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security each "borrower" offers for the faithful redemption of his obligation requires here no explication. But other outlays, such as the making of the notes, together with all the attending expenses, must also be paid by the members of the mutual banks, and this increases the interest virtually payable by the borrowers beyond the rate of risk. Consequently competition will be incompetent to lower the current rate of interest to this desirable point. Money-lenders will therefore still be able to obtain an income from the mere loan of money, and capital will continue to return interest to the wealthy. The germ of the inequitable congestion of wealth will still linger after the introduction of mutual banking.

At this point the question arises as to who should pay for that part of the expenses of the financial system that relates to the production of the money tokens. The answer is not difficult when it is considered that the benefit of the medium of exchange accrues to those who use it. They should contribute, as near as possible, in the proportion in which their handling wears the tokens, for in the long run the cost of production will virtually resolve itself into the cost of replacement. Not the borrowers, then, who as members of the mutual banks would be obliged to do so, but the people at large, in whose hands the money circulates, are in equity under the obligation of this expense. And to accomplish this I see no other way than for the people to instruct their representatives to make the notes at public expense, distribute them according to the demand, and charge no cost to the borrowers exceeding the rate of risk attached to the securities offered by them.

I should of course never attempt to deny that mutual banking would be by far better than the present oppressive system. But the question at issue is between mutual banking, which would not remove but only mitigate the source of involuntary idleness, and a system involving a complete eradication of the cause of the discrepancy of the supply and the demand of commodities. My preference for the latter does, however, not imply that any restrictions should be placed upon mutual banking; such institutions could for obvious reasons not compete against the government institution, and would fail to find a suitable soil for their growth.

Before concluding I also wish to meet the objection of the critic of "Involuntary Idleness" to the use of the word "Capital" in its concrete sense. Having frequent occasion to refer to "labor products used for further production" in contradistinction to "money," I elected to use the shorter term "capital," especially as I had no need to refer, during the discussion, to its other and perhaps more appropriate meaning. I attempted to express thoughts, and made use of words as tools, the selection of which cannot commit me to any opinion. In fact, I am convinced that "Capital" in contradistinction to "Wealth" must lose its significance in either of its concepts as soon as the people learn to make honest laws.

Yours truly, Hugo Bilgram.

Philadelphia, January 18, 1890.

Mr. Bilgram, then, if I understand him, prefers government banking to mutual banking, because with the former the rate of discount would simply cover risk, all banking expenses being paid out of the public treasury, while with the latter the

rate of discount would cover both risk and banking expenses,