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[Liberty, December 1, 1888.]

To the Editor of Liberty:

I have read attentively Mr. Westrup's farther statement on mutual banking, but fail to see wherein he touches what is to my mind the vital point. He says that the system "would not be making use of capital that belonged to some one else." Then I cannot see how it would answer its purpose. The bank itself has no capital save the pledges advanced by borrowers, and if they take out no more than they put in, they make no gain, but are merely to the expense of the transaction. On the other hand, if they do take out more, some one else must have put it in. They do not increase their wealth by using their own property as a basis on which to make advances to themselves. It is only when some one else accepts it as a pledge on which to advance his property that they have made a gain. And if there is no one to be paid a dividend but "the same borrowers," that some one else will go unpaid.

The borrower's object is to get the use of additional capital, not of the money that represents it during the transfer. If he gets it, "some one [else] is deprived of the use of that much wealth," as two cannot use the same property at the same time. Our farmer worth $1,000, who borrowed $500 and invested it, found at the end of the transaction that he had at his disposal $1,500 worth of property. Now, where did the last $500 worth come from? Like all created things, its ownership vested rightfully in its creator; the farmer was not that creator, or he would not have had to borrow it. The bank, in issuing a volume of circulating medium, neither increased nor diminished the aggregate wealth of the country appreciably. It engaged in no "productive" industry. It did not create 500 dollars' nor 500 cents' worth of property. In fact, Mr. Westrup's rate of interest represents what it did create in additional value in making out the transfer papers,—a fraction of one per cent, of the $500. If, then, neither the bank nor the farmer created it, is it not clear that they "made use of capital that belonged to some one else"?

The distinction between owning property and merely having the use of it has been pointed out to me, but appears largely verbal, for the only value of property is the use thereof. At any rate, it seems clear that our farmer gets the use of $500 worth of property so long as he pays the expense of keeping $500 of circulating medium afloat. He uses his $1,000 worth of property as a guarantee to the producer of the $500 of value that the latter shall receive back his property intact, but with no payment for use.

If I have understood correctly the reply to my former letter, this is Liberty's idea; but I do not see that Mr. Westrup coincides. However, if I am in error, I trust I am "open to conviction" and await further light.

J. Herbert Foster.

Mr. Foster's difficulty arises from the futile attempt, which many others have made before him, to distinguish money from capital, the real fact being that money, though not

capital in a material sense, is, in the economic sense and to all in-