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ALTHOUGH money is almost as familiarly associated "with our every-day life as the air we breathe and the water we drink, the laws which create and control it are considered as mysterious and incomprehensible as those which govern the universe of worlds in their eternal rounds through the immensity of space. Not only is the subject considered too profound for the common mind to understand, but the high priests of the Money Power have proclaimed it a political sacrilege to even contemplate the subject. There has ever been a persistent effort to complicate and mistify the financial question. It has been hedged in and walled up. It has been treated in high-sounding words and technical phrases. It has been so long discussed abstractly, logically, learnedly, profoundly, oratorically, rhetorically and otherwise, by scholars, statesmen and professional men, that people have come to regard it as marvelously as the ignorant minds of old regarded the conjurations of


astrologers. And all this has been done with the deliberate purpose of misleading the masses. It has been done in order to shut out the gaze of the "vulgar horde," in order that the inmates of the temple might better enjoy the fruits of their ill-gotten gains. It has been done principally by the supporters of centralized governments in order that the aristocracy, the nobles and princes, might to greater advantage use the power of money to rob and enslave the people.

Because of this supposed rather than real difficulty in comprehending the subject of finance, the writer enters with unfeigned humility upon the self-imposed task of so thoroughly analyzing and simplifying the question that even the uneducated mind may comprehend it. It is proposed to divest the subject of technical phrases and high-sounding terms, to disrobe it of the gaudy apparel with which it has been clothed, in order that it maybe clearly seen and understood by the common mind.

For the purpose, therefore, of simplifying and. analyzing the subject, the writer has chosen the narrative style of presenting it. He hardly dares to hope, in fact will not be presumptuous enough to make the effort, to render the subject so interesting that it will be readable to others than those who are seeking light upon the money question. He does not expect to betray unwilling minds into


a consideration of the subject by the mere art of word-painting. But to those who are anxious for light, who are willing to take the suggestions that are made and apply them to the existing state of affairs in every-day life, and who are honestly and earnestly impressed with the necessity of educating the people upon the financial question, the writer will endeavor to make the subject plain and understandable.


Chapter I.


ONE bright sunny day a staunch, neat little ship set sail upon a voyage of adventure and discovery. The good-bys were said, all hands were on board, the wind was fair, the sails were hoisted, and out of the pleasant little harbor glided the beautiful craft, bound for unknown lands. It was a jolly, happy, indifferent crew. They had bidden good-by to their old homes and friends forever, because they intended to find somewhere a congenial clime and start the world anew — rather, perhaps, to start a new world. They aimed to leave behind them all the manners, habits and customs of the land in which they had lived. They supplied themselves with a goodly quantity of farming and industrial implements, plenty of provisions, clothing and other necessaries of life, but, strange as it may appear to travelers of the present day, they took with them no money, for the simple reason that the country in which they had lived never knew the use of money. Such a thing as money had no actual existence among them. It must have been a strange land, thinks the money-worshiping American, where there was no money in existence. And, thinks


another, they certainly could not have carried on manufacturing, or commerce, or agriculture, without the use of money, Why, it is absurd, thinks some young lady who is accustomed to pleasant trips down town "shopping," to believe that a world could exist without money. And how the banker ridicules the idea that a world could possibly exist without money! But such persons have forgotten, perhaps, that in South America, before the invasion by the Spaniards, there flourished large and populous nations that carried on the most extensive commercial, manufacturing and agricultural enterprises without even the use or knowledge of money. And this, too, notwithstanding the fact that gold and silver existed in such abundance that it was used for frieze work in their temples and public buildings. They have forgotten that the use of coins, in comparison with the duration of the inhabited world, is of recent origin, and that for ages the use of money must have been as unheard-of as roses in December.

And so it was that our little crew knew nothing about money, nothing about shaving notes, legal tenders, gold dollars, remonetization of silver, fractional currency, honest money, interest-bearing bonds, cut-throat mortgages, etc., etc. And happy, indeed, must they have been, exclaims some good woman who has grown sick and tired of this interminable talk about the money question!


But if the ladies will take more interest in the money question and help to unravel its complications and get it established upon right principles, they will not hear so much grumbling from the men about hard times.

The names of the men who composed the shipload of adventurers were Plowem, Reapem, Fore-plane, Sledgehammer, Dressem, Grindem, Pickaxe, Makem, Discount, and Donothing — not very romantic names, to be sure, but, as this story is not intended solely for sentimental young ladies, these names require no apology. Each had a wife and several children, which fact is, in itself, a very good recommendation for the character and good sense of the little band whose fortunes we are to follow through their ventures and vicissitudes in a new world, for without a mate a man is an incom-pleted and imperfect being, growing surly, cross and selfish every year of his life.

The voyage was an uneventful one. After a sail of about six weeks with a fair wind they sighted one of those beautiful islands in the Pacific Ocean, and, after a consultation among themselves, they determined to effect a landing, and, if desirable, to establish a colony.


Chapter II.


IT was one of those beautiful and productive islands in the delightful climate of the Pacific Ocean. Up to this time no human foot had ever stepped upon its soil. It was rich in everything that ministers to the wants of man: fertile soil, large forests, running streams of pure cold water — so infinitely better than the vile compounds so freely drunk in saloons and bar-rooms in our Christian land — rank green grass, bright flowers, singing birds, and exhilarating atmosphere.

It is almost useless to say that, after visiting the island, it was unanimously decided (in which decision the wives rightfully had a voice) to select it as their future home. They did not name it Money Island, because, as heretofore stated, they knew nothing about money ; therefore, it must be explained that, in calling it Money Island, the writer has merely anticipated its history for a few years.

In a few days after the little baud of self-exiles landed they assembled and organized what they called a Government. They agreed that from time to time, as questions of difference arose between, them, an appeal should be made to the whole, and


the decision rendered should be taken and accepted as a precedent to be followed in the future. All decisions should be made by ballot, each having one vote.

Then they separated each taking such a locality. as best suited his taste and purpose. They were without shelter, and the stock of provisions and clothing which they brought with them was necessarily limited, and there was no means of obtaining another supply from the country they had left. They were thus at once confronted with the one great practical question of man's existence — how to obtain food, clothing and shelter — the three great indispensable necessaries of life. They could not purchase from each other, for no one had anything to sell, nor did any of them have anything with which to buy. But let us suppose that they had been possessed of money and known its uses, what good would it have done them? Suppose that each and every one of them had been possessed of a million gold dollars, could they have bought anything with it? If Discount had said to Reapem, " I want to buy your share of the provisions," Reapem would have replied, " I have no use for your gold, for I could exchange it for nothing, nor could I eat it; therefore, I do not want it. I prefer that which sustains life." How, then, could they solve the problem? They could not buy. "What could they do? Nature had ordained that


they should eat, that they should be housed and clothed. The same Nature had surrounded them with a fertile soil and had given them strong arms and cunning hands. How, then, should they obtain from the earth the products which their necessities demanded? Why, any ten-year-old Tommy will say at once: " They must work." It is only by labor that they can live. "With labor they can live ; without labor they must starve. Labor, therefore, is Master. Labor is King. All the gold that was ever melted could not itself produce a single grain of wheat or spear ol grass.

But suppose Mr. Donothing, disdaining work, had sat down under the shade of the trees (just as a great many Donothings are doing every day all around us), what would have become of him? Why, when the cold weather came, he would have been without a house ; when his clothes hadbecome worn out, he would have been naked; and when his provisions were gone, he would have starved — unless his fellows had graciously supported him, or become the foolish victims of some of the shrewd devices for obtaining a living without work in which such persons are naturally expert.

Do we, in this great, busy world of ours, fully realize how the Workers could compel all the Donothings to work or starve, by simply refusing to be defrauded and imposed upon by their sharp


practices? Do you realize how the producers could bring the non-producers to a sense of the dignity and necessity of labor, by withholding from them the products of labor?


Chapter III.


AS soon as our ten adventurers were fairly located, recognizing the necessity of producing from the mother earth whatever they needed to feed, clothe and shelter themselves, they went to work. At first, the same as people did thousands of years ago, each man undertook to feed, clothe and shelter himself, independent of any co-operation. But when Plowem and Eeapem commenced the work of building houses for their families, they found themselves very awkward in the use of carpenters' tools, for they had always been accustomed to work upon a farm. At the same time Foreplane, who was a good carpenter and joiner, had no difficulty in building his house, but when he commenced plowing the land he hardly knew enough about the business to get the horses hitched to the right end of the plow. And as for knowing anything about "holding the plow," why, he was as ignorant of the art as a pig is of arithmetic. Nor did he know anything about what grain was suitable for the different kinds of soil. He did not know anything about planting "deep" or "light," nor how much seed grain was needed to the acre, nor anything about cultivating


or harvesting. And then there were Dressem and Grindem and the rest of the party, who knew just as little about farming as Poreplane did. They were all constantly running to Reapem and Plowem, asking their advice and assistance about cattle-raising, planting or harvesting. And you ought to have seen the first suit of clothes which Sledgehammer, the blacksmith, undertook to make! You would have thought of the man's remark about the first pair of pants that his wife made for their hopeful son — "The hindside and foreside look so much alike you can't tell whether he is going to school or coming home." Pickaxe knew nothing about grinding grain, nor did Grindem know anything about mining. Sledgehammer did not know how to make a pair of pants, nor did Dressem know how to mend a wagon or shoe a horse.

So, for a whole year or more, they labored under the great disadvantage of each man's undertaking to do every kind of work, as much as though he had been living upon the island alone. In other words there was no division of labor.

As awkward and inconvenient as such a life must appear to the advanced social relations of the nineteenth century, one would not have to go very far back in the history of the world to find a time when the great mass of people lived in the same way. Many people can even remember the


time when families depended upon raising sheep, clipping the wool, carding the wool into "rolls," spinning the "rolls" into yarn, weaving the yarn on an old hand-loom into cloth, cutting and making the cloth into clothes — which were truthfully called "home-made." Even the thread itself and the very buttons were "home-made." In fact, a general exchange of the products of labor was in a primitive stage even fifty years ago.

