that he may have the aid of capital to increase his power of production. For example, two men work side by side; one consumes all he produces, the other saves part of his product; in time the latter has saved enough to enable him to build or buy a tool, by the aid of which he accomplishes four times as much work as before, and is able to go on adding to his accumulation. The one who has not saved, seeing the advantage of the use of capital, naturally desires to obtain the same benefit for himself, but, not liking to save and wait until he can create capital, he proposes to borrow a portion of the capital of the other. By means of this borrowed capital he can quadruple his product, and is very willing to give a part of his increased product to the neighbor who has befriended him. Would he not be a mean sneak if be were not glad to do so? By the use of the borrowed capital he is not only enabled to pay for the advantage gained, but, by his greater power to produce, he can, in a short time, buy his own tools and no longer be forced to borrow.
Although our present system of business is vastly complicated, and we sometimes seem to borrow money merely, the actual transaction being kept out of sight, yet the case supposed is the real basis of all just payment of interest. I believe there will be a state of society in which money will not be necessary, but that state cannot be built up by commencing at the top. We must build from the foundation, understanding things as they are as well as knowing how they ought to be.
The question is asked,— and it is a very important one, and, simple as it is at bottom, a complex one as it stands,— what is money? It would simplify this matter very much if all would agree to call coin, or money having value as merchandise, money, and paper or representative money, currency, or notes. It is plain that the representative money is that which must be and is principally used in this country and in all commercial countries. Coin money derives its real value in exchange, and as a measure for ths exchangeable value of other products, from the fact that it costs labor to produce it, and, although government laws may foolishly try to make it pass for more than its cost value, they never succeed in doing so. No government ever has succeeded in over-riding natural law, though they may and often do obstruct the operations of Nature’s laws to the great detriment of Nature’s children.
The simplest form of representative money, or currency, is furnished by Josiah Warren’s labor note, which was substantially as follows (I quote from memory):
For value received, I promise to pay bearer, on demand, one hour’s labor, or ten pounds of corn.
Modern Times, July 4,1852.
So long as it was believed by his neighbors that the maker of such notes always had the corn on hand with which to redeem them (since their redemption in labor would rarery be practicable or desirable), they would pass current in that locality; and, in fact, such “labor notes” did pass to a limited extent at Modern Times. Interesting as that experiment was, and showing clearly as it does the principle at the basis of all good currency, it could not be extended so as to satisfy the needs of a great commercial country, or, safely, of a large neighborhood.
But a currency, to be good, must possess precisely the qualifications and qualities of that labor note, with the addition of a guaranty, universally recognisable, that the notes actually do represent solid wealth with which they will be redeemed on demand. Now, there is one thing, and only one, that government can rightfully or usefully do in the way of interference with the currency, the ebb and flow of which is governed by natural laws altogether out of the reach of state or national governments; and that is to issue all the notes used for currency on such terms that it shall be universally known truly to represent actual, movable capital (not land, which is not property in the true sense, and which cannot be carried off by any one wishing a note redeemed), pledged for its redumption. There should be no monopoly, but any and every person complying with the terms should be furnished with the national note. Of course no one who had not the requisite capital could procure these notes, and rightly so because notes made by those who have no capital would swindle the people. And, as our government has no property or capital except the necessary tools for carrying on the affairs of the nation, and as government should have no debts and no gold and silver accumulated, it is obvious that it cannot properly make a good note beyond the amount which could be redeemed in payment of taxes. And, as taxes ought to be diminished and ultimately abolished, there is no valid basis for a government note to be used as currency. Neither will Mutual Banks answer any good purpose, if the notes are based on land.
But a currency, to be good, must possess precisely the qualifications and qualities of that labor note, with the addition of a guaranty, universally recognisable, that the notes actually do represent solid wealth with which they will be redeemed on demand. Now, there is one thing, and only one, that government can rightfully or usefully do in the way of interference with the currency, the ebb and flow of which is governed by natural laws altogether out of the reach of state or national governments; and that is to issue all the notes used for currency on such terms that it shall be universally known truly to represent actual, movable capital (not land, which is not property in the true sense, and which cannot be carried off by any one wishing a note redeemed), pledged for its redumption. There should be no monopoly, but any and every person complying with the terms should be furnished with the national note. Of course no one who had not the requisite capital could procure these notes, and rightly so because notes made by those who have no capital would swindle the people. And, as our government has no property or capital except the necessary tools for carrying on the affairs of the nation, and as government should have no debts and no gold and silver accumulated, it is obvious that it cannot properly make a good note beyond the amount which could be redeemed in payment of taxes. And, as taxes ought to be diminished and ultimately abolished, there is no valid basis for a government note to be used as currency. Neither will Mutual Banks answer any good purpose, if the notes are based on land.
