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diff --git a/.gitattributes b/.gitattributes new file mode 100644 index 0000000..6833f05 --- /dev/null +++ b/.gitattributes @@ -0,0 +1,3 @@ +* text=auto +*.txt text +*.md text diff --git a/34187-h.zip b/34187-h.zip Binary files differnew file mode 100644 index 0000000..42eabc4 --- /dev/null +++ b/34187-h.zip diff --git a/34187-h/34187-h.htm b/34187-h/34187-h.htm new file mode 100644 index 0000000..e1bf8c6 --- /dev/null +++ b/34187-h/34187-h.htm @@ -0,0 +1,2891 @@ +<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN" + "http://www.w3.org/TR/xhtml1/DTD/xhtml1-strict.dtd"> + +<html xmlns="http://www.w3.org/1999/xhtml"> + <head> + <meta http-equiv="Content-Type" content="text/html;charset=iso-8859-1" /> + <title> + The Project Gutenberg eBook of A New Banking System, by Lysander Spooner. + </title> + <style type="text/css"> + + p { margin-top: .75em; + text-align: justify; + margin-bottom: .75em; + } + h1,h2,h3,h4,h5,h6 { + text-align: center; /* all headings centered */ + clear: both; + } + hr { width: 33%; + margin-top: 2em; + margin-bottom: 2em; + margin-left: auto; + margin-right: auto; + clear: both; + } + + table {margin-left: auto; margin-right: auto;} + + body{margin-left: 10%; + margin-right: 10%; + } + + .pagenum { /* uncomment the next line for invisible page numbers */ + /* visibility: hidden; */ + position: absolute; + left: 92%; + font-size: smaller; + text-align: right; + } /* page numbers */ + + .blockquot{margin-left: 10%; margin-right: 10%;} + + .center {text-align: center;} + .smcap {font-variant: small-caps;} + + .footnotes {border: dashed 1px;} + .footnote {margin-left: 10%; margin-right: 10%; font-size: 0.9em;} + .footnote .label {position: absolute; right: 84%; text-align: right;} + .fnanchor {vertical-align: super; font-size: .8em; text-decoration: none;} + + </style> + </head> +<body> + + +<pre> + +The Project Gutenberg EBook of A New Banking System, by Lysander Spooner + +This eBook is for the use of anyone anywhere at no cost and with +almost no restrictions whatsoever. You may copy it, give it away or +re-use it under the terms of the Project Gutenberg License included +with this eBook or online at www.gutenberg.org + + +Title: A New Banking System + The Needful Capital for Rebuilding the Burnt District + +Author: Lysander Spooner + +Release Date: November 1, 2010 [EBook #34187] + +Language: English + +Character set encoding: ISO-8859-1 + +*** START OF THIS PROJECT GUTENBERG EBOOK A NEW BANKING SYSTEM *** + + + + +Produced by Curtis Weyant and the Online Distributed +Proofreading Team at https://www.pgdp.net (This file was +produced from images generously made available by The +Internet Archive) + + + + + + +</pre> + + + + + +<h2>A<br /> +<big>NEW BANKING SYSTEM:</big><br /> +<br /> +<small>THE<br /> +NEEDFUL CAPITAL FOR REBUILDING<br /> +THE BURNT DISTRICT.</small></h2> + +<h2><span class="smcap">By</span> LYSANDER SPOONER.</h2> + +<h5>BOSTON:<br /> +SOLD BY A. WILLIAMS & CO.<br /> +135 <span class="smcap">Washington Street</span>.<br /> +1873.<br /> +</h5> + + + +<hr style="width: 65%;" /> +<h5>Entered according to Act of Congress, in the year 1873.<br /> + +<big><span class="smcap">By LYSANDER SPOONER</span>,</big><br /> + +in the office of the Librarian of Congress, at Washington.</h5> + +<h4> +Printed by<br /> +<span class="smcap">Warren Richardson</span>,<br /> +112 Washington St<br /> +</h4> + + + +<hr style="width: 65%;" /> +<p><span class='pagenum'><a name="Page_3" id="Page_3">[Pg 3]</a></span></p> +<h2>CONTENTS.</h2> + + + + + +<div class='center'> +<table border="0" cellpadding="4" cellspacing="0" summary=""> +<tr><td align='left'></td><td align='right'>PAGE</td></tr> +<tr><td align='left'><span class="smcap">Chapter I.</span>—A New Banking System,</td><td align='right'><a href="#Page_5">5</a></td></tr> +<tr><td align='left'><span class="smcap">Chapter II.</span>—Specie Payments,</td><td align='right'><a href="#Page_12">12</a></td></tr> +<tr><td align='left'><span class="smcap">Chapter III.</span>—No Inflation of Prices,</td><td align='right'><a href="#Page_21">21</a></td></tr> +<tr><td align='left'><span class="smcap">Chapter IV.</span>—Security of the System,</td><td align='right'><a href="#Page_35">35</a></td></tr> +<tr><td align='left'><span class="smcap">Chapter V.</span>—The System as a Credit System,</td><td align='right'><a href="#Page_41">41</a></td></tr> +<tr><td align='left'><span class="smcap">Chapter VI.</span>—Amount of Currency Needed,</td><td align='right'><a href="#Page_48">48</a></td></tr> +<tr><td align='left'><span class="smcap">Chapter VII.</span>—Importance of the System to Massachusetts,</td><td align='right'><a href="#Page_59">59</a></td></tr> +<tr><td align='left'><span class="smcap">Chapter VIII.</span>—The True Character of the "National" System,</td><td align='right'><a href="#Page_70">70</a></td></tr> +<tr><td align='left'><span class="smcap">Chapter IX.</span>—Amasa Walker's Opinion of the Author's System,</td><td align='right'><a href="#Page_75">75</a></td></tr> +</table></div> + + + + +<hr style="width: 65%;" /> +<p><span class='pagenum'><a name="Page_4" id="Page_4">[Pg 4]</a></span></p> + +<div class="blockquot"> +<p>The reader will understand that the ideas presented +in the following pages admit of a much more +thorough demonstration than can be given in so +small a space. Such demonstration, if it should +be necessary, the author hopes to give at a future +time.</p> + +<p> <i>Boston, March, 1873.</i></p> +</div> + + +<hr style="width: 65%;" /> +<p><span class='pagenum'><a name="Page_5" id="Page_5">[Pg 5]</a></span></p> +<h2><a name="CHAPTER_I" id="CHAPTER_I"></a>CHAPTER I.</h2> + +<h3>A NEW BANKING SYSTEM.</h3> + + +<p>Under the banking system—an outline of which is +hereafter given—the real estate of Boston alone—taken +at only three-fourths its value, as estimated by +the State valuation<a name="FNanchor_A_1" id="FNanchor_A_1"></a><a href="#Footnote_A_1" class="fnanchor">[A]</a>—is capable of furnishing three +hundred millions of dollars of loanable capital.</p> + +<p>Under the same system, the real estate of Massachusetts—taken +at only three-fourths its estimated +value<a name="FNanchor_B_2" id="FNanchor_B_2"></a><a href="#Footnote_B_2" class="fnanchor">[B]</a>—is capable of furnishing seven hundred and +fifty millions of loanable capital.</p> + +<p>The real estate of the Commonwealth, therefore, is +capable of furnishing an amount of loanable capital +more than twelve times as great as that of all the +"<i>National</i>" Banks in the State<a name="FNanchor_C_3" id="FNanchor_C_3"></a><a href="#Footnote_C_3" class="fnanchor">[C]</a>; more than twice as +great as that of all the "National" banks of the whole +United States ($353,917,470); and equal to the entire +amount ($750,000,000, or thereabouts) both of greenback +and "National" bank currency of the United +States.</p> +<p><span class='pagenum'><a name="Page_6" id="Page_6">[Pg 6]</a></span></p> +<p>It is capable of furnishing loanable capital equal to +one thousand dollars for every male and female person, +of sixteen years of age and upwards, within the Commonwealth; +or two thousand five hundred dollars for +every male adult.</p> + +<p>It would scarcely be extravagant to say that it is +capable of furnishing ample capital for every deserving +enterprise, and every deserving man and woman, within +the State; and also for all such other enterprises in +other parts of the United States, and in foreign commerce, +as Massachusetts men might desire to engage in.</p> + +<p>Unless the same system, or some equivalent one, +should be adopted in other States, the capital thus +furnished in this State, could be loaned at high interest +at the West and the South.</p> + +<p>If adopted here earlier than in other States, it would +enable the citizens of this State to act as pioneers in +the most lucrative enterprises that are to be found in +other parts of the country.</p> + +<p>All this capital is now lying dead, so far as being +loaned is concerned.</p> + +<p>All this capital can be loaned in the form of currency, +if so much can be used.</p> + +<p>All the profits of banking, under this system, would +be clear profits, inasmuch as the use of the real estate +as banking capital, would not interfere at all with its +use for other purposes.</p> + +<p>The use of this real estate as banking capital would +break up all monopolies in banking, and in all other +business depending upon bank loans. It would diffuse +credit much more widely than it has ever been diffused. +It would reduce interest to the lowest rates to which<span class='pagenum'><a name="Page_7" id="Page_7">[Pg 7]</a></span> +free competition could reduce it. It would give immense +activity and power to industrial and commercial +enterprise. It would multiply machinery, and do +far more to increase production than any other system +of credit and currency that has ever been invented. +And being furnished at low rates of interest, would +secure to producers a much larger share of the proceeds +of their labor, than they now receive.</p> + +<p>All this capital can be brought into use as fast as +the titles to real estate can be ascertained, and the +necessary papers be printed.</p> + +<p>Legally, the system (as the author claims, and is +prepared to establish) stands upon the same principle +as a patented machine; and is, therefore, already legalized +by Congress; and cannot, unless by a breach of +the public faith, any more be prohibited, <i>or taxed</i>, +either by Congress or this State, than can the use of a +patented machine.</p> + +<p>Every dollar of the currency furnished by this system +would have the same value in the market as a +dollar of gold; or so nearly the same value that the +difference would be a matter of no appreciable importance.</p> + +<p>The system would, therefore, restore specie payments +at once, by furnishing a great amount of currency, +that would be equal in value to specie.</p> + +<p>The system would not inflate prices above their true +and natural value, relatively to specie; for no possible +amount of paper currency, every dollar of which is +equal in value to specie, <i>can</i> inflate prices above their +true and natural value, relatively to specie.<span class='pagenum'><a name="Page_8" id="Page_8">[Pg 8]</a></span></p> + +<p>Whenever, if ever, the paper should not buy as much +in the market as specie, it would be returned to the +banks for redemption, and thus taken out of circulation. +So that no more could be kept in circulation +than should be necessary for the purchase and sale of +property at specie prices.</p> + +<p>The system would not tend to drive specie out of +the country; although very little of it would be needed +by the banks. It would rather tend to bring specie +into the country, because it would immensely increase +our production. We should, therefore, have much +more to sell, and much less to buy. This would always +give a balance in our favor, which would have to be +paid in specie.</p> + +<p>It is, however, a matter of no practical importance +whether the system would bring specie into the country, +or drive it out; for the volume and value of the +currency would be substantially unaffected either by +the influx or efflux of specie. Consequently industry, +trade, and prices would be undisturbed either by the +presence or absence of specie. The currency would +represent property that could not be exported; that +would always be here; that would always have a value +as fixed and well known as that of specie; that would +always be many times more abundant than specie can +ever be; and that could always be delivered (in the +absence of specie) in redemption of the currency. +These attributes of the currency would render all +financial contractions, revulsions, and disorders forever +impossible.</p> + +<p>The following is<span class='pagenum'><a name="Page_9" id="Page_9">[Pg 9]</a></span></p> + +<p class="center"><span class="smcap">An Outline of the System.</span></p> + +<p>The principle of the system is that the currency +shall represent an <i>invested</i> dollar, instead of a specie +dollar.</p> + +<p>The currency will, therefore, be redeemable by an +<i>invested</i> dollar, except when redeemed by specie, or by +being received in payment of debts due the banks.</p> + +<p>The best capital will probably be mortgages and railroads; +and these will very likely be the only capital +which it will ever be expedient to use.</p> + +<p>Inasmuch as railroads could not be used as capital, +without a modification of their present charters, mortgages +are probably the best capital that is immediately +available.</p> + +<p>Supposing mortgages to be the capital, they will be +put into joint stock, held by trustees, and divided into +shares of one hundred dollars each.</p> + +<p>This stock may be called the <span class="smcap">Productive Stock</span>, and +will be entitled to the dividends.</p> + +<p>The dividends will consist of the interest on the +mortgages, and the profits of banking.</p> + +<p>The interest on the mortgages should be so high—say +six or seven per cent—as to make the <span class="smcap">Productive +Stock</span> worth ordinarily par of specie in the market, +<i>independently of the profits of banking</i>.</p> + +<p>Another kind of stock, which may be called <i>Circulating +Stock</i>, will be created, <i>precisely equal in amount +to the</i> <span class="smcap">Productive Stock</span>, and divided into shares of <i>one +dollar each</i>.</p> + +<p>This <i>Circulating Stock</i> will be represented by certificates, +scrip, or bills, of various denominations, like<span class='pagenum'><a name="Page_10" id="Page_10">[Pg 10]</a></span> +our present bank bills—that is, <i>representing one, two, +three, five, ten, or more shares, of one dollar each</i>.</p> + +<p>These certificates, scrip, or bills of the <i>Circulating +Stock</i>, will be issued for circulation as currency, as our +bank bills are now.</p> + +<p>In law, this <i>Circulating Stock</i> will be in the nature +of a lien on the <span class="smcap">Productive Stock</span>. It will be entitled +to no dividends. Its value will consist, <i>first</i>, in its +title to be received in payment of all dues to the bank; +<i>second</i>, in its title to be redeemed, either in specie on +demand, or in specie, with interest from the time of +demand, before any dividends can be made to the +bankers; and, <i>third</i>, in its title, when not redeemed +with specie, to be redeemed (in sums of one hundred +dollars each) by a transfer of a corresponding amount +of the capital itself; that is, of the <span class="smcap">Productive Stock</span>.</p> + +<p>The holders of the <i>Circulating Stock</i> are, therefore, +sure, <i>first</i>, to be able to use it (if they have occasion +to do so) in payment of their dues to the bank; <i>second</i>, +to get, in exchange for it, either specie on demand, or +specie, with interest from the time of demand; or, +<i>third</i>, a share of the capital itself, the <span class="smcap">Productive +Stock</span>; a stock worth par of specie in the market, and +as merchantable as a share of railroad stock, or government +stock, or any other stock whatever is now.</p> + +<p>Whenever <span class="smcap">Productive Stock</span> shall have been transferred +in redemption of <i>Circulating Stock</i>, it (the +<span class="smcap">Productive Stock</span>) may be itself redeemed, or bought +back, at pleasure, by the bankers, on their paying its +face in specie, with interest (or dividends) from the time +of the transfer; and <i>must</i> be so bought back, before +any dividends can be paid to the original bankers.<span class='pagenum'><a name="Page_11" id="Page_11">[Pg 11]</a></span></p> + +<p>The fulfilment of all these obligations, on the part +of the bank, is secured by the fact that the capital and +all the resources of the bank are in the hands of trustees, +who are legally bound—before making any +dividends to the bankers—to redeem all paper in the +manner mentioned; and also to buy back all <span class="smcap">Productive +Stock</span> that shall have been transferred in redemption +of the circulation.</p> + +<p>Such are the general principles of the system. The +details are too numerous to be given here. They will +be found in the "<i>Articles of Association of a Mortgage +Stock Banking Company</i>," which the author has +drawn up and copyrighted.</p> + + + +<hr style="width: 65%;" /> +<p><span class='pagenum'><a name="Page_12" id="Page_12">[Pg 12]</a></span></p> +<h2><a name="CHAPTER_II" id="CHAPTER_II"></a>CHAPTER II.</h2> + +<h3>SPECIE PAYMENTS.</h3> + + +<p>Although the banks, under this system, make no +absolute promise to pay specie <i>on demand</i>, the system +nevertheless affords a much better <i>practical</i> guaranty +for specie payments, than the old specie paying system +(so called); and for these reasons, viz:</p> + +<p>1. The banks would be so universally solvent, and +so universally known to be solvent, that no runs would +ever be made upon them for specie, through fear of +their insolvency. They could, therefore, maintain specie +payments with much less amounts of specie, than +the old specie paying banks (so called) could do.</p> + +<p>2. As there would be no fears of the insolvency of +the banks, and as the paper would be more convenient +than specie for purposes of trade, bills would rarely be +presented for redemption—otherwise than in payment +of debts due the banks—except in those cases where +the holders desired to invest their money; and would +therefore <i>prefer</i> a transfer of <span class="smcap">Productive Stock</span>, to a +payment in specie. If they wanted specie for exportation, +they would buy it in the market (with the +bills), as they would any other commodities for export.<a name="FNanchor_D_4" id="FNanchor_D_4"></a><a href="#Footnote_D_4" class="fnanchor">[D]</a> +It would, therefore, usually be only when they +wanted an investment, and could find none so good as<span class='pagenum'><a name="Page_13" id="Page_13">[Pg 13]</a></span> +the <span class="smcap">Productive Stock</span>, that they would return their +bills for redemption. And then they would return +them, not really for the purpose of having them +redeemed with specie, but in the hope of getting a +transfer of <span class="smcap">Productive Stock</span>, and holding it awhile, +and drawing interest on it.</p> + +<p>3. The banks would probably find it for their interest, +as promoting the circulation of their bills, to pay, +at all times, such <i>small</i> amounts of specie, as the +public convenience might require.</p> + +<p>4. If there should be any suspensions of specie +payments, they would be only temporary ones, by +here and there a bank separately, and not by all the +banks simultaneously, as under the so called specie +paying system. No general public inconvenience +would therefore ever be felt from that cause.</p> + +<p>5. If the banks should rarely, or never, pay specie +<i>on demand</i>, that fact would bring no discredit upon +their bills, and be no obstacle to their circulation at +par with specie. It would be known that—unless +bad notes had been discounted—all the bills issued by +the banks, would be wanted to pay the debts due the +banks. This would ordinarily be sufficient, of itself, +to keep the bills at par with specie. It would also be +known that, if specie were not paid <i>on demand</i>, it +would either be paid afterwards, with interest from the +time of demand; or <span class="smcap">Productive Stock</span>, equal in value +to specie in the market, would be transferred in redemption +of the bills. The bills, therefore, would +never depreciate in consequence of specie not being<span class='pagenum'><a name="Page_14" id="Page_14">[Pg 14]</a></span> +paid <i>on demand</i>; nor would any contraction of the +currency ever be occasioned on that account.</p> + +<p>For the reasons now given, the system is practically +the best specie paying system that was ever invented. +That is to say, it would require less specie to work it; +and also less to keep its bills always at par with specie. +In proportion to the amount of currency it would furnish, +it would not require so much as one dollar in specie, +where the so called specie paying system would require +a hundred. It would also, by immensely increasing +our production and exports, do far more than any other +system, towards bringing specie into the country, and +preventing its exportation.</p> + +<p>If it should be charged that the system supplies no +specie for <i>exportation</i>; the answer is, that it is really +no part of the legitimate business of a bank to furnish +specie for exportation. Its legitimate business is simply +to furnish credit and currency for home industry +and trade. And it can never furnish these constantly, +and in adequate amounts, unless it can be freed from +the obligation to supply specie on demand for exportation. +Specie should, therefore, always be merely an +article of merchandise in the market, like any other; +and should have no special—or, at least, no important—connection +with the business of banking, except as +furnishing the measure of value. If a paper currency +is made payable in specie, <i>on demand</i>, very little of it +can ever be issued, or kept in circulation; and that +little will be so irregular and inconstant in amount as +to cause continual and irremediable derangements.<span class='pagenum'><a name="Page_15" id="Page_15">[Pg 15]</a></span> +But if a paper currency, instead of promising to pay +specie <i>on demand</i>, promises only an alternative redemption, +viz: specie on demand, or specie with interest +from the time of demand, or other merchantable +property of equal market value with specie—it can +then be issued to an amount equal to such property; +and yet keep its promises to the letter. It can, therefore, +furnish all the credit and currency that can be +needed; or at least many times more than the so called +specie paying system ever did, or ever can, furnish. And +then the interest, industry and trade of a nation will +never be disturbed by the exportation of specie. And +yet the standard of value will always be maintained.</p> + +<p>The difference between the system here proposed, +and the so called specie paying system—in respect to +their respective capacities for furnishing credit and currency, +and at the same time fulfilling their contracts to +the letter—is as fifty to one, at the least, in favor of +the former; probably much more than that.</p> + +<p>Thus under the system now proposed, the real estate +and railroads of the United States, at their present values, +are capable of furnishing twenty thousand millions +($20,000,000,000) of paper currency; and furnishing +it constantly, and without fluctuation, and every dollar +of it will have an equal market value with gold. The +contracts or certificates comprising it, can always be +fulfilled to the letter; that is, the capital itself, (the +<span class="smcap">Productive Stock</span>,) represented by these certificates, +can always be delivered, <i>on demand</i>, in redemption of +the certificates, if the banks should be unable to redeem +in specie.<span class='pagenum'><a name="Page_16" id="Page_16">[Pg 16]</a></span></p> + +<p>On the other hand, it would be impossible to have so +much as four hundred millions, ($400,000,000)—one +fiftieth of the amount before mentioned—of so called +specie paying paper currency; that is, a paper promising +to pay specie <i>on demand</i>; <i>and constantly able to +fulfil its obligations</i>.</p> + +<p>It is of no appreciable importance that a paper currency +should be payable <i>on demand</i> with specie. It is +sufficient, if it be payable <i>according to its terms, if only +those terms are convenient and acceptable</i>. For then +the value of the currency will be known, <i>and its contracts +will be fulfilled to the letter</i>. And when these contracts +are fulfilled to the letter, then, <i>to all practical +purposes, specie payments are maintained</i>. When, for +example, a man promises to pay wheat, either on demand, +or at a time specified, and he fulfils that contract +to the letter, <i>that, to all practical purposes, is +specie payments</i>; as much so as if the promise and payment +had been made in coin. <span class="smcap">It is, therefore, the +specific and literal fulfilment of contracts, that +constitutes specie payments; and not the particular +kind of property that is promised and paid.</span></p> + +<p>The great secret, then, of having an abundant paper +currency, and yet maintaining all the while specie +payments, consists in having the paper represent property—like +real estate, for example—that exists in +large amounts, and can always be delivered, on demand, +in redemption of the paper; and also in having +this paper issued by the persons who actually own the +property represented by it, and who can be compelled<span class='pagenum'><a name="Page_17" id="Page_17">[Pg 17]</a></span> +by law to deliver it in redemption of the paper. And +the great secret—if it be a secret—of having only a +scanty currency, and of <i>not</i> having specie payments, +consists in having the paper issued by a government +that cannot fulfil its contracts, and has no intention of +fulfilling them; and by banks that are not even required +to fulfil them.</p> + +<p>It is somewhat remarkable that after ten years experiment, +we have not yet learned these apparently +self-evident truths.</p> + +<p>The palpable fact is that the advocates of the present +"National" currency system,—that is, the stockholders +in the present "National" banks,—<i>do not +wish for specie payments</i>. They wish only to maintain, +in their own hands, a monopoly of banking, and, as far +as possible also, a monopoly of all business depending +upon bank loans. They wish, therefore, to keep the +volume of the currency down to its present amount. +As an excuse for this, they profess a great desire for +specie payments; and at the same time practice the +imposture of declaring that specie payments will be +impossible, if the amount of the currency be increased.</p> + +<p>But all this is sheer falsehood and fraud. It is, of +course, impossible to have specie payments, so long as +the only currency issued is issued by a government +that has nothing to redeem with, and has no intention +of redeeming; and by banks that are not even required +to redeem. But there is no obstacle to our having +twenty times as much currency as we now have, and +yet having specie payments—or the literal fulfilment<span class='pagenum'><a name="Page_18" id="Page_18">[Pg 18]</a></span> +of contracts—if we will but suffer the business of +banking to go into the hands of those who have property +with which to redeem, and can be compelled by +law to redeem.</p> + +<p>It is with government paper, and bank paper, as it is +with the paper of private persons; that is, it is worth +just what can be delivered in redemption of it, and no +more. We all understand that the notes of the Astors, +and Stewarts, and Vanderbilts, though issued by millions, +and tens of millions, are really worth their nominal +values. And why? Solely because the makers of +them have the property with which to redeem them in +full, and can be made to redeem them in full. We also +all understand that the notes of Sam Jones, and Jim +Smith, and Bill Nokes, though issued for only five dollars, +are not worth two cents on the dollar. And why? +Solely because they have nothing to pay with; and +cannot be made to pay.