But it so happened one day that, when Dressem went to ask Plowem something about planting corn, he found him at work trying to make a coat. Plowem was making such wretched work of cutting the garment, and was in such terror lest he should spoil the cloth by cutting it wrong, that he impatiently declared that he had just about as soon go without clothes as to undertake to make them himself. He was only too glad to accept the kindly services of Dressem, the tailor, who offered to cut his coat for him.

"Why," exclaimed Plowem, as he saw how handily Dressem marked off the cloth and cut it into the different parts, ready to be sewed together, "I wish I could measure and cut a coat as easily as you do."

"And I," says Dressem, modestly pretending not to notice the implied compliment, and at the same time thinking of his own troubles about planting the corn, "only wish that I knew as much


about planting corn as you do, neighbor Plowem."

"What a pity it is, indeed, that I do not know more about tailoring and you more about farming," thoughtfully responded Plowem.

"Now, I will tell you what I will do," said Dressem suddenly, as if impressed with a new idea: "You know all about planting corn, and I know how to make coats; if you will go and work on my farm planting corn, I will make your coat."

"Why, agreed,"readily replied Plowem; "I will accept your offer. But how many days shall I work for you on your farm?"

"As many as it takes me to complete your coat," responded Dressem.

Let it be remarked that in Dressem's simple answer is involved the law which measures all values of articles of use. Taking into consideration the difference between skilled and unskilled labor, the value of all useful products is measured by a day's labor, or by the amount of labor involved. In other words, all other things being equal, one day's labor, however remotely or indirectly expended, is always equal to another day's labor. Coats are always measured by wheat, and wheat by coats. Produce of one kind is measured by the produce of another kind, computed in the labor which is involved in them. They are always upon a level with each other. If the price of one advances, sooner or later the price of all the rest


will advance also. Relatively they are always the same. Now and then the relation may be disturbed temporarily, but in the end the ratio will be established. Four thousand years ago it may have taken a man ninety days to sow, reap, thresh and grind wheat enough to make a barrel of flour, whereas now it could be done in less than two days, all told. But four thousand years ago it would have taken ninety days of shearing, spinning, weaving, cutting and sewing to produce a coat, which now might be mad e in less than two days. The amount of labor in the one is reduced in the same ratio as the other. Then the price of the coat might have been one piece of silver, while now its price may be twenty pieces of silver. But, upon examination, it will be found that the price of wheat or flour has changed in the same ratio.

As soon as the above bargain was entered into, Dressem commenced work upon the coat, and Plowem went into Dressem's field and went to planting corn. It was found that at the end of five days Dressem, in consequence of his superior knowledge of the work, had accomplished as much as Plowem would have accomplished in twenty days, and that on the other hand Plowem had done as much for Dressem as he could have done for himself.

The plan for exchange of work between Plowem and Dressem worked so well that the other members


of the community profited by the example, and in a short time Foreplaiie, the carpenter, was building all the houses; Sledgehammer, the blacksmith, was doing all the blacksmithing; Grindem, the miller, was grinding all the grain, and Pickaxe, the miner, was mining all the coal and minerals. They had not as yet exchanged the products of their labor — only the labor itself. That is, Sledgehammer repaired the tools of Grinder, in exchange for which Grinder ground Sledgehammer's wheat; Dressem still worked for Plowem, making his clothes, while Plowem worked on Dressem's farm. In fact, they had just learned the system of a division of labor. In the next chapter will be shown how they learned the system of exchanging the products of labor.


Chapter IV.


IN this chapter will be discussed the system of barter, and incidentally the question of overproduction.

The next step after a division of labor comes the exchange of the products of labor. Our uneducated people upon Money Island did not understand even the old, old system of barter. It was suggested to them in a very simple manner indeed, and almost by accident.

With a view to providing for the future, Dressem had, in addition to his other work, employed his leisure time in making an extra suit of clothes for himself. Having no present use for them, he put them away where they would not be damaged till such time as he might need them. But it so happened that year that his crops were almost entirely destroyed by the drouth, in consequence of which he was nearly destitute of breadstuffs. He contemplated the intervening time before he could raise more grain with a good deal of alarm. He had an extra suit of clothes, to be sure, but those he could not eat. A loaf of bread would be worth more to him than the entire suit. He vainly wished that he had spent the


time which he had devoted to making the extra suit to raising more grain. He lamented sorely his misfortune. In fact, starvation stared him in the face. Not only on his own account did he suffer, but on account of his wife and children. In utter despair he sat down to meet the apparently inevitable fate that awaited him and his loved ones.

Now, then, tho very same year Reapem had succeeded, by hard work and favorable crops, in raising grain enough to last him for two years. In other words, he had a surplus of one year's grain on hand. He was well pleased with the fact, because he felt that if it should so happen that his crops should fail for a year he would be amply provided for. But he had become so engrossed in tho work of raising grain that he had neglected to provide himself with suitable clothing for the approaching cold weather. In fact, he was in rags; not only himself, but his family, and before he could possibly make clothes enough, for all that he knew, he would be almost in danger of perishing for want of proper wearing apparel. Tho joy and satisfaction with which he had contemplated his supply of grain now turned to mourning. He was so troubled over the matter that ho thought he would visit his neighbor Dressem, and see if he could not get him to help him in his work. He found Dressem in tho deplorable condition which


has been described; that is, on the very verge of starvation.

Here, then, were two men in a suffering condition. The one with a surplus suit of clothes, but with nothing to eat. The other with a surplus of breadstuffs, but nothing to wear. Some would say that they were troubled with an overproduction. While it is true that Eeapem had more grain than he wanted to use, his surplus certainly did him no harm. If the extra quantity of grain did not serve to keep him warm its possession certainly did not make him any colder. He might have piled up ten times as much grain and he would have been no worse off. In other words, he was not suffering on account of overproduction of bread-stuffs. He suffered for that which he had not produced; he suffered through a lack of production — of clothing.

In the case of Dressem, he had an overproduction of clothes. But he certainly was not any hungrier simply because he had an extra suit of clothes; if so, he could have burned them up and helped his case to that extent. In short, Dressem did not suffer hunger because he had more clothes than he wanted to use. But he, like his neighbor Eeapem, was suffering through a lack of production — in Dressem's case it being a lack of production in breadstuffs.

To a sensible mind it is certainly absurd to talk


of a person's suffering from overproduction. A man may possess plenty to eat, a good house to live in, and have all the clothing he wants, with the exception of the one article — a pair of boots, for instance. If he were compelled to go out-doors in the snow the lack of the boots would not be compensated by the possession of ten times as much of every other article he could possibly have.

But let us solve the serious problem which presents itself in the case of Dressem and Beapem. What can they do? It is a simple matter, you answer. It is so very plain that a child can understand it. It is, however, no simpler of solution than the money question. "When properly presented there is not a single proposition in political economy or social science but what is as easily understood as the problem which is presented in the case under consideration.

In this country to-day we see an army of Dress-ems hungry for bread, and an army of Reapems almost naked for want of clothing. At the same time we see in one section of the country stores filled with boots, shoes and clothing, and in another we see granaries bursting with a surplus product of breadstuffs. How to distribute these products so that all may be fed and clothed is the great problem of the day — and as easy of solution as the question between Dressem and Eeapem.

When Reapem asked Dressem if he could not


help him make a suit of clothes, promising to return to him as many days' work upon his farm the next year, Dressem replied: "I am too weak from lack of food, neighbor Eeapem, to do any work."

"Well," said Eeapem, "I have plenty to eat over at my house, but I have no clothes to wear."

"Why, I wish," said Dressem, "that instead of making an extra suit of clothes for myself last year I had raised more grain."

"Why," exclaimed Eeapem, "do you tell me that you have an extra suit of clothes?"

"It is a fact," responded Dressem — dolefully adding, "and precious little good they do a starving man, too."

"I will tell yon what I will do," said Eeapem. "You come over and help me make a suit of clothes and I will let you have what grain you want. I can do this instead of working for you next year on your farm."

"But I will tell you what is better still," said Dressem. " I do not want this extra suit of clothes I have laid away for future use ; therefore, you take the suit which I have already made and I will take the grain which you have already raised."

"Agreed," said Reapem eagerly, as he caught sight of the comfortable coat which Dressem had just brought from its hiding-place. "I am only too glad to do it."


Thus it was that our neighbors, Dressem and Reapem, commenced an exchange of the products of their labor. As simple as the process is, it is nothing more or less than the commerce of the whole world. The world is full of Dressems and Reapems who are constantly exchanging the products of their labor, some by the primitive system just explained and others by a more modern system, which will be explained in the following chapters.

The example of Dressem and Reapem was soon, caught up by the entire community, so that it was not many years before there was a regular system of exchange of goods carried on. Dressem did not stop at one suit of clothes, for he knew that at any time he could exchange clothing with Reapem for wheat, or with Grindem for flour. And Reapem raised all the grain he possibly could, taking no thought of making clothes, for, after his first experience, he had no doubt about being able to get a suit of clothes at any time of Dressem in exchange for grain. He knew, too, that any time when he wanted fuel he could exchange breadstuffs with Pickaxe, the miner, for coal.

But there was one matter that they had not yet settled, and that was how much of one article to exchange for another. For instance, Reapem did not know exactly how much wheat he ought to give for a coat, nor did Pickaxe, the miner, know


just exactly how much coal he ought to give Grindem, the miller, for a pack of flour. In other words, there was no measure of values.

This will be one of the questions to be settled in a subsequent chapter.


Chapter V.


WE have seen how our little community advanced from that primitive system, when every man provided for all his wants without any exchange of products with his neighbor, to the condition of a division of labor and then to an exchange of products by barter. We will now see how they progressed to the use of a medium of exchange.

It so happened that their settlement was divided by a small river. At certain times of the year, the river was so swollen with rains that it was impossible to ford it, and even when fordable it was an inconvenience to do so. It was proposed therefore to build a bridge across the stream, so that they could all pass or repass at any time they chose. They called a meeting and determined that the bridge should be built. The next question was, how should it be done? That is, who should furnish the labor and material to do it? It was first suggested that a week should be fixed upon when they should convene and all take hold together and work till the bridge should be completed, and then all would own it.