Basis.
The remarks that follow are not intended to debar “Apex” from answering his opponent in these columns in his own time and way, but simply to combat, from Liberty’s standpoint, such of the positions taken by “Basis” as seem to need refutation.
The first error into which “Basis” falls is his identification of money with capital. Representative money is not capital; it is only a title to capital. He who borrows a paper dollar from another simply borrows a title, and not at all that to which it is a title. Consequently he takes from the lender nothing which the lender wishes to use; unless, indeed, the lender desires to purchase capital with his dollar, in which case he will not lend it, or, if he does, will charge for the sacrifice of his opportunity,— a very different thing from usury, which is payment, not for the lender’s sacrifice, but for the borrower’s use; that is, not for a burden borne, but for a benefit conferred. Neither does the borrower of the dollar take from the person of whom he purchases capital with it anything which that person desires to use; for, in ordinary commerce, the seller is either a manufacturer or a dealer, who produces or buys his stock for no other purpose than to sell it. And thence this dollar goes on transferring products for which the holders thereof have no use, until it reaches its issuer and final redeemer and is cancelled, depriving, in the course of its journey, no person of any opportunity, but, on the contrary, serving the needs of all through whose hands it passes. Henco, borrowing a title to capital is a very different thing from borrowing capital itself. But under the system of organized credit contemplated by “Apex,” no capable and deserving person would borrow even a title to capital. The so-called borrower would simply so change the face of his own title as to make it recognizable by the world at large, and at no other expense than the mere cost of the alteration. That is to say, the man, having capital or good credit, who, under the system advocated by “Apex,” should go to a credit-shop — in other words, a bank — and procure a certain amount of its notes by the ordinary processes of mortgaging property or getting endorsed commercial paper discounted, would only exchange his own personal credit — known only to his immediate friends and neighbors and the bank, and therefore useless in transactions with any other parties — for the bank’s credit, known, and receivable for products delivered, throughout the state, or the nation, or, perhaps, the world. And for this convenience the bank would charge him only the labor-cost of its service in effecting the exchange of credits, instead of the ruinous rates of discount, by which, under the present system of monopoly, privileged banks tax the producers of unprivileged property out of house and home. So that “Apex” really would have no borrowing at all, except in certain individual cases not worth considering; and therefore, when “Basis,” answering “Apex,” says that “it is really capital that is borrowed, and not money,” he makes a remark for which there is no audible call.
The second error committed by “Basis” he commits in common with the economists in assuming that an increase of capital decreases the rate of interest and that nothing else can materially decrease it. The facts are just the contrary. The rate of interest may, and often does, decrease, when the amount of capital has not increased; the amount of capital may increase without decreasing the rate of interest, which may, in fact, increase at the same time; and, so far from the universalization of wealth being the sole means of abolishing interest, the abolition of interest is the sinc qua non of the universalization of wealth.
Suppose, for instance, that the banking business of a nation is conducted by a system of banks chartered and regulated by the government, those banks issuing paper money based on specie, dollar for dollar. If, now, a certain number of these banks, by combining to buy up the national legislature, should secure the exclusive privilege of issuing two paper dollars for each specie dollar in their vaults, could they not afford to, and would they not in fact, materially reduce their rate of discount? Would not tho competing banks be forced to reduce their rate in consequence? And would not this reduction lower the rate of interest throughout the nation? Undoubtedly; and yet the amount of capital in the country remains the same as before.
Suppose, further, that during the following year, in consequence of the stimulus given to business and production by this decrease in the rate of interest and also because of unusually favorable natural conditions, a great increase of wealth occurs. If, then, the banks of the nation, holding from the government a monopoly of the power to issue money, should combine to contract the volume of the currency, could they not, and would they not, raise the rate of interest thereby? Undoubtedly; and yet the amount of capital in the country is greater than it ever was before.