</p> + +<p>Suppose, now, that these notes of Sam Jones, and +Jim Smith, and Bill Nokes, for five dollars, were the +only currency allowed by law; and that they were +worth in the market but two cents on the dollar. And +suppose that the few holders of these notes, wishing to +make the most of them, at the expense of the rights +of everybody else, should keep up a constant howl for +specie payments; and should protest against any issue +of the notes of the Astors, the Stewarts, and the Vanderbilts, +upon the ground that such issue would inflate +the currency, and postpone specie payments! What +would we think of men capable of uttering such ab<span class='pagenum'><a name="Page_19" id="Page_19">[Pg 19]</a></span>surdities? +Would we in charity to their weakness, call +them idiots? or would we in justice to their villainy, +denounce them as impostors and cheats of the most +transcendent and amazing impudence? And what +would we think of the wits of forty millions of people, +who could be duped by such preposterous falsehoods?</p> + +<p>And yet this is scarcely an exaggerated picture of +the fraud that has been practiced upon the people for +the last ten years. A few men have secured to themselves +the monopoly of a few irredeemable notes; and +not wishing to have any competition, either in the +business of banking, or in any business depending +upon bank loans, they cry out for specie payments; +and declare that no <i>solvent</i> or <i>redeemable</i> notes must +be put into circulation, in competition with their +<i>insolvent</i> and <i>irredeemable</i> ones, lest the currency be +inflated, and specie payments be postponed!</p> + +<p>And this imposture is likely to be palmed off upon +the people in the future, as it has been in the past, if +they are such dunces as to permit it to be done.</p> + +<p>It is perfectly evident, then, that specie payments—or +the literal fulfilment of contracts—does not depend +at all upon the amount of paper in circulation as +currency; but solely upon the fact whether, on the one +hand, it be issued by those who have property with +which to redeem it, and can be made to redeem it; or +whether, on the other hand, it be issued by those who +cannot redeem it, and cannot be made to redeem it.</p> + +<p>When the people shall understand these simple, manifest +truths, they will soon put an end to the monopoly,<span class='pagenum'><a name="Page_20" id="Page_20">[Pg 20]</a></span> +extortion, fraud, and tyranny of the existing "National" +system.</p> + +<p>The "National" system, so called, is, in reality, no +national system at all; except in the mere facts that it +is called the national system, and was established by +the national government. It is, in truth, only a private +system; a mere privilege conferred upon a few, to +enable them to control prices, property, and labor; and +thus to swindle, plunder, and oppress all the rest of the +people.</p> + + + +<hr style="width: 65%;" /> +<p><span class='pagenum'><a name="Page_21" id="Page_21">[Pg 21]</a></span></p> +<h2><a name="CHAPTER_III" id="CHAPTER_III"></a>CHAPTER III.</h2> + +<h3>NO INFLATION OF PRICES.</h3> + + +<h4><span class="smcap">Section</span> 1.</h4> + +<p>In reality there is no such thing as an inflation of +prices, relatively to gold. There is such a thing as a +depreciated paper currency. That is to say, there is +such a thing as a paper currency, that is called by the +same names as gold—to wit, money, dollars, &c.—but +that cannot be redeemed in full; and therefore has +not the same value as gold. Such a currency does not +circulate at its nominal, but only at its real, value. +And when such a currency is in circulation, and prices +are measured by it, instead of gold, they are said to +be inflated, relatively to gold. But, in reality, the +prices of property are not thereby inflated at all relatively +to gold. It is only the measuring of prices by a +currency, that is called by the same names as gold, but +that is really inferior in value to gold, that causes the +<i>apparent</i>, not <i>real</i>, inflation of prices, relatively to +gold.</p> + +<p>To measure prices by a currency that is called by +the same names as gold, but that is really inferior in +value to gold, and then—because those prices are +nominally higher than gold prices—to say that they +are inflated, relatively to gold, is a perfect absurdity.<span class='pagenum'><a name="Page_22" id="Page_22">[Pg 22]</a></span></p> + +<p>If we were to call a foot measure a yard, and were +then to say that all cloth measured by it became thereby +stretched to three times its length, relatively to a +true yard-stick, we should simply make ourselves ridiculous. +We should not thereby prove that the foot +measure had really stretched the cloth, but only that it +had taxed our brains beyond their capacity.</p> + +<p>It is only irredeemable paper—irredeemable in +whole or in part,—that ever <i>appears</i> to inflate prices, +relatively to gold. But that it really causes no inflation +of prices, relatively to gold, is proved by the fact +that it no more inflates the prices of other property, +than it does the price of gold itself. Thus we say that +irredeemable paper, that is worth but fifty cents on the +dollar, inflates the prices of commodities in general to +twice their real value. By this we mean, that they are +inflated to twice their value relatively to gold. And +why do we say this? Solely because it takes twice as +many of these irredeemable paper dollars to buy any +commodity,—a barrel of flour for example,—as it +would if the paper were equal in value to gold. But it +also takes twice as many of these irredeemable paper +dollars to buy gold itself, as it would if the paper were +equal in value to gold. There is, therefore, just as +much reason for saying that the paper inflates the +price of gold, as there is for saying that it inflates the +price of flour. It inflates neither. It is, itself, worth +but fifty cents on the dollar; and it, therefore, takes +twice as much of it to buy either flour or gold, as it +would if the paper were of equal value with gold.<span class='pagenum'><a name="Page_23" id="Page_23">[Pg 23]</a></span></p> + +<p>The value of the coins—in any nation that is open +to free commerce with the rest of the world—is fixed +by their value in the markets of the world; and can +neither be reduced below that value, in that nation, by +any possible amount of paper currency, nor raised +above that value, by the entire disuse of a paper currency. +Any increase of the currency, therefore, by +means of paper representing other property than the +coins—but having an equal value with the coins—is +an absolute <i>bona fide</i> increase of the currency to that +extent; and not a mere depreciation of it, as so many +are in the habit of asserting.</p> + +<p>Practically and commercially speaking, a dollar is +not necessarily a specific thing, made of silver, or gold, +or any other single metal, or substance. <i>It is only +such a quantum of market value as exists in a given +piece of silver or gold.</i> And it is the same quantum +of value, whether it exist in gold, silver, houses, lands, +cattle, horses, wool, cotton, wheat, iron, coal, or any +other commodity that men desire for use, and buy and +sell in the market.</p> + +<p>Every dollar's worth of vendible property in the +world is equal in value to a dollar in gold. And if it +were possible that every dollar's worth of such property, +in the world, could be represented, in the market, +by a contract on paper, promising to deliver it on demand; +and if every dollar's worth could be delivered +on demand, in redemption of the paper that represented +it, the world could then have an amount of currency +equal to the entire property of the world. And yet +clearly every dollar of paper would be equal in value<span class='pagenum'><a name="Page_24" id="Page_24">[Pg 24]</a></span> +to a dollar of gold; specie payments—or the literal +fulfilment of contracts—could forever be maintained; +and yet there could be no inflation of prices, relatively +to gold. Such a currency would no more inflate the +price of one thing, than of another. It would as much +inflate the price of gold, as of any thing else. Gold +would stand at its true and natural value as a metal; +and all other things would also stand at their true and +natural values, for their respective uses.</p> + +<p>On this principle, if every dollar's worth of vendible +property in the United States could be represented by +a paper currency; and if the property could all be delivered +on demand, in redemption of the paper, such a +currency would not inflate the prices of property at all, +relatively to gold. Gold would still stand at its true +and natural value as a metal, or at its value in the +markets of the world. And all the property represented +by the paper, would simply be measured by the +gold, and would stand at its true and natural value, +relatively to the gold.</p> + +<p>We could then have some thirty thousand millions +($30,000,000,) of paper currency,—taking our property +at its present valuation. And yet every dollar of +it would be equal to a dollar of gold; and there could +evidently be no inflation of prices, relatively to gold. +No more of the currency could be kept in circulation, +than should be necessary or convenient for the purchase +and sale of property at specie prices.</p> + +<p>It is probably not practicable to represent the entire +property of the country by such contracts on paper as<span class='pagenum'><a name="Page_25" id="Page_25">[Pg 25]</a></span> +would be convenient and acceptable as a currency. +This is especially true of the <i>personal</i> property; +although large portions even of this are being constantly +represented by such contracts as bank notes, +private promissory notes, checks, drafts, and bills of +exchange; all of which are in the nature of currency; +that is, they serve for the time as a substitute for specie; +although some of them do not acquire any extensive, +or even general, circulation.</p> + +<p>But that it is perfectly practicable to represent +nearly all the <i>real estate</i> of the country—including +the railroads—by such contracts on paper as will be +perfectly convenient and acceptable as a currency; and +that every dollar of it can be kept always at par with +specie throughout the entire country—that all this is +perfectly practicable, the author offers the system +already presented in proof.</p> + + +<h4><span class="smcap">Section</span> 2.</h4> + +<p>To sustain their theory, that an abundant paper +currency—though equal in value to gold—inflates +prices, relatively to gold, its advocates assert that, <i>for +the time being</i>, the paper depreciates the gold itself +below its true value; or at least below that value +which it had before the paper was introduced. But +this is an impossibility; for in a country open to free +commerce with the rest of the world, gold must always +have the same value that it has in the markets of the +world; neither more, nor less. No possible amount of<span class='pagenum'><a name="Page_26" id="Page_26">[Pg 26]</a></span> +paper can reduce it below that value; as has been +abundantly demonstrated in this country for the last +ten years. Neither can any possible amount of paper +currency reduce gold below its only true and natural +value, viz.: its value as a metal, for uses in the arts. +The paper cannot reduce the gold below this value, +because the paper does not come at all in competition +with it for those uses. We cannot make a watch, a +spoon, or a necklace, out of the paper; and therefore +the paper cannot compete with the gold for these uses.</p> + +<p>That gold and silver now have, and can be made to +have, no higher value, as a currency, than they have +as metals for uses in the arts, is proved by the fact +that doubtless not more than one tenth, and very likely +not more than a twentieth, of all the gold and silver in +the world (out of the mines), is in circulation as currency. +In Asia, where these metals have been accumulating +from time immemorial, and whither all the +gold and silver of Europe and America—except what +is caught up, and converted into plate, jewelry, &c.—is +now going, and has been going for the last two +thousand years, very little is in circulation as money. +For the common traffic of the people, coins made of +coarser metals, shells, and other things of little value, +are the only currency. It is only for the larger commercial +transactions, that gold and silver are used at +all as a currency. The great bulk of these metals are +used for plate, jewelry, for embellishing temples and +palaces. Large amounts are also hoarded.</p> + +<p>But that gold and silver coins now stand, and that +they can be made to stand, as currency, only at their<span class='pagenum'><a name="Page_27" id="Page_27">[Pg 27]</a></span> +true and natural values as metals, for uses in the arts; +and that neither the use, nor disuse, of any possible +amount of paper currency, in any one country—the +United States, for example—can sensibly affect their +values in that country, or raise them above, or reduce +them below, their values in the markets of the world, +the author hopes to demonstrate more fully at a future +time, if it should be necessary to do so.</p> + + +<h4><span class="smcap">Section</span> 3.</h4> + +<p>Another argument—or rather assertion—of those +who say that any increase of the currency, by means +of paper—though the paper be equal in value to +gold—depreciates the value of the gold, or inflates +prices relatively to gold, is this: They assert that, +where no other circumstances intervene to affect the +prices of particular commodities, such increase of the +currency raises the prices of <i>all</i> kinds of property—relatively +to gold—in a degree precisely corresponding +with the increase of the currency.</p> + +<p>This is the universal assertion of those who oppose a +<i>solvent</i> paper currency; or a paper currency that is +equal in value to gold.</p> + +<p>But the assertion itself is wholly <i>untrue</i>. It is +wholly <i>untrue</i> that an abundant paper currency—that +is equal in value to gold—raises the prices of <i>all</i> commodities—relatively +to gold—in a proportion corresponding +to the increase of the currency. <i>Instead of +doing so, it causes a rise only in agricultural commodities, +and real estate; while it causes a great fall in the +prices of manufactures generally.</i><span class='pagenum'><a name="Page_28" id="Page_28">[Pg 28]</a></span></p> + +<p>Thus the increased currency produces <i>a directly +opposite effect</i> upon the prices of agricultural commodities +and real estate, on the one hand, and upon manufactures, +on the other.</p> + +<p>The reasons are these:</p> + +<p>Agriculture requires but very few exchanges, and +can, therefore, be carried on with very little money. +Manufactures, on the other hand, require a great many +exchanges, and can, therefore, be carried on (except in +a very feeble way), only by the aid of a great deal of +money.</p> + +<p>The consequence is, that the people of all those +nations, that have but little money, are engaged mostly +in agriculture. Very few of them are manufacturers. +Being mostly engaged in agriculture, each one producing +the same commodities with nearly all the others; +and each one producing all he wants for his own consumption, +there is no market, or very little market, for +agricultural commodities; and such commodities, consequently, +bear only a very small price.</p> + +<p>Manufactured commodities, on the other hand, are +very scarce and dear, for the sole reason that so few +persons are engaged in producing them.</p> + +<p>But let there be an increase of currency, and laborers +at once leave agriculture, and become manufacturers.</p> + +<p>As manufactured commodities usually bring much +higher prices than agricultural, in proportion to the +labor it costs to produce them, men usually leave agriculture, +and go into manufacturing, to the full extent +the increased currency will allow.<span class='pagenum'><a name="Page_29" id="Page_29">[Pg 29]</a></span></p> + +<p>The consequence is that, under an abundant currency, +manufactures become various, abundant, and +cheap; where before they were scarce and dear.</p> + +<p>But while, on the one hand, manufactures are thus +becoming various, abundant, and cheap, agricultural +commodities, on the other hand, are rising: and why? +Not because the currency is depreciated, but simply +because so many persons, who before—under a scanty +currency—were engaged in agriculture, and produced +all the agricultural commodities they needed, and perhaps +more than they needed, for their own consumption, +having now left agriculture, and become manufacturers, +have become purchasers and consumers, instead +of producers, of agricultural commodities.</p> + +<p>Here the same cause—abundant currency—that +has occasioned a <i>rise</i> in the prices of agricultural commodities, +has produced a <i>directly opposite effect</i> upon +manufactures. It has made the latter various, abundant, +and cheap; where before they were scarce and +dear.</p> + +<p>On the other hand, when the currency contracts, +manufacturing industry is in a great degree stopped; +and the persons engaged in it are driven to agriculture +as their only means of sustaining life. The consequence +is, that manufactured commodities become +scarce and dear, from non-production. At the same +time, agricultural commodities become superabundant +and cheap, from over-production and want of a market.</p> + +<p>Thus an abundant currency, and a scanty currency, +produce directly opposite effects upon the prices of<span class='pagenum'><a name="Page_30" id="Page_30">[Pg 30]</a></span> +agricultural commodities, on the one hand, and manufactures, +on the other.</p> + +<p>The <i>abundant</i> currency makes manufactures various, +abundant, and cheap, from increased production; while +it raises the prices of agricultural commodities, by +withdrawing laborers from the production of them, and +also by creating a body of purchasers and consumers, +to wit, the manufacturers.</p> + +<p>On the other hand, a <i>scanty</i> currency drives men +from manufactures into agriculture, and thus causes +manufactures to become scarce and dear, from non-production; +and, at the same time, causes agricultural +commodities to fall in price, from over-production, and +want of a market.</p> + +<p>But whether, on the one hand, agricultural commodities +are rising, and manufactured commodities are falling, +under an abundant currency; or whether, on the +other hand, manufactured commodities are rising, and +agricultural commodities are falling, under a scanty +currency, the value of the currency itself, dollar for +dollar, remains the same in both cases.</p> + +<p>The value of the currency, in either of these cases; +is fixed, not at all by the amount in circulation, but by +its value relatively to gold. And the value of gold, in +any particular country, is fixed by its value as a metal, +and its value in the markets of the world; and not at +all by any greater or less quantity of paper that may +be in circulation in that country.</p> +<p><span class='pagenum'><a name="Page_31" id="Page_31">[Pg 31]</a></span></p> + +<h4><span class="smcap">Section</span> 4.</h4> + +<p>But it is not alone agricultural <i>products</i> that rise in +price under an abundant currency. Real estate also, +of all kinds—agricultural, manufacturing, and commercial—rises +under an abundant currency, and falls +under a scanty currency. The reasons are these:</p> + +<p><i>Agricultural</i> real estate rises under an abundant currency, +because agricultural products rise under such a +currency, as already explained. <i>Manufacturing</i> real +estate rises under an abundant currency, simply because—money +being the great instrumentality of manufacturing +industry—that industry is active and profitable +under an abundant currency. <i>Commercial</i> real estate +rises under an abundant currency, because, under such +a currency, commerce, the exchange and distribution +of agricultural and manufactured commodities, is active +and profitable. <i>Railroads</i>, also, rise under an abundant +currency, because, under such a currency, the +transportation of freight and passengers is increased.</p> + +<p>On the other hand, all kinds of real estate fall in +price under a scanty currency, for these reasons, to wit: +Agricultural real estate falls, because, manufactures +having been in a great measure stopped, and the manufacturers +driven into agriculture, there is little market +for agricultural products, and those products bring only +a small price. Manufacturing real estate falls, because, +manufacturing industry having become impossible for +lack of money, manufacturing real estate is lying dead, +or unproductive. Commercial real estate falls, because<span class='pagenum'><a name="Page_32" id="Page_32">[Pg 32]</a></span> +commerce, the exchange and distribution of agricultural +and manufactured commodities, has ceased. Railroads +fall in price, because, owing to the suspension of manufactures +and commerce, there is little transportation of +either freight or passengers.</p> + +<p>Thus it will be seen that an abundant currency +creates a great rise in agricultural products, and in all +kinds of real estate—agricultural, manufacturing, and +commercial, (including railroads); and, at the same +time, causes manufactured commodities to become +various, abundant, and cheap. While, on the other +hand, a scanty currency causes agricultural commodities, +and all kinds of real estate, to fall in price; and, +at the same time, makes manufactured commodities +scarce and dear.</p> + +<p>It is a particularly noticeable fact, that those who +claim that an abundant paper currency inflates the +prices of <i>all</i> commodities, relatively to gold, never find +it convenient to speak of the variety, abundance, and +cheapness of manufactures, that exist under an abundant +currency; but only of the high prices of agricultural +commodities, and real estate.</p> + +<p>The whole subject of prices—a subject that is very +little understood, and that has been forever misrepresented, +in order to justify restraints upon the currency, +and keep it in a few hands—deserves a more extensive +discussion; but the special purposes of this pamphlet +do not admit of it here. But enough has probably +now been said, to show that the great changes that +take place in prices, under an abundant currency, on<span class='pagenum'><a name="Page_33" id="Page_33">[Pg 33]</a></span> +the one hand, and a scanty currency, on the other, are +not occasioned at all by any change in the value of the +currency itself—dollar for dollar—provided the currency +be equal in value to coin.</p> + +<p>Enough, also, it is hoped, has been said, to show to +all holders of either agricultural, manufacturing, or +commercial real estate (including railroads), that the +greater or less value of their property depends almost +wholly upon the abundance or scarcity of currency; +and that, inasmuch as, under the system proposed, +they have the power, in their own hands, of creating +probably all the currency that can possibly be used in +manufactures and commerce, they have no one but +themselves to blame, if they suffer the value of their +property to be destroyed by any such narrow and +tyrannical systems of currency and credit as those that +now prevail, or those that have always heretofore +prevailed.</p> + +<p>By using their real estate as banking capital, they +can not only get an income from it, in the shape of +interest on money, but by supplying capital to mechanics +and merchants, they create a large class who will +pay high prices for agricultural products, and high +prices and rents for manufacturing and commercial +real estate; and who will also supply them, in return, +with manufactured commodities of the greatest variety, +abundance, and cheapness.</p> + +<p>It is, therefore, mere suicide for the holders of real +estate, who have the power of supplying an indefinite +amount of capital for mechanics and merchants—and<span class='pagenum'><a name="Page_34" id="Page_34">[Pg 34]</a></span> +who can make themselves and everybody else rich by +supplying it—to suffer that power to be usurped by +any such small body of men as those who now monopolize +it, through mere favoritism, corruption, and +tyranny, on the part of the government, and not +because they have any claim to it.</p> + + + +<hr style="width: 65%;" /> +<p><span class='pagenum'><a name="Page_35" id="Page_35">[Pg 35]</a></span></p> +<h2><a name="CHAPTER_IV" id="CHAPTER_IV"></a>CHAPTER IV.</h2> + +<h3>SECURITY OF THE SYSTEM.</h3> + + +<p>Supposing the property mortgaged to be ample, the +system, as a system, is absolutely secure. The currency +would be absolutely incapable of insolvency; +for there could never be a dollar of the currency in circulation, +without a dollar of capital (Productive Stock) +in bank, which <i>must</i> be transferred in redemption of +it, unless redemption be made in specie.</p> + +<p>The capital <i>alone</i>, be it observed—independently of +the notes discounted—must always be sufficient to +redeem the entire circulation; for the circulation can +never exceed the capital (Productive Stock). But the +notes discounted are also holden by the trustees, and +the proceeds of them must be applied to the redemption +of the circulation. Supposing, therefore, the capital +to be sufficient, and the notes discounted to be +solvent, the redemption of the circulation is doubly +secured.</p> + +<p>What guarantee, then, have the public, for the sufficiency +of the mortgages? They have these, viz.:</p> + +<p>1. The mortgages, composing the capital of a bank, +will be matters of public record, and everybody, <i>in the +neighborhood</i>, will have the means of judging for himself +of the sufficiency of the property holden. If the<span class='pagenum'><a name="Page_36" id="Page_36">[Pg 36]</a></span> +property should be insufficient, the bank would be discredited +at once; for the abundance of solvent currency +would be so great, that no one would have +any inducement to take that which was insolvent or +doubtful.</p> + +<p>2. By the Articles of Association, all the mortgages +that make up the capital of a bank, are made mutually +responsible for each other; because, if any one mortgage +proves insufficient, no dividend can afterwards be +paid to any of the bankers (mortgagors), until that +deficiency shall have been made good by the company. +The effect of this provision will be, to make all the +founders of a bank look carefully to the sufficiency of +each other's mortgages; because no man will be willing +to put in a good mortgage of his own, on equal +terms with a bad mortgage of another man's, when he +knows that his own mortgage will have to contribute +to making good any deficiency of the other. The +result will be, that the mortgages, that go to make up +the capital of any one bank, <i>will be either all good, or +all bad</i>. If they are <i>all good</i>, the solvency of the +bank will be apparent to all <i>in the vicinity</i>; and the +credit of the bank will at once be established <i>at home</i>. +If the mortgages are <i>all bad</i>, that fact, also, will be +apparent to everybody <i>in the vicinity</i>, and the bank is +at once discredited <i>at home</i>.</p> + +<p>From the foregoing considerations, it is evident that +nothing is easier than for a <i>good</i> bank to establish its +credit, <i>at home</i>; and that nothing is more certain than +that a <i>bad</i> bank would be discredited, <i>at home</i>, from +the outset, and could get no circulation at all.<span class='pagenum'><a name="Page_37" id="Page_37">[Pg 37]</a></span></p> + +<p>It is also evident that a bank, that has no credit at +home, could get none abroad. There is, therefore, no +danger of the public being swindled by bad banks.</p> + +<p>A bank that is well founded, and that has established +its credit at home, has so many ways of establishing +its credit abroad, that there is no need that +they be all specified here. The mode that seems most +likely to be adopted, is the following, viz.:</p> + +<p>When the capital shall consist of mortgages, it will +be very easy for all the banks, in any one State, to +make their solvency known <i>to each other</i>. There +would be so many banks, that some <i>system</i> would +naturally be adopted for this purpose.