"But," Reapem says, "I am going to be busy


for some time and do not know when I can get away from my farm a week." " My work is such that I cannot leave my farm either," chimed in Plowem.

But Foreplane, Pickaxe and Makem said that they could spend a week at any time and were willing to do so, although they were not willing to do all the work. It was only fair and just that they should do their fair proportion. In fact their various duties were such that they found that it would be impossible for them to do the work together. They therefore delegated Donothing to superintend the construction of the bridge, and they empowered him to take such a course and to. employ such help as he saw fit.

But Donothing had no notion of doing all the work himself, nor was it right that lie should, but, he began devising a plan whereby the work should be done by a part and yet the burden should be borne equally by all.

Now, then, the remark is ventured that if to-day, in our country where money is used, such an emergency should arise, the first consideration would be to provide money to defray the expenses of the work. Men would say at once, without money the work cannot be done. What county, for instance, would undertake to build a courthouse without money? What town would undertake to build a town hall without first procuring


the money with which to pay for the labor and material? They might assess the people for the money, or they might borrow the money and agree to return it at some future time, but one thing is certain, they would consider it absolutely necessary to have money, and without it, ninety-nine times in a hundred, the work would not be done. In fact, there are, no doubt, hundreds of cases within our knowledge where public improvements would be made if people had the money. They have everything that is needed, the country is rich with every kind of material that is necessary to build railroads, bridges, school-houses, docks, etc., and there is plenty of idle help ready and willing to do the work. Suppose our little community upon Money Island had said: "We have no money, therefore we cannot build the bridge"? Suppose they had stopped all improvement in the way of building bridges, roads, public buildings, etc.? Why, they would never have advanced from barbarism. But some person may say, as all have heard so many people say in our own beloved country during the last few years, there is such a thing as having too many improvements; there is such a thing as having too many railroads, too many bridges, too many fine public buildings, too many school-houses, too many comfortable homes too well provided; yet the writer dares to say that there is pot a mile of railroad, nor a bridge, nor


a public building that to destroy would benefit the country. But is it not plain to every one that, the more improvements, in the way of constructing bridges, roads and public buildings, which the ten men of Money Island made, the better off they would be? Is it not just as plain that the more of such things, and the nicer and better, we have in this country, the richer it will be? Was it not better that our little community should devote their spare time in making themselves comfortable and happy than to be idle and live in poverty? Would it not be better in our Republic that every man should be at work producing something whereby all may be benefited than that millions should be idle?

To set every man at work and keep him at work, and so order things that he shall have the full reward and benefit of his work, is the great problem that statesmen should try to solve. Had it been solved, this country would have avoided the terrible visitation of financial disaster, commercial depression and unemployed workingmen which has been witnessed in recent years. Till it is solved there will be a periodical visitation of the same distress and disorder.

But having no money to use, and not knowing the use of money, Donothing had to resort to other methods. Some of the members of the community suggested to him the idea of calling upon each man


for ten day's work, letting him do it when lie could. But by such a plan it might have taken a whole year, as some of the community could not get around to do their proportion within that time. Others suggested that he should open a hook of account, and whenever any of the members should do a day's work he should have credit for it, so that when the day of settlement came he should be rewarded for it.

And such in fact was the plan which Donothing adopted, although, instead of keeping books of account, he resorted to another and simpler method.

When Donothing had gotten everything in readiness he informed the community of the fact, and invited those who could spare the time to go to work. Pickaxe was the first, man to go to work, and at the close of the first day he naturally inquired of Donothing how the record of his work was to be kept. Donothing handed him a little slip of paper, upon which were written these words:

Money Island is indebted to the bearer for the value of One Day's Work. This Note will he received for all dues to the Government of Money Island.

When Pickaxe inquired concerning the purport of the promise to receive the note for all dues to the government, Donothing explained to him that he proposed to keep an account of the work performed,


and when completed, to assess each man one-tenth of the whole amount, and call upon him to settle his account with the government, and that the note would be received as an evidence that the bearer had performed such a share of the work, and by surrendering it his account would be canceled to that extent.

So it happened that Pickaxe performed twenty days' work, and of course he received twenty of the above described certificates of indebtedness. Reapem worked fifteen days and received fifteen of them. Plowem did the same amount of work as Reapem and received the same number of certificates. Others worked more or less and received certificates for all they did. At the completion of the work the certificates were held as follows:

Pickaxe held 20; Plowem, 15; Reapem, 15; Sledgehammer, 5; Grindem, 5; Dressem, 2; Donothing, 8; Makem, 5; Discount, 10, and Poreplane, 15. Total, 100. In all, therefore, there had been one hundred days' work expended upon the bridge.

It will be seen that if each person had performed an equal share of the work it would have taken just ten days to each one.

Equal responsibility being the rule, Donothing assessed each member of the community the value of ten days' work, and notified them that at a certain


specified time all must be prepared to settle.

Let us observe, for a moment, the exact condition of things in our little community. The community as a whole, an organized body, had issued certificates of indebtedness to the extent of the value of one hundred days' work. On the other hand it had imposed upon its members a tax of one hundred days' work. So the matter stood this way: the community, as a whole, owed its various members the value of one hundred days' work, and the various members as individuals owed the community, as a whole, the value of one hundred days' work. In other words, the ten men of Money Island, as individuals, owed themselves, as an organized government., the value of one hundred days' work. Their case was very much as though a man should hold his own due-bill.

Now, then,, let us speculate upon the different phases which the affairs of Money Island might assume. Let us suppose, for instance, that it had so happened that each man had held ten certificates of indebtedness. This supposition would imply that each man had performed ten days' work, and, if this had been the case, the burden of building the bridge would already have been equally distributed among them, and there would have been no necessity of calling for settlement. Suppose, again, that, while holding these certificates, ten each, by some accident they had all been destroyed,


what would have been the result? "Would the government have lost anything? Nothing. Would the individuals have lost anything? No; because till the certificates had been presented for payment they would never be called upon to settle, and, being destroyed, they could never be presented. Suppose, again, that each man, possessing ten, had lost one of them, the result would have been the same. Neither individual nor government would have lost. If, however, one had lost all of his certificates, he would have suffered, and this loss would have been a gain to the other nine, because the less he presented for payment the less the others would have to pay.


Chapter VI.


PLEASE remember the above comments concerning the value of the certificates, because they will be referred to hereafter in discussing the intrinsic value of money.

When Pickaxe had completed his work upon the bridge he was reminded by the approach of cold weather that he must have a suit of new clothes. He, therefore, visited Dreesem for the purpose of making arrangements for the suit. He found that Dressem, anticipating the wants of his customers, had already made a suit for him. It will be remembered that it had become the custom, first to exchange labor, and then the products of labor, so that when Pickaxe wanted clothing he exchanged coal or other products for it, but, owing to the fact that he had been at work on the bridge, he had had no time to accumulate a surplus product. Therefore, when he made known to Dressem his desire to obtain a suit of clothes, he was met by the pertinent inquiry from Dressem, how he expected to obtain the clothes except through an exchange of products?

"The truth is," said Pickaxe, "I have spent so much time at work upon the bridge that I have


not been able to produce material enough to exchange with you."

"The excuse is well enough," said Dressem, "but it does not help the matter any so far as I am concerned. If you had worked less upon the bridge and more in your mines, you would have had enough. While you have been at work for the public I have been at work for myself. In fact I have even neglected to do work enough on the bridge to get what certificates I need to pay my proportion of the tax, and I really do not know what I am going to do. I suppose, however, that I shall have to turn over some of my goods for the amount which is charged against me."

"How many certificates have you?" inquired Pickaxe.

"Only two," answered Dressem.

" But I have twenty of them," responded Pickaxe, "and now, inasmuch as I require only ten of them, to pay my part of the tax, why cannot you let me have the suit of clothes and take my extra certificates?"

After studying the matter a moment, Dressem replied: "Why, certainly, I can do that. I wonder that I did not think of it before."

But at once a question arose between them. How many certificates should Pickaxe give Dressem for the suit of clothes.? In the answer to this question is involved the problem of a measure


of value — a problem that you find elaborately discussed in every existing treatise upon the subject of political economy. In the transaction between our primitive citizens of Money Island they might have agreed upon any conventional term, such as franc, pound, dollar, or macute. Dressem might have said that his suit of clothes was worth 200 francs, 2 pounds, 10 dollars, or 100 macutes, and Pickaxe might have estimated the value of his certificates in the same manner, but he would have put a valuation upon them that would match the values put upon Dressem's products, in order to have made an even exchange. Suppose, for instance, they had agreed upon the term franc, and Dressem had fixed the value of the suit at 200 francs, what could Pickaxe have done except to say his certificates were worth 200 francs? It certainly would not have done for him to have put a price of 20 francs upon his certificates, for in that event the certificates would only have equaled one-tenth of the value of the suit of clothes. What, then, was the great consideration which entered into the proposition? Why, the cost of production. If Dressem had said that his goods were worth 200 francs, then Pickaxe would have fixed upon the same amount for his certificates. Why? Because if the suit of clothes, which cost an expenditure of ten days' work, was worth 200 francs, then the certificates were worth the same amount, for the reason


that they also cost ten days' work. No other solution could have been reached; no other basis would have been equitable. What, then, is the inevitable conclusion to be drawn from this phase of this simple illustration? It is this: A day's work is the only standard of value.

But as this same topic has been discussed somewhat in a previous chapter (III) it will be well to consider briefly the name, word, or term used to ex-press the value of the articles in question. Suppose, then, that the term iranc had been used in the transaction, and Dressem had claimed the suit of clothes to be worth 200 francs. Would not the result have been the same had he called them worth 20 francs, 10 dollars, 2 pounds, or 100 macutes? There was no such thing known to them as a coin called a franc, a dollar, a pound, or a macute, but the absence of every such thing as a coin could have made no difference with its name as a mere term by which to compare the values of their commodities. In other words, the coin which represents the franc, the dollar, the pound, is an entirely different thing from the franc itself, or the pound, or the dollar.