But suppose, on the other hand, that all these banks, chartered and regulated by the government and issuing money dollar for dollar, had finally been allowed to issue paper beyond their capital based on the credit and guaranteed capital of their customers; that their circulation, thus doubly secured, had become so popular that people preferred to pay their debts in coin, instead of bank-notes, thus causing coin to flow into the vaults of the banks and add to their reserve; that this addition had enabled them to add further to their circulation, until, by a continuation of the process, it at last amounted to eight times their original capital; that by levying a high rate of interest on this they had bled the people nigh unto death; thus then the government had stepped in and said to the banks: “When you began, you received an annual interest of six per cent., on your capital; you now roceive nearly that rate on a circulation eight times your capital based really on the people’s credit; therefore at one-eighth of the original rate your annual profit would be as great as formerly; henceforth your rate of discount must not exceed three-fourths of one per cent..” Had all this happened (and with the exception of the last condition of the hypothesis similar cases have frequently happened), what would have been the result? Proudhon shall answer for us. In the eighth letter of his immortal discussion with Bastiat on the question of interest he exhausts the whole subject of the relation of interest to capital; and “Basis” cannot do better than read the whole of it. A brief extract, however, must suffice here. He is speaking of the Bank of France, which at that time (1849) was actually in almost the same situation as that described above. Supposing, as we have just done after him, a reduction of the rate of discount to three-fourths of one per cent., he than asks, as we do, what the result would be. These are his words in answer to Bastiat, the “Basis” of that discussion:
The fortune and destiny of the country are to-day in the hands of the Bank of France. If it would relieve industry and commerce by a decrease of its rate of discount proportional to the increase of its reserve; in other words, if it would reduce the price of its credit to three-fourths of one per cent., which it must do in order to quit stealing,— this reduction would instantly produce, throughout the Republic and all Europe, incalculable results. They could not be enumerated in a volume: I will confine myself to the indication of a few.
If, then, the credit of the Bank of France should be loaned at three-fourths of one per cent., ordinary bankers, notaries, capitalists, and even the stockholders of the bank itself would be immediately compelled by competition to reduce their interest, discount, and dividends, to at least one per cent., including incidental expenses and brokerage. What harm, think you, would this reduction do to borrowers on personal credit, or to commerce and industry, who are forced to pay by reason of this fact alone, an annual tax of at least two thousand millions?
If financial circulation could be effected at a rate of discount representing only the cost of administration, drafting, registration, etc., the interest charged on purchases and sales on credit would fall in its turn from six per cent., to zero,— that is to say, business would then be transacted on a cash basis; there would be no more debts. Again, to how great a degree, think you, would that diminish the shameful number of suspencions, failures, and bankruptcies?
But, as in society net product is undistinguishable from raw product, so in the light of the sum total of economic facts capital is undistinguihable from product. These two terms do not, in reality, stand for two distinct things; they designate relations only. Product is capital; capital is product: there is a difference between them only in private economy; none whatever in public economy. If, then, interest, after having fallen in the case of money to three-fourths of one per cent.,— that is, to zero, inasmuch as three-fourths of one per cent. represents only the service of the bank,— should fall to zero in the case of merchandise also, by analogy of principles and facts it would soon all to zero in the case of real estate: rent would disappear — becoming one with liquidation. Do you think, sir, that that would prevent people from living in houses and cultivating land?
If, thanks to this radical reform in the machinery of circulation, labor was compelled to pay to capital only as much interest as would be a just reward for the service rendered by the capitalist, specie and real estate being deprived of their reproductive properties and valued only as products,— as things that can be consumed and replaced,— the favor with which specie and capital are now locked upon would be wholly transferred to products; each individual, instead of restricting his consumption, would strive only to increase it. Whereas, at present, thanks to the restriction laid upon consumable products by interest, the means of consumption are always very much limited, then, on the contrary, production would be insufficient: labor would then be secure in fact as well as in right.
The laboring class gaining at one stroke the five thousand millions, or thereabouts, now taken in the form of interest from the ten thousand millions which it produces, plus five thousand millions which this same interest deprives it of by destroying the demand for labor, plus five thousand millions which the parasites, cut off from a living, would then be compelled to produce, the national production would be doubled and the welfare of the laborer increased four-fold. And you, sir, whom the worship of interest does not prevent from lifting your thoughts to another world,— what say you to this improvement of affairs here below? Do you see now that it is not the multiplication of capital which decreases interest, but, on the contrary, that it is the decrease of interest which multiplies capital?
Now, this reduction of the rate of discount to the cost of the bank’s service, and the results therefrom as above described, are precisely what would happen if the whole business of banking should be thrown open to free competition. It behooves “Basis” to examine this argument well; for, unless he can find a fatal flaw in it, he must stand convicted, in saying that “when the accumulated wealth of the world be comes large enough, no one will pay interest,” of putting the cart before the horse.
“Basis” is in error a third time in assuming that “Apex” wishes to “forbid the man of ability, but lacking means, using his credit.” It is precisely because such men are now virtually prohibited from using their credit that “Apex,” and Liberty with him, complains. This singular misconception on the part of “Basis” indicates that he does not yet understand what he is fighting.
