The Abolition of Interest

THE ABOLITION OF INTEREST To-day, a weekly newspaper published in ~oston in 1890, printed an editorial on the subject of interest which contained so·many vulnerable points that the edi tor of Liberty was moved to criticize it. After point ing out the errors and fallacies in the editorial, he pro ceeded: THE modern opponents of interest are perfectly willing to consider facts tending to refute their position, but no facts can have such a tendency unless they belong to one of two classes: first, facts showing that interest has generally (not sporadically) ex~sted in a community in whose economy money was as important a factor as it is with us to-day and in whose laws there was no restriction upon its issue;, or, second, facts showing that interest is sustained by causes that would still be effectively, invincibly operative after the aboli tion of the banking monopoly. I do not find any such facts among those cited by Ta-day. The array is formidable in appearance only. Possession of encyclopxdic knowledge is a virtue which Spencer sometime~ exaggerates into a vice, and IN D I VID U AL LIBE RT Y 10) a. vice' which some of, his •disciples too seldom reduce to the proportions ofa virtue.

rro,the,economic •truism •I will give.a, little 'more 'attention~ its irrelevancy,'. being less apparent. Here it. is: uThe, exist ence of interest depends,\of course,primarily upon thee:x;ist enceo£ private property.". I call this a truism,. though the worduprimarily" introduces an element of error. If weare tojnquire •upon, what interest primarily.. depends, we 'shall. ~ta~t upon,an endlessjourney intQ the realm of metaphysics. But without entering that realm we certainly call go ,farther back iJ;l.theseries than private property and nndthatinterest depends "still more.<remotely upon .'. the existence, of human beings and even of theuniV'erse itself. However, inte!'"est undoubtedly depends upon private property, and, if this fact had any significance, ] sh()uldnot. stop 'to trifle over •the word ctprimarily.".> :But it.has' no ,sigJ;lifica~ce. It only seems to, haV'e significance b~'caQseit ca~ries,or seems,to be.supposed to carry, the implication that, if private •. property' is· a neces sary c~ondition of interest, .interest isa necessary result. of private ·prQperty.• ,The inference, of course, is wholly unwar ralltedbyJogic, but that it is intendedappear~ from ar.emark almost immediately following:ttE~pectations have been en 'tertainedthat it '. [interest] •will eventually become zero; 1)ut this stage. will •• prob~bly, be reached only when 'econorme products. become common free propefty of the human· race."

The word uprobably" .• leaves the. writer "to be' sure, 'a '. small logic.al loophole of escape, but .it is _not expected that the re;tderwill .notice it,the', emphasis.'. being all in the other di~ection.The reader is expected to look upon interest asa n.ec~ssary result of. private property simply because without private property there ,could, be no. interest. • Now, my hat sometimes.hangs upon a .hook, and, if there were no book, there could be no hanging hat; but it by no means follows that, because there isa hook there must be. a hanging hat. Therefore, if 1 wanted to abolish hanging hats, itwouldibe idle, irrelevant, and' illogical to declare. that. I must. nrst , abqlishhooks., Likewiseit is idle, irrelevant, and illogical to de~lare that before interest, can be abolished.private property must be. abolished~ .,.Take another illustration~ If there were tl0>yvinter, water-pipes would never freeze up,. but it is not 41.~cessary ,to abolish winter to. prevent this. freezing••'.' HU1l1a~ 104 INDIVIDUAL LIBERTY device has succeeded in preventing it as a general thing. Simi larly, without private property there would be no borrowing of capital and therefore no interest; but it is claimed that, without abolishing private property, a human device-namely, money and banking-will, if not restricted, prevent the necessity of borrowing capi~al as a general thing, and there fore virtually abolish interest; though interest might still be paid in extraordinary cases, just as water-pipes still freeze up under extraordinary conditions. Is this claim true? That is the only question.