In the discussion of the financial question one of the greatest stumbling-blocks in the way of a clear understanding of the matter is the fact that the coin which represents the dollar, and which in Common phrase is called a "dollar," is confounded


with the dollar itself. The dollar bears the same relation to the coin that the name of an individual does to the individual. The individual may die, but the name exists; coin may be destroyed, but the term "dollar" exists. One of the most apt illustrations of this idea is that given by John Stuart Mill when he tells about the African tribes who calculate the value of things by the term "macute." They say such a thing is worth a "macute," another is worth five " macutes" and another ten, and so on, and yet there is no such real thing as a "macute" and probably never was such a thing in existence. A more recent illustration is to be found in the custom, which prevails, even to the present time, of computing values in the old "York shilling" that passed out of coin existence years ago. You ask for the price of an article and you are told that it is worth six shillings, yet the shilling is so rarely found in circulation that very few have ever seen one. Again, it is an everyday occurrence for people to exchange commodities without the use of coins or bills at all. Mr. A. says to B., "My horse is worth 1100; your two horses are worth $50 each," which valuation being agreed upon, an even exchange is made, although perhaps neither possesses such a thing as cash. And in such a case it would not matter if A. had said to B., "My horse is worth $200; and your horses are worth $100 each,"for the exchange


would have been an even exchange if made on that basis.

It would be just as correct to estimate the value of things in "units" as "dollars." A promissory note promising to pay 100 "units" would mean precisely the same thing as a promise to pay 100 "dollars," because the statute of the United States reads that the money of account shall be "expressed in dollars, or units." It also further enacted, in effect, that 371ź grains of silver should be valued at one dollar, and in 110 instance is it enacted that 371ź grains of silver shall be a dollar.

But in the case of Dressem and Pickaxe the matter was settled very speedily, and in this manner:

" The suit which I have on hand," said Dressem. "took me ten days to make."

"Very well," replies Pickaxe; "each of mycertificates cost me a day's work; therefore I will give you ten certificates for the clothes, and then, when the day of settlement with the agent, Donothing, comes, all you will have to do will be to take the certificates there, and he will accept them and discharge you from further liability."

"Very good," again said Dressem, "but I already have two of these certificates and I only want eight more to make up the amount which I require. If I accept ten from you, then I shall have two more than I want, and I should not know what to do with them. It is possible, however,


that Grindem would take two of them in exchange for flour. If he will I will gladly accept them from you."

The two visited Grindem, who, after explanations were made, consented to receive the certificates for flour.

It will be observed, in the foregoing description of the brief manner in which the exchange was made between Dressem and Pickaxe, that the measure or standard of value was the day's work. That was the term which they used. It was just as well as though Dressem had said, "My work is worth one dollar per day, and it took me ten days to produce this suit of clothes; therefore it is worth $10." In fact, the day's work being the natural standard, or measure, it would be a much more appropriate term than the word "dollar" or "unit" as adopted by Congress in 1792.

After the experience which Dressem, Pickaxe and Grindem had in effecting exchanges of commodities by means of the certificates, it became quite the custom to use them in place of the barter system. They passed around from hand to hand, each representing the value of a day's work till the day of settlement for taxes came.

"Well, what office did those little certificates perform as they passed from hand to hand? The office of Money. In other words, they were a medium of exchange, nothing more nor less.


Chapter VII.


IT has been shown, in the last chapter, how the little certificates of indebtedness passed around among the inhabitants of Money Island as a means of exchanging products. In other words, they became a medium of exchange as complete and perfect as any coin that ever was circulated. Being a medium of exchange, they were in that sense money. Whatever is used as a medium of exchange is to that extent money. This is an undisputed proposition.

But it is said by some, although it is incorrect and inconsiderate, that money can only be made out of coin. It is one of those errors which have been born in the flesh. It is an error of education and thought. The proposition that money can exist, independent and irrespective of coin, is ridiculed by the newspapers of the day. And in ridiculing the idea, if they claim the credit of acting honestly and sincerely, they certainly cannot escape the conviction of inexcusable ignorance. It is an every-day experience to hear men insist that coin is the only money. They denominate everything else mere promises to pay money.

But it has been shown that on Money Island


money did exist, and yet no such thing as a coin of any kind or description whatever was ever seen or heard of. In short, the people of Money Island absolutely created money. And was it not perfect money with the exception of its not being a legal tender? Did it not answer the purpose of a medium of exchange and a measure of value? And yet how easily, how sensibly, how naturally the problem was solved. While it had no value in itself — that is, intrinsic value — it had, nevertheless, a commercial and exchangeable value. It represented credit, the credit of the entire community.

It needs but a moment's reflection to see that precisely the same system has been used in this country for a quarter of a century. In 1862 the Government, desiring to build a bridge across the yawning chasm of Disunion and having no money to use, employed a whole army of Dressems, Sledgehammers, Grindems, Plowems and others and gave to each one little certificates of indebtedness, in exchange for their services or such products of their labor as the Government needed. These little certificates were of various denominations, and of such size and shape that they were readily accepted by the people and used as a medium of exchange. It so happened that the back of the paper on which they were printed was partially green, so that in course of time they


came to be popularly called "Greenbacks." It is true they possessed no intrinsic value, yet they possessed an exchangeable value. It is true that, in and of themselves, they were worth no more than the paper of which they were made, but yet they were always received by the soldiers in exchange for their services, and by the farmers in exchange for horses, beef and breadstuffs — because they represented credit, the credit of the American people.

There was, however, one very grave and almost fatal mistake in the law which created them. The mistake consisted in making them a "promise to pay" instead of a "promise to receive." The money of Money Island bore upon its face a promise from the government to receive it for any dues to the government. The greenbacks of the United States were sent forth dishonored by the Government itself with the declaration that they would not be received for import duties, nor would they be used in payment of interest on bonds, even though such bonds were bought with greenbacks. The government of Money Island acted upon the principle that that which was good enough to pay the laborer for his hire was good enough for any and all dues to the government. The Government of the United States proclaimed that the money which it compelled its soldiers to take was not good enough for the Government to take; nor was


it good enough for those who were drawing high rates of interest on untaxed bonds. The inevitable consequence, therefore, was to create a special demand for coin, for the payment of interest on bonds and import duties, enhancing its exchangeable value far beyond that of the greenbacks. In other words, there was a premium upon coin because of the disability imposed by the Government upon the greenbacks.

Says John Stuart Mill:

"Money, when its use has grown habitual, is the medium through which the incomes of the different members of the community are distributed to them, and the measure by which they estimate their possessions."

Says J. E. McCulloch:

"When the division of labor was first introduced, one commodity was directly bartered for another. Those, for example, who had an excess of corn, and were in want of wine, endeavored to find out those who were in the opposite circumstances, or who had an excess of wine and wanted corn, and then exchanged the one for the other. It is obvious, however, that the power of exchanging,. and, consequently, of dividing employments, must have been confined within very narrow limits, so long as it was restricted to mere barter. A. might have had a surplus of wine, and B. might have been anxious to purchase it; but if B. had no commodity


that A. stood in need of, no exchange could take place between them. To avoid the inconvenience of such situations, every prudent man, in every age of the world, after the first establishment of the division of labor, must naturally, as Adam Smith has observed, have endeavored to manage his affairs in such a manner as to have at all times by him, besides the peculiar produce of his own industry, a certain quantity of some one commodity or another, such as he imagined few people would be likely to refuse in exchange for the produce of their industry. Now, this commodity, whatever it may be, is money,"

Says Sir James Stewart:

"Money which I call of account is no more than a scale of equal parts, invented for measuring the respective value of things vendible. Money of account is, therefore, quite a different thing from money coin, and might exist although there was no such thing in the world as any substance which could become an adequate and proportional equivalent for every commodity. Money of account performs the same office, with regard to the value of things, that degrees, minutes, seconds, etc., do with regard to angles, or as scales do to geographical maps, or to plans of any kind. In all these inventions there is some denominative taken for the unit. In angles, it is the degree; in geography, it is the mile; in plans, foot and


yard; in money, it is the pound, livre, florin, etc. The degree has no determined length; so, neither, has that part of the scale upon plans or maps which marks the unit; the usefulness of all these being solely confined to the marking of proportions. Just so, the unit in money can have no invariable determinate proportion to any part of value; that is to say, it cannot be fixed in perpetuity to any particular quantity of gold and silver, or any other commodity. The value of commodities depending upon circumstances relative to themselves, their value ought to be considered as changing with respect to one another only ; consequently, any thhig which troubles or perplexes the ascertaining these changes of proportion by the means of a general determinate and invariable scale, must be hurtful to trade; and this is the infallible consequence of every rise in. the price of money or coin. Money, as has been said, is an ideal scale of equal parts. If it be demanded what ought to be the standard value of one part, I answer by putting another question: What is the standard length of a degree, a minute, or a second? None ; and there is no necessity of any other than what, by convention, mankind think fit to give. The first step being perfectly arbitrary, people may adjust one or more of these parts to a precise quantity of the precious metals; and so soon as this is done, and that money becomes realized, as it were, in gold and silver, then


it acquires a new definition ; it then becomes the price as well as the measure of value. It does not follow from this adjusting of the metal to the scale of value that they themselves should become the scale."

Says Edward Kellogg:

"Money is the national medium of exchange for property and products."

Says Prof. A. L. Perry:

"Money is a medium of exchange and a measure of value."

Please apply these various definitions of money to the certificates of indebtedness used on Money Island, and see if they could be any more completely and perfectly described. If not, they certainly must have been Money. And, inasmuch as they were created and existed entirely independent of gold, silver or any other metal, then it must follow that money can be made of paper without the association of either gold or silver.


Chapter VIII.


THE bridge having been completed, the apportionment of work adjusted and the tax levied, Donothing requested the people to come up and settle.

