They need all this money capital to enable them to buy the raw materials upon which to bestow their labor, the implements and machinery with which to labor, and their means of subsistence while producing their goods for the market.
Unless they can get this capital, they must all either work at a disadvantage, or not work at all. A very large portion of them, to save themselves from starvation, have no alternative but to sell their labor to others, at just such prices as these others choose to pay. And these others choose to pay only such prices as are far below what the laborers could produce, if they themselves had the necessary capital to work with.
But this needed capital your lawmakers arbitrarily forbid them to have; and for no other reason than to reduce them to the condition of servants; and subject them to all such extortions as their employers—the holders of the privileged money—may choose to practise upon them.
If, now, you ask me where these twenty-five thousand millions of dollars of money capital, which these laborers need, are to come from, I answer:
Theoretically there are, in this country, fifty thousand millions of dollars of money capital ($50,000,000,000)—or twice as much as I have supposed these laborers to need—now lying idle! And it is lying idle, solely because the circulation of it, as money, is prohibited by the lawmakers.
If you ask how this can be, I will tell you.
Theoretically, every dollar’s worth of material property, that is capable of being taken by law, and applied to the payment of the owner’s debts, is capable of being represented by a promissory note, that shall circulate as money.
But taking all this material property at only half its actual value, it is still capable of supplying the twenty-five thousand millions of dollars—or one thousand dollars each—which these laborers need.
Now, we know—because experience has taught us—that solvent promissory notes, made payable in coin on demand, are the best money that mankind have ever had; (although probably not the best they ever will have).
To make a note solvent, and suitable for circulation as money, it is only necessary that it should be made payable in coin on demand, and be issued by a person, or persons, who are known to have in their hands abundant material property, that can be taken by law, and applied to the payment of the note, with all costs and damages for non-payment on demand.
Theoretically, I repeat, all the material property in the country, that can be taken by law, and applied to the payment of debts, can be used as banking capital; and be represented by promissory notes, made payable in coin on demand. And, practically, so much of it can be used as banking capital as may be required for supplying all the notes that can be kept in circulation as money.
Although these notes are made legally payable in coin on demand, it is seldom that such payment is demanded, if only it be publicly known that the notes are solvent: that is, if it be publicly known that they are issued by persons who have so much material property, that can be taken by law, and sold, as may be necessary to bring the coin that is needed to pay the notes. In such cases, the notes are preferred to the coin, because they are so much more safe and convenient for handling, counting, and transportation, than is the coin; and also because we can have so many times more of them.
These notes are also a legal tender, to the banks that issue them, in payment of the notes discounted; that is, in payment of the notes given by the borrowers to the banks. And, in the ordinary course of things, all the notes, issued by the banks for circulation, are wanted, and come back to the banks, in payment of the notes discounted; thus saving all necessity for redeeming them with coin, except in rare cases. For meeting these rare cases, the banks find it necessary to keep on hand small amounts of coin; probably not more than one per cent. of the amount of notes in circulation.
As the notes discounted have usually but a short time to run,—say three months on an average,—the bank notes issued for circulation will all come back, on an average, once in three months, and be redeemed by the bankers, by being accepted in payment of the notes discounted.
Then the bank notes will be re-issued, by discounting new notes, and will go into circulation again; to be again brought back, at the end of another three months, and redeemed, by being accepted in payment of the new notes discounted.
In this way the bank notes will be continually re-issued, and redeemed, in the greatest amounts that can be kept in circulation long enough to earn such an amount of interest as will make it an object for the bankers to issue them.
Each of these notes, issued for circulation, if known to be solvent, will always have the same value in the market, as the same nominal amount of coin. And this value is a just one, because the notes are in the nature of a lien, or mortgage, upon so much property of the bankers as is necessary to pay the notes, and as can be taken by law, and sold, and the proceeds applied to their payment.
There is no danger that any more of these notes will be issued than will be wanted for buying and selling property at its true and natural market value, relatively to coin; for as the notes are all made legally payable in coin on demand, if they should ever fall below the value of coin in the market, the holders of them will at once return them to the banks, and demand coin for them; and thus take them out of circulation.
The bankers, therefore, have no motive for issuing more of them than will remain long enough in circulation, to earn so much interest as will make it an object to issue them; the only motive for issuing them being to draw interest on them while they are in circulation.
The bankers readily find how many are wanted for circulation, by the time those issued remain in circulation, before coming back for redemption. If they come back immediately, or very quickly, after being issued, the bankers know that they have over-issued, and that they must therefore pay in coin—to their inconvenience, and perhaps loss—notes that would otherwise have remained in circulation long enough to earn so much interest as would have paid for issuing them; and would then have come back to them in payment of notes discounted, instead of coming back on a demand for redemption in coin.
Now, the best of all possible banking capital is real estate. It is the best, because it is visible, immovable, and indestructible. It cannot, like coin, be removed, concealed, or carried out of the country. And its aggregate value, in all civilized countries, is probably a hundred times greater than the amount of coin in circulation. It is therefore capable of furnishing a hundred times as much money as we can have in coin.
The owners of this real estate have the greatest inducements to use it as banking capital, because all the banking profit, over and above expenses, is a clear profit; inasmuch as the use of the real estate as banking capital does not interfere at all with its use for other purposes.
Farmers have a double, and much more than a double, inducement to use their lands as banking capital; because they not only get a direct profit from the loan of their notes, but, by loaning them, they furnish the necessary capital for the greatest variety of manufacturing purposes. They thus induce a much larger portion of the people, than otherwise would, to leave agriculture, and engage in mechanical employments; and thus become purchasers, instead of producers, of agricultural commodities. They thus get much higher prices for their agricultural products, and also a much greater variety and amount of manufactured commodities in exchange.
The amount of money, capable of being furnished by this system, is so great that every man, woman, and child, who is worthy of credit, could get it, and do business for himself, or herself—either singly, or in partnerships—and be under no necessity to act as a servant, or sell his or her labor to others. All the great establishments, of every kind, now in the hands of a few proprietors, but employing a great number of wage laborers, would be broken up; for few, or no persons, who could hire capital, and do business for themselves, would consent to labor for wages for another.
The credit furnished by this system would always be stable; for the system is probably capable of furnishing, at all times, all the credit, and all the money, that can be needed. It would also introduce a substantially universal system of cash