This claim is met in the single relevant sixteenth of To day's· article. But it is met sim,ply by denial, which is not disproof. I give the writer's words: uThe most popular fallacy upon the subject now is that the rate of interest can be lowered by increasing the amount of currency. What men really wish to borrow usually is capital,-agencies of production,-and money is only a means for the transfer of these. The amount· of currency can have no effect upon the abundance of capital, and even an increase in the abundance of capital does not always lower the rate of interest; this is partly determined by the value of capital in use." This paragraph, though introduced with a rather nonchalant air, seems to have been the objective point of the entire article. All the rest was apparently written to furnish an occasion for voicing the excessively silly notion that ccthe amount of cur rency can have no effect upon· the abundance of capital." As I have already said, to show how silly it is, it is only necessary to slightly change the wording of the phrase. Let it be stated thus: ccThe abolition of currency can have no effect upon the abundance of capital." Of 'course, if the former statement is true, the latter follows. But the latter is manifestly absurd, and hence the former is false. To affirm it is to affirm that currency does not facilitate the distribution of wealth; for if it does, then it increases the effective demand for wealth, and hence the production of wealth, and hence the abundance of capital. It is true that tcah increase in the abundance of capital does not always lower the rate of interest." An extra horse attached to a heavy load does not always move the load. If the load is heavy enough, two extra horses will be r~quired to move it. But it .is 'always the tendency of INDIVIDUAL LIBERTY 105 the first extra horse.to move it, .whether he.succeedsor not.

In the same, way, increase. of ,capit'al always tends to .lower interest up to· the time .when in;terest disappears entirely• But .though increased·.capital .• lowers·.·interest and increased curre;ncy•increases•capital, increased cu~rencyalso acts·dirtctly in.• lowering . interest before it has increased.the amount of capital. It is here that .theeditorQfTo-day seems to .show unlamiliarity with. !heposition •. of.tfie •. opponents of •.• interest. It is true that what men really wi$h. t~get is capital, __the agencies of pr.oductiQn.. And it is· pr~c:isely because money isccame~ns. for the transfer of these" that the ability to issue mon~y secured by their own property would make it' unneees saryfor them to borrow these agencies by enabling them to buy .. tIlem. This .. raises .a ..question ·which I. haveask,ed ·hun~ dreds of times of defenders ofinterestandwhichhasinvari ahlyproveda ((poser0" . I.wilL nOw put it to. the editor of '(.o-day, A is a farmer. owning .a farm.. He. mortgages his fa;rm to a bank f.or $1,000, giving •. the bank a tllortgagenote for. that sum and receiving in e;x:ch~nge the. bank's .notes f()r the satnesum,which are.secured.·by·•• the mortgage .•' .With the·bank ..notes.A ·buys farming tools ofB. The next day·B uses the. notes to buy of Q themate~alsused inthemanufac tl.lre.of tools. The day after,Cin .. ,turn pays them to:D in exchange for something that he needs.. At the end ofayear, after a constant ·succe$sionofexchallges, the notes are in. the hands of .Z, a dealer in farm produce. He pays' them to A,.

who gives in return $1,000 worth of·.• farm products which he has raised during. the year. Then' A carries the notes to the ba.nk, receivesjnexchal1ge for· them his mortgage note, and the bank cancels the mortgage. Now, in •this ~hole •circle of transactions, has.· t1).ere been any ·lellding of capital? If. so, who was,the lender?. If not, who is entitled to any interest? I ,call upon the editor of To-day. to answer this question. It is needless to assure him that it is vital. To-aay'srejoinder to my criticism of its article on interest is chiefly remarkable as an exhibition of dust-throwing.. In the art .of kicking up a .dust the '. editor· is .an expert.· ···When~ ever•. he.. is asked an elllbarrassing question, he begins to .show his. skill il1 •• this direction•.•·.He reminclsone .of the clown .at the . circus 'when /ttstumped" by-the.· ring-master to. turn a 106 INDIVIDUAL LIBER TY double somersault over the .elephant's back. He prances and dances, jabbers and gyrates, quotes Latin forwards and Greek backwards, declaims in the style of Dr. Johnson to the fish wife, sings· algebraical formul~ to the music of the band, makes faces, makes puns, and makes an excellent fool of him self; and when at the end of all this enormous activity he slyly slips between the elephant's legs instead of leaping over his back, the hilarious crowd, if it does not forget his failure to perform the prescribed feat, at least good-humoredly for gives it. But I am not so good-natured. I admit that, as a clown, I find the editor interesting, but his performance, ap propriate enough in a Barnum circus ring, is out of place in the economic area. So I propose to ignore his three pages of antics and note only his ten-line slip between the elephant's legs, or, laying metaphor aside, his evasion of my question.