The fourth error for which “Basis” assumes responsibility is found in his statement that “in the last analysis the possessor of capital has acquired it by a willingness to work harder than his fellows and to sacrifice his love of spending all he produces that he may have the aid of capital to increase his power of production.” A man who thoroughly means to toll the truth here reiterates one of the most devilish of the many infernal lies for which the economists have to answer. It is indeed true that the possessor of capital may, in rare cases, have acquired it by the method stated, though even then he could not be excused for making the capital so acquired a leech upon his fellow-men. But ninety-nine times in a hundred the modern possessor of any large amount of capital has acquired it, not “by a willingness to work harder than his fellows,” but by a shrewdness in getting possession of a monopoly which makes it needless for him to do any real work at all; not “by a willingness to sacrifice his love of spending all he produces,” but by a cleverness in procuring from the government a privilege by which he is able to spend in wanton luxury half of what a large number of other men produce. The chief privilege to which we refer is that of selling the people’s credit for a price.
“Basis” is guilty of several other errors which we have not space to discuss at length. He supposes that to confine the term money to coin and to call all other money currency would simplify matters, when in reality it is the insistance upon this false distinction that is the prevailing cause of mystification. If the idea of the royalty of gold and silver could be once knocked out of the people’s heads, and they could once understand that no particular kind of merchandise is created by nature for monetary purposes, they would settle this question in a trice. Again, he seems to think that Josiah Warren based his notes on corn. Nothing of the kind. Warren simply took corn as his standard, but made labor and all its products his basis. His labor notes were rarely redeemed in corn. If he had made corn his exclusive basis, there would be no distinction in principle between him and the specie men. Perhaps the central point in his monetary theory was his denial of the idea that any one product of labor can properly be made the only basis of money. To quote him in this connection at all is the height of presumption on the part of “Basis.” A charge that his system, which recognized cost as the only ground of price, ever contemplated a promise to pay anything “for value received,” he would deem the climax of insult to his memory. “Basis,” in donning the garments of Josiah Warren to defend the specie fraud, has “stolon the livery of heaven to serve the devil in.” “Basis” is wrong, too, in thinking that land is not a good basis for currency. True, unimproved land, not having properly a market value, cannot properly give value to anything that represents it; but permanent improvements on land, which should have a market value and carry with them a title to possession, are an excellent basis for currency. It is not the raw material of any product that fits it for a basis, but the labor that has been expended in shaping the material. As for the immovability of land unfitting it for a basis, it has just the opposite effect. Here “Basis” is misled by the idea that currency can be redeemed only in that on which it is based.
But this fertile subject has taken us farther than we intended to follow it. So here, for the present, we will quit its company, meanwhile handing over “Basis” to the tender mercies of “Apex,” and heartily endorsing almost all that “Basis” says at the close of his article concerning the true duty of government, as long as it shall exist, regarding the currency.
6/7/17
Usury.
Paying money for the use of money is a great and barbarous wrong. It is also a stupendous absurdity. No one man can use money. The use of money involves its transfer from one to another. Therefore, as no one man can use money, it cannot be right and proper for any man to pay for the use of that which he cannot use. The people do use money; consequently, they should pay whatever the money may cost.
Money is necessarily a thing which belongs to society. This is one of the great truths of civilization which has been generally overlooked. For this whole question of the rightfulness of interest turns on the question, “What is money?” So long as the people shall continue to consider money as a thing of itself objectively,— why, there is no hope for humanity.
All wealth is the product of labor, but no labor can produce money. There can be no money until some wealth has been produced, because money is a representative of wealth.
Money is a form of credit,— credit in circulation. It is not a thing of substance. The great object of money is to exchange values. Now value is an idea, and money is used to represent, count, and exchange values. The symbol or token of money is not the money itself. Therefore, as money is not a thing of substance, and cannot wear out, it is and ever must to a great wrong and an utter absurdity to give wealth for the use of an idea.
In equity compensation implies service or labor, and as money does not cost labor, why, labor cannot, justly be demanded for its use.
But let us look at it practically. The people use money; the people furnish the money; and, if the cost of issue is paid, there can be no other expense. The great difficulty touching this whole matter is a barbarous misconception of the nature of monoy and a more barbarous disposition to monopolize power and rob the weak. For — let us ask — who pays the great tax of interest? Not those who have and handle the money; not those who use the money; but the poor, the weak, the ignorant, the dupes of the ruling class. We can illustrate this by a fact of to-day. If five or more men having one hundred thousand dolars, and no more, organise and establish a national bank, just so soon as their bank is in operation they have the use and income of one hundred and ninety thousand dollars. Now, is it not clear that, this company having got ninety thousand dollars for nothing, somebody has lost that amount? For, if one man gets a dollar that he has not earned, some other man has earned a dollar that he has not got. That is as certain as that two and two make four.