</p> + +<p>Perhaps this system would be, that a standing committee, +appointed by the banks, would be established +in each State, to whom each bank in the State would +be required to produce satisfactory evidence of its solvency, +before its bills should be received by the other +banks of the State.</p> + +<p>When the banks, or any considerable number of +the banks, of any particular State—Massachusetts, +for instance,—shall have made themselves so far +acquainted with each other's solvency, as to be ready +to receive each other's bills, they will be ready to +make a still further arrangement for their mutual benefit, +viz: To unite in establishing one general agency in +Boston, another in New York, and others in Philadelphia, +Baltimore, Cincinnati, Chicago, St. Louis, New +Orleans, San Francisco, &c., &c., where the bills of all +these Massachusetts banks would be redeemed, either<span class='pagenum'><a name="Page_38" id="Page_38">[Pg 38]</a></span> +from a common fund contributed for the purpose, or in +such other way as might be found best. And thus the +bills of all the Massachusetts banks would be placed at +par at all the great commercial points.</p> + +<p>Each bank, belonging to the association, might print +on the back of its bills, "<i>Redeemable at the Massachusetts +Agencies in Boston, New York, Philadelphia, &c.</i>"</p> + +<p>In this way, all the banks of each State might unite +to establish a joint agency in every large city, throughout +the country, for the redemption of all their bills. +In doing so, they would not only certify, but make +themselves responsible for, the solvency of each other's +bills.</p> + +<p>The banks might safely make <i>permanent</i> arrangements +of this kind with each other; because the <i>permanent</i> +solvency of all the banks might be relied on.</p> + +<p>The permanent solvency of all the banks might be +relied on, because, under this system, a bank (whose +capital consists of mortgages), once solvent, is necessarily +forever solvent, unless in contingencies so +utterly improbable as not to need to be taken into +account. In fact, in the ordinary course of things, +every bank would be growing more and more solvent; +because, in the ordinary course of things, the mortgaged +property would be constantly rising in value, as +the wealth and population of the country should +increase. The exceptions to this rule would be so rare +as to be unworthy of notice.</p> + +<p>There is, therefore, no difficulty in putting the currency, +furnished by each State, at par throughout the +United States.<span class='pagenum'><a name="Page_39" id="Page_39">[Pg 39]</a></span></p> + +<p>At the general agencies, in the great cities, the +redemption would, doubtless, <i>so far as necessary</i>, be +made in specie, <i>on demand</i>; because, at such points, +especially in cities on the sea-board, there would +always be an abundance of specie in the market as +merchandise; and it would, therefore, be both for the +convenience and interest of the banks to redeem in +specie, on demand, rather than transfer a portion of +their capital, and then pay interest on that capital +until it should be redeemed, or bought back, with +specie.</p> + +<p>Often, however, and very likely even in the great +majority of cases, a man from one State—as California, +for example,—presenting Massachusetts bills for +redemption at a Massachusetts agency—either in +Boston, New York, or elsewhere—would prefer to +have them redeemed with bills from his own State, +California, rather than with specie.</p> + +<p>If the system were adopted throughout the United +States, the banks of each State would be likely to +have agencies of this kind in all the great cities. Each +of these agencies would exchange the bills of every +other State for the bills of its own State; and thus the +bills of each State would find their way home, without +any demand for their redemption in specie having ever +been made.</p> + +<p>Where railroads were used as capital, all the banks +in the United States could form one association, of the +kind just mentioned, to establish agencies at all the +great commercial points, for the redemption of their +bills.<span class='pagenum'><a name="Page_40" id="Page_40">[Pg 40]</a></span></p> + +<p>Of course each railroad would receive the bills of all +other roads, for fare and freight.</p> + +<p>Thus all railroad currency, under this system, would +be put at par throughout the United States.</p> + + +<hr style="width: 65%;" /> +<p><span class='pagenum'><a name="Page_41" id="Page_41">[Pg 41]</a></span></p> +<h2><a name="CHAPTER_V" id="CHAPTER_V"></a>CHAPTER V.</h2> + +<h3>THE SYSTEM AS A CREDIT SYSTEM.</h3> + + +<h4><span class="smcap">Section</span> 1.</h4> + +<p>Perhaps the merits of the system, as a credit system, +cannot be better illustrated than by comparing +the amount of loanable capital it is capable of supplying, +with the amount which the present "National" +banks (so called) are capable of supplying.</p> + +<p>If we thus compare the two systems, we shall find +that the former is capable of supplying more than fifty +times as much credit as the latter.</p> + +<p>Thus the entire circulation authorized by all the +"National" banks,<a name="FNanchor_E_5" id="FNanchor_E_5"></a><a href="#Footnote_E_5" class="fnanchor">[E]</a> is but three hundred and fifty-four +millions of dollars ($354,000,000).</p> + +<p>But the real estate and railroads of the country are +probably worth twenty thousand millions of dollars +($20,000,000,000). This latter sum is fifty-six times +greater than the former; and is all capable of being +loaned in the form of currency.</p> + +<p>Calling the population of the country forty millions +(40,000,000), the "National" system is capable of +supplying not quite <i>nine</i> dollars ($9) of loanable capital<span class='pagenum'><a name="Page_42" id="Page_42">[Pg 42]</a></span> +to each individual of the whole population. The +system proposed is capable of supplying five hundred +dollars ($500) of loanable capital to each individual +of the whole population.</p> + +<p>Supposing one half the population (male and female) +to be sixteen years of age and upwards, and to be +capable of producing wealth, and to need capital for +their industry, the "National" system would furnish +not quite eighteen dollars ($18) for each one of them, +on an average. The other system is capable of furnishing +one thousand dollars ($1,000) for each one of them, +on an average.</p> + +<p>Supposing the adults (both male and female) of the +country to be sixteen millions (16,000,000), the "National" +system is capable of furnishing only twenty-two +dollars and twelve and a half cents ($22.12½) to +each one of these persons, on an average. The system +proposed is capable of furnishing twelve hundred and +fifty dollars ($1,250) to each one, on an average.</p> + +<p>Supposing the number of <i>male</i> adults in the whole +country to be eight millions (8,000,000), the "National" +system is capable of furnishing only forty-four +dollars and twenty-five cents ($44.25) to each one. +The other system is capable of furnishing twenty-five +hundred dollars ($2,500) to each one.</p> + +<p>The present number of "National" banks is little +less than two thousand (2,000). Calling the number +two thousand (2,000), and supposing the $354,000,000 +of circulation to be equally divided between them, each +bank would be authorized to issue $177,000.<span class='pagenum'><a name="Page_43" id="Page_43">[Pg 43]</a></span></p> + +<p>Under the proposed system, the real estate and railroads +of the country are capable of furnishing one hundred +thousand (100,000) banks, having each a capital +of two hundred thousand dollars ($200,000); or it is +capable of furnishing one hundred and twelve thousand +nine hundred and ninety-four (112,994) banks, having +each a capital ($177,000), equal, on an average, to the +capital of the present "National" banks. That is, this +system is capable of furnishing fifty-six times as many +banks as the "National" system, having each the same +capital, on an average, as the "National" banks.</p> + +<p>Calling the number of the present "National" banks +two thousand (2,000), and the population of the country +forty millions (40,000,000), there is only one bank +to 20,000 people, on an average; each bank being +authorized to issue, on an average, a circulation of +$177,000.</p> + +<p>Under the proposed system, we could have one bank +for every five hundred (500) persons; each bank being +authorized to issue $200,000; or $23,000 each more +than the "National" banks.</p> + +<p>These figures give some idea of the comparative +capacity of the two systems to furnish credit.</p> + +<p>Under which of these two systems, now, would +everybody, who needs credit, and deserves it, be most +likely to get it? And to get all he needs to make his +industry most productive? And to get it at the lowest +rates of interest?</p> + +<p>The proposed system is as much superior to the old +specie paying system (so called)—in respect to the<span class='pagenum'><a name="Page_44" id="Page_44">[Pg 44]</a></span> +amount of loanable capital it is capable of supplying—as +it is to the present "National" system.</p> + + +<h4><span class="smcap">Section</span> 2.</h4> + +<p>But the proposed system has one other feature, +which is likely to be of great practical importance, and +which gives it a still further superiority—as a credit +system—over the so-called specie paying system. It +is this:</p> + +<p>The old specie paying system (so called) could add +to the loanable capital of the country, <i>only by so much +currency as it could keep in circulation, over and above +the amount of specie that it was necessary to keep on +hand for its redemption</i>. But the amount of loanable +capital which the proposed system can supply, hardly +depends at all upon the amount of its currency that +can be kept in circulation. It can supply about the +same amount of loanable capital, even though its currency +should be returned for redemption immediately +after it is issued. It can do this, because the banks, +<i>by paying interest on the currency returned for redemption</i>—or, +what is the same thing, by paying dividends +on the <span class="smcap">Productive Stock</span> transferred in redemption of +the currency—can postpone the payment of specie to +such time as it shall be convenient for them to pay it.</p> + +<p>All that would be necessary to make loans practicable +on this basis, would be, that the banks should +receive a higher rate of interest on their loans than +they would have to pay on the currency returned for<span class='pagenum'><a name="Page_45" id="Page_45">[Pg 45]</a></span> +redemption; that is, on the <span class="smcap">Productive Stock</span> transferred +in redemption of the currency.</p> + +<p>The rate of interest <i>received</i> by the banks, on the +loans made by them, would need to be so much higher +than that <i>paid</i> by them, on currency returned for +redemption, as to make it an object for them to loan +more of their currency than could be kept in circulation. +Subject to this condition, the banks could loan +their entire capitals, whether much or little of it could +be kept in circulation.</p> + +<p>For example, suppose the banks should pay <i>six</i> per +cent. interest on currency returned for redemption—(or +as dividends on the <span class="smcap">Productive Stock</span> transferred +in redemption of such currency)—they could then +loan their currency at <i>nine</i> per cent. and still make +<i>three</i> per cent. profits, even though the currency loaned +should come back for redemption immediately after it +was issued.</p> + +<p>But this is not all. Even though the banks should +<i>pay</i>, on currency returned for redemption, precisely +the same rate of interest they <i>received</i> on loans—say +<i>six</i> per cent.—they could still do business, if their +currency should, on an average, continue in circulation +<i>one half the time for which it was loaned</i>; for then the +banks would get three per cent. net on their loans, and +this would make their business a paying one.</p> + +<p>But the banks would probably do much better than +this; for bank credits would supersede all private +credits; and the diversity and amount of production +would be so great that an immense amount of currency<span class='pagenum'><a name="Page_46" id="Page_46">[Pg 46]</a></span> +would be constantly required to make the necessary +exchanges. And whatever amount should be necessary +for making these exchanges, would, of course, remain +in circulation. However much currency, therefore, +should be issued, it is probable that, on an average, it +would remain in circulation more than half the time for +which it was loaned.</p> + +<p>Or if the banks should pay <i>six</i> per cent. interest on +currency returned for redemption; and should then +loan money, for <i>six</i> months, at <i>eight</i> per cent. interest; +and this currency should remain in circulation but one +month; the banks would then get eight per cent. for +the one month, and two per cent. net for the other five +months; which would be equal to three per cent. for +the whole six months. Or if the currency should +remain in circulation two months, the banks would +then get eight per cent. for the two months, and two +per cent. net for the other four months; which would +be equal to four per cent. for the whole six months. +Or if the currency should remain in circulation three +months, the banks would then get eight per cent. for +three months, and two per cent. net for the other three +months; which would be equal to five per cent. for the +whole six months. Or if the currency should remain +in circulation four months, the banks would then get +eight per cent. for the four months, and two per cent. +net for the other two months; which would be equal to +six per cent. for the whole six months. Or if the currency +should remain in circulation five months, the +banks would then get eight per cent. for the five<span class='pagenum'><a name="Page_47" id="Page_47">[Pg 47]</a></span> +months, and two per cent. net for the other month; +which would be equal to seven per cent. for the whole +six months.</p> + +<p>The banks would soon ascertain, by experiment, +how long their currency was likely to remain in circulation; +and what rate of interest it was therefore +necessary for them to charge to make their business a +paying one. And that rate, whatever it might be, the +borrowers would have to pay. Subject to this condition, +the banks could always loan their entire capitals.</p> + + + +<hr style="width: 65%;" /> +<p><span class='pagenum'><a name="Page_48" id="Page_48">[Pg 48]</a></span></p> +<h2><a name="CHAPTER_VI" id="CHAPTER_VI"></a>CHAPTER VI.</h2> + +<h3>AMOUNT OF CURRENCY NEEDED.</h3> + + +<p>It is of no use to say that we do not need so much +currency as the proposed system would supply; +because, first, if we should not need it, we shall not +use it. Every dollar of paper will represent specific +property that can be delivered on demand in redemption +of it, and that will have the same market value as +gold. The paper dollar, therefore, will have the same +market value as the gold dollar, or as a dollar's worth +of any other property; and no one will part with it, +unless he gets in exchange for it something that will +serve his particular wants better; and no one will +accept it, unless it will serve his particular wants better +than the thing he parts with. No more paper, +therefore, can circulate, than is wanted for the purchase +and sale of commodities at their true and natural +values, as measured by gold.</p> + +<p>Secondly, we do not know at all how much currency +we do need. That is something that can be determined +only by experiment. We know that, heretofore, +whenever currency has been increased, industry +and traffic have increased to a corresponding extent. +And they would unquestionably increase to an extent +far beyond any thing the world has ever seen, if only<span class='pagenum'><a name="Page_49" id="Page_49">[Pg 49]</a></span> +they were aided and permitted by an adequate currency.</p> + +<p>We, as yet, know very little what wealth mankind +are capable of creating. It is only within a hundred +years, or a little more, that any considerable portion of +them have really begun to invent machinery, and +learned that it is only by machinery that they can +create any considerable wealth. But they have not +yet learned—at least, they profess not to have learned—that +money is indispensable to the practical employment +of machinery; that it is as impossible to operate +machinery without money, as it is to operate it without +wind, water, or steam. When they shall have learned, +and practically accepted, this great fact, and shall have +provided themselves with money, wealth will speedily +become universal. And it is only those who would +deplore such a result, or those who are too stupid to +see the palpable and necessary connection between +money and manufacturing industry, who resist the +indefinite increase of money.</p> + +<p>It is scarcely a more patent fact that land is the +indispensable capital for agricultural industry, than it +is that money is the indispensable capital for manufacturing +industry. Practically, everybody recognizes +this fact, and virtually acknowledges it; although, in +words, so many deny it. Men as deliberately and +accurately calculate the amount of machinery that a +hundred dollars in money will operate, as they do the +amount of machinery that a ton of coal, or a given +amount of water, will operate. They calculate much<span class='pagenum'><a name="Page_50" id="Page_50">[Pg 50]</a></span> +more accurately the amount of manufactured goods a +hundred dollars will produce, than they do the amount +of grain, grass, or vegetables an acre of land will produce. +They no more expect to see mechanics carrying +on business for themselves without money, than they +do to see agricultural laborers carrying on farming +without land, or than they do to see sailors going to +sea without ships. They know that all mechanical, as +well as agricultural, laborers, who have not the appropriate +capital for their special business, must necessarily +stand idle, or become mere wage-laborers for +others, at such particular employments as the latter +may dictate, and at such prices as the latter may see +fit to pay.</p> + +<p>All these things attest the perfect knowledge that +men have, that a money capital is indispensable to +manufacturing industry; whatever assertions they may +make to the contrary.</p> + +<p>They know, therefore, that prohibitions upon money +are prohibitions upon industry itself; that there can +be no such thing as freedom of industry, where there +is not freedom to lend and hire capital for such +industry.</p> + +<p>Every one knows, too—who knows any thing at all +on such a subject—that it is, intrinsically, as flagrant +a tyranny, as flagrant a violation of men's natural +rights, for a government to forbid the lending and hiring +of money for manufacturing industry, as it is to +forbid the lending and hiring of land, or agricultural +implements, for agricultural industry, or the lending<span class='pagenum'><a name="Page_51" id="Page_51">[Pg 51]</a></span> +and hiring of ships for maritime industry. They know +that it is as flagrant a tyranny, as flagrant a violation of +men's natural rights, to forbid one man to lend another +money for mechanical industry, as it would be to forbid +the former to lend the latter a house to live in, a +shop to work in, or tools to work with.</p> + +<p>It is, therefore, a flagrant, manifest tyranny, a flagrant, +manifest violation of men's natural rights, to +lay any conditions or restrictions whatever upon the +business of banking—that is, upon the lending and +hiring of money—except such as are laid upon all +other transactions between man and man, viz.: the +fulfilment of contracts, and restraints upon force and +fraud.</p> + +<p>A man who is without capital, and who, by prohibitions +upon banking, is practically forbidden to hire +any, is in a condition elevated but one degree above that +of a chattel slave. He may live; but he can live only as +the servant of others; compelled to perform such labor, +and to perform it at such prices, as they may see fit to +dictate. And a government, which, at this day, subjects +the great body of the people—or even any portion +of them—to this condition, is as fit an object of +popular retribution as any tyranny that ever existed.</p> + +<p>To deprive mankind of their natural right and power +of creating wealth for themselves, is as great a tyranny +as it is to rob them of it after they have created it. +And this is done by all laws against honest banking.</p> + +<p>All these things are so self-evident, so universally +known, that no man, of ordinary mental capacity, can<span class='pagenum'><a name="Page_52" id="Page_52">[Pg 52]</a></span> +claim to be ignorant of them. And any legislator, +who disregards them, should be taught, by a discipline +short, sharp, and decisive, that his power is wholly +subordinate to the natural rights of mankind.</p> + +<p>It is, then, one of man's indisputable, natural rights +to lend and hire capital in any and every form and +manner that is intrinsically honest. And as money, or +currency, is the great, the indispensable instrumentality +in the production and distribution of wealth; as it is +the capital, the motive power, that sets all other instrumentalities +in motion; as it is the one thing, without +which all the other great agencies of production—such +as science, skill, and machinery—are practically paralyzed; +to say that we need no more of it, and shall +have no more of it, than we now have, is to say that +we need no more wealth, and shall have no more +wealth, and no more equal or equitable distribution of +wealth, than we now have. It is to say that the mass +of mankind—the laborers, the producers of wealth—need +not to produce, and shall not be permitted to produce, +wealth for themselves, but only for others.</p> + +<p>For a government to limit the currency of a people, +and to designate the individuals (or corporations) who +shall have the control of that currency, is, manifestly, +equivalent to saying there shall be but so much industry +and wealth in the nation, and that these shall be +under the special control, and for the special enjoyment, +of the individuals designated; and, of course, +that all other persons shall be simply their dependants +and servants; receiving only such prices for their prop<span class='pagenum'><a name="Page_53" id="Page_53">[Pg 53]</a></span>erty, +and such compensation for their labor, as these +few holders of the currency shall see fit to give for +them.</p> + +<p>The effect of these prohibitions upon money, and +consequently upon industry, are everywhere apparent +in the poverty of the great body of the people.</p> + +<p>At the present time, the people of this country certainly +do not produce one third, very likely not one +fifth, of the wealth they might produce. And the +little they do produce is all in the hands of a few. +All this is attributable to the want of currency and +credit, and to the consequent want of science, skill, +machinery, and working capital.</p> + +<p>Of the twenty million persons, male and female, of +sixteen years of age and upwards—capable of producing +wealth—certainly not one in five has the +science, skill, implements, machinery, and capital necessary +to make his or her industry most effective; or to +secure to himself or herself the greatest share in the +products of his or her own industry. A very large +proportion of these persons—nearly all the females, +and a great majority of the males—persons capable +of running machinery, and of producing each three, +five, or ten dollars of wealth per day, are now without +science, skill, machinery, or capital, and are either producing +nothing, or working only with such inferior +means, and at such inferior employments, as to make +their industry of scarcely any value at all, either to +themselves or others, beyond the provision of the +coarsest necessaries of a hard and coarse existence.<span class='pagenum'><a name="Page_54" id="Page_54">[Pg 54]</a></span> +And this is all owing to the lack of money; or rather +to the lack of money and credit.</p> + +<p>There are, doubtless, in the country, ten million +(10,000,000) persons, male and female—sixteen years +of age and upwards—who are naturally capable of +creating from three to five dollars of wealth per day, +if they had the science, skill, machinery, and capital +which they ought to have, and might have; but who, +from the want of these, are now creating not more +than one dollar each per day, on an average; thus +occasioning a loss, to themselves and the country of +from twenty to forty millions of dollars per day, for +three hundred days in a year; a sum equal to from six +to twelve thousand millions per annum; or three to +six times the amount of our entire national debt.</p> + +<p>And there are another ten million of persons—better +supplied, indeed, with capital, machinery, &c., than +the ten million before mentioned—but who, nevertheless, +from the same causes, are producing far less than +they might.</p> + +<p>The aggregate loss to the country, from these +causes, is, doubtless, equal to from ten to fifteen thousand +millions per year; or five, six, or seven times the +amount of the entire national debt.</p> + +<p>In this estimate no account is taken of the loss suffered +from our inability—owing simply to a want of +money—to bring to this country, and give employment +to, the millions of laborers, in Europe and Asia, +who desire to come here, and add the products of their +labor to our national wealth.<span class='pagenum'><a name="Page_55" id="Page_55">[Pg 55]</a></span></p> + +<p>It is, probably, no more than a reasonable estimate +to suppose that the nation, as a nation, is losing twenty +thousand millions of dollars ($20,000,000,000) per +annum—about ten times the amount of our national +debt—solely for the want of money to give such employment +as they need, to the population we now have, +and to those who desire to come here from other +countries.</p> + +<p>Among the losses we suffer, from the causes mentioned, +the non-production of new inventions is by no +means the least. As a general rule, new inventions +are made only where money and machinery prevail. +And they are generally produced in a ratio corresponding +with the amount of money and machinery. In no +part of the country are the new inventions equal in +number to what they ought to be, and might be. In +three fourths of the country very few are produced. +In some, almost none at all. The losses from this +cause cannot be estimated in money.</p> + +<p>The government, in its ignorance, arrogance, and +tyranny, either does not see all this, or, seeing it, does +not regard it. While these thousands of millions are +being lost annually, from the suppression of money, +and consequently of industry, and while three fourths +of the laborers of the country are either standing idle, +or, for the want of capital, are producing only a mere +fraction of what they might produce, a two-pence-ha'-penny +Secretary of the Treasury can find no better +employment for his faculties, than in trying, first, to +reduce the rate of interest on the public debt one per<span class='pagenum'><a name="Page_56" id="Page_56">[Pg 56]</a></span> +cent.