The remarks that follow are not intended to debar Apex from answering his opponent in his own time and way, but simply to combat, from Liberty’s standpoint, such of the positions taken by Basis as seem to need refutation.(62 ¶ 10)

The first error into which Basis falls is his identification of money with capital. Representative money is not capital; it is only a title to capital. He who borrows a paper dollar from another simply borrows a title.^[11] Consequently he takes from the lender nothing which the lender wishes to use; unless, indeed, the lender desires to purchase capital with his dollar, in which case he will not lend it, or, if he does, will charge for the sacrifice of his opportunity,—a very different thing from usury, which is payment, not for the lender’s sacrifice, but for the borrower’s use; that is, not for a burden borne, but for a benefit conferred. Neither does the borrower of the dollar take from the person of whom he purchases capital with it anything which that person desires to use; for, in ordinary commerce, the seller is either a manufacturer or a dealer, who produces or buys his stock for no other purpose than to sell it. And thence this dollar goes on transferring products for which the holders thereof have no use, until it reaches its issuer and final redeemer and is cancelled, depriving, in the course of its journey, no person of any opportunity, but, on the contrary, serving the needs of all through whose hands it passes. Hence borrowing a title to capital is a very different thing from borrowing capital itself. But under the system of organized credit contemplated by Apex no capable and deserving person would borrow even a title to capital. The so-called borrower would simply so change the face of his own title as to make it recognizable by the world at large, and at no other expense than the mere cost of the alteration. That is to say, the man having capital or good credit, who, under the system advocated by Apex, should go to a credit-shop—in other words, a bank—and procure a certain amount of its notes by the ordinary process of mortgaging property or getting endorsed commercial credit discounted, would only exchange his own personal credit—known only to his immediate friends and neighbors and the bank, and therefore useless in transactions with any other parties—for the bank’s credit, known and receivable for products delivered throughout the State, or the nation, or perhaps the world. And for this convenience the bank would charge him only the labor-cost of its service in effecting the exchange of credits, instead of the ruinous rates of discount by which, under the present system of monopoly, privileged banks tax the producers of unprivileged property out of house and home. So that Apex really would have no borrowing at all, except in certain individual cases not worth considering; and, therefore, when Basis, answering Apex, says that it is really capital that is borrowed, and not money, he makes a remark for which there is no audible call.(62 ¶ 11)

The second error committed by Basis he commits in common with the economists in assuming that an increase of capital decreases the rate of interest and that nothing else can materially decrease it. The facts are just the contrary. The rate of interest may, and often does, decrease when the amount of capital has not increased; the amount of capital may increase without decreasing the rate of interest, which may in fact increase at the same time; and so far from the universalization of wealth being the sole means of abolishing interest, the abolition of interest is the sine qua non of the universalization of wealth.(62 ¶ 12)

Suppose, for instance, that the banking business of a nation is conducted by a system of banks chartered and regulated by the government, these banks issuing paper money based on specie, dollar for dollar. If now a certain number of these banks, by combining to buy up the national legislature, should secure the exclusive privilege of issuing two paper dollars for each specie dollar in their vaults, could they not afford to, and would they not in fact, materially reduce their rate of discount? Would not the competing banks be forced to reduce their rate in consequence? And would not this reduction lower the rate of interest throughout the nation? Undoubtedly; and yet the amount of capital in the country remains the same as before.(62 ¶ 13)

Suppose, further, that during the following year, in consequence of the stimulus given to business and production by this decrease in the rate of interest and also because of unusually favorable natural conditions, a great increase of wealth occurs. If then the banks of the nation, holding from the government a monopoly of the power to issue money, should combine to contract the volume of the currency, could they not, and would they not, raise the rate of interest thereby? Undoubtedly; and yet the amount of capital in the country is greater than it ever was before.(62 ¶ 14)