I had challenged him to point out any lending of capital in a typical banking transaction which I had described. He re sponds by asking me to define capital. This is the slip, the evasion, the postponement of the difficulty. He knows that~ if he can draw me off into a discussion of the nature of capital, there will be an admirable opportunity for more clownishness, since there is no point in political economy that lends itself more completely to the sophist's art .. than this. But I am not to be turned aside. I stick to my question. In regard to the notion of capital the editor of To-day will find me, so far as the immediate question at issue is connected with it, the most pliable man in the world. I will take the definition, if he likes, that was given in the previous article in To-day. There it was said that money was one thing and capital an other; that capital consists of the agencies of production, while money is only a means for the transfer of these; that what men really want is not money, but capital; that it is for the use of capital that interest is paid; and that this interest, this price for the use of capital, lowers, generally speaking, as capital becomes plentier, and probably cannot disappear un less abundance of capital shall reach the extreme of common property. Now I have shown (at least I shall so claim until my question is answered) that in the most ordinary form of ~transaction involving interest-namely, the discounting of notes-there is absolutely no lending of capital in the sense in which capital was used in To-day's first article, and the INDIVIDUAL LIBERTY, 107 collsequence, o£course, is that that defence of interest which regards it as payment for the use of capitaLstraigbtway falls to the ground. But iithe editor of To-day does not liketh.e vie:wof.capitalthat •. was given.in the. article criticised, he m.ay ta}{e some other; I am perfectly willing•. HCtnay make a defi~ nition of his own. , Whatever-it may be, I, for the tirneb~i1'lg andfor the purposes of this argument,shall s:ay ttAmen" toit"

And after that I shall again press the question ,whether, in the transaction,which1 described,there was any lending of any thing 'Whatever..And if he shall then answer, as .a. paragraph in his··latest.article indicates, ttYes, the bank lent its notes.to the ,£armer/' I, shall show conclusively that the· bank did _not~ing '. of •• the .. ki9-d. If •I •suc~essfullymaintain this· conten tion, th.enit will be demonstrated·.that the interest paid in. the transaction specified. was. not .paid for the •. use .of .anything whatever, but 'was a tax levied by monopoly and nothing else. Meantime itiscomforting to reflect that my Jabor has opt be¢nentirely .in. vain. As •a consequence of.' my> criticism of To-day'sarticle on1llterest, the editor has disowned it (though it .appeared unsigned and in editorial type) ,charac terjzed it, as utrivial" (heaven .knows it had the.,air ofgrav· ity!), and •squarely contradicted its chief doctrinal.ass,ertion"

TtIis assertion was that' ttthe amount' of currency can. have .no effect upon the-abundance. of capital." ,.It· is contradicted in these terms: ttEyidently money is a I necessary elementin the e:x:isti1}gindustrial. plexus, a;nd increa~e. of capital is depelldent upon the supply of a sufficient amoupt of mopey." After this Lhave hopes. UAn E.nquirer" wrote to the editor of Liberty confess ing h.erincapaeity to understand why he advocated the abolition of rent. and interest. She cited the C.ase,·of a 'cook loaning l1er savings.to a young man. who needed some ready cash, and she wanted to know what was wrong with this. ·Mr. Tucker told her: My enquiring friend. is •• by no means. stupid. Her argument: is 'Well and clearly stated and is indicative of the hapito£ th.(i)ught. .Neitherisshe ignorant or superficial in the.sense 108 I N D I V I D U ALL I B E R T Y in which those terms are usually employed for the general characterization of personality. She has simply failed to acquaint herself with the position of the Anarchistic oppon ents of interest, the soundness of which her native power of penetration will enable her to see when once she has become fainiliar with it.