—thereby saving twenty millions a year, <i>or fifty +cents for each person, on an average</i>! And, secondly, +in paying one hundred millions per annum of the principal; +that is, <i>two and a half dollars for each person, +on an average</i>! And he insists that the only way to +achieve these astounding results, is to deprive the people +at large of money! To destroy, as far as possible, +their industry! To deprive them, as far as possible, of +all power to manufacture for themselves! And to compel +them to pay, to the few manufacturers it has under +its protection, fifty or one hundred per cent. more for +their manufactures than they are worth!</p> + +<p>He has been tugging at this tremendous task four +years, or thereabouts. And he confidently believes +that if he can be permitted to enforce this plan for a +sufficient period of years, in the future, he will ultimately +be able to save the people, annually, <i>fifty cents +each, on an average, in interest</i>! and also continue to +pay, annually, <i>two dollars and a half for each person, +on an average</i>, of the principal, of the national debt!</p> + +<p>He apparently does not know, or, if he knows, it is, +in his eyes, a matter of comparatively small moment, +that this saving of $20,000,000 per annum in interest, +and this payment of $100,000,000 per annum of principal, +which he proposes to make on behalf of the +people, are not equal to what <i>two days</i>—or perhaps +even <i>one day</i>—of their industry would amount to, if +they were permitted to enjoy their natural rights of +lending and hiring capital, and producing such wealth +as they please for themselves.<span class='pagenum'><a name="Page_57" id="Page_57">[Pg 57]</a></span></p> + +<p>He apparently does not know, or, if he knows, it is +with him a small matter, that if the people were permitted +to enjoy their natural freedom in currency and +credit, and consequently their natural freedom in industry, +they could pay the entire national debt three, +four, or a half dozen times over <i>every year</i>, more easily +than they can save the $20,000,000, and pay the +$100,000,000, annually, by the process that he adopts +for saving and paying them.</p> + +<p>And yet this man, and his policy, represent the government +and its policy. The president keeps him in +office, and Congress sustain him in his measures.</p> + +<p>In short, the government not only does not offer, but +is apparently determined not to suffer, any such thing +as freedom in currency and credit, or, consequently, in +industry. It is, apparently, so bent upon compelling +the people to give more for its few irredeemable notes +than they are worth; and so bent upon keeping all +wealth, and all means of wealth, in the hands of the +few—upon whose money and frauds it relies for support—that +it is determined, if possible, to perpetuate +this state of things indefinitely. And it will probably +succeed in perpetuating it indefinitely—under cover +of such false pretences as those of specie payments, +inflation of prices, reducing the interest, and paying the +principal, of the national debt, &c.—unless the people +at large shall open their eyes to the deceit and robbery +that are practised upon them; and, by establishing<span class='pagenum'><a name="Page_58" id="Page_58">[Pg 58]</a></span> +freedom in currency and credit—and thereby freedom +in industry and commerce—end at once and forever +the tyranny that impoverishes and enslaves them.</p> + + + +<hr style="width: 65%;" /> +<p><span class='pagenum'><a name="Page_59" id="Page_59">[Pg 59]</a></span></p> +<h2><a name="CHAPTER_VII" id="CHAPTER_VII"></a>CHAPTER VII.</h2> + +<h3>IMPORTANCE OF THE SYSTEM TO MASSACHUSETTS.</h3> + + +<h4><span class="smcap">Section</span> 1.</h4> + +<p>The tariffs, by means of which a few monied men +of Massachusetts have so long plundered the rest of +the country, and on which they have so largely relied +for their prosperity, will not much longer be endured. +The nation at large has no need of tariffs. Money is +the great instrumentality for manufacturing. And the +nation needs nothing but an ample supply of money—in +addition to its natural advantages—to enable +our people to manufacture for themselves much more +cheaply than any other people can manufacture for us.</p> + +<p>To say nothing of the many millions who, if we had +the money necessary to give them employment, might +be brought here from Europe and Asia, and employed +in manufactures, more than half the productive power +of our present population—in the South and West +much more than half—is utterly lost for the want of +money, and the consequent want of science, skill, and +machinery. And yet those few, who monopolize the +present stock of money, insist that they must have +tariffs to enable them to manufacture at all. And the +nation is duped by these false pretences.<span class='pagenum'><a name="Page_60" id="Page_60">[Pg 60]</a></span></p> + +<p>To give bounties to encourage manufactures, and at +the same time forbid all but a favored few to have +money to manufacture with, is just as absurd as it +would be to give bounties to encourage manufactures, +and at the same time forbid all but a favored few to +have machinery of any kind to manufacture with. It +is just as absurd as it would be to give bounties to +encourage agriculture, and at the same time forbid all +but a favored few to own land, or have cattle, horses, +seed corn, seed wheat, or agricultural implements. It +is just as absurd as it would be to give bounties to +encourage navigation, and at the same time forbid all +but a favored few to have ships.</p> + +<p>The whole object of such absurdities and tyrannies +is to commit the double wrong of depriving the mass +of the people of all power to manufacture for themselves, +and at the same time compel them to pay extortionate +prices to the favored few who are permitted to +manufacture.</p> + +<p>When tariffs shall be abolished, Massachusetts will +have no means of increasing her prosperity, nor even +of perpetuating such poor prosperity as she now has,<a name="FNanchor_F_6" id="FNanchor_F_6"></a><a href="#Footnote_F_6" class="fnanchor">[F]</a> +except by a great increase of money; such an increase +of money as will enable her skilled laborers and enterprising +young men to get capital for such industries +and enterprises as they may prefer to engage in here, +rather than go elsewhere.</p> +<p><span class='pagenum'><a name="Page_61" id="Page_61">[Pg 61]</a></span></p> +<p>Even if Massachusetts were willing to manufacture +for the South and West, <i>without a tariff</i>, she could +hope to do so only until the South and West should +supply themselves with money. So soon as they shall +supply themselves with money, they will be able to +manufacture for themselves more cheaply than Massachusetts +can manufacture for them. Their natural +advantages for manufacturing are greatly superior to +those of Massachusetts. They have the cheap food, +coal, iron, lead, copper, wool, cotton, hides, &c., &c. +They lack only money to avail themselves of these +advantages. And, under the system proposed, their +lands and railroads are capable of supplying all the +money they need. And they will soon adopt that, or +some other system. And they will then not only be +independent of Massachusetts, but will be able to draw +away from her her skilled laborers, and enterprising +young men, unless she shall first supply them with the +money capital necessary for such industries and enterprises +as may induce them to remain. They will, of +course, go where they can get capital, instead of staying +where they can get none.</p> + +<p>So great are the natural advantages of the South +and West over those of Massachusetts, that it is doubtful +how many of these men can be persuaded to +remain, by all the inducements that capital can offer. +But without such inducements it is certain they will +all go.</p> + +<p>And Massachusetts has no means of supplying this +needed money, except by using her real estate as +banking capital.</p> +<p><span class='pagenum'><a name="Page_62" id="Page_62">[Pg 62]</a></span></p> +<p>It is, therefore, plainly a matter of life or death to +the holders of real estate in Massachusetts to use it for +that purpose; for their real estate will be worth nothing +when the skilled labor and the enterprising young +men of Massachusetts shall have deserted her.</p> + +<p>All this is so manifest as to need no further demonstration. +And Massachusetts will do well to look the +facts in the face before it is too late.</p> + + +<h4><span class="smcap">Section</span> 2.</h4> + +<p>What prospect has Massachusetts under the present +"National" system?</p> + +<p>The Comptroller of the Currency, in his last annual +report, says, that of the $354,000,000 of circulation +authorized by law, Massachusetts has now $58,506,686. +He says, further, that this is more than four times as +much as she would be entitled to, if the currency were +apportioned equally among the States, according to +population; more than twice as much as she would be +entitled to, if the circulation were apportioned among +the States, according to their wealth; and three times +as much as she is entitled to upon an apportionment +made—as apportionments are now professedly made—half +upon population, and half upon wealth.</p> + +<p>The Comptroller further says, that a law of Congress, +passed July 12, 1870, requiring him to withdraw circulation +from those States having more than their just +proportion, and to distribute it among those now having +less than their just proportion, will require him to<span class='pagenum'><a name="Page_63" id="Page_63">[Pg 63]</a></span> +withdraw "from thirty-six banks in the City of Boston, +$11,403,000; [and] from fifty-three country banks of +Massachusetts, $2,997,000."</p> + +<p>Thus the law requires $14,400,000 to be withdrawn +from the present banks of Massachusetts.</p> + +<p>When this shall have been done, she will have but +$44,106,686 left. And as this will be more than three +times her just proportion on a basis of population, and +nearly twice her just share on a basis of wealth, there +is no knowing how soon the remaining excess over her +just share may be withdrawn.<a name="FNanchor_G_7" id="FNanchor_G_7"></a><a href="#Footnote_G_7" class="fnanchor">[G]</a></p> + +<p>By the census of 1870, Massachusetts had a population +of 1,457,351. She has now, doubtless, a population +of 1,500,000. Calling her population 1,500,000, +the $58,506,686 of circulation which she now has, is +equal to $39 for each person, on an average. When +$14,400,000 of this amount shall have been withdrawn, +as the law now requires it to be, the circulation will be +reduced to less than $30 for each person, on an average. +If the circulation should be reduced to the proportion +to which Massachusetts is entitled, on the basis +of wealth—that is, to $25,098,600—she will then +have less than $17 for each person, on an average. +If the circulation should be reduced to the proportion +to which Massachusetts is entitled on a basis of population—that +is to $13,879,778—she will then have a +trifle less than $9 for each person, on an average.<span class='pagenum'><a name="Page_64" id="Page_64">[Pg 64]</a></span></p> + +<p>For years the industry of Massachusetts has been +greatly crippled for the want of bank credits, although +her banks have been authorized to issue their notes to +the amount of $58,506,686; or $39 to each person, on +an average. What will her industry be when her +banks shall be authorized to issue only $44,106,686, or +$30 for each person, on an average? What will it be, +if her bank issues shall be reduced to her proportion on +a basis of wealth, to wit, $25,098,600; or less than +$17 for each person, on an average? Or what will it +be, if her bank circulation shall be reduced to her proportion +on a basis of population, to wit, to $13,379,778; +or less than $9 for each person, on an average?</p> + +<p>In contrast with such contemptible sums as these, +Massachusetts, under the system proposed, could have +nine hundred millions ($900,000,000) of bank loans;<a name="FNanchor_H_8" id="FNanchor_H_8"></a><a href="#Footnote_H_8" class="fnanchor">[H]</a> +that is, $600 for every man, woman, and child, on an +average; or $1,500 to each adult, male and female, on +an average; or $3,000 to each <i>male</i> adult, on an +average.</p> + +<p>Which, now, of these two systems is most likely to +secure and increase the prosperity of Massachusetts? +Which is most likely to give to every deserving man +and woman in the State, the capital necessary to make +their industry most productive to themselves individually, +and to the State? Which system is most likely +to induce the skilled laborers and enterprising young +men of Massachusetts to remain here? And which is +most likely to drive them away?</p> +<p><span class='pagenum'><a name="Page_65" id="Page_65">[Pg 65]</a></span></p> + +<h4><span class="smcap">Section</span> 3.</h4> + +<p>But the whole is not yet told. The present "National" +system is so burdened with taxes and other +onerous conditions, that no banking at all can be done +under it, except at rates of interest that are two or +three times as high as they ought to be; or as they +would be under the system proposed.</p> + +<p>The burdens imposed on the present banks are probably +equal to from six to eight per cent. <i>upon the +amount of their own notes that they are permitted to +issue</i>.</p> + +<p>In the first place, they are required, for every $90 +of circulation, to invest $100 in five or six per cent. +government bonds.<a name="FNanchor_I_9" id="FNanchor_I_9"></a><a href="#Footnote_I_9" class="fnanchor">[I]</a> This alone is a great burden to +all that class of persons who want their capital for +active business. It amounts to actual prohibition upon +all whose property is in real estate, and therefore not +convertible into bonds. And this is a purely tyrannical +provision, inasmuch as real estate is a much safer +and better capital than the bonds. Let us call this a +burden of <i>two per cent. on their circulation</i>.</p> + +<p>Next, is the risk as to the permanent value of the +bonds. Any war, civil or foreign, would cause them to<span class='pagenum'><a name="Page_66" id="Page_66">[Pg 66]</a></span> +drop in value, as the frost causes the mercury to drop +in the thermometer. Even any danger of war would +at once reduce them in value. Let us call this risk +another burden of <i>one per cent. on the circulation</i>.</p> + +<p>Next, every bank in seventeen or eighteen of the +largest cities—Boston among the number—are required +to keep on hand, at all times, a reserve—<i>in +dead capital</i> (legal tenders)—"equal to at least twenty-five +per centum," and all other banks a similar +reserve "equal to at least fifteen per centum," "of the +aggregate amount of their <i>notes in circulation, and of +their deposits</i>."</p> + +<p>Doubtless, two thirds—very likely three fourths—of +all the bank circulation and deposits are in the +seventeen cities named. And as these city banks are +required to keep a reserve of dead capital equal to +twenty-five per cent., and all others a similar reserve +equal to fifteen per cent., <i>both on their circulation and +deposits</i>, this average burden on all the banks is, +doubtless, equal to <i>two per cent. on their circulation</i>.</p> + +<p>Next, the banks are required to pay to the United +States an annual tax of one per cent. on their average +circulation, and half of one per cent. on the amount of +their deposits.</p> + +<p>Here is another burden equal to at least <i>one and a +half per cent. on their circulation</i>.</p> + +<p>Then the capitals of the banks—the United States +bonds—are made liable to State taxes to any extent, +"not at a greater rate than is assessed upon the monied +capital in the hands of individual citizens of such<span class='pagenum'><a name="Page_67" id="Page_67">[Pg 67]</a></span> +State." This tax is probably equal to <i>one per cent. on +their circulation</i>.</p> + +<p>Here, then, are taxes and burdens equal to <i>seven and +a half per cent. on their circulation</i>.</p> + +<p>Next, the banks are required to make at least <i>five</i> +reports annually, to the Comptroller of the Currency, +of their "resources and liabilities." Also reports of +"the amount of each dividend declared by the association."</p> + +<p>Then, too, the banks are restricted as to the rates of +interest they are permitted to take.</p> + +<p>Then "Congress may at any time alter, amend, or +repeal this act;" and thus impose upon the banks still +further taxes, conditions, restrictions, returns, and +reports. Or it may at pleasure abolish the banks +altogether.</p> + +<p>All these taxes, burdens, and liabilities, cannot be +reckoned at less than <i>eight or nine per cent. on the circulation +of the banks</i>; a sum two or three times as +great as the rate of interest ought to be; and two or +three times as great as it would be under the system +proposed.</p> + +<p>And yet the banks must submit to all these burdens +as a condition of being permitted to loan money at all. +And they must make up—in their rates of interest—for +all these burdens. Under this system, therefore, +the rate of interest must always be two or three times +as high as it ought to be.</p> + +<p>The objections to the system, then, are, first, that it +furnishes very little loanable capital; and, second, that<span class='pagenum'><a name="Page_68" id="Page_68">[Pg 68]</a></span> +it necessarily raises the interest on that little to two or +three times what it ought to be.</p> + +<p>Such a system, obviously, could not be endured at +all, but for these reasons, viz.: first, that, being a +monopoly, those holding it are enabled to make enormous +extortions upon borrowers; and, secondly, that +these borrowers—most of whom are the bankers +themselves—employ the money in the manufacture +and sale of goods that are protected, by tariffs, from +foreign competition, and for which they are thus enabled +to get, say, fifty per cent. more than they are +worth.</p> + +<p>In this way, these bank extortions and tariff extortions +are thrown ultimately upon the people who consume +the goods which the bank capital is employed in +producing and selling.</p> + +<p>Thus the joint effect of the bank system and the +tariff is, first, to deprive the mass of the people of the +money capital that would enable them to manufacture +for themselves; and, secondly, to compel them to pay +extortionate prices for the few manufactures that are +produced.</p> + +<p>Under the system proposed, all these things would +be done away. The West and the South, that are now +relied on to pay all these extortions, would manufacture +for themselves. Their lands and railroads would +enable them to supply all the manufacturing capital +that could be used. And they could supply it at one +half, or one third, the rates now required by the "National" +banks. Of course, Massachusetts could not<span class='pagenum'><a name="Page_69" id="Page_69">[Pg 69]</a></span>—under +the "National" system—manufacture a dollar's +worth for the South and West. She could not keep +her manufacturing laborers. They would all go where +they could get cheap capital, cheap supplies, and good +markets. And then the manufacturing industry of +Massachusetts, and with it the value of her real estate, +will have perished from the natural and legitimate +effect of her meanness, extortion, and tyranny.</p> + +<p>Looking to the future, then, there is no State in the +Union—certainly none outside of New England—that +has a greater interest in supplying her mechanics +with the greatest possible amount of capital; or in +supplying it at the lowest possible rates of interest. +And this can be done only by using her real estate as +banking capital.</p> + + +<hr style="width: 65%;" /> +<p><span class='pagenum'><a name="Page_70" id="Page_70">[Pg 70]</a></span></p> +<h2><a name="CHAPTER_VIII" id="CHAPTER_VIII"></a>CHAPTER VIII.</h2> + +<h3>THE TRUE CHARACTER OF THE "NATIONAL" SYSTEM.</h3> + + +<h4><span class="smcap">Section</span> 1.</h4> + +<p>Under the "National" system there are less than +2,000 banks. But let us call them 2,000.</p> + +<p>Calling the population of the country forty millions, +there is but one bank to 20,000 people.</p> + +<p>And this one bank is, <i>in law</i>, a person; and only a +single person. In lending money, it acts, and can act, +only as a unit. Its several stockholders cannot act +separately, as so many individuals, in lending money.</p> + +<p>So far, therefore, as this system is concerned, <i>there +is but one money lender for twenty thousand people</i>!</p> + +<p>Of these 20,000 people, ten thousand (male and +female) are sixteen years of age and upwards, capable +of creating wealth, and requiring capital to make their +labor most productive.</p> + +<p>Yet, so far as this system is concerned, there is but +one person authorized to lend money to, or for, these +ten thousand, who wish to borrow.</p> + +<p>And this one money lender is one who, proverbially +"has no soul." It is not a natural human being. It +is a legal, an artificial, and not a natural, person. It is +neither masculine nor feminine. It has not the ordin<span class='pagenum'><a name="Page_71" id="Page_71">[Pg 71]</a></span>ary +human sympathies, and is not influenced by the +ordinary human motives of action. It is no father, +who might wish to lend money to his children, to start +them in life. It is no neighbor, who might wish to +assist his neighbor. It is no citizen, who might wish +to promote the public welfare. It is simply a nondescript, +created by law, that wants money, and nothing +else.</p> + +<p>Moreover, it has only $177,000 to lend to these +10,000 borrowers; <i>that is, a fraction less than $18, on +an average, for each one</i>!</p> + +<p>What chance of borrowing capital have these ten +thousand persons, who are forbidden to borrow, except +from this one soulless person, who has so little to lend?</p> + +<p>If money lenders must be soulless—as, perhaps, to +some extent, they must be—it is certainly of the +utmost importance that there be so many of them, and +that they may have so much money to lend, as that +they may be necessitated, by their own selfishness, to +compete with each other, and thus save the borrowers +from their extortions.</p> + +<p>But the "National" system says, not only that the +money lender shall be a soulless person, and one having +only a little money to lend, but that he shall also have +the whole field—a field of 10,000 borrowers—entirely +to himself!</p> + +<p>It says that this soulless person shall have this whole +field to himself, notwithstanding he has so little money +to lend, and notwithstanding there are many other persons +standing by, having, in the aggregate, fifty times<span class='pagenum'><a name="Page_72" id="Page_72">[Pg 72]</a></span> +as much money to lend as he; and desiring to lend it +at one half, or one third, the rates he is demanding, and +extorting!</p> + +<p>It says, too, that he shall have this whole field +to himself, notwithstanding that ninety-nine one-hundredths +of those who desire to borrow, are sent away +empty! and are thereby condemned—so far as such a +system can condemn them—to inevitable poverty!</p> + + +<h4><span class="smcap">Section</span> 2.</h4> + +<p>But further. Each one of these 2,000 legal, or artificial, +persons, who alone are permitted to <i>lend</i> money, +is made up of, say, fifty actual, or natural, persons, to +whom alone, it is well known, that this legal person +will lend it!</p> + +<p>These 2,000 legal persons, then, who alone are permitted +to lend money, are made up of 100,000 actual +persons, who alone are to borrow it.</p> + +<p>These 100,000 actual persons, who compose the +legal persons, do not, then, become bankers because +they have money to lend to others, but only because +they themselves want to borrow!</p> + +<p>Thus when the system says that they alone shall +lend, it virtually says that they alone shall borrow; +because it is well known that, in practice, they <i>will</i> +lend only to themselves.</p> + +<p>In short, it says that only these 100,000 men—or +one in four hundred of the population—shall have +liberty either to lend, or borrow, capital! Such capital<span class='pagenum'><a name="Page_73" id="Page_73">[Pg 73]</a></span> +as is indispensable to every producer of wealth, if he +would control his own industry, or make his labor most +productive.</p> + +<p>Consequently, it says, practically—so far as it is in +its power to say—that only one person in four hundred +of the population shall be permitted to have capital; +or, consequently, to labor directly for himself; +and that all the rest of the four hundred shall be compelled +to labor for this one, at such occupations, and +for such wages, as he shall see fit to dictate.</p> + +<p>In short, the system says—as far as it can say—that +only 100,000 persons—only one person in four +hundred of the population—<i>shall be suffered to have +any money</i>! And, consequently, that all the property +and labor of the thirty-nine million nine hundred thousand +(39,900,000) persons shall be under the practical, +and nearly absolute, control of these 100,000 persons! +It says that thirty-nine million nine hundred thousand +(39,900,000) persons shall be in a state of industrial +and commercial servitude (to the 100,000), elevated +but one degree above that of chattel slavery.</p> + +<p>And this scheme is substantially carried out in practice. +These 100,000 men call themselves "<i>the business +men</i>" of the country. By this it is meant, not +that they are the producers of wealth, but only that +they alone handle the money! Other persons are permitted +to sell only to them! to buy only of them! to +labor only for them! and to sell to, buy of, and labor +for, them, only at such prices as these 100,000 shall +dictate.<span class='pagenum'><a name="Page_74" id="Page_74">[Pg 74]</a></span></p> + +<p>These 100,000 so called "<i>business men</i>," not only +own the government, but they <i>are</i> the government. +Congress is made up of them, and their tools. And +they hold all the other departments of the government +in their hands. Their sole purpose is power and plunder; +and they suffer no constitutional or natural law +to stand in the way of their rapacity.</p> + +<p>How many times, during the last presidential canvass, +were we told that "<i>the business men</i>" of the +country wished things to remain as they were? Having +gathered all power into their own hands, having +subjected all the property and all the labor of the +country to their service and control, who can wonder +that they were content with things as they were? +That they did not desire any change? And their +money and their frauds being omnipotent in carrying +elections, there was no change.</p> + +<p>These 100,000 "business men," having secured to +themselves the control of all bank credits, and thereby +the control of all business depending on bank loans; +having also obtained control of the government, enact +that foreigners shall not be permitted to compete with +them, by selling goods in our markets, except under a +disadvantage of fifty to one hundred per cent.</p> + +<p>And this is the industrial and financial system which +the "National" bank system establishes—so far as it +can establish it. And this is the scheme by means of +which these 100,000 men cripple, and more than half +paralyze, the industry of forty millions of people, and +secure to themselves so large a portion of the proceeds +of such industry as they see fit to permit.</p> + + + +<hr style="width: 65%;" /> +<p><span class='pagenum'><a name="Page_75" id="Page_75">[Pg 75]</a></span></p> +<h2><a name="CHAPTER_IX" id="CHAPTER_IX"></a>CHAPTER IX.</h2> + +<h3>AMASA WALKER'S OPINION OF THE AUTHOR'S SYSTEM.</h3> + + +<p>As Mr. Amasa Walker is considered the highest +authority in the country, in opposition to all paper +currency that does not represent gold or silver actually +on hand, it will not be impertinent to give his opinion +of the system now proposed.</p> + +<p>He reviewed it in a somewhat elaborate article, +entitled "<i>Modern Alchemy</i>," published in the <i>Bankers +Magazine (N. Y.)