But suppose, on the other hand, that all these banks, chartered and regulated by the government and issuing money dollar for dollar, had finally been allowed to issue paper beyond their capital based on the credit and guaranteed capital of their customers; that their circulation, thus doubly secured, had become so popular that people preferred to pay their debts in coin instead of bank-notes, thus causing coin to flow into the vaults of the banks and add to their reserve; that this addition had enabled them to add further to their circulation, until, by a continuation of the process, it at last amounted to eight times their original capital; that by levying a high rate of interest on this they had bled the people nigh unto death; that then the government had stepped in and said to the banks: When you began, you received an annual interest of six per cent. on your capital; you now receive nearly that rate on a circulation eight times your capital based really on the people’s credit; therefore at one-eighth of the original rate your annual profit would be as great as formerly; henceforth your rate of discount must not exceed three-fourths of one per cent. Had all this happened (and with the exception of the last condition of the hypothesis similar cases have frequently happened), what would have been the result? Proudhon shall answer for us. In the eighth letter of his immortal discussion with Bastiat on the question of interest he exhausts the whole subject of the relation of interest to capital; and Basis cannot do better than to read the whole of it. A brief extract, however, must suffice here. He is speaking of the Bank of France, which at that time (1849) was actually in almost the same situation as that described above. Supposing, as we have just done after him, a reduction of the rate of discount to three-fourths of one per cent., he then asks, as we do, what the result would be. These are his words in answer to Bastiat, the Basis of that discussion:(62 ¶ 15)

Now, this reduction of the rate of discount to the bank’s service, and the results therefrom as above described, are precisely what would happen if the whole business of banking should be thrown open to free competition. It behooves Basis to examine this argument well; for, unless he can find a fatal flaw in it, he must stand convicted, in saying that when the accumulated wealth of the world becomes large enough, no one will pay interest, of putting the cart before the horse.(62 ¶ 22)

Basis is in error a third time in assuming that Apex wishes to forbid the man of ability, but lacking means, using his credit It is precisely because such men are now virtually prohibited from using their credit that Apex, and Liberty with him, complains. This singular misconception on the part of Basis indicates that he does not yet understand what he is fighting.(62 ¶ 23)

The fourth error for which Basis assumes responsibility is found in his statement that in the last analysis the possessor of capital has acquired it by a willingness to work harder than his fellows and to sacrifice his love of spending all he produces that he may have the aid of capital to increase his power of production. A man who thoroughly means to tell the truth here reiterates one of the most devilish of the many infernal lies for which the economists have to answer. It is indeed true that the possessor of capital may, in rare cases, have acquired it by the method stated, though even then be could not be excused for making the capital so acquired a leech upon his fellow-men. But ninety-nine times in a hundred the modern possessor of any huge amount of capital has acquired it, not by a willingness to work harder than his fellows, but by a shrewdness in getting possession of a monopoly which makes it needless for him to do any real work at all; not by a willingness to sacrifice his love of spending all he produces, but by a cleverness in procuring from the government a privilege by which he is able to spend in wanton luxury half of what a large number of other men produce. The chief privilege to which we refer is that of selling the people’s credit for a price.(62 ¶ 24)

Basis is guilty of several other errors which we have not space to discuss at length. He supposes that to confine the term money to coin and to call all other money currency would simplify matters, when in reality it is the insistence upon this false distinction that is the prevailing cause of mystification. If the idea of the royalty of gold and silver could be once knocked out of the people’s heads, and they could once understand that no particular kind of merchandise is created by nature for monetary purposes, they would settle this question in a trice. Some persons seem to think that Josiah Warren based his notes on corn. Nothing of the kind. Warren simply took corn as his standard, but made labor and all its products his basis. His labor notes were rarely redeemed in corn. If he had made corn his exclusive basis, there would be no distinction in principle between him and the specie men. Perhaps the central point in his monetary theory was his denial of the idea that any one product of labor can properly be made the only basis of money. To quote him in this connection at all is the height of presumption on the part of Basis. A charge that his system, which recognized cost as the only ground of price, even contemplated a promise to pay anything for value received, he would deem the climax of insult to his memory. Basis, in donning the garments of Josiah Warren to defend the specie fraud, has stolen the livery of heaven to serve the devil in. Basis is wrong, too, in thinking that land is not a good basis for currency. True, unimproved vacant land, not having properly a market value, cannot properly give value to anything that represents it; but permanent improvements on land, which should have a market value and carry with them a title to possession, are an excellent basis for currency. It is not the raw material of any product that fits it for a basis, but the labor that has been expended in shaping the material. As for the immovability of land unfitting it for a basis, it has just the opposite effect. Here Basis is misled by the idea that currency can be redeemed only in that on which it is based.(62 ¶ 25)

But this fertile subject has taken us farther than we intended to follow it. So here, for the present, we will quit its company, meanwhile handing over Basis to the tender mercies of Apex, and heartily indorsing almost all that Basis says at the close of his article concerning the true duty of government, as long as it shall exist, regarding the currency.(62 ¶ 26)