Wherein consists her misapprehension? In this,-that she supposes the Anarchists to condemn the contract between the horrower and the lender, per se; whereas the truth is that they condemn, not the contract, but the conditions of compulsory restriction and limitation under which such contract is now necessarily made if made at all, and in the absence of which it would be prevented, not by law or by invasion of any kind, but by simple competition, from embodying the element of interest oncapitaI. Take the case which she cites. No Anarchist disputes that it is perfectly legitimate for the young man in question to borrow either of the cook or of the bank upon such terms as may be agreed upon in a free market. The complaint of Anarchism is that the market is not free, and that the trans actions effected therein are necessarily tainted with injustice. At present, if the young man borrows, whether of the cook or of the 9ank, the terms of contract are dictated to his dis advantage, by means of a legal privilege or Inonopoly enjoyed by the bank. N either cook nor bank will lend to the young man unless he can give a note the redemption of which is considered sure and is generally made sure by a lien upon actual property. Upon being thus secured, the lender sup plies the borrower with other notes, intrinsically no stronger, but in the redemption of which not only the lender and borrower but the entire community have reason to have confi dence. That is to say, the lender,. either by issuing his own universally known notes or by furnishing equally well known notes previously issued by others, virtually indorses the bor rower's note, or, in still other words, insures his credit. For this service what does he charge? A price as low as that for which anyone else is willing and able to perform the same service. Now, the AnarchitSts assert that there are large numbers of people who are willing, either individually or by forming themselves into banking associations, to perform this service at something ,less than one per cent., and that the INDIVIDUAL LIBERTY 109 only reason why •they •are not able to'do so is 'that they are preven.ted by law. The grounds ,upon ,. which they base this assertion are, first, the ·fact. that prices in ··a.free ,market tend toward cost of production .and. performance, which, in the matter of .insurance of credit, ,. is shown by banking statistics to·, be about one-half of one per, cent., .and, ·.·second,··the existence of Federal laws imposing a tax of ten per cent. on all banks of issue not complying with the provisions of the nat~pnal banking act, and ot, State la.-ws tna~~ng it ,a cr~tn~to circulate as currency. other ~notes ,than those. ,specifically authorized by statute. ., To this.. it is no ,answer. to say that all l?ersonsare equally. free to comply with the provisions ofthe national banking act;£or these provisions by their,very nature, limiting the basisof:currency to government honds~ limit the volume of the curr~ncy, and in any business,a limi tation., which"reduces. the .ou~put is ••as, truly a .restriction.··of' competition as. a limitation specifyintgthat only certain per sons shall engage· in the business. Now, ,if the, above facts an.d the assertions •based on ithem are, correct, it is obvious that~ but for these, the price of insuring credit would faUto less..than one per. cent., this' small ,percentage paying.' not dividends to stockholders, but the salaries of ,bankingofIi cials, 'providing for incidental expenses, and making good any deficiencies from ,ba4 debts. Thus is justified the An archistic' contention thrtinterest. upon capital is dependent ,upon. the restrictions strrou~ding the con~ra~t betweenbor rower 'and. lender,;, for' surely CCAn ,Enquirer's" young man would not be willing to,'paythe .cook six per cent. for money w;henhe could borrow. of, a b~nk for· one per cent.,. or able to exact ten per 'cent. for his house from a homeless man when the latter could' hire money ,at one percent. with which ., to