</i> for December, 1861.</p> + +<p>That he had no disposition to do any thing but condemn +the system to the best of his ability, may be +inferred from the following facts.</p> + +<p>After describing the efforts of the old alchemists to +transmute the baser metals into gold, he represents all +attempts to make a useful paper currency as attempts +"<i>to transmute paper into gold</i>." He says that the +idea that paper can be made to serve the purposes of +money is "<i>a perfectly cognate idea</i>" with that of the +old alchemists, that the baser metals can be transmuted +into gold. (p. 407.)</p> + +<p>He also informs us that—</p> + +<div class="blockquot"><p>"It is perfectly impracticable <i>to transmute paper +into gold</i> to any extent or degree whatever, and that +all attempts to do so (beneficially to the trade and<span class='pagenum'><a name="Page_76" id="Page_76">[Pg 76]</a></span> +commerce of the world) are as absurd and futile as the +efforts of the old alchemists to change the baser metals +into the most precious." (p. 415).</p></div> + +<p>These extracts are given to show the spirit and +principle of his article, and the kind of arguments he +employs against all paper that represents other property +than coin; even though that property have equal +value with coin in the market.</p> + +<p>Yet he says:—</p> + +<div class="blockquot"><p>"One thing we cheerfully accord to <span class="smcap">Mr. Spooner's</span> +system—<i>it is an honest one</i>. Here is no fraud, no +deception. <i>It makes no promise that it cannot fulfil.</i> +It does not profess to be convertible into specie [on +demand]. It is the best transmutation project we +have seen." (p. 413).</p></div> + +<p>When he says that "it is the best <i>transmutation</i> +project he has seen," the context shows that he means +to say that it <i>comes nearer to transmuting paper into +gold</i>, than any other system he has seen.</p> + +<p>This admission, coming from so violent an opponent +of paper currency, may reasonably be set down as the +highest commendation that <i>he</i> could be expected to +pay to any <i>paper</i> system.</p> + +<p>He also says:—</p> + +<div class="blockquot"><p>"Many schemes of the same kind have, at different +times, been presented to the world; but none of them +have been more complete in detail, or more systematically +arranged, than that of <span class="smcap">Mr. Spooner</span>. (p. 414).</p></div> + +<p>But by way of condemning the system as far as possible, +he says:<span class='pagenum'><a name="Page_77" id="Page_77">[Pg 77]</a></span>—</p> + +<div class="blockquot"><p>"<span class="smcap">Mr. Spooner</span>, however, can, we think, make no +claim to originality, so far as the general principle is +concerned. The famous bank of <span class="smcap">John Law</span>, in France, +was essentially of the same character." (p. 413.)</p></div> + +<p>No, it was <i>not</i> essentially of the same character. +One difference—to say nothing of twenty others—between +the two systems was this: that <span class="smcap">Law's</span> bank +issued notes that it had no means to redeem; whereas +<span class="smcap">Mr. Walker</span> himself admits that "<span class="smcap">Mr. Spooner's</span> <i>system +makes no promises that it cannot fulfil</i>." That is +to say, it purports to represent nothing except what +it actually represents, viz.: property that is actually +on hand, and can always be delivered, <i>on demand</i>, in +redemption of the paper. Is not this difference an +"essential" one? If <span class="smcap">Mr. Walker</span> thinks it is not, he +differs "essentially" from the rest of mankind. What +fault was ever found with <span class="smcap">John Law's</span> bank, except +that it could not redeem its paper? Will <span class="smcap">Mr. Walker</span> +inform us?</p> + +<hr style="width: 65%;" /> + +<div class="footnotes"> +<h4>FOOTNOTES</h4> +<div class="footnote"><p><a name="Footnote_A_1" id="Footnote_A_1"></a><a href="#FNanchor_A_1"><span class="label">[A]</span></a> By the State valuation of May, 1871, the real estate of Boston is estimated +at $395,214,950.</p></div> + +<div class="footnote"><p><a name="Footnote_B_2" id="Footnote_B_2"></a><a href="#FNanchor_B_2"><span class="label">[B]</span></a> By the State valuation of May, 1871, the real estate of the Commonwealth +is estimated at $991,196,803.</p></div> + +<div class="footnote"><p><a name="Footnote_C_3" id="Footnote_C_3"></a><a href="#FNanchor_C_3"><span class="label">[C]</span></a> The amount of circulation now authorized by the present "National" banks +of Massachusetts, is $58,506,686, as appears by the recent report of the Comptroller +of the Currency.</p></div> + +<div class="footnote"><p><a name="Footnote_D_4" id="Footnote_D_4"></a><a href="#FNanchor_D_4"><span class="label">[D]</span></a> There would always be a plenty of specie for sale, in the seaports, as merchandise.</p></div> + +<div class="footnote"><p><a name="Footnote_E_5" id="Footnote_E_5"></a><a href="#FNanchor_E_5"><span class="label">[E]</span></a> Exclusive of the so-called "gold" banks, which are too few to be worthy of +notice.</p></div> + +<div class="footnote"><p><a name="Footnote_F_6" id="Footnote_F_6"></a><a href="#FNanchor_F_6"><span class="label">[F]</span></a> I say "poor prosperity," because the present prosperity of Massachusetts is +not only a dishonest prosperity, but is also only the prosperity of the few, and +not of the many.</p></div> + +<div class="footnote"><p><a name="Footnote_G_7" id="Footnote_G_7"></a><a href="#FNanchor_G_7"><span class="label">[G]</span></a> If the excess mentioned in the text should not be withdrawn, it will be only +because the system is so villainous in itself, that other parts of the country will +not accept the shares to which they are entitled.</p></div> + +<div class="footnote"><p><a name="Footnote_H_8" id="Footnote_H_8"></a><a href="#FNanchor_H_8"><span class="label">[H]</span></a> Since the notes on page fifth were printed, the <i>Boston Journal</i>, of Jan. 11, +1873, says that, by the valuation of 1872, the real estate of Massachusetts is +$1,131,306,347.</p></div> + +<div class="footnote"><p><a name="Footnote_I_9" id="Footnote_I_9"></a><a href="#FNanchor_I_9"><span class="label">[I]</span></a> At first they were required to invest only in <i>six</i> per cent. bonds. But more +recently they have been coerced or "persuaded" to invest sixty-five millions +($65,000,000) in <i>five</i> per cent. bonds. And very lately it has been announced +that "The Comptroller of the Currency will not hereafter change United States +bonds, deposited as security for circulating notes of national banks, except upon +condition of substituting the new five per cents. of the loan of July 14, 1870, and +January 20, 1872."—<i>Boston Daily Advertiser of February 5, 1873.</i> +</p><p> +From this it is evident that all the banks are to be "persuaded" into investing +their capitals in <i>five</i> per cent. bonds.</p></div> +</div> + + + + + + + + +<pre> + + + + + +End of Project Gutenberg's A New Banking System, by Lysander Spooner + +*** END OF THIS PROJECT GUTENBERG EBOOK A NEW BANKING SYSTEM *** + +***** This file should be named 34187-h.htm or 34187-h.zip ***** +This and all associated files of various formats will be found in: + https://www.gutenberg.org/3/4/1/8/34187/ + +Produced by Curtis Weyant and the Online Distributed +Proofreading Team at https://www.pgdp.net (This file was +produced from images generously made available by The +Internet Archive) + + +Updated editions will replace the previous one--the old editions +will be renamed. + +Creating the works from public domain print editions means that no +one owns a United States copyright in these works, so the Foundation +(and you!) can copy and distribute it in the United States without +permission and without paying copyright royalties. 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You may copy it, give it away or +re-use it under the terms of the Project Gutenberg License included +with this eBook or online at www.gutenberg.org + + +Title: A New Banking System + The Needful Capital for Rebuilding the Burnt District + +Author: Lysander Spooner + +Release Date: November 1, 2010 [EBook #34187] + +Language: English + +Character set encoding: ASCII + +*** START OF THIS PROJECT GUTENBERG EBOOK A NEW BANKING SYSTEM *** + + + + +Produced by Curtis Weyant and the Online Distributed +Proofreading Team at https://www.pgdp.net (This file was +produced from images generously made available by The +Internet Archive) + + + + + + + + + + A + NEW BANKING SYSTEM: + + THE + NEEDFUL CAPITAL FOR REBUILDING + THE BURNT DISTRICT. + + BY LYSANDER SPOONER. + + BOSTON: + SOLD BY A. WILLIAMS & CO. + + 135 WASHINGTON STREET. + + 1873. + + + + Entered according to Act of Congress, in the year 1873. + BY LYSANDER SPOONER, + in the office of the Librarian of Congress, at Washington. + + + Printed by + WARREN RICHARDSON, + 112 Washington St + + + + +CONTENTS. + + + PAGE + CHAPTER I.--A New Banking System, 5 + CHAPTER II.--Specie Payments, 12 + CHAPTER III.--No Inflation of Prices, 21 + CHAPTER IV.--Security of the System, 35 + CHAPTER V.--The System as a Credit System, 41 + CHAPTER VI.--Amount of Currency Needed, 48 + CHAPTER VII.--Importance of the System to Massachusetts, 59 + CHAPTER VIII.--The True Character of the "National" System, 70 + CHAPTER IX.--Amasa Walker's Opinion of the Author's System, 75 + + + + +The reader will understand that the ideas presented in the following +pages admit of a much more thorough demonstration than can be given in +so small a space. Such demonstration, if it should be necessary, the +author hopes to give at a future time. + + _Boston, March, 1873._ + + + + +CHAPTER I. + +A NEW BANKING SYSTEM. + + +Under the banking system--an outline of which is hereafter given--the +real estate of Boston alone--taken at only three-fourths its value, as +estimated by the State valuation[A]--is capable of furnishing three +hundred millions of dollars of loanable capital. + + [A] By the State valuation of May, 1871, the real estate of Boston + is estimated at $395,214,950. + +Under the same system, the real estate of Massachusetts--taken at only +three-fourths its estimated value[B]--is capable of furnishing seven +hundred and fifty millions of loanable capital. + + [B] By the State valuation of May, 1871, the real estate of the + Commonwealth is estimated at $991,196,803. + +The real estate of the Commonwealth, therefore, is capable of furnishing +an amount of loanable capital more than twelve times as great as that +of all the "_National_" Banks in the State[C]; more than twice as +great as that of all the "National" banks of the whole United States +($353,917,470); and equal to the entire amount ($750,000,000, or +thereabouts) both of greenback and "National" bank currency of the +United States. + + [C] The amount of circulation now authorized by the present + "National" banks of Massachusetts, is $58,506,686, as appears + by the recent report of the Comptroller of the Currency. + +It is capable of furnishing loanable capital equal to one thousand +dollars for every male and female person, of sixteen years of age and +upwards, within the Commonwealth; or two thousand five hundred dollars +for every male adult. + +It would scarcely be extravagant to say that it is capable of furnishing +ample capital for every deserving enterprise, and every deserving man +and woman, within the State; and also for all such other enterprises in +other parts of the United States, and in foreign commerce, as +Massachusetts men might desire to engage in. + +Unless the same system, or some equivalent one, should be adopted in +other States, the capital thus furnished in this State, could be loaned +at high interest at the West and the South. + +If adopted here earlier than in other States, it would enable the +citizens of this State to act as pioneers in the most lucrative +enterprises that are to be found in other parts of the country. + +All this capital is now lying dead, so far as being loaned is concerned. + +All this capital can be loaned in the form of currency, if so much can +be used. + +All the profits of banking, under this system, would be clear profits, +inasmuch as the use of the real estate as banking capital, would not +interfere at all with its use for other purposes. + +The use of this real estate as banking capital would break up all +monopolies in banking, and in all other business depending upon bank +loans. It would diffuse credit much more widely than it has ever been +diffused. It would reduce interest to the lowest rates to which free +competition could reduce it. It would give immense activity and power to +industrial and commercial enterprise. It would multiply machinery, and +do far more to increase production than any other system of credit and +currency that has ever been invented. And being furnished at low rates +of interest, would secure to producers a much larger share of the +proceeds of their labor, than they now receive. + +All this capital can be brought into use as fast as the titles to real +estate can be ascertained, and the necessary papers be printed. + +Legally, the system (as the author claims, and is prepared to establish) +stands upon the same principle as a patented machine; and is, therefore, +already legalized by Congress; and cannot, unless by a breach of the +public faith, any more be prohibited, _or taxed_, either by Congress or +this State, than can the use of a patented machine. + +Every dollar of the currency furnished by this system would have the +same value in the market as a dollar of gold; or so nearly the same +value that the difference would be a matter of no appreciable +importance. + +The system would, therefore, restore specie payments at once, by +furnishing a great amount of currency, that would be equal in value to +specie. + +The system would not inflate prices above their true and natural value, +relatively to specie; for no possible amount of paper currency, every +dollar of which is equal in value to specie, _can_ inflate prices above +their true and natural value, relatively to specie. + +Whenever, if ever, the paper should not buy as much in the market as +specie, it would be returned to the banks for redemption, and thus taken +out of circulation. So that no more could be kept in circulation than +should be necessary for the purchase and sale of property at specie +prices. + +The system would not tend to drive specie out of the country; although +very little of it would be needed by the banks. It would rather tend to +bring specie into the country, because it would immensely increase our +production. We should, therefore, have much more to sell, and much less +to buy. This would always give a balance in our favor, which would have +to be paid in specie. + +It is, however, a matter of no practical importance whether the system +would bring specie into the country, or drive it out; for the volume and +value of the currency would be substantially unaffected either by the +influx or efflux of specie. Consequently industry, trade, and prices +would be undisturbed either by the presence or absence of specie. The +currency would represent property that could not be exported; that would +always be here; that would always have a value as fixed and well known +as that of specie; that would always be many times more abundant than +specie can ever be; and that could always be delivered (in the absence +of specie) in redemption of the currency. These attributes of the +currency would render all financial contractions, revulsions, and +disorders forever impossible. + +The following is + +AN OUTLINE OF THE SYSTEM. + +The principle of the system is that the currency shall represent an +_invested_ dollar, instead of a specie dollar. + +The currency will, therefore, be redeemable by an _invested_ dollar, +except when redeemed by specie, or by being received in payment of debts +due the banks. + +The best capital will probably be mortgages and railroads; and these +will very likely be the only capital which it will ever be expedient to +use. + +Inasmuch as railroads could not be used as capital, without a +modification of their present charters, mortgages are probably the best +capital that is immediately available. + +Supposing mortgages to be the capital, they will be put into joint +stock, held by trustees, and divided into shares of one hundred dollars +each. + +This stock may be called the PRODUCTIVE STOCK, and will be entitled to +the dividends. + +The dividends will consist of the interest on the mortgages, and the +profits of banking. + +The interest on the mortgages should be so high--say six or seven per +cent--as to make the PRODUCTIVE STOCK worth ordinarily par of specie in +the market, _independently of the profits of banking_. + +Another kind of stock, which may be called _Circulating Stock_, will be +created, _precisely equal in amount to the_ PRODUCTIVE STOCK, and +divided into shares of _one dollar each_. + +This _Circulating Stock_ will be represented by certificates, scrip, or +bills, of various denominations, like our present bank bills--that is, +_representing one, two, three, five, ten, or more shares, of one dollar +each_. + +These certificates, scrip, or bills of the _Circulating Stock_, will be +issued for circulation as currency, as our bank bills are now. + +In law, this _Circulating Stock_ will be in the nature of a lien on the +PRODUCTIVE STOCK. It will be entitled to no dividends. Its value will +consist, _first_, in its title to be received in payment of all dues to +the bank; _second_, in its title to be redeemed, either in specie on +demand, or in specie, with interest from the time of demand, before any +dividends can be made to the bankers; and, _third_, in its title, when +not redeemed with specie, to be redeemed (in sums of one hundred dollars +each) by a transfer of a corresponding amount of the capital itself; +that is, of the PRODUCTIVE STOCK. + +The holders of the _Circulating Stock_ are, therefore, sure, _first_, to +be able to use it (if they have occasion to do so) in payment of their +dues to the bank; _second_, to get, in exchange for it, either specie on +demand, or specie, with interest from the time of demand; or, _third_, a +share of the capital itself, the PRODUCTIVE STOCK; a stock worth par of +specie in the market, and as merchantable as a share of railroad stock, +or government stock, or any other stock whatever is now. + +Whenever PRODUCTIVE STOCK shall have been transferred in redemption of +_Circulating Stock_, it (the PRODUCTIVE STOCK) may be itself redeemed, +or bought back, at pleasure, by the bankers, on their paying its face in +specie, with interest (or dividends) from the time of the transfer; and +_must_ be so bought back, before any dividends can be paid to the +original bankers. + +The fulfilment of all these obligations, on the part of the bank, is +secured by the fact that the capital and all the resources of the bank +are in the hands of trustees, who are legally bound--before making any +dividends to the bankers--to redeem all paper in the manner mentioned; +and also to buy back all PRODUCTIVE STOCK that shall have been +transferred in redemption of the circulation. + +Such are the general principles of the system. The details are too +numerous to be given here. They will be found in the "_Articles of +Association of a Mortgage Stock Banking Company_," which the author has +drawn up and copyrighted. + + + + +CHAPTER II. + +SPECIE PAYMENTS. + + +Although the banks, under this system, make no absolute promise to pay +specie _on demand_, the system nevertheless affords a much better +_practical_ guaranty for specie payments, than the old specie paying +system (so called); and for these reasons, viz: + +1. The banks would be so universally solvent, and so universally known +to be solvent, that no runs would ever be made upon them for specie, +through fear of their insolvency. They could, therefore, maintain specie +payments with much less amounts of specie, than the old specie paying +banks (so called) could do. + +2. As there would be no fears of the insolvency of the banks, and as the +paper would be more convenient than specie for purposes of trade, bills +would rarely be presented for redemption--otherwise than in payment of +debts due the banks--except in those cases where the holders desired to +invest their money; and would therefore _prefer_ a transfer of +PRODUCTIVE STOCK, to a payment in specie. If they wanted specie for +exportation, they would buy it in the market (with the bills), as they +would any other commodities for export.[D] It would, therefore, usually +be only when they wanted an investment, and could find none so good as +the PRODUCTIVE STOCK, that they would return their bills for redemption. +And then they would return them, not really for the purpose of having +them redeemed with specie, but in the hope of getting a transfer of +PRODUCTIVE STOCK, and holding it awhile, and drawing interest on it. + + [D] There would always be a plenty of specie for sale, in the + seaports, as merchandise. + +3. The banks would probably find it for their interest, as promoting the +circulation of their bills, to pay, at all times, such _small_ amounts +of specie, as the public convenience might require. + +4. If there should be any suspensions of specie payments, they would be +only temporary ones, by here and there a bank separately, and not by all +the banks simultaneously, as under the so called specie paying system. +No general public inconvenience would therefore ever be felt from that +cause. + +5. If the banks should rarely, or never, pay specie _on demand_, that +fact would bring no discredit upon their bills, and be no obstacle to +their circulation at par with specie. It would be known that--unless bad +notes had been discounted--all the bills issued by the banks, would be +wanted to pay the debts due the banks. This would ordinarily be +sufficient, of itself, to keep the bills at par with specie. It would +also be known that, if specie were not paid _on demand_, it would either +be paid afterwards, with interest from the time of demand; or PRODUCTIVE +STOCK, equal in value to specie in the market, would be transferred in +redemption of the bills. The bills, therefore, would never depreciate in +consequence of specie not being paid _on demand_; nor would any +contraction of the currency ever be occasioned on that account. + +For the reasons now given, the system is practically the best specie +paying system that was ever invented. That is to say, it would require +less specie to work it; and also less to keep its bills always at par +with specie. In proportion to the amount of currency it would furnish, +it would not require so much as one dollar in specie, where the so +called specie paying system would require a hundred. It would also, by +immensely increasing our production and exports, do far more than any +other system, towards bringing specie into the country, and preventing +its exportation. + +If it should be charged that the system supplies no specie for +_exportation_; the answer is, that it is really no part of the +legitimate business of a bank to furnish specie for exportation. Its +legitimate business is simply to furnish credit and currency for home +industry and trade. And it can never furnish these constantly, and in +adequate amounts, unless it can be freed from the obligation to supply +specie on demand for exportation. Specie should, therefore, always be +merely an article of merchandise in the market, like any other; and +should have no special--or, at least, no important--connection with the +business of banking, except as furnishing the measure of value. If a +paper currency is made payable in specie, _on demand_, very little of it +can ever be issued, or kept in circulation; and that little will be so +irregular and inconstant in amount as to cause continual and +irremediable derangements. But if a paper currency, instead of +promising to pay specie _on demand_, promises only an alternative +redemption, viz: specie on demand, or specie with interest from the time +of demand, or other merchantable property of equal market value with +specie--it can then be issued to an amount equal to such property; and +yet keep its promises to the letter. It can, therefore, furnish all the +credit and currency that can be needed; or at least many times more than +the so called specie paying system ever did, or ever can, furnish. And +then the interest, industry and trade of a nation will never be +disturbed by the exportation of specie. And yet the standard of value +will always be maintained. + +The difference between the system here proposed, and the so called +specie paying system--in respect to their respective capacities for +furnishing credit and currency, and at the same time fulfilling their +contracts to the letter--is as fifty to one, at the least, in favor of +the former; probably much more than that. + +Thus under the system now proposed, the real estate and railroads of the +United States, at their present values, are capable of furnishing twenty +thousand millions ($20,000,000,000) of paper currency; and furnishing it +constantly, and without fluctuation, and every dollar of it will have an +equal market value with gold. The contracts or certificates comprising +it, can always be fulfilled to the letter; that is, the capital itself, +(the PRODUCTIVE STOCK,) represented by these certificates, can always be +delivered, _on demand_, in redemption of the certificates, if the banks +should be unable to redeem in specie. + +On the other hand, it would be impossible to have so much as four +hundred millions, ($400,000,000)--one fiftieth of the amount before +mentioned--of so called specie paying paper currency; that is, a paper +promising to pay specie _on demand_; _and constantly able to fulfil its +obligations_. + +It is of no appreciable importance that a paper currency should be +payable _on demand_ with specie. It is sufficient, if it be payable +_according to its terms, if only those terms are convenient and +acceptable_. For then the value of the currency will be known, _and its +contracts will be fulfilled to the letter_. And when these contracts are +fulfilled to the letter, then, _to all practical purposes, specie +payments are maintained_. When, for example, a man promises to pay +wheat, either on demand, or at a time specified, and he fulfils that +contract to the letter, _that, to all practical purposes, is specie +payments_; as much so as if the promise and payment had been made in +coin. IT IS, THEREFORE, THE SPECIFIC AND LITERAL FULFILMENT OF +CONTRACTS, THAT CONSTITUTES SPECIE PAYMENTS; AND NOT THE PARTICULAR KIND +OF PROPERTY THAT IS PROMISED AND PAID. + +The great secret, then, of having an abundant paper currency, and yet +maintaining all the while specie payments, consists in having the paper +represent property--like real estate, for example--that exists in large +amounts, and can always be delivered, on demand, in redemption of the +paper; and also in having this paper issued by the persons who actually +own the property represented by it, and who can be compelled by law to +deliver it in redemption of the paper. And the great secret--if it be a +secret--of having only a scanty currency, and of _not_ having specie +payments, consists in having the paper issued by a government that +cannot fulfil its contracts, and has no intention of fulfilling them; +and by banks that are not even required to fulfil them. + +It is somewhat remarkable that after ten years experiment, we have not +yet learned these apparently self-evident truths. + +The palpable fact is that the advocates of the present "National" +currency system,--that is, the stockholders in the present "National" +banks,--_do not wish for specie payments_. They wish only to maintain, +in