[Liberty, June 27, 1891.]

To the Editor of Liberty:(81 ¶ 1)

It is not only a delusion, but a misuse of language to talk about a standard of value. Give us a standard of pain and pleasure, and you may convince us that there can be a standard of value. I am well aware of the difficulty of discussing this question, even with so precise an editor as Mr. Tucker; but since he has called into question the views presented in my pamphlet, I feel called upon to lay before the readers of Liberty some additional arguments to show the correctness of what Mr. Tucker has honored by calling the Westrup view.(81 ¶ 2)

Let us consider for a moment the practical workings of a Mutual Bank, as near as we can foretell them.(81 ¶ 3)

The incentive to organize a Mutual Bank is the opportunity of borrowing money at a very low rate of interest and no additional expense. This desideratum is not confined to a few individuals, but is well-nigh universal. It follows, therefore, that the starting of a bank will draw to it a large number of people, embracing producers and dealers in almost, perhaps all, commodities. One of the conditions in obtaining the notes (paper money) of the Mutual Bank is that they will be taken in lieu of current money without variation in the price of the commodities by those who borrow them. This condition is just, and will be readily acquiesced in without a murmur. At the very outset of the Mutual Bank, then, we have at least dealers in most of the ordinary commodities who will accept its money in place of current money. This certainty of its redemption in commodities at their market-price in current money guarantees its circulation.(81 ¶ 4)

Strictly speaking, the Mutual Bank does not issue the money; it simply furnishes it and is the custodian of the collateral pledged to insure its return. It is the borrowers who both issue and redeem.(81 ¶ 5)

The transaction between the bank and the borrower is of no interest to the public previous to the issue of any of the money by the borrower. Neither is it concerned with the transaction between the borrower and the bank after the former has redeemed all the money he borrowed.(81 ¶ 6)

Discussing theories is far less important than efforts to put in practice such momentous reforms as the application of the mutual feature to the supply of the medium of exchange. If Comrade Tucker really desires the establishment of Mutual Banks, it seems to me he would naturally discuss the practicability of such institutions. Let him point out wherein the above forecast is unsound. Let him show the necessity for a standard of value and suggest how to introduce one: perhaps I may become converted. I shall most surely acknowledge my error if I am convinced, but I have no time or inclination to discuss any abstract theory about a standard of value. The one question that seems to me of importance is the practicability of the Mutual Bank. If it is not practicable, why is it not so? If it is, why waste time and space in discussing whether the first or the second or any other commodity exchanged becomes the measure or standard of value; especially as the whole trouble disappears with the abolition of the basis privilege.(81 ¶ 7)

Alfred B. Westrup

Mr. Westrup’s article sustains in the clearest manner my contention that money is impossible without a standard of value. Starting out to show that such a standard is a delusion, he does not succeed in writing four sentences descriptive of his proposed bank before he adopts that delusion. He tells us that one of the conditions in obtaining the notes (paper money) of the Mutual Bank is that they will be taken in lieu of current money. What does this mean? Why, simply that the patrons of the bank agree to take its notes as the equivalent of gold coin of the same face value. In other words, they agree to adopt gold as a standard of value. They will part with as much property in return for the notes as they would part with in return for gold. And if there were no such standard, the notes would not pass at all, because nobody would have any idea of the amount of property that he ought to exchange for them. The naïveté with which Mr. Westrup gives away his case shows triumphantly the peurility of his raillery at the idea of a standard of value.(81 ¶ 8)

Indeed, Comrade Westrup, I ask nothing better than to discuss the practicability of mutual banks. All the work that I have been doing for liberty these nineteen years has been directed steadily to the establishment of the conditions that alone will make them practicable. I have no occasion to show the necessity for a standard of value. Such necessity is already recognized by the people whom we are trying to convince of the truth of mutual banking. It is for you, who deny this necessity, to give your reasons. And in the very moment in which you undertake to tell us why you deny it, you admit it without knowing it. It would never have occurred to me to discuss the abstract theory of a standard of value. I regard it as too well settled. But when you, one of the most conspicuous and faithful apostles of mutual banking, begin to bring the theory into discredit and ridicule by basing your arguments in its favor on a childish attack against one of the simplest of financial truths, I am as much bound to repudiate your heresy as an engineer would be to disavow the calculations of a man who should begin an attempt to solve a difficult problem in engineering by denying the multiplication table.(81 ¶ 9)

I fully recognize Mr. Westrup’s faithful work for freedom in finance and the ability with which he often defends it. In fact, it is my appreciation of him that has prevented me from criticizing his error earlier. I did not wish to throw any obstacle in the path or in any way dampen the enthusiasm of this ardent propagandist. But when I see that admirable paper, Egoism, of San Francisco, putting forward those writings of Mr. Westrup which contain the objectionable heresy;^[14] and when I see that other admirable paper, The Herald of Anarchy, of London, led by his or similar ideas to advocate the issue of paper bearing on its face the natural prices of all commodities (!); and when I see Individualists holding Anarchism responsible for these absurdities and on the strength of them making effective attacks upon a financial theory which, when properly defended, is invulnerable,—it seems high time to declare that the free and mutual banking advocated by Proudhon, Greene, and Spooner never contemplated for a moment the desirability or the possibility of dispensing with a standard of value. If others think that a standard of value is a delusion, let them say so by all means; but let them not say so in the name of financial theories and projects which the original advocates of mutual banking gave to the world.(81 ¶ 10)

81 n. 1. Egoism later saw its error, and recognized the necessity of a standard of value. ↩