buy' or build a house. If there is a:flaw in the :Anarchistic argument, I wait for UAnEnquirer" to point it O\1t. For her sake 1 have told an old story to the readers of Liberty; but then, •• I expect to nave to ten it many times again. . ' Mr.. ]. K. Ingalls, in a Jetter to the editor of Liberty arguing that interest is un~scapable, asserted that there, is aneconomicinterestasw¢Il as economic rent, and that 1:10 INDIVID'UAL LIBE.RTY it differs from that which is captured by the stronger and more cunning from 'the weaker and more stupid through the enforcement of barbarous (not economic) laws and customs; and he also asserted that interest is derived from the increase of any labor over its bare support. Mr. T~cker met the issue squarely: MR. INGALLS gives no clear definition or measure of the term Cteconomic interest." Economic rent is measured by the difference between the poorest land in use and the grades superior thereto. But what measures economic interest? Is it the difference between the product of labor absolutely destitute of capital, and that of labor possessing capital in varying degrees? But in that case economic interest is not entirely Hderived from the increase of any labor over its bare support," since the product of labor absolutely destitute of capital would be less than a starvation wage to a man living in the midst of our civilization. Or is it measured by the difference between the product of labor possessing the poorest ,capital in use, and that of labor possessing better capital?

Which at once gives rise to another question: what is the poorest capital in use, and how is it to be recognized as such? In the absence of a satisfactory answer to this question, Mr. Ingalls's economic interest must be looked upon as a de cidedly indeterminate economic factor~ All that his theory means, so far as I can grasp it, is that interest exists because people can do more with capital than without it, and that interest actually is, in fact, this surplus obtained by the employment of capital. Now, so defining interest, the Anarchists do not wish to abolish it. Such a wish would be absurd, for it would· be a wish to lessen the world's wealth. and productive power. To Anarchists the only consequence of this new definition is the necessity of :finding another term to represent that which they do wish to abolish,-namely, payment by borrower to lender for the use of capital. But, once this necessary term is found or devised, the old question recurs: will free and mutual banking make it possible to procure capital without paying for its use?

INDTVIDU A'L LIB.ERTY III To the determination of this' question three other questions l~adup,and I will. put them to Mr.•IngaUsstraightway. J:. If a>thousartd men engaged indifferent ·1inesof busi ness unite to forma bank of issue; and if this bank of issue unites with other similar banks .for clearing purposes; and if said bank lends its naturally well··known "circulating credit to its members.(or to others, for that matter) .against con ditional· titles to actual and. specific v.alues given by the boftOW~r~,-dothese ·lo1ns of the bank:s.credit. cost the bank anything .beyond the salaries of manager and assistants~ rent of building, expenditure for paper and printing, losses by depreciatiQnof securities, 'and sundry incidentals? 2.' Do 'not statisticians and economists agree that a dis count .afone-half of one percent. covers the expenses referred tQinthe preceding. questions? 3••If men were'. free'. to ·'unite in the. formation of· sucn han.ks of issue, •and subject to no penalty or tax whatsoever for so doil1g,would not competition between the banks thus for1l1ed"fQrce the' price' of the service ,rendered by them. down tocost, ........that is, one-half of one per cent.,--or to a figure closely•• approximating it?

Now, 1 insist, and I have a right. to insist, that Mr. Ingalls shall,answer these three fair and .pertinent questions directly, without . extraneous .• discussion, without •any minglingQ£ considerations or speculatiorts' not absolutely .essential. to. the . answers. ,For eitherthes.e direct answers will be what 1 think they must be, and then the case of the Anarchists (so .fa.r asnnance ,is concerned) is established; Qr else they will be something else,.and then, the. case o£the.Anarchists· falls. If, it falls, of course I. shall.'.'have nothing more to say, and the publication. of. Liberty,·will be discontinued; but,. if it is established,then I shall be ready to discuss with Mr. Ingalls those .. 'interesting. but at present non-essential questions'. of collection ..of debts, .enfdrcementof. contracts, the compara tive good and evil of discounting the future results of labor, etc., etc., etc.