their own hands, a monopoly of banking, and, as far as possible also, +a monopoly of all business depending upon bank loans. They wish, +therefore, to keep the volume of the currency down to its present +amount. As an excuse for this, they profess a great desire for specie +payments; and at the same time practice the imposture of declaring that +specie payments will be impossible, if the amount of the currency be +increased. + +But all this is sheer falsehood and fraud. It is, of course, impossible +to have specie payments, so long as the only currency issued is issued +by a government that has nothing to redeem with, and has no intention of +redeeming; and by banks that are not even required to redeem. But there +is no obstacle to our having twenty times as much currency as we now +have, and yet having specie payments--or the literal fulfilment of +contracts--if we will but suffer the business of banking to go into the +hands of those who have property with which to redeem, and can be +compelled by law to redeem. + +It is with government paper, and bank paper, as it is with the paper of +private persons; that is, it is worth just what can be delivered in +redemption of it, and no more. We all understand that the notes of the +Astors, and Stewarts, and Vanderbilts, though issued by millions, and +tens of millions, are really worth their nominal values. And why? Solely +because the makers of them have the property with which to redeem them +in full, and can be made to redeem them in full. We also all understand +that the notes of Sam Jones, and Jim Smith, and Bill Nokes, though +issued for only five dollars, are not worth two cents on the dollar. And +why? Solely because they have nothing to pay with; and cannot be made to +pay. + +Suppose, now, that these notes of Sam Jones, and Jim Smith, and Bill +Nokes, for five dollars, were the only currency allowed by law; and that +they were worth in the market but two cents on the dollar. And suppose +that the few holders of these notes, wishing to make the most of them, +at the expense of the rights of everybody else, should keep up a +constant howl for specie payments; and should protest against any issue +of the notes of the Astors, the Stewarts, and the Vanderbilts, upon the +ground that such issue would inflate the currency, and postpone specie +payments! What would we think of men capable of uttering such +absurdities? Would we in charity to their weakness, call them idiots? +or would we in justice to their villainy, denounce them as impostors and +cheats of the most transcendent and amazing impudence? And what would we +think of the wits of forty millions of people, who could be duped by +such preposterous falsehoods? + +And yet this is scarcely an exaggerated picture of the fraud that has +been practiced upon the people for the last ten years. A few men have +secured to themselves the monopoly of a few irredeemable notes; and not +wishing to have any competition, either in the business of banking, or +in any business depending upon bank loans, they cry out for specie +payments; and declare that no _solvent_ or _redeemable_ notes must be +put into circulation, in competition with their _insolvent_ and +_irredeemable_ ones, lest the currency be inflated, and specie payments +be postponed! + +And this imposture is likely to be palmed off upon the people in the +future, as it has been in the past, if they are such dunces as to permit +it to be done. + +It is perfectly evident, then, that specie payments--or the literal +fulfilment of contracts--does not depend at all upon the amount of paper +in circulation as currency; but solely upon the fact whether, on the one +hand, it be issued by those who have property with which to redeem it, +and can be made to redeem it; or whether, on the other hand, it be +issued by those who cannot redeem it, and cannot be made to redeem it. + +When the people shall understand these simple, manifest truths, they +will soon put an end to the monopoly, extortion, fraud, and tyranny of +the existing "National" system. + +The "National" system, so called, is, in reality, no national system at +all; except in the mere facts that it is called the national system, and +was established by the national government. It is, in truth, only a +private system; a mere privilege conferred upon a few, to enable them to +control prices, property, and labor; and thus to swindle, plunder, and +oppress all the rest of the people. + + + + +CHAPTER III. + +NO INFLATION OF PRICES. + + +SECTION 1. + +In reality there is no such thing as an inflation of prices, relatively +to gold. There is such a thing as a depreciated paper currency. That is +to say, there is such a thing as a paper currency, that is called by the +same names as gold--to wit, money, dollars, &c.--but that cannot be +redeemed in full; and therefore has not the same value as gold. Such a +currency does not circulate at its nominal, but only at its real, value. +And when such a currency is in circulation, and prices are measured by +it, instead of gold, they are said to be inflated, relatively to gold. +But, in reality, the prices of property are not thereby inflated at all +relatively to gold. It is only the measuring of prices by a currency, +that is called by the same names as gold, but that is really inferior in +value to gold, that causes the _apparent_, not _real_, inflation of +prices, relatively to gold. + +To measure prices by a currency that is called by the same names as +gold, but that is really inferior in value to gold, and then--because +those prices are nominally higher than gold prices--to say that they are +inflated, relatively to gold, is a perfect absurdity. + +If we were to call a foot measure a yard, and were then to say that all +cloth measured by it became thereby stretched to three times its length, +relatively to a true yard-stick, we should simply make ourselves +ridiculous. We should not thereby prove that the foot measure had really +stretched the cloth, but only that it had taxed our brains beyond their +capacity. + +It is only irredeemable paper--irredeemable in whole or in part,--that +ever _appears_ to inflate prices, relatively to gold. But that it really +causes no inflation of prices, relatively to gold, is proved by the fact +that it no more inflates the prices of other property, than it does the +price of gold itself. Thus we say that irredeemable paper, that is worth +but fifty cents on the dollar, inflates the prices of commodities in +general to twice their real value. By this we mean, that they are +inflated to twice their value relatively to gold. And why do we say +this? Solely because it takes twice as many of these irredeemable paper +dollars to buy any commodity,--a barrel of flour for example,--as it +would if the paper were equal in value to gold. But it also takes twice +as many of these irredeemable paper dollars to buy gold itself, as it +would if the paper were equal in value to gold. There is, therefore, +just as much reason for saying that the paper inflates the price of +gold, as there is for saying that it inflates the price of flour. It +inflates neither. It is, itself, worth but fifty cents on the dollar; +and it, therefore, takes twice as much of it to buy either flour or +gold, as it would if the paper were of equal value with gold. + +The value of the coins--in any nation that is open to free commerce with +the rest of the world--is fixed by their value in the markets of the +world; and can neither be reduced below that value, in that nation, by +any possible amount of paper currency, nor raised above that value, by +the entire disuse of a paper currency. Any increase of the currency, +therefore, by means of paper representing other property than the +coins--but having an equal value with the coins--is an absolute _bona +fide_ increase of the currency to that extent; and not a mere +depreciation of it, as so many are in the habit of asserting. + +Practically and commercially speaking, a dollar is not necessarily a +specific thing, made of silver, or gold, or any other single metal, or +substance. _It is only such a quantum of market value as exists in a +given piece of silver or gold._ And it is the same quantum of value, +whether it exist in gold, silver, houses, lands, cattle, horses, wool, +cotton, wheat, iron, coal, or any other commodity that men desire for +use, and buy and sell in the market. + +Every dollar's worth of vendible property in the world is equal in value +to a dollar in gold. And if it were possible that every dollar's worth +of such property, in the world, could be represented, in the market, by +a contract on paper, promising to deliver it on demand; and if every +dollar's worth could be delivered on demand, in redemption of the paper +that represented it, the world could then have an amount of currency +equal to the entire property of the world. And yet clearly every dollar +of paper would be equal in value to a dollar of gold; specie +payments--or the literal fulfilment of contracts--could forever be +maintained; and yet there could be no inflation of prices, relatively to +gold. Such a currency would no more inflate the price of one thing, than +of another. It would as much inflate the price of gold, as of any thing +else. Gold would stand at its true and natural value as a metal; and all +other things would also stand at their true and natural values, for +their respective uses. + +On this principle, if every dollar's worth of vendible property in the +United States could be represented by a paper currency; and if the +property could all be delivered on demand, in redemption of the paper, +such a currency would not inflate the prices of property at all, +relatively to gold. Gold would still stand at its true and natural value +as a metal, or at its value in the markets of the world. And all the +property represented by the paper, would simply be measured by the gold, +and would stand at its true and natural value, relatively to the gold. + +We could then have some thirty thousand millions ($30,000,000,) of paper +currency,--taking our property at its present valuation. And yet every +dollar of it would be equal to a dollar of gold; and there could +evidently be no inflation of prices, relatively to gold. No more of the +currency could be kept in circulation, than should be necessary or +convenient for the purchase and sale of property at specie prices. + +It is probably not practicable to represent the entire property of the +country by such contracts on paper as would be convenient and +acceptable as a currency. This is especially true of the _personal_ +property; although large portions even of this are being constantly +represented by such contracts as bank notes, private promissory notes, +checks, drafts, and bills of exchange; all of which are in the nature of +currency; that is, they serve for the time as a substitute for specie; +although some of them do not acquire any extensive, or even general, +circulation. + +But that it is perfectly practicable to represent nearly all the _real +estate_ of the country--including the railroads--by such contracts on +paper as will be perfectly convenient and acceptable as a currency; and +that every dollar of it can be kept always at par with specie throughout +the entire country--that all this is perfectly practicable, the author +offers the system already presented in proof. + + +SECTION 2. + +To sustain their theory, that an abundant paper currency--though equal +in value to gold--inflates prices, relatively to gold, its advocates +assert that, _for the time being_, the paper depreciates the gold itself +below its true value; or at least below that value which it had before +the paper was introduced. But this is an impossibility; for in a country +open to free commerce with the rest of the world, gold must always have +the same value that it has in the markets of the world; neither more, +nor less. No possible amount of paper can reduce it below that value; +as has been abundantly demonstrated in this country for the last ten +years. Neither can any possible amount of paper currency reduce gold +below its only true and natural value, viz.: its value as a metal, for +uses in the arts. The paper cannot reduce the gold below this value, +because the paper does not come at all in competition with it for those +uses. We cannot make a watch, a spoon, or a necklace, out of the paper; +and therefore the paper cannot compete with the gold for these uses. + +That gold and silver now have, and can be made to have, no higher value, +as a currency, than they have as metals for uses in the arts, is proved +by the fact that doubtless not more than one tenth, and very likely not +more than a twentieth, of all the gold and silver in the world (out of +the mines), is in circulation as currency. In Asia, where these metals +have been accumulating from time immemorial, and whither all the gold +and silver of Europe and America--except what is caught up, and +converted into plate, jewelry, &c.--is now going, and has been going for +the last two thousand years, very little is in circulation as money. For +the common traffic of the people, coins made of coarser metals, shells, +and other things of little value, are the only currency. It is only for +the larger commercial transactions, that gold and silver are used at all +as a currency. The great bulk of these metals are used for plate, +jewelry, for embellishing temples and palaces. Large amounts are also +hoarded. + +But that gold and silver coins now stand, and that they can be made to +stand, as currency, only at their true and natural values as metals, +for uses in the arts; and that neither the use, nor disuse, of any +possible amount of paper currency, in any one country--the United +States, for example--can sensibly affect their values in that country, +or raise them above, or reduce them below, their values in the markets +of the world, the author hopes to demonstrate more fully at a future +time, if it should be necessary to do so. + + +SECTION 3. + +Another argument--or rather assertion--of those who say that any +increase of the currency, by means of paper--though the paper be equal +in value to gold--depreciates the value of the gold, or inflates prices +relatively to gold, is this: They assert that, where no other +circumstances intervene to affect the prices of particular commodities, +such increase of the currency raises the prices of _all_ kinds of +property--relatively to gold--in a degree precisely corresponding with +the increase of the currency. + +This is the universal assertion of those who oppose a _solvent_ paper +currency; or a paper currency that is equal in value to gold. + +But the assertion itself is wholly _untrue_. It is wholly _untrue_ that +an abundant paper currency--that is equal in value to gold--raises the +prices of _all_ commodities--relatively to gold--in a proportion +corresponding to the increase of the currency. _Instead of doing so, it +causes a rise only in agricultural commodities, and real estate; while +it causes a great fall in the prices of manufactures generally._ + +Thus the increased currency produces _a directly opposite effect_ upon +the prices of agricultural commodities and real estate, on the one hand, +and upon manufactures, on the other. + +The reasons are these: + +Agriculture requires but very few exchanges, and can, therefore, be +carried on with very little money. Manufactures, on the other hand, +require a great many exchanges, and can, therefore, be carried on +(except in a very feeble way), only by the aid of a great deal of money. + +The consequence is, that the people of all those nations, that have but +little money, are engaged mostly in agriculture. Very few of them are +manufacturers. Being mostly engaged in agriculture, each one producing +the same commodities with nearly all the others; and each one producing +all he wants for his own consumption, there is no market, or very little +market, for agricultural commodities; and such commodities, +consequently, bear only a very small price. + +Manufactured commodities, on the other hand, are very scarce and dear, +for the sole reason that so few persons are engaged in producing them. + +But let there be an increase of currency, and laborers at once leave +agriculture, and become manufacturers. + +As manufactured commodities usually bring much higher prices than +agricultural, in proportion to the labor it costs to produce them, men +usually leave agriculture, and go into manufacturing, to the full extent +the increased currency will allow. + +The consequence is that, under an abundant currency, manufactures become +various, abundant, and cheap; where before they were scarce and dear. + +But while, on the one hand, manufactures are thus becoming various, +abundant, and cheap, agricultural commodities, on the other hand, are +rising: and why? Not because the currency is depreciated, but simply +because so many persons, who before--under a scanty currency--were +engaged in agriculture, and produced all the agricultural commodities +they needed, and perhaps more than they needed, for their own +consumption, having now left agriculture, and become manufacturers, have +become purchasers and consumers, instead of producers, of agricultural +commodities. + +Here the same cause--abundant currency--that has occasioned a _rise_ in +the prices of agricultural commodities, has produced a _directly +opposite effect_ upon manufactures. It has made the latter various, +abundant, and cheap; where before they were scarce and dear. + +On the other hand, when the currency contracts, manufacturing industry +is in a great degree stopped; and the persons engaged in it are driven +to agriculture as their only means of sustaining life. The consequence +is, that manufactured commodities become scarce and dear, from +non-production. At the same time, agricultural commodities become +superabundant and cheap, from over-production and want of a market. + +Thus an abundant currency, and a scanty currency, produce directly +opposite effects upon the prices of agricultural commodities, on the +one hand, and manufactures, on the other. + +The _abundant_ currency makes manufactures various, abundant, and cheap, +from increased production; while it raises the prices of agricultural +commodities, by withdrawing laborers from the production of them, and +also by creating a body of purchasers and consumers, to wit, the +manufacturers. + +On the other hand, a _scanty_ currency drives men from manufactures into +agriculture, and thus causes manufactures to become scarce and dear, +from non-production; and, at the same time, causes agricultural +commodities to fall in price, from over-production, and want of a +market. + +But whether, on the one hand, agricultural commodities are rising, and +manufactured commodities are falling, under an abundant currency; or +whether, on the other hand, manufactured commodities are rising, and +agricultural commodities are falling, under a scanty currency, the value +of the currency itself, dollar for dollar, remains the same in both +cases. + +The value of the currency, in either of these cases; is fixed, not at +all by the amount in circulation, but by its value relatively to gold. +And the value of gold, in any particular country, is fixed by its value +as a metal, and its value in the markets of the world; and not at all by +any greater or less quantity of paper that may be in circulation in that +country. + + +SECTION 4. + +But it is not alone agricultural _products_ that rise in price under an +abundant currency. Real estate also, of all kinds--agricultural, +manufacturing, and commercial--rises under an abundant currency, and +falls under a scanty currency. The reasons are these: + +_Agricultural_ real estate rises under an abundant currency, because +agricultural products rise under such a currency, as already explained. +_Manufacturing_ real estate rises under an abundant currency, simply +because--money being the great instrumentality of manufacturing +industry--that industry is active and profitable under an abundant +currency. _Commercial_ real estate rises under an abundant currency, +because, under such a currency, commerce, the exchange and distribution +of agricultural and manufactured commodities, is active and profitable. +_Railroads_, also, rise under an abundant currency, because, under such +a currency, the transportation of freight and passengers is increased. + +On the other hand, all kinds of real estate fall in price under a scanty +currency, for these reasons, to wit: Agricultural real estate falls, +because, manufactures having been in a great measure stopped, and the +manufacturers driven into agriculture, there is little market for +agricultural products, and those products bring only a small price. +Manufacturing real estate falls, because, manufacturing industry having +become impossible for lack of money, manufacturing real estate is lying +dead, or unproductive. Commercial real estate falls, because commerce, +the exchange and distribution of agricultural and manufactured +commodities, has ceased. Railroads fall in price, because, owing to the +suspension of manufactures and commerce, there is little transportation +of either freight or passengers. + +Thus it will be seen that an abundant currency creates a great rise in +agricultural products, and in all kinds of real estate--agricultural, +manufacturing, and commercial, (including railroads); and, at the same +time, causes manufactured commodities to become various, abundant, and +cheap. While, on the other hand, a scanty currency causes agricultural +commodities, and all kinds of real estate, to fall in price; and, at the +same time, makes manufactured commodities scarce and dear. + +It is a particularly noticeable fact, that those who claim that an +abundant paper currency inflates the prices of _all_ commodities, +relatively to gold, never find it convenient to speak of the variety, +abundance, and cheapness of manufactures, that exist under an abundant +currency; but only of the high prices of agricultural commodities, and +real estate. + +The whole subject of prices--a subject that is very little understood, +and that has been forever misrepresented, in order to justify restraints +upon the currency, and keep it in a few hands--deserves a more extensive +discussion; but the special purposes of this pamphlet do not admit of it +here. But enough has probably now been said, to show that the great +changes that take place in prices, under an abundant currency, on the +one hand, and a scanty currency, on the other, are not occasioned at all +by any change in the value of the currency itself--dollar for +dollar--provided the currency be equal in value to coin. + +Enough, also, it is hoped, has been said, to show to all holders of +either agricultural, manufacturing, or commercial real estate (including +railroads), that the greater or less value of their property depends +almost wholly upon the abundance or scarcity of currency; and that, +inasmuch as, under the system proposed, they have the power, in their +own hands, of creating probably all the currency that can possibly be +used in manufactures and commerce, they have no one but themselves to +blame, if they suffer the value of their property to be destroyed by any +such narrow and tyrannical systems of currency and credit as those that +now prevail, or those that have always heretofore prevailed. + +By using their real estate as banking capital, they can not only get an +income from it, in the shape of interest on money, but by supplying +capital to mechanics and merchants, they create a large class who will +pay high prices for agricultural products, and high prices and rents for +manufacturing and commercial real estate; and who will also supply them, +in return, with manufactured commodities of the greatest variety, +abundance, and cheapness. + +It is, therefore, mere suicide for the holders of real estate, who have +the power of supplying an indefinite amount of capital for mechanics and +merchants--and who can make themselves and everybody else rich by +supplying it--to suffer that power to be usurped by any such small body +of men as those who now monopolize it, through mere favoritism, +corruption, and tyranny, on the part of the government, and not because +they have any claim to it. + + + + +CHAPTER IV. + +SECURITY OF THE SYSTEM. + + +Supposing the property mortgaged to be ample, the system, as a system, +is absolutely secure. The currency would be absolutely incapable of +insolvency; for there could never be a dollar of the currency in +circulation, without a dollar of capital (Productive Stock) in bank, +which _must_ be transferred in redemption of it, unless redemption be +made in specie. + +The capital _alone_, be it observed--independently of the notes +discounted--must always be sufficient to redeem the entire circulation; +for the circulation can never exceed the capital (Productive Stock). But +the notes discounted are also holden by the trustees, and the proceeds +of them must be applied to the redemption of the circulation. Supposing, +therefore, the capital to be sufficient, and the notes discounted to be +solvent, the redemption of the circulation is doubly secured. + +What guarantee, then, have the public, for the sufficiency of the +mortgages? They have these, viz.: + +1. The mortgages, composing the capital of a bank, will be matters of +public record, and everybody, _in the neighborhood_, will have the means +of judging for himself of the sufficiency of the property holden. If +the property should be insufficient, the bank would be discredited at +once; for the abundance of solvent currency would be so great, that no +one would have any inducement to take that which was insolvent or +doubtful. + +2. By the Articles of Association, all the mortgages that make up the +capital of a bank, are made mutually responsible for each other; +because, if any one mortgage proves insufficient, no dividend can +afterwards be paid to any of the bankers (mortgagors), until that +deficiency shall have been made good by the company. The effect of this +provision will be, to make all the founders of a bank look carefully to +the sufficiency of each other's mortgages; because no man will be +willing to put in a good mortgage of his own, on equal terms with a bad +mortgage of another man's, when he knows that his own mortgage will have +to contribute to making good any deficiency of the other. The result +will be, that the mortgages, that go to make up the capital of any one +bank, _will be either all good, or all bad_. If they are _all good_, the +solvency of the bank will be apparent to all _in the vicinity_; and the +credit of the bank will at once be established _at home_. If the +mortgages are _all bad_, that fact, also, will be apparent to everybody +_in the vicinity_, and the bank is at once discredited _at home_. + +From the foregoing considerations, it is evident that nothing is easier +than for a _good_ bank to establish its credit, _at home_; and that +nothing is more certain than that a _bad_ bank would be discredited, _at +home_, from the outset, and could get no circulation at all. + +It is also evident that a bank, that has no credit at home, could get +none abroad. There is, therefore, no danger of the public being swindled +by bad banks. + +A bank that is well founded, and that has established its credit at +home, has so many ways of establishing its credit abroad, that there is +no need that they be all specified here. The mode that seems most likely +to be adopted, is the following, viz.: + +When the capital shall consist of mortgages, it will be very easy for +all the banks, in any one State, to make their solvency known _to each +other_. There would be so many banks, that some _system_ would naturally +be adopted for this purpose. + +Perhaps this system would be, that a standing committee, appointed