Free Banking

get rid of rent; but it willbein:6.nitely fteer if it ge'ts rider interest, profit, and rent of buildings and still keeps ground rent, than if. it gets rid of ground-rent and keeps •the other forl11sof usury. Give us free money, the nrst great step to Anarchy, and we'll attend to ground-rent, afterwards. FREE' BANKING In 1889, Mr. Hugo Bilgram firstpubIished his Hln_ voluntary Idleness," 'which Mr. Tucker ,characterized as the most important book -of the generation. ' But" while admtringthe author's examination of the relation be tween unemployment and .interest on money, and while agreeing with his conclusion that Han expansion of the volutrie of money, by extending. the issue of credit llloney, will •••'prevent 'business stagnation and involuntary 'idle ness," the editor of Liberty. had, one substantial disagree fi1ent with Mr. Bilgram:t.which he stated ,thus: WHEN, Mr., Bilgram' proposes that ,the government, shall carryon .(and .presumably monopolize, though. ,this ~s. not clearly ,stated) the business of issuing.,money, ,it is hardly necessar.y to say that' Liberty cannot follow hirth It goes with him ih his economy, but not. in his politics. There are at (least,three valid reasons" and doubtless others also, why the. government should do nothing of the kind.

98 INDIVIDU AL LIBERTY First the government is a tyrant living by theft, and therefore has no business to engage in any business. Second, the government has none of the characteristics of a successful business man, being wasteful, careless, clumsy, and short-sighted in the extrem~. Third, the government is· thoroughly irresponsible, having it in its power to effectively repudiate its obligations at any time. With these qualifications Liberty gives Mr. Bilgram's book enthusiastic welcome. Its high price will debar many from reading it; but money cannot be expended more wisely than in learning the truth about money. Mr. Bilgram then writes to Liberty in defense of his contention that State banking is preferable to mutual banking on the ground that ttmutual banking cannot deprive capital of its power to bring unearned returns to its owner." Mr. Tucker proceeds to demolish that position: MR. BILGRAM, if I understand him, prefers government banking to mutual banking, because with the former the rate of discount would simply cover risk, all banking expenses being paid out of the public treasury, while with the latter the rate of· discount would cover both risk and banking expenses, which in his opinion·.would place the burden of banking ex penses upon the borrow~rs instead of upon the people. The answer to this is simple and decisive: the burden of discount, no matter what elements, many or few, may constitute it, falls ultimately, under any system, not on the borrowers, but on the people. Broadly speaking, all the interest paid is paid by the people. Under mutual banking the expenses of the banks would, it is true, be paid directly by the borrowers, but the latter would recover this from the people in the prices placed upon their products. And it seems to me much more scientific that the people should thus pay these expenses through the borrowers in the regular channels of exchange than that they should follow the communistic method of pay ing them through the public treasury.

INDIVIUUAL LIBERTY 99 Mr. Bilgram's statement. that money-lenders •who, besides "heing compensated for risk, .are"compensated ,.for' their labor asbankers •••and .for their incidental expenses,~~thereby obtain an income from themereJoanof money"is incomprehensible to me. He<might just as well say that under government banking the officials who should receive salaries"from the treasury for, carrying, on,the business.would thereby obtain an income.£rom the mere loan of money. Under a free system the hanker is as simply and truly paid only the normal wage of his labor as is the' official under a government system.. But, since Mr. Bilgramdoes not ·propose to place any re striction upon private banking, Jhave no quarrel with him. He is welcome to 'his opinion. that private banking could not compete with the governmental institution. I stoutly main tain .the contrary,.' and the '•• very existence of. the. finandal prohibitions is thehest,' evidence that 1'3tll right. That' which can succeed by intrinsic merit never seeks a legal bolster.

Mr. Bilgram remained .unconvinced that he was wrong in every respect, and still maintained that the cost of making the tokens should he defrayed hythe. government. To which Mr. Tucker replied that there areatle,ast two answers: TIiE fu-stisthat tliatJac~dnthe tate of interest which represents the cost of making tokens is so insignificant (prob ably Jess than one-tenth of one per cent., guessing at it) that the. people could wen afford (if there were no alternative )to Iet,a few individualsprpfit to that extent rather than suffer the enormous evils that., result, .from transferring enterprise from' private·,to government controL, I am .not so enamored of absolute equality that I would sacrifice both hands rather than one finger. The second answer is that no ,private money-lenders could, under a free system, reap "even the small,.profit referred to. Mr.•,Bilgram. speaks of' ~Cthose •who lend •money which they have acquired." •Acquired how? Any money which they have acquired must have. originated, with '. issuers.who paid, tJ.,e cpsto£making>thetokens, and every time it, has change~ '·handsthehurden .of .this 'cost has. been transferred with it.