;Sywayof caution, let me add that the Anarchists do not look •forward to a time. when there will be no sporadic. cases of payment ,for the use· of. capital,--such, .for instance, •.. as th~i example cited by Mr. Ing~lls where an inducement .is given to the endorser' ofanote. They simply. claim that 112 INDI·VIDUAL LIBERTY under freedom borrowing and lending will so generally take the shape of an exchange of credits at the mere cost of the exchange that interest-or, rather, what we used to call interest before M~. Ingalls appropriated the term to a different purpose-will disappear as an influential economic factor. Mr. Ingalls then offered his answers to the three ques tions propounded by the editor of Liberty, and Mr. Tuck~r dissected them as follows: To MY first question Mr. Ingalls answers that the bank of my hypothesis could issue its notes at a cost not exceeding its running expenses and incidental losses. So far, then, my claim is sustained. For he answers further that such a bank.

could not exist in the absence of a motive for its existence. It remains for me, ~hep, only to supply the motive. The task is easy. The thousand business men of my hypothesis would unite to form a bank of issue, and would connect this bank of issue with other similar banks for clearing purposes, because thereby they could establish a collective credit having circulat ing power, which each of them could obtain in exchange for his equally good but less reputable individual credit, hav ing to pay th~refor nothing but the cost of this exchange of credits. In other words, these business men would form such a bank as I describe· in order to borrow money at less than 'one per cent .. instead of paying, as they do now, from.£our to fift~en per cent. Is .the motive sufficient? To my second question Mr. Ingalls answers that the cost above referred· to would probably be met by a discount of one-half of one per cent. Sustained again. I have not to :discuss here why bank employees ushould be expected to work for bare support." It suffices for the argument to know that what these employees are now willing to accept for their services can be paid to them out· of funds provided. by a discount of one-half of one per cent. And this Mr. Ingalls :admits. When we have exhausted the present issue, then I will consider with him how 'many tears I can afford ·to .shed over the sad fate of those bank presidents for whom a dis count of .one-half of one per cent. provides salaries of only ten, fifteen, and twenty thousand dollars.

IN"DIVIDU AL LIBERTY II} to my third question Mr.. Ingalls answers that under free conditions competition would tend to reduce .discount to, its lowest term,-ordinarilysomething above ·.cost. rtake .• 'it that Mr. Ingalls means. by •this that' in banking--a business which under freedom is accompanied .by no •. physical condi,.. tions that place a naturallimituponcompetition---the force of competition would have a· tendency of the .same strength as that which it hasin other ,businesses.similarly •. free from phys~c~llinUtations,--in. othet words, .th~t the te'ndency· 'Would be strong enough to cause the price· to> hover. around the cost limit,n~wrising a little above it, now falling a little beloW' it, but averaging cost, or perhaps a shade more. If thisis.his meaning, then Tam sustained •again. 17he discussion now centres, .therefore, upon. the following question,· which.I put to Mr. Ingalls: Is the desire tohorrowmoney<at les~ th~nl one per c~nt., instead of at four percent. or more, a· sufficient consideration to induce businessmen to form suchbanltsas Thave described?

IfMt. Ingalls. answers'that it is not, he. must show ,why. it is not. If he answers that' it. is, then the propositionwhich~ according. to Mr. Ingalls,. has never been .delllonstrated, will have •• received '. its ·demonstration,-r,-the .proposition, namely~ that free and .mutual banking will make it •possible'to'pro cure capital without paying Jor its use (the discount being charged, not f~r. the •. use .of .capital, but, to. meet expenses in~dental to· tHe transfet of· c,apital)• . , With apologr toMi"; Ingalls for my persistence,I· must Eh:~~:;i~~:~:r~~:~t~~;J~:%:~~~~~~ t~...:.·•.•:~.tgl:S·~ffi.::~i:..~Si.a.•~r:.O·~~~:.~u.:tt~o~.te:::;~~~b.t.tt.=e:~:~eP:.:. lend at more han four per cent. is asuflicientmotiveto business ,men s lenders· to kaep them from embarking in mutual· hanki!1i··. ·Now I must ask for answers to the folIowingquestions: . . . (1) Does tebusiness man who has capital but lacks ca~~-that is, the business man who wishes toborrow-saerifice" by. e . gaging with •others '. in ,mutual banking, any.