by +the banks, would be established in each State, to whom each bank in the +State would be required to produce satisfactory evidence of its +solvency, before its bills should be received by the other banks of the +State. + +When the banks, or any considerable number of the banks, of any +particular State--Massachusetts, for instance,--shall have made +themselves so far acquainted with each other's solvency, as to be ready +to receive each other's bills, they will be ready to make a still +further arrangement for their mutual benefit, viz: To unite in +establishing one general agency in Boston, another in New York, and +others in Philadelphia, Baltimore, Cincinnati, Chicago, St. Louis, New +Orleans, San Francisco, &c., &c., where the bills of all these +Massachusetts banks would be redeemed, either from a common fund +contributed for the purpose, or in such other way as might be found +best. And thus the bills of all the Massachusetts banks would be placed +at par at all the great commercial points. + +Each bank, belonging to the association, might print on the back of its +bills, "_Redeemable at the Massachusetts Agencies in Boston, New York, +Philadelphia, &c._" + +In this way, all the banks of each State might unite to establish a +joint agency in every large city, throughout the country, for the +redemption of all their bills. In doing so, they would not only certify, +but make themselves responsible for, the solvency of each other's bills. + +The banks might safely make _permanent_ arrangements of this kind with +each other; because the _permanent_ solvency of all the banks might be +relied on. + +The permanent solvency of all the banks might be relied on, because, +under this system, a bank (whose capital consists of mortgages), once +solvent, is necessarily forever solvent, unless in contingencies so +utterly improbable as not to need to be taken into account. In fact, in +the ordinary course of things, every bank would be growing more and more +solvent; because, in the ordinary course of things, the mortgaged +property would be constantly rising in value, as the wealth and +population of the country should increase. The exceptions to this rule +would be so rare as to be unworthy of notice. + +There is, therefore, no difficulty in putting the currency, furnished by +each State, at par throughout the United States. + +At the general agencies, in the great cities, the redemption would, +doubtless, _so far as necessary_, be made in specie, _on demand_; +because, at such points, especially in cities on the sea-board, there +would always be an abundance of specie in the market as merchandise; and +it would, therefore, be both for the convenience and interest of the +banks to redeem in specie, on demand, rather than transfer a portion of +their capital, and then pay interest on that capital until it should be +redeemed, or bought back, with specie. + +Often, however, and very likely even in the great majority of cases, a +man from one State--as California, for example,--presenting +Massachusetts bills for redemption at a Massachusetts agency--either in +Boston, New York, or elsewhere--would prefer to have them redeemed with +bills from his own State, California, rather than with specie. + +If the system were adopted throughout the United States, the banks of +each State would be likely to have agencies of this kind in all the +great cities. Each of these agencies would exchange the bills of every +other State for the bills of its own State; and thus the bills of each +State would find their way home, without any demand for their redemption +in specie having ever been made. + +Where railroads were used as capital, all the banks in the United States +could form one association, of the kind just mentioned, to establish +agencies at all the great commercial points, for the redemption of their +bills. + +Of course each railroad would receive the bills of all other roads, for +fare and freight. + +Thus all railroad currency, under this system, would be put at par +throughout the United States. + + + + +CHAPTER V. + +THE SYSTEM AS A CREDIT SYSTEM. + + +SECTION 1. + +Perhaps the merits of the system, as a credit system, cannot be better +illustrated than by comparing the amount of loanable capital it is +capable of supplying, with the amount which the present "National" banks +(so called) are capable of supplying. + +If we thus compare the two systems, we shall find that the former is +capable of supplying more than fifty times as much credit as the latter. + +Thus the entire circulation authorized by all the "National" banks,[E] +is but three hundred and fifty-four millions of dollars ($354,000,000). + + [E] Exclusive of the so-called "gold" banks, which are too few + to be worthy of notice. + +But the real estate and railroads of the country are probably worth +twenty thousand millions of dollars ($20,000,000,000). This latter sum +is fifty-six times greater than the former; and is all capable of being +loaned in the form of currency. + +Calling the population of the country forty millions (40,000,000), the +"National" system is capable of supplying not quite _nine_ dollars ($9) +of loanable capital to each individual of the whole population. The +system proposed is capable of supplying five hundred dollars ($500) of +loanable capital to each individual of the whole population. + +Supposing one half the population (male and female) to be sixteen years +of age and upwards, and to be capable of producing wealth, and to need +capital for their industry, the "National" system would furnish not +quite eighteen dollars ($18) for each one of them, on an average. The +other system is capable of furnishing one thousand dollars ($1,000) for +each one of them, on an average. + +Supposing the adults (both male and female) of the country to be sixteen +millions (16,000,000), the "National" system is capable of furnishing +only twenty-two dollars and twelve and a half cents ($22.12-1/2) to each +one of these persons, on an average. The system proposed is capable of +furnishing twelve hundred and fifty dollars ($1,250) to each one, on an +average. + +Supposing the number of _male_ adults in the whole country to be eight +millions (8,000,000), the "National" system is capable of furnishing +only forty-four dollars and twenty-five cents ($44.25) to each one. The +other system is capable of furnishing twenty-five hundred dollars +($2,500) to each one. + +The present number of "National" banks is little less than two thousand +(2,000). Calling the number two thousand (2,000), and supposing the +$354,000,000 of circulation to be equally divided between them, each +bank would be authorized to issue $177,000. + +Under the proposed system, the real estate and railroads of the country +are capable of furnishing one hundred thousand (100,000) banks, having +each a capital of two hundred thousand dollars ($200,000); or it is +capable of furnishing one hundred and twelve thousand nine hundred and +ninety-four (112,994) banks, having each a capital ($177,000), equal, on +an average, to the capital of the present "National" banks. That is, +this system is capable of furnishing fifty-six times as many banks as +the "National" system, having each the same capital, on an average, as +the "National" banks. + +Calling the number of the present "National" banks two thousand (2,000), +and the population of the country forty millions (40,000,000), there is +only one bank to 20,000 people, on an average; each bank being +authorized to issue, on an average, a circulation of $177,000. + +Under the proposed system, we could have one bank for every five hundred +(500) persons; each bank being authorized to issue $200,000; or $23,000 +each more than the "National" banks. + +These figures give some idea of the comparative capacity of the two +systems to furnish credit. + +Under which of these two systems, now, would everybody, who needs +credit, and deserves it, be most likely to get it? And to get all he +needs to make his industry most productive? And to get it at the lowest +rates of interest? + +The proposed system is as much superior to the old specie paying system +(so called)--in respect to the amount of loanable capital it is capable +of supplying--as it is to the present "National" system. + + +SECTION 2. + +But the proposed system has one other feature, which is likely to be of +great practical importance, and which gives it a still further +superiority--as a credit system--over the so-called specie paying +system. It is this: + +The old specie paying system (so called) could add to the loanable +capital of the country, _only by so much currency as it could keep in +circulation, over and above the amount of specie that it was necessary +to keep on hand for its redemption_. But the amount of loanable capital +which the proposed system can supply, hardly depends at all upon the +amount of its currency that can be kept in circulation. It can supply +about the same amount of loanable capital, even though its currency +should be returned for redemption immediately after it is issued. It can +do this, because the banks, _by paying interest on the currency returned +for redemption_--or, what is the same thing, by paying dividends on the +PRODUCTIVE STOCK transferred in redemption of the currency--can postpone +the payment of specie to such time as it shall be convenient for them to +pay it. + +All that would be necessary to make loans practicable on this basis, +would be, that the banks should receive a higher rate of interest on +their loans than they would have to pay on the currency returned for +redemption; that is, on the PRODUCTIVE STOCK transferred in redemption +of the currency. + +The rate of interest _received_ by the banks, on the loans made by them, +would need to be so much higher than that _paid_ by them, on currency +returned for redemption, as to make it an object for them to loan more +of their currency than could be kept in circulation. Subject to this +condition, the banks could loan their entire capitals, whether much or +little of it could be kept in circulation. + +For example, suppose the banks should pay _six_ per cent. interest on +currency returned for redemption--(or as dividends on the PRODUCTIVE +STOCK transferred in redemption of such currency)--they could then loan +their currency at _nine_ per cent. and still make _three_ per cent. +profits, even though the currency loaned should come back for redemption +immediately after it was issued. + +But this is not all. Even though the banks should _pay_, on currency +returned for redemption, precisely the same rate of interest they +_received_ on loans--say _six_ per cent.--they could still do business, +if their currency should, on an average, continue in circulation _one +half the time for which it was loaned_; for then the banks would get +three per cent. net on their loans, and this would make their business a +paying one. + +But the banks would probably do much better than this; for bank credits +would supersede all private credits; and the diversity and amount of +production would be so great that an immense amount of currency would +be constantly required to make the necessary exchanges. And whatever +amount should be necessary for making these exchanges, would, of course, +remain in circulation. However much currency, therefore, should be +issued, it is probable that, on an average, it would remain in +circulation more than half the time for which it was loaned. + +Or if the banks should pay _six_ per cent. interest on currency returned +for redemption; and should then loan money, for _six_ months, at _eight_ +per cent. interest; and this currency should remain in circulation but +one month; the banks would then get eight per cent. for the one month, +and two per cent. net for the other five months; which would be equal to +three per cent. for the whole six months. Or if the currency should +remain in circulation two months, the banks would then get eight per +cent. for the two months, and two per cent. net for the other four +months; which would be equal to four per cent. for the whole six months. +Or if the currency should remain in circulation three months, the banks +would then get eight per cent. for three months, and two per cent. net +for the other three months; which would be equal to five per cent. for +the whole six months. Or if the currency should remain in circulation +four months, the banks would then get eight per cent. for the four +months, and two per cent. net for the other two months; which would be +equal to six per cent. for the whole six months. Or if the currency +should remain in circulation five months, the banks would then get eight +per cent. for the five months, and two per cent. net for the other +month; which would be equal to seven per cent. for the whole six months. + +The banks would soon ascertain, by experiment, how long their currency +was likely to remain in circulation; and what rate of interest it was +therefore necessary for them to charge to make their business a paying +one. And that rate, whatever it might be, the borrowers would have to +pay. Subject to this condition, the banks could always loan their entire +capitals. + + + + +CHAPTER VI. + +AMOUNT OF CURRENCY NEEDED. + + +It is of no use to say that we do not need so much currency as the +proposed system would supply; because, first, if we should not need it, +we shall not use it. Every dollar of paper will represent specific +property that can be delivered on demand in redemption of it, and that +will have the same market value as gold. The paper dollar, therefore, +will have the same market value as the gold dollar, or as a dollar's +worth of any other property; and no one will part with it, unless he +gets in exchange for it something that will serve his particular wants +better; and no one will accept it, unless it will serve his particular +wants better than the thing he parts with. No more paper, therefore, can +circulate, than is wanted for the purchase and sale of commodities at +their true and natural values, as measured by gold. + +Secondly, we do not know at all how much currency we do need. That is +something that can be determined only by experiment. We know that, +heretofore, whenever currency has been increased, industry and traffic +have increased to a corresponding extent. And they would unquestionably +increase to an extent far beyond any thing the world has ever seen, if +only they were aided and permitted by an adequate currency. + +We, as yet, know very little what wealth mankind are capable of +creating. It is only within a hundred years, or a little more, that any +considerable portion of them have really begun to invent machinery, and +learned that it is only by machinery that they can create any +considerable wealth. But they have not yet learned--at least, they +profess not to have learned--that money is indispensable to the +practical employment of machinery; that it is as impossible to operate +machinery without money, as it is to operate it without wind, water, or +steam. When they shall have learned, and practically accepted, this +great fact, and shall have provided themselves with money, wealth will +speedily become universal. And it is only those who would deplore such a +result, or those who are too stupid to see the palpable and necessary +connection between money and manufacturing industry, who resist the +indefinite increase of money. + +It is scarcely a more patent fact that land is the indispensable capital +for agricultural industry, than it is that money is the indispensable +capital for manufacturing industry. Practically, everybody recognizes +this fact, and virtually acknowledges it; although, in words, so many +deny it. Men as deliberately and accurately calculate the amount of +machinery that a hundred dollars in money will operate, as they do the +amount of machinery that a ton of coal, or a given amount of water, will +operate. They calculate much more accurately the amount of manufactured +goods a hundred dollars will produce, than they do the amount of grain, +grass, or vegetables an acre of land will produce. They no more expect +to see mechanics carrying on business for themselves without money, than +they do to see agricultural laborers carrying on farming without land, +or than they do to see sailors going to sea without ships. They know +that all mechanical, as well as agricultural, laborers, who have not the +appropriate capital for their special business, must necessarily stand +idle, or become mere wage-laborers for others, at such particular +employments as the latter may dictate, and at such prices as the latter +may see fit to pay. + +All these things attest the perfect knowledge that men have, that a +money capital is indispensable to manufacturing industry; whatever +assertions they may make to the contrary. + +They know, therefore, that prohibitions upon money are prohibitions upon +industry itself; that there can be no such thing as freedom of industry, +where there is not freedom to lend and hire capital for such industry. + +Every one knows, too--who knows any thing at all on such a subject--that +it is, intrinsically, as flagrant a tyranny, as flagrant a violation of +men's natural rights, for a government to forbid the lending and hiring +of money for manufacturing industry, as it is to forbid the lending and +hiring of land, or agricultural implements, for agricultural industry, +or the lending and hiring of ships for maritime industry. They know +that it is as flagrant a tyranny, as flagrant a violation of men's +natural rights, to forbid one man to lend another money for mechanical +industry, as it would be to forbid the former to lend the latter a house +to live in, a shop to work in, or tools to work with. + +It is, therefore, a flagrant, manifest tyranny, a flagrant, manifest +violation of men's natural rights, to lay any conditions or restrictions +whatever upon the business of banking--that is, upon the lending and +hiring of money--except such as are laid upon all other transactions +between man and man, viz.: the fulfilment of contracts, and restraints +upon force and fraud. + +A man who is without capital, and who, by prohibitions upon banking, is +practically forbidden to hire any, is in a condition elevated but one +degree above that of a chattel slave. He may live; but he can live only +as the servant of others; compelled to perform such labor, and to +perform it at such prices, as they may see fit to dictate. And a +government, which, at this day, subjects the great body of the +people--or even any portion of them--to this condition, is as fit an +object of popular retribution as any tyranny that ever existed. + +To deprive mankind of their natural right and power of creating wealth +for themselves, is as great a tyranny as it is to rob them of it after +they have created it. And this is done by all laws against honest +banking. + +All these things are so self-evident, so universally known, that no man, +of ordinary mental capacity, can claim to be ignorant of them. And any +legislator, who disregards them, should be taught, by a discipline +short, sharp, and decisive, that his power is wholly subordinate to the +natural rights of mankind. + +It is, then, one of man's indisputable, natural rights to lend and hire +capital in any and every form and manner that is intrinsically honest. +And as money, or currency, is the great, the indispensable +instrumentality in the production and distribution of wealth; as it is +the capital, the motive power, that sets all other instrumentalities in +motion; as it is the one thing, without which all the other great +agencies of production--such as science, skill, and machinery--are +practically paralyzed; to say that we need no more of it, and shall have +no more of it, than we now have, is to say that we need no more wealth, +and shall have no more wealth, and no more equal or equitable +distribution of wealth, than we now have. It is to say that the mass of +mankind--the laborers, the producers of wealth--need not to produce, and +shall not be permitted to produce, wealth for themselves, but only for +others. + +For a government to limit the currency of a people, and to designate the +individuals (or corporations) who shall have the control of that +currency, is, manifestly, equivalent to saying there shall be but so +much industry and wealth in the nation, and that these shall be under +the special control, and for the special enjoyment, of the individuals +designated; and, of course, that all other persons shall be simply their +dependants and servants; receiving only such prices for their property, +and such compensation for their labor, as these few holders of the +currency shall see fit to give for them. + +The effect of these prohibitions upon money, and consequently upon +industry, are everywhere apparent in the poverty of the great body of +the people. + +At the present time, the people of this country certainly do not produce +one third, very likely not one fifth, of the wealth they might produce. +And the little they do produce is all in the hands of a few. All this is +attributable to the want of currency and credit, and to the consequent +want of science, skill, machinery, and working capital. + +Of the twenty million persons, male and female, of sixteen years of age +and upwards--capable of producing wealth--certainly not one in five has +the science, skill, implements, machinery, and capital necessary to make +his or her industry most effective; or to secure to himself or herself +the greatest share in the products of his or her own industry. A very +large proportion of these persons--nearly all the females, and a great +majority of the males--persons capable of running machinery, and of +producing each three, five, or ten dollars of wealth per day, are now +without science, skill, machinery, or capital, and are either producing +nothing, or working only with such inferior means, and at such inferior +employments, as to make their industry of scarcely any value at all, +either to themselves or others, beyond the provision of the coarsest +necessaries of a hard and coarse existence. And this is all owing to +the lack of money; or rather to the lack of money and credit. + +There are, doubtless, in the country, ten million (10,000,000) persons, +male and female--sixteen years of age and upwards--who are naturally +capable of creating from three to five dollars of wealth per day, if +they had the science, skill, machinery, and capital which they ought to +have, and might have; but who, from the want of these, are now creating +not more than one dollar each per day, on an average; thus occasioning a +loss, to themselves and the country of from twenty to forty millions of +dollars per day, for three hundred days in a year; a sum equal to from +six to twelve thousand millions per annum; or three to six times the +amount of our entire national debt. + +And there are another ten million of persons--better supplied, indeed, +with capital, machinery, &c., than the ten million before mentioned--but +who, nevertheless, from the same causes, are producing far less than +they might. + +The aggregate loss to the country, from these causes, is, doubtless, +equal to from ten to fifteen thousand millions per year; or five, six, +or seven times the amount of the entire national debt. + +In this estimate no account is taken of the loss suffered from our +inability--owing simply to a want of money--to bring to this country, +and give employment to, the millions of laborers, in Europe and Asia, +who desire to come here, and add the products of their labor to our +national wealth. + +It is, probably, no more than a reasonable estimate to suppose that the +nation, as a nation, is losing twenty thousand millions of dollars +($20,000,000,000) per annum--about ten times the amount of our national +debt--solely for the want of money to give such employment as they need, +to the population we now have, and to those who desire to come here from +other countries. + +Among the losses we suffer, from the causes mentioned, the +non-production of new inventions is by no means the least. As a general +rule, new inventions are made only where money and machinery prevail. +And they are generally produced in a ratio corresponding with the amount +of money and machinery. In no part of the country are the new inventions +equal in number to what they ought to be, and might be. In three fourths +of the country very few are produced. In some, almost none at all. The +losses from this cause cannot be estimated in money. + +The government, in its ignorance, arrogance, and tyranny, either does +not see all this, or, seeing it, does not regard it. While these +thousands of millions are being lost annually, from the suppression of +money, and consequently of industry, and while three fourths of the +laborers of the country are either standing idle, or, for the want of +capital, are producing only a mere fraction of what they might produce, +a two-pence-ha'-penny Secretary of the Treasury can find no better +employment for his faculties, than in trying, first, to reduce the rate +of interest on the public debt one per cent.--thereby saving twenty +millions a year, _or fifty cents for each person, on an average_! And, +secondly, in paying one hundred millions per annum of the principal; +that is, _two and a half dollars for each person, on an average_! And he +insists that the only way to achieve these astounding results, is to +deprive the people at large of money! To destroy, as far as possible, +their industry! To deprive them, as far as possible, of all power to +manufacture for themselves! And to compel them to pay, to the few +manufacturers it has under its protection, fifty or one hundred per +cent. more for their manufactures than they are worth! + +He has been tugging at this tremendous task four years, or thereabouts. +And he confidently believes that if he can be permitted to enforce this +plan for a sufficient period of years, in the future, he will ultimately +be able to save the people, annually, _fifty cents each, on an average, +in interest_! and also continue to pay, annually, _two dollars and a +half for each person, on an average_, of the principal, of the national +debt! + +He apparently does not know, or, if he knows, it is, in his eyes, a +matter of comparatively small moment, that this saving of $20,000,000 +per annum in interest, and this payment of $100,000,000 per annum of +principal, which he proposes to make on behalf of the people, are not +equal to what _two days_--or perhaps even _one day_--of their industry +would amount to, if they were permitted to enjoy their natural rights of +lending and hiring capital, and producing such wealth as they please for +themselves. + +He apparently does not know, or, if he knows, it is with him a small +matter, that if the people were permitted to enjoy their natural freedom +in currency and credit, and consequently their natural freedom in +industry, they could pay the entire national debt three, four, or a half +dozen times over _every year_, more easily than they can save the +$20,000,000, and pay the $100,000,000, annually, by the process that he +adopts for saving and paying them. + +And yet this man, and his policy, represent the government and its +policy. The president keeps him in office, and Congress sustain him in +his measures. + +In short, the government not only does not offer, but is apparently +determined not to suffer, any such thing as freedom in currency and +credit, or, consequently, in industry. It is, apparently, so bent upon +compelling the people to give more for its few irredeemable notes than +they are worth; and so bent upon keeping all wealth, and all means of +wealth, in the hands of the few--upon whose money and frauds it relies +for support--that it is determined, if possible, to perpetuate this +state of things indefinitely. And it will probably succeed in +perpetuating it indefinitely--under cover of such false pretences as +those of specie payments, inflation of prices, reducing the interest, +and paying the principal, of the national debt, &c.