Let us consider for a moment the practical workings of a Mutual Bank, as near as we can foretell them.
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.
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.
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 a the money he borrowed.
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."
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