114 IN D I V I D U ALL I B E R T Y opportunity of lending (at four per cent. or any other rate)" which he enjoys before so engaging? (2) If so, what? (3) If not; if the business man in question, by embarking with. others in mutual banking, does not thereby damage himself as lender,-is not the desire to borrow at less than one per cent. a sufficient consideration to induce him to so embark? I respectfully insist on answers to these questions. Mr. Ingalls is a very able and sincere writer on economic· problems. He deservedly exercises an influence on the class of people to whom Liberty appeals. Repeatedly· during its publication he has come forward with a denial of the position that mutual banking will make it possible to borrow money without in terest. I have now determined to force him, once and for all, to make good ~his denial by proof, or else to retract it. Mr. Ingalls seems to imagine that the answers which he now gives to my last series of questions are as equivocal as his answer to my previous question. Not so. The terms in which he answered my previous question implied two opposite mo tives influencing at the same time a business man fulfilling a double capacity,-a borrower and lender,-and cancelling each other. As my question did not concern men, who, as indi....

viduals, were in the market as lenders, but only those who were in the market as borrowers,. this answer was equivocal. But the answers now given to .my last questions distinctly recognize the borrowing business ·man and the lending busi ness man as two individuals, and this recognition removes· all the equivocation; forthe desire of a lender to lend at a high rate cannot cancel the desire of a borrower to borrow at 3\ low rate, provided the borrower, by association with other borrow ers, can provide himself with a source from which to borrow at a low rate,-a condition not as paradoxical as it seems, since the fact of association creates a credit that before had no. ex istence. The present answers, then, being straightforward and satisfactory, let us review the admissions which I have secured. Mr. Ingalls has .admitted that business men desiring to borrow have an adequate motive for embarking in mutual banking; he has admitted that the loans of a mutual bank's credit LIBER. TY lIS' . would cost the. bank· nothing··but running ·expensesandinci"

dental.outlays.and.losses; he.hasadmitted that this cost would probably. be•. covered by:a. discount. of •••·one-half '.of ·one .. per cetlt.; and· he has admitted that,· CCin the absence·0£ State· Qr colle.ctivemeddling,cornpetition wolJ1dtendunquestionably to reduce discount to its lowest term, which would ordinarily be something above.. cost." .•. I· have interpreted this last ad mission.as meaning that in banking the force of competition -would have a •tendency of thesatne strengthasth:tt wh;ch.it 'hasin other businessessimilarly free from physical limitations, -ill •• other .. words, •that •. the tendency would .be strong enough to cause the price •to hover around the cost •limit, now rising a little above it,. now falling. a. little below it,. but averaging cost, or perhaps a shade more.. In neither of the two articles which· Mr. Ingalls has written. since this interpretation ap pe~red has he taken any exception to it. I am justified there fore in assuming that he admits this also.

Now, .this senesof •admissions •constitutes the entire case £ormutualbanking. Whether or not it was ever demon stratedbefore .that mutual banking would abolish the pay tnentofinterest for the use of borrowed money, I have now ~edMr. Ingalls to demonstrate this himself. Hisi del:larations shoW' that under freedom the rate of discount would faU to neadyone-lulf of one. percent •..This is equivalent to the abolition of the payment of interest, for in such a money mar.. ~ ket an individual case of.·interest payment would cut no fig ure economically, any more. than one~s occasional.pay111entof a ··quarter. to •an urchin· for delivering a letter .cuts a figure nOW that letter-postage has fallen to two cents. Mr.. Ingalls has formally allowed that •• mutuaL banking will. do all that it claims for itself, ,and he is. forever .debarred from repeating that denial or doubt of its claims which has been heard from him at intervals for many years. I .began this little cam paign.··of question •and answer for the purpose .of silencing this gun,. and I have effectually done it.

At present Mr. Ingalls finds .but one course open to him, viz., to deny that he ever denied. . The plea comes at a sus.. piciously .late hour. Strange· that he did not· advance it in resgonseto my first questions £ourmonths. ago, and thus save much· time, trouble and ink. But never mind; late or not, IS it· 'true?