--unless the people +at large shall open their eyes to the deceit and robbery that are +practised upon them; and, by establishing freedom in currency and +credit--and thereby freedom in industry and commerce--end at once and +forever the tyranny that impoverishes and enslaves them. + + + + +CHAPTER VII. + +IMPORTANCE OF THE SYSTEM TO MASSACHUSETTS. + + +SECTION 1. + +The tariffs, by means of which a few monied men of Massachusetts have so +long plundered the rest of the country, and on which they have so +largely relied for their prosperity, will not much longer be endured. +The nation at large has no need of tariffs. Money is the great +instrumentality for manufacturing. And the nation needs nothing but an +ample supply of money--in addition to its natural advantages--to enable +our people to manufacture for themselves much more cheaply than any +other people can manufacture for us. + +To say nothing of the many millions who, if we had the money necessary +to give them employment, might be brought here from Europe and Asia, and +employed in manufactures, more than half the productive power of our +present population--in the South and West much more than half--is +utterly lost for the want of money, and the consequent want of science, +skill, and machinery. And yet those few, who monopolize the present +stock of money, insist that they must have tariffs to enable them to +manufacture at all. And the nation is duped by these false pretences. + +To give bounties to encourage manufactures, and at the same time forbid +all but a favored few to have money to manufacture with, is just as +absurd as it would be to give bounties to encourage manufactures, and at +the same time forbid all but a favored few to have machinery of any kind +to manufacture with. It is just as absurd as it would be to give +bounties to encourage agriculture, and at the same time forbid all but a +favored few to own land, or have cattle, horses, seed corn, seed wheat, +or agricultural implements. It is just as absurd as it would be to give +bounties to encourage navigation, and at the same time forbid all but a +favored few to have ships. + +The whole object of such absurdities and tyrannies is to commit the +double wrong of depriving the mass of the people of all power to +manufacture for themselves, and at the same time compel them to pay +extortionate prices to the favored few who are permitted to manufacture. + +When tariffs shall be abolished, Massachusetts will have no means of +increasing her prosperity, nor even of perpetuating such poor prosperity +as she now has,[F] except by a great increase of money; such an increase +of money as will enable her skilled laborers and enterprising young men +to get capital for such industries and enterprises as they may prefer to +engage in here, rather than go elsewhere. + + [F] I say "poor prosperity," because the present prosperity of + Massachusetts is not only a dishonest prosperity, but is also + only the prosperity of the few, and not of the many. + +Even if Massachusetts were willing to manufacture for the South and +West, _without a tariff_, she could hope to do so only until the South +and West should supply themselves with money. So soon as they shall +supply themselves with money, they will be able to manufacture for +themselves more cheaply than Massachusetts can manufacture for them. +Their natural advantages for manufacturing are greatly superior to those +of Massachusetts. They have the cheap food, coal, iron, lead, copper, +wool, cotton, hides, &c., &c. They lack only money to avail themselves +of these advantages. And, under the system proposed, their lands and +railroads are capable of supplying all the money they need. And they +will soon adopt that, or some other system. And they will then not only +be independent of Massachusetts, but will be able to draw away from her +her skilled laborers, and enterprising young men, unless she shall first +supply them with the money capital necessary for such industries and +enterprises as may induce them to remain. They will, of course, go where +they can get capital, instead of staying where they can get none. + +So great are the natural advantages of the South and West over those of +Massachusetts, that it is doubtful how many of these men can be +persuaded to remain, by all the inducements that capital can offer. But +without such inducements it is certain they will all go. + +And Massachusetts has no means of supplying this needed money, except by +using her real estate as banking capital. + +It is, therefore, plainly a matter of life or death to the holders of +real estate in Massachusetts to use it for that purpose; for their real +estate will be worth nothing when the skilled labor and the enterprising +young men of Massachusetts shall have deserted her. + +All this is so manifest as to need no further demonstration. And +Massachusetts will do well to look the facts in the face before it is +too late. + + +SECTION 2. + +What prospect has Massachusetts under the present "National" system? + +The Comptroller of the Currency, in his last annual report, says, that +of the $354,000,000 of circulation authorized by law, Massachusetts has +now $58,506,686. He says, further, that this is more than four times as +much as she would be entitled to, if the currency were apportioned +equally among the States, according to population; more than twice as +much as she would be entitled to, if the circulation were apportioned +among the States, according to their wealth; and three times as much as +she is entitled to upon an apportionment made--as apportionments are now +professedly made--half upon population, and half upon wealth. + +The Comptroller further says, that a law of Congress, passed July 12, +1870, requiring him to withdraw circulation from those States having +more than their just proportion, and to distribute it among those now +having less than their just proportion, will require him to withdraw +"from thirty-six banks in the City of Boston, $11,403,000; [and] from +fifty-three country banks of Massachusetts, $2,997,000." + +Thus the law requires $14,400,000 to be withdrawn from the present banks +of Massachusetts. + +When this shall have been done, she will have but $44,106,686 left. And +as this will be more than three times her just proportion on a basis of +population, and nearly twice her just share on a basis of wealth, there +is no knowing how soon the remaining excess over her just share may be +withdrawn.[G] + + [G] If the excess mentioned in the text should not be withdrawn, + it will be only because the system is so villainous in itself, + that other parts of the country will not accept the shares to + which they are entitled. + +By the census of 1870, Massachusetts had a population of 1,457,351. She +has now, doubtless, a population of 1,500,000. Calling her population +1,500,000, the $58,506,686 of circulation which she now has, is equal to +$39 for each person, on an average. When $14,400,000 of this amount +shall have been withdrawn, as the law now requires it to be, the +circulation will be reduced to less than $30 for each person, on an +average. If the circulation should be reduced to the proportion to which +Massachusetts is entitled, on the basis of wealth--that is, to +$25,098,600--she will then have less than $17 for each person, on an +average. If the circulation should be reduced to the proportion to which +Massachusetts is entitled on a basis of population--that is to +$13,879,778--she will then have a trifle less than $9 for each person, +on an average. + +For years the industry of Massachusetts has been greatly crippled for +the want of bank credits, although her banks have been authorized to +issue their notes to the amount of $58,506,686; or $39 to each person, +on an average. What will her industry be when her banks shall be +authorized to issue only $44,106,686, or $30 for each person, on an +average? What will it be, if her bank issues shall be reduced to her +proportion on a basis of wealth, to wit, $25,098,600; or less than $17 +for each person, on an average? Or what will it be, if her bank +circulation shall be reduced to her proportion on a basis of population, +to wit, to $13,379,778; or less than $9 for each person, on an average? + +In contrast with such contemptible sums as these, Massachusetts, under +the system proposed, could have nine hundred millions ($900,000,000) of +bank loans;[H] that is, $600 for every man, woman, and child, on an +average; or $1,500 to each adult, male and female, on an average; or +$3,000 to each _male_ adult, on an average. + + [H] Since the notes on page fifth were printed, the _Boston Journal_, + of Jan. 11, 1873, says that, by the valuation of 1872, the real + estate of Massachusetts is $1,131,306,347. + +Which, now, of these two systems is most likely to secure and increase +the prosperity of Massachusetts? Which is most likely to give to every +deserving man and woman in the State, the capital necessary to make +their industry most productive to themselves individually, and to the +State? Which system is most likely to induce the skilled laborers and +enterprising young men of Massachusetts to remain here? And which is +most likely to drive them away? + + +SECTION 3. + +But the whole is not yet told. The present "National" system is so +burdened with taxes and other onerous conditions, that no banking at all +can be done under it, except at rates of interest that are two or three +times as high as they ought to be; or as they would be under the system +proposed. + +The burdens imposed on the present banks are probably equal to from six +to eight per cent. _upon the amount of their own notes that they are +permitted to issue_. + +In the first place, they are required, for every $90 of circulation, to +invest $100 in five or six per cent. government bonds.[I] This alone is +a great burden to all that class of persons who want their capital for +active business. It amounts to actual prohibition upon all whose +property is in real estate, and therefore not convertible into bonds. +And this is a purely tyrannical provision, inasmuch as real estate is a +much safer and better capital than the bonds. Let us call this a burden +of _two per cent. on their circulation_. + + [I] At first they were required to invest only in _six_ per cent. + bonds. But more recently they have been coerced or "persuaded" + to invest sixty-five millions ($65,000,000) in _five_ per + cent. bonds. And very lately it has been announced that "The + Comptroller of the Currency will not hereafter change United + States bonds, deposited as security for circulating notes of + national banks, except upon condition of substituting the new + five per cents. of the loan of July 14, 1870, and January 20, + 1872."--_Boston Daily Advertiser of February 5, 1873._ + + From this it is evident that all the banks are to be "persuaded" + into investing their capitals in _five_ per cent. bonds. + +Next, is the risk as to the permanent value of the bonds. Any war, civil +or foreign, would cause them to drop in value, as the frost causes the +mercury to drop in the thermometer. Even any danger of war would at once +reduce them in value. Let us call this risk another burden of _one per +cent. on the circulation_. + +Next, every bank in seventeen or eighteen of the largest cities--Boston +among the number--are required to keep on hand, at all times, a +reserve--_in dead capital_ (legal tenders)--"equal to at least +twenty-five per centum," and all other banks a similar reserve "equal to +at least fifteen per centum," "of the aggregate amount of their _notes +in circulation, and of their deposits_." + +Doubtless, two thirds--very likely three fourths--of all the bank +circulation and deposits are in the seventeen cities named. And as these +city banks are required to keep a reserve of dead capital equal to +twenty-five per cent., and all others a similar reserve equal to fifteen +per cent., _both on their circulation and deposits_, this average burden +on all the banks is, doubtless, equal to _two per cent. on their +circulation_. + +Next, the banks are required to pay to the United States an annual tax +of one per cent. on their average circulation, and half of one per cent. +on the amount of their deposits. + +Here is another burden equal to at least _one and a half per cent. on +their circulation_. + +Then the capitals of the banks--the United States bonds--are made liable +to State taxes to any extent, "not at a greater rate than is assessed +upon the monied capital in the hands of individual citizens of such +State." This tax is probably equal to _one per cent. on their +circulation_. + +Here, then, are taxes and burdens equal to _seven and a half per cent. +on their circulation_. + +Next, the banks are required to make at least _five_ reports annually, +to the Comptroller of the Currency, of their "resources and +liabilities." Also reports of "the amount of each dividend declared by +the association." + +Then, too, the banks are restricted as to the rates of interest they are +permitted to take. + +Then "Congress may at any time alter, amend, or repeal this act;" and +thus impose upon the banks still further taxes, conditions, +restrictions, returns, and reports. Or it may at pleasure abolish the +banks altogether. + +All these taxes, burdens, and liabilities, cannot be reckoned at less +than _eight or nine per cent. on the circulation of the banks_; a sum +two or three times as great as the rate of interest ought to be; and two +or three times as great as it would be under the system proposed. + +And yet the banks must submit to all these burdens as a condition of +being permitted to loan money at all. And they must make up--in their +rates of interest--for all these burdens. Under this system, therefore, +the rate of interest must always be two or three times as high as it +ought to be. + +The objections to the system, then, are, first, that it furnishes very +little loanable capital; and, second, that it necessarily raises the +interest on that little to two or three times what it ought to be. + +Such a system, obviously, could not be endured at all, but for these +reasons, viz.: first, that, being a monopoly, those holding it are +enabled to make enormous extortions upon borrowers; and, secondly, that +these borrowers--most of whom are the bankers themselves--employ the +money in the manufacture and sale of goods that are protected, by +tariffs, from foreign competition, and for which they are thus enabled +to get, say, fifty per cent. more than they are worth. + +In this way, these bank extortions and tariff extortions are thrown +ultimately upon the people who consume the goods which the bank capital +is employed in producing and selling. + +Thus the joint effect of the bank system and the tariff is, first, to +deprive the mass of the people of the money capital that would enable +them to manufacture for themselves; and, secondly, to compel them to pay +extortionate prices for the few manufactures that are produced. + +Under the system proposed, all these things would be done away. The West +and the South, that are now relied on to pay all these extortions, would +manufacture for themselves. Their lands and railroads would enable them +to supply all the manufacturing capital that could be used. And they +could supply it at one half, or one third, the rates now required by the +"National" banks. Of course, Massachusetts could not--under the +"National" system--manufacture a dollar's worth for the South and West. +She could not keep her manufacturing laborers. They would all go where +they could get cheap capital, cheap supplies, and good markets. And then +the manufacturing industry of Massachusetts, and with it the value of +her real estate, will have perished from the natural and legitimate +effect of her meanness, extortion, and tyranny. + +Looking to the future, then, there is no State in the Union--certainly +none outside of New England--that has a greater interest in supplying +her mechanics with the greatest possible amount of capital; or in +supplying it at the lowest possible rates of interest. And this can be +done only by using her real estate as banking capital. + + + + +CHAPTER VIII. + +THE TRUE CHARACTER OF THE "NATIONAL" SYSTEM. + + +SECTION 1. + +Under the "National" system there are less than 2,000 banks. But let us +call them 2,000. + +Calling the population of the country forty millions, there is but one +bank to 20,000 people. + +And this one bank is, _in law_, a person; and only a single person. In +lending money, it acts, and can act, only as a unit. Its several +stockholders cannot act separately, as so many individuals, in lending +money. + +So far, therefore, as this system is concerned, _there is but one money +lender for twenty thousand people_! + +Of these 20,000 people, ten thousand (male and female) are sixteen years +of age and upwards, capable of creating wealth, and requiring capital to +make their labor most productive. + +Yet, so far as this system is concerned, there is but one person +authorized to lend money to, or for, these ten thousand, who wish to +borrow. + +And this one money lender is one who, proverbially "has no soul." It is +not a natural human being. It is a legal, an artificial, and not a +natural, person. It is neither masculine nor feminine. It has not the +ordinary human sympathies, and is not influenced by the ordinary human +motives of action. It is no father, who might wish to lend money to his +children, to start them in life. It is no neighbor, who might wish to +assist his neighbor. It is no citizen, who might wish to promote the +public welfare. It is simply a nondescript, created by law, that wants +money, and nothing else. + +Moreover, it has only $177,000 to lend to these 10,000 borrowers; _that +is, a fraction less than $18, on an average, for each one_! + +What chance of borrowing capital have these ten thousand persons, who +are forbidden to borrow, except from this one soulless person, who has +so little to lend? + +If money lenders must be soulless--as, perhaps, to some extent, they +must be--it is certainly of the utmost importance that there be so many +of them, and that they may have so much money to lend, as that they may +be necessitated, by their own selfishness, to compete with each other, +and thus save the borrowers from their extortions. + +But the "National" system says, not only that the money lender shall +be a soulless person, and one having only a little money to lend, +but that he shall also have the whole field--a field of 10,000 +borrowers--entirely to himself! + +It says that this soulless person shall have this whole field to +himself, notwithstanding he has so little money to lend, and +notwithstanding there are many other persons standing by, having, in the +aggregate, fifty times as much money to lend as he; and desiring to +lend it at one half, or one third, the rates he is demanding, and +extorting! + +It says, too, that he shall have this whole field to himself, +notwithstanding that ninety-nine one-hundredths of those who desire to +borrow, are sent away empty! and are thereby condemned--so far as such a +system can condemn them--to inevitable poverty! + + +SECTION 2. + +But further. Each one of these 2,000 legal, or artificial, persons, who +alone are permitted to _lend_ money, is made up of, say, fifty actual, +or natural, persons, to whom alone, it is well known, that this legal +person will lend it! + +These 2,000 legal persons, then, who alone are permitted to lend money, +are made up of 100,000 actual persons, who alone are to borrow it. + +These 100,000 actual persons, who compose the legal persons, do not, +then, become bankers because they have money to lend to others, but only +because they themselves want to borrow! + +Thus when the system says that they alone shall lend, it virtually says +that they alone shall borrow; because it is well known that, in +practice, they _will_ lend only to themselves. + +In short, it says that only these 100,000 men--or one in four hundred of +the population--shall have liberty either to lend, or borrow, capital! +Such capital as is indispensable to every producer of wealth, if he +would control his own industry, or make his labor most productive. + +Consequently, it says, practically--so far as it is in its power to +say--that only one person in four hundred of the population shall be +permitted to have capital; or, consequently, to labor directly for +himself; and that all the rest of the four hundred shall be compelled to +labor for this one, at such occupations, and for such wages, as he shall +see fit to dictate. + +In short, the system says--as far as it can say--that only 100,000 +persons--only one person in four hundred of the population--_shall be +suffered to have any money_! And, consequently, that all the property +and labor of the thirty-nine million nine hundred thousand (39,900,000) +persons shall be under the practical, and nearly absolute, control of +these 100,000 persons! It says that thirty-nine million nine hundred +thousand (39,900,000) persons shall be in a state of industrial and +commercial servitude (to the 100,000), elevated but one degree above +that of chattel slavery. + +And this scheme is substantially carried out in practice. These 100,000 +men call themselves "_the business men_" of the country. By this it is +meant, not that they are the producers of wealth, but only that they +alone handle the money! Other persons are permitted to sell only to +them! to buy only of them! to labor only for them! and to sell to, buy +of, and labor for, them, only at such prices as these 100,000 shall +dictate. + +These 100,000 so called "_business men_," not only own the government, +but they _are_ the government. Congress is made up of them, and their +tools. And they hold all the other departments of the government in +their hands. Their sole purpose is power and plunder; and they suffer no +constitutional or natural law to stand in the way of their rapacity. + +How many times, during the last presidential canvass, were we told that +"_the business men_" of the country wished things to remain as they +were? Having gathered all power into their own hands, having subjected +all the property and all the labor of the country to their service and +control, who can wonder that they were content with things as they were? +That they did not desire any change? And their money and their frauds +being omnipotent in carrying elections, there was no change. + +These 100,000 "business men," having secured to themselves the control +of all bank credits, and thereby the control of all business depending +on bank loans; having also obtained control of the government, enact +that foreigners shall not be permitted to compete with them, by selling +goods in our markets, except under a disadvantage of fifty to one +hundred per cent. + +And this is the industrial and financial system which the "National" +bank system establishes--so far as it can establish it. And this is the +scheme by means of which these 100,000 men cripple, and more than half +paralyze, the industry of forty millions of people, and secure to +themselves so large a portion of the proceeds of such industry as they +see fit to permit. + + + + +CHAPTER IX. + +AMASA WALKER'S OPINION OF THE AUTHOR'S SYSTEM. + + +As Mr. Amasa Walker is considered the highest authority in the country, +in opposition to all paper currency that does not represent gold or +silver actually on hand, it will not be impertinent to give his opinion +of the system now proposed. + +He reviewed it in a somewhat elaborate article, entitled "_Modern +Alchemy_," published in the _Bankers Magazine (N. Y.)_ for December, +1861. + +That he had no disposition to do any thing but condemn the system to the +best of his ability, may be inferred from the following facts. + +After describing the efforts of the old alchemists to transmute the +baser metals into gold, he represents all attempts to make a useful +paper currency as attempts "_to transmute paper into gold_." He says +that the idea that paper can be made to serve the purposes of money is +"_a perfectly cognate idea_" with that of the old alchemists, that the +baser metals can be transmuted into gold. (p. 407.) + +He also informs us that-- + + "It is perfectly impracticable _to transmute paper into gold_ + to any extent or degree whatever, and that all attempts to do + so (beneficially to the trade and commerce of the world) are + as absurd and futile as the efforts of the old alchemists to + change the baser metals into the most precious." (p. 415). + +These extracts are given to show the spirit and principle of his +article, and the kind of arguments he employs against all paper that +represents other property than coin; even though that property have +equal value with coin in the market. + +Yet he says:-- + + "One thing we cheerfully accord to MR. SPOONER'S system--_it is + an honest one_. Here is no fraud, no deception. _It makes no + promise that it cannot fulfil._ It does not profess to be + convertible into specie [on demand]. It is the best + transmutation project we have seen." (p. 413). + +When he says that "it is the best _transmutation_ project he has seen," +the context shows that he means to say that it _comes nearer to +transmuting paper into gold_, than any other system he has seen. + +This admission, coming from so violent an opponent of paper currency, +may reasonably be set down as the highest commendation that _he_ could +be expected to pay to any _paper_ system. + +He also says:-- + + "Many schemes of the same kind have, at different times, been + presented to the world; but none of them have been more + complete in detail, or more systematically arranged, than that + of MR. SPOONER. (p. 414). + +But by way of condemning the system as far as possible, he says:-- + + "MR. SPOONER, however, can, we think, make no claim to + originality, so far as the general principle is concerned. The + famous bank of JOHN LAW, in France, was essentially of the same + character." (p. 413.) + +No, it was _not_ essentially of the same character. One difference--to +say nothing of twenty others--between the two systems was this: that +LAW'S bank issued notes that it had no means to redeem; whereas MR. +WALKER himself admits that "MR. SPOONER'S _system makes no promises that +it cannot fulfil_." That is to say, it purports to represent nothing +except what it actually represents, viz.: property that is actually on +hand, and can always be delivered, _on demand_, in redemption of the +paper. Is not this difference an "essential" one? If MR. WALKER thinks +it is not, he differs "essentially" from the rest of mankind. What fault +was ever found with JOHN LAW'S bank, except that it could not redeem its +paper? Will MR. WALKER inform us? + + + + + +End of Project Gutenberg's A New Banking System, by Lysander Spooner + +*** END OF THIS PROJECT GUTENBERG EBOOK A NEW BANKING SYSTEM *** + +***** This file should be named 34187.txt or 34187.zip ***** +This and all associated files of various formats will be found in: + https://www.gutenberg.org/3/4/1/8/34187/ + +Produced by Curtis Weyant and the Online Distributed +Proofreading Team at https://www.pgdp.net (This file was +produced from images generously made available by The +Internet Archive) + + +Updated editions will replace the previous one--the old editions +will be renamed. + +Creating the works from public domain print editions means that no +one owns a United States copyright in these works, so the Foundation +(and you!) can copy and distribute it in the United States without +permission and without paying copyright royalties. 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