On a given day, therefore, the several members of the community — each one having previously managed to acquire the exact number of certificates necessary to settle his account — presented themselves at Donothing's office and surrendered their certificates, taking their receipts in full for taxes assessed and paid.

As a matter of fact, one man (Grindem) was short just one certificate, and as its loss occurred in a manner that will illustrate an important though generally unnoticed item in the affairs of finance, it is worth while to relate it. One day as Grindem was at work at his grist mill he accidentally dropped one of his certificates into the fire, and in an instant it was burned to ashes. He looked upon it of course as a day's work absolutely lost, for it had cost him a day's work. Being able to produce but nine certificates, he found himself indebted to the government for the amount of one day's work, which he at once paid in making some


needed changes in the bridge. The government therefore gained one day's work — just the amount which Grindem lost. Being a patriotic man, the thought that his loss was the government's gain consoled him so thoroughly that he did not murmur at all. Right here it may be suggested by some hard money advocate that, had Grindem's money been made of coin, he would not have lost anything. If the fact that his loss was the government's gain is not sufficient answer to this hard money plea, read along carefully and it will be seen in a subsequent chapter that a day's labor can be lost even when embodied in coin.

In this manner, the distribution of the burden of building the bridge had been equalized through the process of using the certificates as a medium of exchange. It mattered not that Pickaxe did twenty days' work while Dressem did only two, for Dressem was compelled to pay over just as many certificates as Pickaxe.

And who shall say that when Donothing, as agent for the government, received the certificates in payment of taxes, he did not "redeem" them just as completely and absolutely as though he had paid or "redeemed" them in gold, silver or any other commodity?

And who can candidly and truthfully say that, whenever the United States Government has received its greenback certificates of indebtedness


for taxes, it has not just as completely and absolutely "redeemed " them as though it had exchanged gold and silver for them? Has it not, in fact, "redeemed" every dollar of greenbacks many times over by receiving them for taxes? And what better redemption is required?

The people of Money Island had become so accustomed to the use of the little certificates as a medium of exchange that they hardly knew how to get along without them. There being no alternative, however, they were compelled to return to the old system of barter, each one exchanging the surplus products of his own labor for such of the surplus products of his neighbor's labor as he most needed.

The inconvenience of the barter system became so great, however, that they resolved to invent something that should serve as a substitute for the certificates.

In groping around after some sort of a substitute, many different schemes were suggested. For instance, it was proposed to write upon some kind of substance the words: "Good for a Day's Work, " or "Good for the Product of a Day's Work," to be accompanied with an agreement upon tha. part of every member of the community that whenever such substance, containing said formula of words,


should lie presented, it should le duly honored and received at its face value.

In other words, they said: "By our agreement here and now entered into, we give that material or substance exchangeable value" — the only real value, save a legal-tender value, which money possesses.

The next question which arose was, out of what material should the money be made? Some proposed wood; others proposed shells. Finally they concluded to use little blocks of wood, with the words, "Good for the Product of a Day's Labor," written upon them. There was to be no signature of the government, no promise to pay, no acknowledgment of an indebtedness upon them. Their only value was to depend upon their mutual agreement to receive them in exchange for the products of their labor! This fact should be kept in mind, as it has an important bearing on the future discussion of coin money.

"Well," said Donothing (who was already beginning to develop quite remarkable abilities as a "shrewd financier " — equal in fact to those exhibited by the ordinary bankers of the United States), "I like that kind of money, because when I want a bushel of wheat of Plowem, I will simply write upon a block of wood, ‘Good for the Product of a Day's Labor,’ and present it to him, and, according to the agreement here made, he is bound to


accept it. When I want a coat I will take five pieces of wood and write upon each the same words and give them to the tailor, and he will be obliged to give me a coat for them."

The suggestion of Donothing exposed the error of the scheme to use blocks of wood. And probably nowhere else, save in the disordered imaginations of those critics who falsely accuse paper-money advocates of "wanting to start a printing-press and issue an unlimited quantity of irredeemable money," was ever another such a scheme proposed.

After further discussion of the subject, one of the members said: "Down in the bottom of the river, I discovered, while at work upon the bridge, a fine yellow dust; and, while cutting logs on the side of the mountain, I noticed in the crevices of the rocks a peculiarly bright white metal; let us make our money out of that yellow dust, or out of that white metal, because it is so scarce and so hard to get that it will take as much, and probably even more labor to get the material, out of which to make this money, than it will to work and earn, or produce, that which can be obtained with the money. Of course, upon the quantity of metal which each article contains will depend its exchangeable value; therefore we must regulate the size accordingly."

For reasons given above the yellow dust (gold)


and the white metal (silver) were chosen as a material out of which to make the future money of Money Island.

But what value did the yellow dust have? What value did the white metal have? Had the bed of the river been fairly paved with the yellow dust, it would not have sustained the life of a single member for a day. Had the rocks themselves been composed of solid white metal, all of it combined would not have kept even a child from starving. It could not be eaten; it could not be used for clothing; it was no better than sand and lime, and not half as useful as iron, in the construction of dwellings.

What, then, imparted value to them? It was the agreement among the producers of articles of use to recognize and receive them as a medium of exchange!

They agreed, in other words, to redeem that money with the products of their labor.

In the ages past, in this great Money World of ours, this agreement, through custom, has become an almost universal law. Upon that law does the value of gold and silver depend. If the law should be repealed or ignored, gold and silver would become comparatively valueless.. Gold might have a slight value; as, for instance, for filling teeth. Its value for ornaments and jewels


even would disappear — for its value for such purposes depends upon the value given to it through its use as money.


Chapter IX.


HAVING concluded to use coin money, the various men went to work delving the yellow dust from the bed of the river, and blasting the white metal from the rocks, and employed Donothing to weigh it and stamp upon the face of each piece its exchangeable value. As they had had 100 certificates in circulation, and experience had demonstrated that that volume of currency was adapted to the demands of their commercial transactions, they determined upon putting in work enough to make one hundred pieces of coin. Each man spent ten days in the mines, and each was rewarded with ten pieces of coin money.

It proved to be good money, it passed around from hand to hand, performing the functions of a medium of exchange, the same as the bridge certificates had done. As a matter of practical utility there was no difference between the two kinds of money.

But was there, in fact, no real difference in the cost of the two kinds of money? Casual observers — the nine men out of ten who see things only upon the surface — will say at once there was no difference whatever. They say: The 100 certificates


cost 100 days' work; the 100 coin pieces also cost 100 days' work; therefore, the cost of the one was the same as the other.

But what about the bridge?

The labor that was expended in. procuring the certificates went into the bridge; the bridge was a valuable and indispensable public improvement; it enriched the community to that extent; it was so much accumulated labor, used for the benefit of the community.

On the contrary the labor that was expended in mining the gold and silver was to be seen only in the holes in the bed of the river and in the crevices of the rocks.

The amount of money produced was the same in both cases, but in the one case the labor expended to produce it was put into a bridge and in the other it was wasted!

If the 100 days' work that was put into the mines had been expended in the construction of other public improvements (bridges, roads, halls, canals, etc.), the community of Money Island would have been that much better off.

And so it is in this great Money World — sometimes called the Civilized World. Every day's work that has ever been put into a gold or silver mine has been absolutely wasted. Whenever you see a gold piece or a silver piece you may say, there is a representative of so much labor thrown away.


The miners themselves may not have lost their labor, for they exchanged the product of their mines for the product of other people's labor, but to the world as a whole it was labor thrown away.

According to one of the best authorities (A. Soetbeers' "Edelmetall-Produktion seit der Ent-deckung Amerikas"), up to 1879 there had been produced in the United States $1,175,000,138; and according to the report of the Director of the U. S. Mint, December, 1884, the amount had increased so that it reached a total of 11,558,672,055. Allowing that only two-thirds of the labor of mining is productive of paying results, it shows that $2,348,008,072 has been expended in furnishing the United States with a coin currency — enough labor to build more than half of all the railroads in the entire country.

The incident which was promised to throw additional light upon the hard money advocate's suggestion concerning the loss of Grindem's bridge certificate may as well be told in concluding this chapter. One day, while Makem was testing a boat that he had just constructed, in a trial trip across the lake, in pulling his knife out of his pocket he pulled out a silver coin, which unluckily slipped out of his hands and dropped into the water. It sank to the bottom of the lake in just


about the time it took the fire to consume Grindem's bridge certificate. Thus Makem lost the day's work embodied in the coin, and unfortunately he had not even the consolation of knowing that his loss was the government's gain. If a greenback is destroyed Uncle Sam is the gainer. If a gold or silver coin is destroyed, it is an absolute loss, no one being a gainer thereby.


Chapter X.


THREE was one difference between the paper and coin money which experience proved to be in favor of the paper money. The latter was more convenient to carry. As he was at work at his forge, Sledgehammer complained that the ten big silver coins that he had in his pocket were so cumbersome as to actually interfere with his work. Plowem and Eeapem made the same complaint as they worked on their farms. The annoyance, in fact, became so great that some of them got in the habit of depositing their coin pieces with Discount, taking his due-bill therefor. For every coin piece that he took in he put out a promise-to-pay: he became, in fact, a sort of private banker, receiving coin and issuing bank notes. It was paper money based upon coin, but it was "honest," for behind every paper promise was a coin piece. It could be redeemed at any moment.

But there was no profit in that sort of banking. It frequently occurred to the keen mind of Discount that if there was any use to which he could put the idle coin pieces in his possession, he could make something by being a banker. His cogitations upon the subject, although vague and indefinite


years afterward served him a good purpose.

In course of time the complaint concerning the cumbersome character of the coin pieces became so general that it was agreed that Donothing should be employed to devise some method whereby the system could be improved. At first he received coin and entered the name of the depositor upon a book, and whenever the depositor wanted to pay a debt or purchase goods he had the credit on the book transferred to his creditor or the party from whom he purchased.

In time, however, instead of keeping books,.Donothing would receive the coin and give therefor paper substitutes. He wrote upon little slips of paper these words: "I promise to pay the bearer one coin piece on demand," and signed them as "Agent of Money Island."