100 ·INDIVIDUAL LIBER TY Is it likely that men who acquire money by paying this cost will lend it to others without exacting this cost? If they should, they would be working for others for nothing,-a very different thing from ccreceiving pay for work they had not performed." No man can lend money unless he either issues it himself and pays the cost of making the tokens, or else buys or borrows it from others to whom he must pay that cost. Along these same lines Mr. J. K. Ingalls contributed to Liberty an article, and incidentally asked the editor some questions; among others, whether, if mutual money is to be made redeemable in gold or silver, it involves the principle of a legal tender, or of a tender of CCcommon consent." Mr. Tucker answers: YES, it does involve one of these, but between the two there is all the difference that there is between force and freedom" authority and liberty. And where the tender is one of ((common consent," those who do not like it are at liberty to consent in common to use any other and better one that they can devise.

It is difficult for me to see any fraud in promising to pay a certain thing in a certain time, or on demand, and keep ing the promise. That is what we do when we issue redeem able money and afterwards redeem it. The fraud in regard to money consists not in this, but in limiting 'by law the security for these promises to pay to a special kind of property, limited in quantity and easily monopolizable. It is doubtful if there is anything more variable in its purchasing power than labor. The causes of this are partly natural, such as the changing conditions of production, and partly and principally artificial, such as the legal monopolies that impart fictitious values. But'labor expended in certain directions is unquestionably more constant in its average re sults than when expended in other directions. Hence the ad vantage of using the commodities resulting from the former for the redemption of currency whenever redemption shall be demanded. Whether gold and silver are among these INDIVIDUAL LIBERTY 101: commodities ~sa question, not of principle, but of statistics.

As a matter of fact, the holders of good redeemable money seldom as~ for any other-redemption than its acceptance in the. market and its final cancellation by the>i~uer's restoration of •. the .securities on which it· was issued. But ill case any other redemption is. desired, .it .is necessary to adopt for .the purpose some· commodity easily transferable •. and most nearly invariable in value. Does .Mr.. Ingalls mean that all. xnoney must 1>e a1>9UsheJ~ I· can see no other inference from. his position. For there are only two kinds ofmoney,-commodity money and credit money. The former he . certainly does not believe in,. the latter he thinks fra~dulent and unsafe. Are we, then, to stop exchanging the products oiour labor? It is clearly the right of everyman. to •.• gamble it. .h~ chooses to, and he has as good a right to make his bets on the rise and fall of grain l'rices .as· on anything else; only he must not gamble with loaded dice, or be allowed special privileges whereby he can control the price of grain. Hence, in a free and •• open .market,. these transactions wher,e neither equiva: lent is transferred ;fre legitimate enough. But they are un wise, because, apart from the winning orJosing of the bet, there is .no advantage to.begained. from them. Transactions, on .the other hand,iJ:i which only One equivalent is immedi ately~ransferred are.£requentlyof the greatest advantage, as they enable men to getl'0ssession of tools which they imme diatelyneed, but cannot'immediately pay for. Of course the promise to pay is liable to be more or less valuable at ma turity than when issued, but so is the property .originally transferred. Theborro,wer is no mo~e. exempt than the lender ·from the variatiol}s.in .value. An1 the .interests of .the holderot property who nelther borrows qor lends are also Just as Il1uchaffectedbythem.There is an ~lement of· chance in aHproperty. relations. So far as this. is 1uetomonopoly and privilege, we must do our best to aboli~h it;. so far as it is natural and inevitable, we must get alon~with it as· best we can,ibutnot be frighte1.1ed by it into discarding credit .and trioney,the •most potent •instruments .of~ssociation and civi.w · lization. , Liberty.is published •not so. much to· th9roughlY.inform its reacIers.regardingthe ideas which· it advocates as to interest 102. INDIVIDUAL LIBERTY them to seek this thorough information through other chan nels. For instance, in regard to free money, there is a book HMutual Banking," by William B. Greene-which sets forth the evils of money monopoly and the blessings of gratuitous credit in a perfectly plain and convincing way to all who will take the pains to study and understand it. Liberty. can only state baldly the principles which Greene advocates and hint at some of their results. Whomsoever such statements and hints serve to interest can and will secure the book of me for a 'small sum. Substantially the same views, presented in different ways, are to be found in the financial writings of Lysander Spooner, Stephen Pearl Andrews, Josiah Warren, and, above all, P. J. Proudhon, whose untranslated works contain untold treasures, which I hope· some day to put within the reach of English readers.