A LITTLE TALK ABOUT MONEY.
Boston, May 16, 2085.
My Dear Louise:
Mr. De Demain today explained to me some things about the money of today which I think will be of interest to you. Knowing how much we of 1885 depended upon our government for a stable currency, I have often wondered how a people without a government could have any safe medium for exchange. Mr. De Demain’s answer to my question about the matter was, first, his peculiar smile, and then the following:
“Our money is simply labor certificates. Labor is the basis of our currency,—not gold, not silver. We consider the result of man’s handiwork more stable than the credit of a government. Our money is based upon nothing potential, but upon something actual, something substantial. Nothing can cause such a currency to fluctuate. It never depreciates, it never bears a lie on its face. If it be marked ‘one dollar,’ it is worth one dollar in exchange without the command of any law.”
“Who makes and issues the money?” I asked.
“Private individuals or companies. Money is issued just the same as cotton cloth is, and with no more restrictions. You know that a certain firm which manufactures cotton cloth is reliable, that its goods are always what they are represented to be. You do not ask your government to guarantee that cotton cloth shall be as represented or up to a certain standard, and you do not expect your government to monopolize the manufacture of such goods or to grant to others such a monopoly. You prefer to rely on the honesty, or, if not the honesty, the self-interest, of the manufacturers. That is the way we feel about money. Private individuals organize, a company and issue money based upon the possessions of the members of the company. These possessions, of course, are based upon labor expended in producing them. They loan this money to such as need it who can give good security, charging for such use enough only to cover the cost of transacting the business. No interest is charged.”
“You say the money issued by a banking firm is based upon property owned by the firm. Suppose a case where $50,000 was the total amount of property owned by a bank represented by A. B is worth property valued at $1,000. He goes to A and desires to exchange moneys for convenience’ sake. A has already disposed of notes to the value of $50,000, the extent of his firm’s wealth. Must he refuse B?”
“Not at all,” said Mr. De Demain. “When he takes B’s money, he adds just so much to the wealth of his firm, and can issue notes for this additional wealth. If B presents $1,000 worth of his money, A fills out blank notes of his firm to that amount and hands them over to B. Under this system, which, you can see, is perfectly honest and sound, a banker is not required to have much capital. His stock in trade is his widely and favorably known name. He simply loans the indorsement of that name.”
“Why, if the borrower has good security, does he not issue his own money?”
“Because it is generally more convenient to have the money issued by a well-known firm. For use simply among those who know him well his own money, or notes, would be perfectly good. If he is transacting business with strangers, he must have money that they know to be good. So he exchanges his money for that of some well-known man or company. The cost is trifling. A man who owns property worth two thousand dollars issues money to that amount. This is a very simple matter. No one is forced by any law to receive such money. If the man who issues it is known to be honest, it will be received, of course. You would take a check from an honest man in your Boston of 1885 as soon as you would a bank note or coin. In order to protect the interests of the national bank, you made laws that such checks should not pass as currency. Honesty is the only protection that our currency needs.”
“Suppose you were well-known here in Boston, but were unknown in San Francisco, and you should have occasion to pay a bill in that city,—what money could you use?”
“I should simply exchange my personal notes for those of some individual or firm well-known on the Pacific coast and send such notes in payment,” said Mr. De Demain.
“Such a system as you have was tried before the times of national banks in the United States, but was a failure, as I suppose you have learned from history. Why was it?” I asked.
“The system in vogue before that of national banks was not in any manner like ours. The currency issued by those institutions (which, by the way, were under State control) was based upon fictitious values. There was nothing stable at the bottom. Most of such currency was based on the credit of the State. Is there any wonder that money of this kind was of uncertain value?
“I have read that many men of your time argued that a national debt was a national blessing, because without it there could be no national bank currency. There is some difference between money based upon a debt and money based upon the actual labor value of property. We think ours is the better system. We have no fault to find with it, at any rate.”
“To make such a system the success that you say it is the people of today must be much more honest than the people of two hundred years ago,” I suggested.
“Not of necessity,” said Mr. De Demain. “I think the people of today are more honest, but their prosperity is what supports our currency, and that prosperity is in turn supported by the currency system. General prosperity also, I think, tends to make honesty more general. All things work together for the good of those who live under Anarchy.”
At this point our conversation drifted off to other subjects, one of which I shall write you about in my next letter. It will, I think, show you one of the most peculiar things about this most peculiar thing,—Socialistic Anarchy.
Josephine.[/ezcol_2third] [ezcol_1third_end] [/ezcol_1third_end]