Part 02, Chapter 34

[Liberty, April 19, 1890.]

To the Editor of Liberty:(85 ¶ 1)

My rejoinder on your remarks on my last communication, in your issue of February 15, was unavoidably delayed.(85 ¶ 2)

Above all, I must admit an omission in my exposition, but, since it was on both sides of the question, the result remains unaffected. I had paid no attention to the labor involved in making loans. Including this admitted factor, my argument is this: The expenses of mutual banks may be divided into three categories,—i.e., risks, cost of making loans, and cost of making the tokens. These three items are represented in the interest payable by the patrons of such banks, and, while they determine the current rate of interest, those who lend money which they have acquired have to bear only two of these items, and will obtain interest composed of the three, and consequently receive pay for work they have not performed. And capital having the power of bringing an unearned income as long as money is thus blessed, I still hold that justice is not attained until the gross interest is reduced to the rate of risk and cost of making loans, the cost of making the tokens being defrayed by public contributions.(85 ¶ 3)

It cannot be denied that the burden of discount falls ultimately, not on the borrowers, but on the people; the trouble is that the people are compelled to pay more than this discount, and my desire is that they should cease to pay this excess which now falls into the hands of the owners of capital.(85 ¶ 4)

Should the question of free banking become a political issue, I should heartily coöperate with you in furthering the object. But this does not prevent me from advocating a government issue, provided the borrowers are charged no more than risk and cost of making the loans, as a preferable measure.(85 ¶ 5)

Yours truly,

Hugo Bilgram.

Philadelphia, March 31, 1890.

To the above there are at least two answers. The first is that factor in the rate of interest which represents the cost of making tokens is so insignificant (probably less than one-tenth of one percent, guessing at it) that the people could well afford (if there were no alternative) to let a few individuals profit to that extent rather than suffer the enormous evils that result from transferring enterprise from private to government control. I am not so enamored of absolute equality that I would sacrifice both hands rather than one finger.(85 ¶ 6)

The second answer is that no private money-lenders could, under a free system, reap even the small profit referred to. Mr. Bilgram speaks of those who lend money which they have acquired. Acquired how? Any money which they have acquired must have originated with issuers who paid the cost of making the tokens, and every time it has changed hands the burden of this cost has been transferred with it. Is it likely that men who acquire money by paying this cost will lend it to others without exacting this cost? If they should, they would be working for others for nothing,—a very different thing from receiving pay for work they had not performed. No man can lend money unless he either issues it himself and pays the cost of making the tokens, or else buys or borrows it from others to whom he must pay that cost.(85 ¶ 7)