In this way, government paper money based upon coin was substituted for individual paper money based upon coin.

Although it was honest paper money, because there was the same amount of coin on hand that


there were promises to pay outstanding, it, nevertheless, depended upon the good faith and credit of the government. And the query naturally arises, why might not an absolute paper money have been issued based directly upon the credit of the government?

In this chapter it has been shown how the ten men of Money Island issued an "honest paper money based upon coin," and in the next chapter it will be shown how one of the ten men invented and practiced a system of issuing "dishonest paper money based upon coin."


Chapter XI.


IN course of time the commerce of Money Island grew to such an extent that it was found necessary to have more money. Had the inhabitants of the island been raised under the teachings of the money-lord press of the United States, it would never have occurred to them that, as the number of inhabitants increased, more money would be needed. They would have been educated to believe that, inasmuch as there was "just as much money" on the island as there had ever been — no matter how much the commerce of the island had increased — there was "plenty of it." They learned by experience that 100 pieces of money would not profitably perform the work of 200 pieces. This idea was so obvious to them that it did not require any argument at all to make them understand it.

Although they had made sufficient advancement in monetary science to adopt a paper money instead of coin, they had not learned all the tricks and trades, the shoals and quicksands, of the business. It was left for Discount to give them a lesson that was never afterwards forgotten.

As intimated, the want of money was felt quite


seriously, and more or less discussion was had among individuals upon the subject. But each asked the other: "What shall we do? How shall we provide for the necessity we all know to exist?" Grindem was busy in his grist-mill; Plowem and Reapem were at work from morning till night in their fields; Makem was constantly occupied at all sorts of jobs; Pickaxe was busy in the mines; Dressem had his hands full making clothes; Sledgehammer and Foreplane were also constantly employed. One man, Discount, had been up to this time a man of all work, and, besides taking pretty good care of himself and family, had considerable time to study up the financial question. And it was noticed that he had quite an apt way of making sharp little bargains in the way of exchanging goods, and also that he usually managed to keep quite a quantity of the coin pieces on hand. He seemed to have an inborn love for them, so much so that he would eagerly exchange any of the products of his labor for them. Instead of keeping an extra suit of clothes on hand that might be destroyed by moths, or a few extra bushels of wheat that the mice and rats might get into, he kept the coin pieces — for those, he shrewdly calculated, could not be destroyed by moths or eaten up by rats or mice.

It was also observed that Discount and Donothing were always on good terms, and that they had


frequent discussions of the money question between themselves.

A public meeting was called and a whole afternoon was spent in discussing the "financial situation." No conclusion, however, was reached, as some were in favor of building a public hall — which was very much needed — and issuing certificates the same as when the bridge was built, and others were in favor of going into the mines and getting out more yellow dust and more white metal to coin into money. It was very forcibly pointed out that the coin pieces already in use had been too cumbersome and inconvenient for actual circulation, and that paper, based upon them, had been, used as substitutes.

Finally, upon a suggestion from Donothing, the whole matter was put into the hands of Discount to arrange. In making the suggestion, Donothing quite eloquently dwelt upon the great and shrewd natural abilities of Discount as a financier; he also as eloquently pointed out to the others that they were "too busy" to attend to the matter themselves, and they would be the gainers if they would leave the control of the currency with Discount, promising that he, as the government official of the Island, would keep an eye on the matter.

It was a sad and fatal mistake for the inhabitants of Money Island. Many people may wonder that they should be so foolish as to turn over to


these two particular men, Donothing and Discount, the settlement of the most vital problem which had yet come up for adjustment. But when it is considered that, acting under the advice of the professional office-seekers, the people of the United States have turned over to the bankers the solo management of the money question, it will be seen that sad and foolish mistakes may also be made by other people than the inexperienced inhabitants of Money Island.

In course of time Discount matured a scheme whereby he supplied the inhabitants of the Island with "plenty of money." He had 20 pieces of coin to start with. But inasmuch as the inhabitants did not want the coin lie merely wrote upon little slips of paper these words:

I promise to pay the bearer on demand One Piece of Coin of the weight and fineness established by the government of Money Island.


Whenever any of the inhabitants wanted money he would let them have it, taking back a promise to return the money at a certain time, or when called upon.

Finally a new idea struck Discount — which was to make something out of the operation. Therefore, one day when Plowem came to him for some money, the following conversation occurred:


Plowem: "Brother Discount, I want to buy some seed grain of Grindem, but I am out of money and come to you to borrow it."

Discount: "Really, brother Plowem, I. am a little short myself and I do not know as I ought to spare any. Besides, I am doing considerable work, and running some risk in loaning you the money, and somehow it seems to me that I ought to make a little something out of it."

Plowem: "But I will return your money to you, and it will be worth just as much when you get it back as it is now. It will not wear out, nor will it be any less valuable."

Discount: "Well, I know, but then there is some risk; you may not be able to pay it, and I ought to have a little something on that account, Now, if I should want to borrow ten bushels of wheat of you for seed, I should be willing to give you back eleven bushels at the end of the year. The extra bushel would not amount to much. But can't you get the money of some of your neighbors? I'd rather you would."

(To tell the truth, Discount lied when he said he would prefer to have Plowem get the money somewhere else — but the same lie has been told millions of times by other men in the same business.)

Plowem: "No, I do not think I can get it anywhere else. Besides I come to you because it


was agreed that you should attend to all of these matters."

Discount: "I am willing to let you have 10 coin pieces, if you will return 11 pieces to me at the end of the year. You can afford to do it; because if you don't get the money yon can't buy the seed wheat, and without the seed wheat you can't raise any crop."

Looking at it in this light, Plowem consented to the proposition and signed a note reading somewhat as follows:

At the end of one year I promise to pay to Discount Ten Pieces of Coin of the weight and fineness established by the government of Money Island; also one piece extra for the use of the same.


As these pieces changed hands Plowem observed that they were precisely alike with the exception that Discount's name appeared instead of "bearer," and the addition of the words, "also one piece extra for the use of same."

As a matter of fact, they had merely exchanged their promises-to-pay.

In answer to some comments upon the similarity of the two pieces of paper, Discount very patronizingly responded that "his (Discount's) paper would pass anywhere, for he was recognized as the person engaged in attending to that sort of business, whereas the other would not."


Not stopping to think very much about the matter — for he was in a hurry to get his grain into the ground — Plowem took his ten pieces of paper and left.

This scheme of Discount's worked so well that he adopted it with all. He soon had out as many promises-to-pay as he had coin pieces on hand. "But" thought he, "why should I limit my paper money to the actual number of pieces of coin that I have on hand? So far only a very few of my paper promises have been presented for payment. I really think that with my 20 pieces of coin I could issue 60 paper promises. And only think what I could get for the use of them? Why, I should get 6 extra ones every year. In three years I should get almost as many extra pieces as I have now on hand. I should then have nearly double the amount that I now possess."

These thoughts made Discount fairly rub his hands together in an ecstasy of delight. Ho could scarcely contain himself; he was transformed into another being; he had invented a plan whereby he could accumulate "property" without working in the heat of summer or the cold blasts of winter.

Did he disclose his scheme to the inhabitants of the Island?

Ah, not he! Instead of that he invented all


sorts of queer words, mysterious terms and high-sounding sentences; he talked in a very pompous and important way about his transactions, and thus unconsciously impressed everybody else with the idea that his knowledge was superior to that of his neighbors.

His scheme worked successfully. The people wanted and needed "more money" — and, sure enough, did he not supply them? And in about three years did not his 20 pieces become 40, and upon the 40 pieces did he not issue 120 of his own promises-to-pay, and thereby did he not accumulate 12 extra pieces every year?

He soon quit all other business entirely, and devoted himself to "financial transactions." And somehow, in spite of the fact that he did no work and produced nothing at all, he lived in grand style, had the best of everything which the Island afforded, and withal deported himself in such a pompous and patronizing way that the others began to look upon him as quite a superior being, and they all exclaimed: "What should we do without the services of Discount? He knows so much more than all the rest of us about this money question. See how he solved the problem as to ‘more money;’ there is plenty of it; no one has to dig in the mines; no one has to work on the public bridges for paper certificates. Great and mighty is Discount!"


Ah, great indeed was Discount, and glorious indeed was his system of finance — but, to see that it was dishonest paper money, read the next chapter.


Chapter XII.


BY the process of charging his neighbors for the use of money, and a shrewd manipulation of the finances, Discount, in a few years, managed to get possession of nearly every piece of coin upon the Island. And, as he put out three paper promises-to-pay for every coin piece on hand, he had nearly 300 paper promises constantly outstanding — all of which "bore interest," as it would be called in America — and, as a consequence, he was "accumulating" 30 pieces, or their equivalent, every year. Every three years he was gathering in an amount equal to the total original stock of coin pieces on the whole Island. Of course, he had to live and support his family, and, aside from doing that, he had made a great many improvements and accumulated a great deal of other property. But it was only the surplus that he invested; he managed to keep all the money within his control.

Now, let us see exactly how matters stood. The "paper promises" which he issued and loaned out were, as stated above, as follows:

I promise to pay the bearer on demand One Piece of Coin of the weight and fineness established by the government of Money Island.



For instance, Plowem held 10 of them. Was it not an evidence that Discount owed Plowen 10 pieces of coin? Grindem held 20 more of them. Did not Discount owe Grindem 20 pieces of coin? In short, did not Discount owe in the aggregate 300 pieces of coin to the people of Money Island who held those promises-to-pay? Could not any of them, at any time, have presented them to Discount and enforced payment?

Was he not, in fact, loaning his own promises-to-pay?

Did not the income derived from such loans support himself and family?

In short, was lie not living off the interest of what he, himself, owed to the community?

Ah, great, indeed, was Discount as a "financier," for it is not every man who can manage to live on the interest of what he owes.

But do you say, O most sagacious reader, that the inhabitants of Money Island were little less than simpletons to permit the existence of such a system? Do you say that they were fools to borrow another man's promises-to-pay and pay interest therefor?