If all men could use their own credit in the form of money, there could be no such thing as interest. Yet, to put this idea into practice, there must be organization and consolidation of credit. Commercial credit, to be good, must be known to be good. A man’s credit may be good to the extent of a thousand dollars, but, that fact not being generally known, he must, as things are, exchange his credit for that which is known to be good, and pay a monopoly price for the privilege of using his own credit in the form of money.
Let us remember that no man can borrow money, as a good business transaction, under any system, unless he has the required security to make the lender whole in case he should lose the money. What a stupendous wrong is this,— that a man having credit cannot use it, but must exchange it and pay a monopoly price, which is really for the privilege of using his own credit!
And again, he cannot pay this himself, but must compel the poor man to work out this tax; the latter must pay this interest in the enhanced price of goods. I wonder if the people will always be this blind and stupid!
So long as business men, as such, and laborers shall continue to permit the few shrewd moneyed men to monopolize commercial credit,— that is, money,— just so long will it be hard times for business and labor. What we want now is the organization of credit on a just and equal plan. William B. Greene solved this whole matter and summed it up in two words: “Mutual Banking.” That is what we want.
Money is necessarily a thing which belongs to society. This is one of the great truths of civilization which has been generally overlooked. For this whole question of the rightfulness of interest turns on the question, “What is money?” So long as the people shall continue to consider money as a thing of itself objectively,— why, there is no hope for humanity.
All wealth is the product of labor, but no labor can produce money. There can be no money until some wealth has been produced, because money is a representative of wealth.
Money is a form of credit,— credit in circulation. It is not a thing of substance. The great object of money is to exchange values. Now value is an idea, and money is used to represent, count, and exchange values. The symbol or token of money is not the money itself. Therefore, as money is not a thing of substance, and cannot wear out, it is and ever must to a great wrong and an utter absurdity to give wealth for the use of an idea.
In equity compensation implies service or labor, and as money does not cost labor, why, labor cannot, justly be demanded for its use.
But let us look at it practically. The people use money; the people furnish the money; and, if the cost of issue is paid, there can be no other expense. The great difficulty touching this whole matter is a barbarous misconception of the nature of monoy and a more barbarous disposition to monopolize power and rob the weak. For — let us ask — who pays the great tax of interest? Not those who have and handle the money; not those who use the money; but the poor, the weak, the ignorant, the dupes of the ruling class. We can illustrate this by a fact of to-day. If five or more men having one hundred thousand dolars, and no more, organise and establish a national bank, just so soon as their bank is in operation they have the use and income of one hundred and ninety thousand dollars. Now, is it not clear that, this company having got ninety thousand dollars for nothing, somebody has lost that amount? For, if one man gets a dollar that he has not earned, some other man has earned a dollar that he has not got. That is as certain as that two and two make four.
If all men could use their own credit in the form of money, there could be no such thing as interest. Yet, to put this idea into practice, there must be organization and consolidation of credit. Commercial credit, to be good, must be known to be good. A man’s credit may be good to the extent of a thousand dollars, but, that fact not being generally known, he must, as things are, exchange his credit for that which is known to be good, and pay a monopoly price for the privilege of using his own credit in the form of money.
Let us remember that no man can borrow money, as a good business transaction, under any system, unless he has the required security to make the lender whole in case he should lose the money. What a stupendous wrong is this,— that a man having credit cannot use it, but must exchange it and pay a monopoly price, which is really for the privilege of using his own credit!
And again, he cannot pay this himself, but must compel the poor man to work out this tax; the latter must pay this interest in the enhanced price of goods. I wonder if the people will always be this blind and stupid!
So long as business men, as such, and laborers shall continue to permit the few shrewd moneyed men to monopolize commercial credit,— that is, money,— just so long will it be hard times for business and labor. What we want now is the organization of credit on a just and equal plan. William B. Greene solved this whole matter and summed it up in two words: “Mutual Banking.” That is what we want.
Apex.
Attention, “Apex”!
My dear Mr, Tucker,— Allow me just to say that “Apex” is in error in supposing he has answered my question. It appears by his own comment that his “Yes” means that the plough-lender is entitled to pay for the wear and tear of the plough. I asked: Is he entitled to pay for its use? I marvel that he should overlook the distinction, for I bad been careful to mark it in my first statement. When the question as I put it is answered in the affirmative, I shall be ready to answer the other, “What of it?” But I am still left to the mournful impression that my question is not answered.
Yours cordially,
J. M. L. Babcock.
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