Liberty cannot follow him. It goes with him in his economy, but not in his politics. There are at least three valid reasons, and doubtless others also, why the government should do nothing of the kind.
First, the government is a tyrant living by theft, and therefore has no business to engage in any business.
Second, the government has none of the characteristics of a successful business man, being wasteful, careless, clumsy, and short-sighted in the extreme.
Third, the government is thoroughly irresponsible, having it in its power to effectively repudiate its obligations at any time.
With these qualifications Liberty gives Mr. Bilgram's book enthusiastic welcome. Its high price, $1.00, will debar many from reading it; but money cannot be expended more wisely than in learning the truth about money.
STATE BANKING VERSUS MUTUAL BANKING.
[Liberty, October 1, 1881.]
To the Editor of Liberty:
In view of the favorable criticism which "Involuntary Idleness" received at your hands, I gladly accept the invitation to state my reasons for advocating governmental management of the circulating medium, rather than free banking.
My studies have led me to the conviction that mutual banking cannot deprive capital of its power to bring unearned returns to its owner. Referring to my exposition of the monetary circulation between the financial and the industrial group, and the inevitable effects flowing from the power of money to bring a persistent revenue, it follows that a normal condition can only be attained if interest on money loans is reduced to the rate of risk, so that, in the aggregate, interest will just pay for the losses incurred by bad debts ; and this desideratum will not result from mutual banking.
The members of such banks must no doubt be in some way assessed to defray the expenses and losses incurred by the banking associations, and these assessments are virtually interest payable for the loan of mutual money. While these rates are lower than the current rates of the money-lenders, the mutual banks will be more and more patronized, which will have a depressing effect on the current rate of interest. But the increase of membership will cease as soon as the current rate has adapted itself to the rate payable to the mutual banks.
We must now assume that the assessments of the mutual banks are in substance equitably distributed among their members; otherwise, such banks cannot compete against others who have adopted the more equitable rules. These assessments must obviously cover not only the expenses of the banks, but also occasional losses; and that such losses
should be assessed in proportion to the rate of risk attached to the