If you do say so, you say only the truth — for fools they were indeed!

But did you ever see any of the old "bank money" that was issued and used in the United States a generation ago? This was merely promises-to-pay,


given by the banks, loaned to the people.

And again, did you ever notice the words that are printed upon the national bank notes of the present day? Do they not read: such or such a "national bank promises to pay the bearer on demand so many dollars"? There are $350,000,000 of them outstanding, and it hardly seems possible that you never read them — and yet, if you have, how can you think that the inhabitants of Money Island are the only fools in the world?

Another thing to consider is the ability of Discount to meet his obligations. As we have seen, he had three times as many promises-to-pay outstanding as he had coin pieces on hand to pay with.

Suppose every man who held his promises-to-pay had presented them at one time, could he have met the demand? Would not two-thirds of them have been disappointed? And if he could not meet his obligations would the "money" have been of any value in the community?

In other words, was not the paper money, based upon coin, dishonest paper money?

Is not any paper money, which professes to be "based upon coin," dishonest, if there is more of


it outstanding than there is coin on hand to redeem it with?

By and by, a history of the experience through which the Money Islanders passed will further illustrate Discount's system of "specie-basis" money. Of course it was very profitable to him, and naturally enough he was very desirous of perpetuating the system.

It is almost needless to say that Discount's scheme of "inflating the currency," as it would be called in this country, accompanied by the power to accumulate through charging a certain per cent, for use of money, in due course of time rendered him the most powerful member of the community. The fact that lie was not absolutely obliged to loan money to every person who might make application, unless he saw tit to, made it possible for him to gratify any dislike that he might feel against any of his neighbors. Being quite human, he was often disposed to make the rest feel his power by granting or withholding his loans as best suited his temper. He could conciliate by granting favors, or he could annoy, or even crush an opponent by refusing accommodations.

The other members of the community, being


also quite human, very soon learned to "keep on the right side" of Discount. No matter whether his acts were approved by them or not, they did not show their disapproval, through fear of offending him, well knowing that he could retaliate by refusing to accommodate them with a loan of his promises-to-pay.

And for the game reason many of them who had even begun to realize the true situation of affairs did not care to criticize his system or call in question the soundness of his financial responsibility. In this way he practically became the dictator of the affairs of Money Island — and if they had called him Dictator Discount it would have been a very appropriate appellation indeed.

The power to accumulate did not depend alone upon the privilege of issuing a three-fold quantity of his own promises-to-pay and charging interest on them. Being a shrewd financier, and audacious in consequence of the deference which was shown him by his neighbors, he was quick to invent and put in practice all sorts of petty schemes whereby he could "turn an honest penny." For instance, knowing that Dressem had quite an amount of money on hand, he kindly offered to take it and take care of it for him, humorously suggesting that Grindem's experience in having one of his bridge certificates burned up on a former occasion,


as well as Makem's loss of a coin piece in the lake, would prompt him to accept the proffered kindness. He explained to Dressem that he had constructed a very secure place, made of stone and iron, which neither mice, rats, fire or storms could destroy, where he kept his own money, and further very generously offered to make no charge whatever for his trouble. The plan succeeded, and Dressem at once "deposited" his surplus money, amounting to 50 pieces (coin and paper included) with Discount for safe keeping.

The very next day, Sledgehammer applied to Discount for a loan of 40 pieces for six months. Having learned during his conversation with Dressem that he would not want to use for at least six months the fifty pieces that he had deposited, Discount readily accommodated Sledgehammer, letting him have 40 of the identical pieces which Dressem had deposited. The interest on it for six months amounted to 2 pieces.

At the same time he kindly suggested to Sledgehammer that if he did not want to use all of the 40 pieces at once he might leave a portion of it on "deposit," to be drawn out when required — intimating to him in a very affable and ingenuous manner that he, Discount, was more likely to accommodate a man who kept his money in a safe place, and conducted his business on "business


principles," than if he carried his money around in his pocket.

Sledgehammer was not slow to see the point, and, inasmuch as he would not want to use 20 pieces of the money till after about three months, he left half the amount borrowed (20 pieces) on deposit. And it so happened, the very afternoon of the same day, that Fore plane came in and wanted to borrow 20 pieces for three months. At once Discount loaned him the very pieces that Sledgehammer had left on deposit. He also induced him to leave 10 of the pieces on deposit the same as Sledgehammer had done with his 20 pieces.

In this way, out of the 50 pieces that Dressem "deposited," Discount had loaned 40 pieces to Sledgehammer and 20 pieces to Fore plane — and yet lie had 30 pieces of Dressem's money still on hand!

He was drawing interest on 60 pieces and had 30 pieces on hand — and doing it all on 40 pieces of another man's money!

Again let it be recorded that great and mighty was Discount as a "financier"!

This system of "deposits" was worked up by Discount till nearly every member of the community had money on deposit in Discount's strong box.

Strange as it may seem, so dexterously did Discount


count manage matters that he actually had 600 pieces loaned out (on which he was drawing 10 per cent, interest) although he only had 100 pieces to start with, and had only 100 pieces (50 of paper and 50 of coin) with which to meet an obligation of 450 pieces due to "depositors," and 250 pieces due to holders of his own promises-to-pay that were outstanding. On an original investment of 100 pieces he was getting 60 pieces a year; a year and a half doubled his money; three years, quadrupled it.

And again you say, O sagacious reader, "What a set of idiots those other men were to let one man practice such a system of finance!" And again are you right in your estimate of those men. They were idiots indeed.

But if you will turn to the Report of the U. S. Comptroller of the Currency for December, 1884, you will see that on Sept. 30, 1884, the 2,664 national banks then in existence had "on deposit" (other people's money) $993,000,000; that they had only $228,000,000 cash on hand (including paper and coin) and that they had loaned out to the people $1,245,000,000!

So you will see that right here, in this civilized, enlightened and intelligent community of American people, there is an institution that corresponds in many respects with Discount's system. In fact,


you will say that, had Discount lived in the United States, he would have been not only a banker, but a credit to the profession.


Chapter XIII.


WHILE Discount was extending and perfecting his wonderful "financial system," and so managing it that he was rapidly accumulating property — not one particle of which did he himself create — other changes were being made in the management of the Island.

For instance, Donothing was chosen to manage the public business of the community, such as looking after the roads and bridges, collecting taxes (which were made payable in money instead of labor), making disbursements, keeping the public accounts, printing the laws, etc., etc. All of these things took so much of his time that he asked, and the community agreed to pay, a certain amount per year. In fact, he became an office-holder. It was not quite as hard work as it was to plow, grind corn, shoe horses, build houses, or mine coal; therefore he was quite well pleased with the position, and so well did he manage things that he continued in office for many years. Moreover, in course of time, he imagined that, inasmuch as he ran the affairs of the government, that he himself constituted the government; and a stranger would have thought that Donothing actually owned the whole


Island, and that all the rest of the people were at work for him. A continual assumption and exercise of authority on his part gradually made such an impression upon the people that they forgot that he was simply their agent and servant. They treated him more as if he were their master than their servant. He was wont to tell them, when re-elected at the end of each year, that he appreciated the very great honor that they conferred upon him — just as if they were selecting him solely for the purpose of bestowing an "honor" upon him, rather than merely choosing him as an agent to transact their business for them, the same as Plowem would hire a man to drive his horses, or Sledgehammer a man to make horse-nails. Thus. he impressed upon them the idea of the honor and importance of his position.

In fact, he deported himself very much as the office-holders do in this country; and one might be excused for thinking that he might at some time have served as the governor of a State, the mayor of a metropolis, a representative in Congress, or a postmaster in some small rural city.

A little event occurred about this time in the history of the Island that is worthy of notice, as it gave rise to a very important law concerning money. It so happened that Sledgehammer became indebted to Grindem for a quantity of flour.


He demanded payment, but they could not agree as to how the payment should be made. Grindem insisted upon a return of wheat enough to make the same amount of flour that he had let Sledgehammer have, and Sledgehammer refused to pay in wheat because he did not have it. On the other hand Sledgehammer offered to pay in horseshoes, but Grindem declared that he had no use for horse-shoes.

It being impossible to settle the difficulty, it was referred to the next meeting of the community for adjustment. After a good deal of discussion it was finally agreed that Sledgehammer should pay the debt in pieces of coin. Grindem objected to receiving the coin, and his objections were so strenuous that a suspicion was aroused that he merely wanted to annoy Sledgehammer, or take some advantage of him by requiring payment of the debt in wheat. The other members, seeing the injustice of Grindem's demand, right then and there decreed (it being conceded by all that they had the right to regulate such matters — and that is an important fact that should not be forgotten) a law that, whenever one person became indebted to another, the debtor should have the privilege of canceling the obligation by paying coin; and if the creditor refused to accept coin he should be debarred from annoying the debtor, or putting him to any cost.


This law, arising from the settlement of difficulties like that between Grindem and Sledgehammer, although a very simple one (and obviously a very just one in that particular case) was, in fact, one of the most important ever passed.

It gave to coin an additional and a very important power, viz., that of legal tender. Before, it had been used merely as a medium of exchange. As a medium of exchange no person was compelled to accept it, save upon his own terms. That is, if a man had an article to dispose of, he need not dispose of it for anything except that which he. wanted in return. By this new law, however, the creditor was not only obliged to accept, but the debtor was compelled to pay in one particularly specified thing!

While it thus became a great additional convenience to the transaction of business, it also became a possible means of hardship and oppression, as will be seen in a subsequent chapter.

As Discount's business enterprises increased, and property accumulated in his hands — for he invested all his surplus in such property as he could buy at good advantage — he grew sharp and cunning. It so happened that the men to whom he loaned money did not always pay quite as promptly as he would like to have them. "Prompt payment," in the estimation of Discount, was one of


the greatest virtues that a business man could possess. It covered a multitude of sins. He could have forgiven a man for driving a sharp bargain, or even cheating another out of property, but he could never forgive him for being dilatory in meeting his obligations to pay money — especially when the payment was due to himself.

