“For always in thine eyes, O Liberty!
Shines that high light by which the world is saved;
And though thou slay us, we will trust in thee.” JOHN HAY.
I consider the question of the status of money—whether money be capital or not—as of very great importance. It is because money has been generally regarded as a form of wealth that interest seems to have a real justification. Once let it be understood that money is not a thing, but a system, and many of the misconceptions circumscribing the subject will be dispelled.
Money is a labor-saving system of book-keeping. It is a convenient modus of keeping account of credits.
A merchant’s books are not wealth; hence they cannot be capital. They are memoranda of wealth which he has agreed to deliver and which has been agreed to be delivered to him The books are merely aids to his memory. When a merchant deplores the “credit system,” it is really the complicated book system he has in mind. The less complex system of credit by certificates insured by a good bank would be satisfactory to him, without doubt.
There are two ways in which commerce can be conducted. One is exchange of commodity for commodity,—barter. The other is exchange of commodity for credit, and, if the credit take form,—as, for instance, the form of certificates insured by a bank,—money.
Money is an evidence of debt. If the debt be well secured, and the certificate of the debt be so drawn us to carry forceful conviction that it is well secured, then such evidences of debt will pass from hand to hand in exchange for wealth, and such certificates of debt will be money.
Money is a labor-saving device for the facilitation of exchanges. It avoids the need of sending the wealth along with the promise to exchange or deliver wealth, or services. When a certain bulk of bullion is fashioned into the shape of coin (indicating the quantity and value of the metal so coined), the shape and size of the coin is the money, and the metal is the wealth which is sent along with the shape to prove its worth.
The money issues of a cooperative bank do not perform the function of gold and silver coin. They better perform the function which gold and silver coin was designed to perform.
Credit is not a thing. It is a quality. It is a part of the intelligence of mankind and inheres in man himself.
One’s credit is a part of himself. It is his credibility. If he have “good credit,” his promise to deliver wealth or perform labor will be believed, and, if the promise be in writing; it will be money with a limited extent. If the maker of the written promise be known to have accumulated property, the money will be better money and circulate somewhat more widely than if he had no property. If he pledge his wealth,—pledge himself to deliver his wealth at some future time in the event that he cannot otherwise redeem his promise,—there will be a further improvement in the quality of the money. But if he mortgage his wealth to a bank, and the bank accepts his written obligation to give up his wealth in the event that he cannot otherwise meet his promise, and if the bank thereupon issues its own notes to him in exchange for his notes, then there is issued the best form of money, because it is the best system of utilizing credit. This money will circulate wherever the bank is known to be a conservatively managed institution issuing no notes except upon the faith of ample security pledged to be delivered in case of certain contingencies.
The editor of Liberty has said: “The bank performs the same service that is performed by the registry of deeds office in the case of land transfers,—that of making the title more secure in the eyes of the parties interested or liable to become interested.” I agree to this. But the certificate issued by the registrar has none of the power or capacity of the transferred land. The certificate is merely a certificate, after all. And the same is true of the credit certificates issued by the bank. The bank here occupies the position of an insurance company. It assures all men that its notes are based upon tangible property worth considerably more than the amount of the bank-notes issued to the mortgagor. The money is somewhat similar to a policy of assurance. The policy is not the paper upon which the guarantee is inscribed. The paper is the durable form upon which the guarantee is recorded It is the guarantee of the bank which is the money.
You say: “In reality the money is not the paper, but is the monetary power or function or capacity naturally inhering in the wealth which the paper represents.” I contend that there is no monetary power inhering in wealth. Whatever there be of such power inheres in man. It is the power or sagacity to make exchanges on credit, and the credit in turn is based largely upon the known ability of the debtor to meet his obligations. He gives the bank such security us warrants the bank in giving assurance of security to all the world, and the bank’s certificates (money) are the tangible forms of this assurance.
The discovery that the possessor of wealth could inspire his neighbors with confidence in his credit was not in itself an addition to the wealth of the world. It is true that the discovery tends to overcome the wastes, inconveniences, and labor incident to barter, and thus will liberate some labor from that form of service, allowing it to be utilized in other directions. But the discovery of the process was merely an advance in human sagacity, and, being a part of man himself, it cannot be classed as wealth. Nor is wealth used in the transaction of credit. It is only used in case the debtor fails otherwise to redeem his promise. In fact, the chief value of credit over barter lies in the fact that the use of the wealth is obviated.
“Monetary power” is a term which cannot be used as applying to wealth without ascribing to wealth some such metaphysical qualities as matter-of-fact commerce has never yet recognized. Unless the symbol may be said to be “the soul” of the thing symbolized, I cannot conceive of any such power inhering in a thing If it were at all proper to regard the symbol synonymous with the thing, then money may be truly said to be debt. since money is really the symbol of debt.
Many of the social injustices which stand between man and his comfort have their origin in the superstition that money is “the soul of wealth,” and that wealth has a monetary power a which can live apart from the body.
There is no such process possible as the monetization of wealth, except by barter. There can be monetization of credit. It is the monetization of credit for which the advocates of the mutual bank should contend.
One of my objections to the terms of your syllogism (the one most particularly applicable to this controversy) is that at money is not a thing.
CHICAGO, IL