Another thing, Discount grew suspicious and nervous as he grew rich, and many times he spent sleepless nights through fear of losing some of the money that he had out on loan. He was afraid that Grindem's mill would be washed away, or that Makem's house might burn down, or that Reapem's crops would fail, or that something would happen whereby some of his debtors would be rendered unable to pay.

Therefore, one day when Foreplane came in to borrow some money, he intimated to him that unless he could deposit something with him as security for the return of the money he did not care to let him have it. He argued to him that he (Discount) was parting with that which possessed great value (money), and that it was no more than right that Foreplane should turn over something of equal value as a guarantee that the money should be promptly returned. He had evidently forgotten that one of his arguments in favor of interest on money was the risk that he ran.

It seemed a little queer to Foreplane that in thus


exchanging equal quantities of value he should be required to pay 10 per cent, interest, while Discount need not pay anything. For the time being they were to "swap" property, but he was compelled to pay "boot money," although the things exchanged were of equal value. And another thing that impressed him as being quite peculiar was that Discount counted his own unsecured promises-to-pay as equal to the secured promise which he (Foreplane) gave in return. Exchanging a secured obligation for an unsecured one and paying 10 per cent, difference rather, staggered the plain common-sense notions of business which Foreplane possessed, but a little "argument" and " explanation." by Discount, accompanied by the intimation that the deal could not be made upon any other terms, very soon persuaded Foreplane to accept the terms proposed by the "great financier," Discount.

This was the entering wedge to a system of pledges, pawns, collaterals, bonds,, securities and mortgages. Then came a system of laws — which Donothing, who was always on good terms with Discount, took an active part in getting up — whereby pledges could be forfeited, collaterals sold, bonds enforced, mortgages foreclosed and judgments entered and collected by seizing and selling property. Not only was Donothing on good terms with Discount, but the enforcement of all these laws


gave him extra employment, for which he wag richly paid.

Having seen how money, usury, mortgages, laws for the collection of debts, banking, etc., were created and established, let us now see how the Ten Men of Money Island prospered.


Chapter XIV.


HE Island being rich in everything that contributes to man's support and enjoyment, and the men being industrious and enterprising, property was rapidly created. There were cultivated fields, plenty of horses, cattle and sheep, large and comfortable dwellings, well-filled warehouses, excellent public roads and bridges, convenient marketplaces, commodious school-houses, delightful playgrounds for the children, pleasant resorts for all; everything, in short, that contributed to the peace, happiness and comfort of the inhabitants. There was not a poor-house on the Island, for there was not a pauper to be found. There was not a jail, for, being happy and contented, there were no criminals. The sun never shone on a richer country or a happier people. It seemed as if God had especially blessed the beautiful Money Island and its inhabitants.

With their well-tilled fields, their improved machinery, their well-ordered system of work, their simple and equitable distribution of the products of labor, less than six hours per day were required for work, the rest being devoted to pleasure, recreation and mental improvement. The men, having


time to read, were intelligent; the women were educated and refined ; the children were healthy and well clothed.

To all outward appearance it seemed to be a model republic; discords and dissensions were unknown; the golden rule was the prevailing law ; equality and fraternity the basic principle upon which society rested.

But, alas, the happiness and prosperity of Money Island were doomed! A canker worm was already gnawing at its vitals. The seeds of destruction had already been sown. Avarice had fastened its poisonous fangs into the flesh, and ruin, want and misery were destined to ensue.

Discount became avaricious and Donothing became ambitious. In strict justice to these men, however, it ought to be said that when they first came upon the Island they were as free from avarice and ambition as were their companions. But the very first taste of office had sown the seeds of ambition in Donothing's breast. The very first piece of money that Discount made, as a broker or a money-loaner, poisoned his whole being with avarice. As the taste of the first drop of blood transforms the tamed and caged tiger into a savage, merciless beast of prey, so did the first official position and the first item of gain transform Discount into a selfish, greedy money-getter, and Donothing into a scheming, ambitious usurper of


power. They were merely the offspring of the system that had been unwittingly established in the community. They were the children rather than the fathers of the system.

They were bred, the same as ambitious office-seekers, usurpers and tyrants are bred in the world to-day; the same as avaricious money-getters are bred in Europe and America to-day. So thoroughly is this the case that it may be truthfully said it is the system that is to blame, and not the men.

It is true, these men existed before the system; so it is true that mankind existed before the system; so it is true that mankind existed before many of the curable though terrible physical diseases that flesh is heir to. Correct the system and the evil propensities of these men will disappear.

Avarice and Ambition, like the serpent in the Garden of Eden, entered into the earthly Paradise of Money Island, and the people were doomed to be driven beneath the lash of the task-master.

The Usurer and the Office-holder joined hands, and Prosperity was succeeded by Pauperism. Debt, credit, usury, taxation, mortgages, money-loaning, banks and their attendant evils, all became established institutions, and peace and contentment no longer found an abiding place with the Ten Men of Money Island.


It will he remembered that Discount started out with the theory of issuing three paper promises-to-pay for every coin piece he had on hand. Although that system increased his loanable capital threefold, he was not satisfied; in fact, avarice and greed are never satisfied. The scheme worked so admirably, and the people had such implicit confidence in his "abilities as a financier," that he ventured to increase his volume of paper money. He issued sometimes as many as twenty pieces of paper for every piece of coin on hand.

Eight here it may be well to note the effect of inflation. Everybody had plenty of money — such as it was. Grindem had plenty of money in the bank; therefore he was not anxious to sell his flour. Not being anxious to sell, he put up his price. Pickaxe, who also had plenty of money, readily paid the advanced price of flour. Money with him was plentier than flour; therefore he readily exchanged money for flour. Inasmuch as Grindem received a better price for his flour, he paid Plowem and Reapem better prices for their wheat. And, inasmuch as Dressem had to pay more for flour, he charged more for the clothes which he made and sold.

In short, as can be readily seen, an inflation of money increased prices, the percentage of increase in the volume of money being followed by an almost exact ratio of increase in prices. And, as


will be seen hereafter, a decrease in the volume of money decreased prices.

In calculating this proportion, however, the volume of business should be taken into account. For instance, 100 pieces of money were ample, at one time, for the volume of business on Money Island. The volume of money was doubled, but there was no increase of price, for the reason that the volume of business had also doubled. But when the increase of currency exceeded the rate of increase of business, there was an advance of prices equal to the excess of money volume over business volume. To illustrate: The volume of money was increased 100 per cent.; the volume of business 100 — prices remained the same. The volume of money was still further increased 125 per cent; the volume of business 100 per cent. — prices increased 25 per cent.

It is also plain to be seen that as an increase of money increases prices, so a decrease in the volume decreases prices, though a decrease in the volume of money is often supplied by private credit, and thus a proportionate decrease of prices is, for the time being at least, avoided.

The volume of money depended altogether upon the greed, fear or caprice of Discount. If he could get a good rate of interest he put out all the money that was wanted; if there was a stringency in the money market he was afraid to loan money for


fear he could not get it back, thus aggravating the stringency which already existed; if ho had property to sell he could, by inflating the currency, put up prices and sell out at high tide; if lie wanted to purchase he could contract the volume of money, and thus cut down prices and buy up property at much less than its real value. The control of the volume of money — that is, the power to innate and contract — gave him control of the little commercial community in which he lived, just as the control of the money volume in this country gives the bankers control of its vast commercial world.

All of these powers and privileges were made such good use of by Discount that, in fifteen or twenty years, he had accumulated more property than any other two members of the community put together, and he still held mortgages and notes against nearly every other man on the Island. And yet not one particle of the property that he held had he created or produced himself. He had merely taken that which the labor of others had created. He had acquired, by and through the invention and practice of the ingenious devices of usury and banking, that which, under any other system, would have still belonged to the actual producers. He was the drone in the hive, yet he lived on the fat of the land. He had taken a little from this one, and a little from that one — so gradually, so imperceptibly, that its loss was scarcely felt.


Had all that he had taken been exacted at one time, there would have been a rebellion against his exactions; but it had been taken little by little, and withal in such a perfectly legal manner, that there was no other thought than submission to the results which the practice of his system had accomplished.

Poor Sledgehammer was the first victim who succumbed to Discount's greed. He had borrowed money of Discount during a period of "flush times," and given him notes due on a certain day. In the meantime, a little "stringency in the money market," manipulated by Discount, had made Sledgehammer's business dull, and sickness in his family had consumed some of his earnings. Besides, let it be frankly confessed that Sledgehammer, although a hard-working man, was what might be called an "easy-going, good-hearted man." He was generous and accommodating, ready to inconvenience himself for the sake of helping a neighbor. One of the best men in the world, you say, as a neighbor. But, alas, he was not shrewd and sharp; he had not the faculty of accumulating wealth — and these, in the eyes of the great money-loving, throat-cutting, brother-cheating world, are almost criminal faults!

He was, therefore, perhaps a little thoughtless and careless about "meeting his notes promptly," never having been trained in the school of money-mongers; and, moreover, he presumed that Discount


count would extend the time of his loan if he was not prepared to meet it.

The day of payment came, and he could not meet his obligation. His property was really worth a great deal more than the amount of money which he owed. In vain he endeavored to get his loan extended; in vain he tried to borrow the money of his neighbors — some of them did not have the money to help him, others referred him to Discount, the man " whose business it was to loan money;" in vain he tried to sell property enough to raise the money, but, having no use for it, no one cared to buy. Discount himself was about the only man who had ever bought property as a speculation — and Discount told him very plainly that he "did not want his property; all he wanted was his money."

The fates were against poor Sledgehammer. He could not pay; judgment was entered up against him; his property was seized by the sheriff, and due notice was given of the public sale.

Several of his neighbors appeared, but no one had money enough to purchase. Discount himself was the only man who had money enough on hand to bid off the property. Openly he professed to be very unwilling to buy the property ; secretly lie rejoiced, for he knew he was going to get it for little or nothing compared with its real value. He bid it off and took the sheriff's deed. Poor Sledgehammer


hammer and his wife and children were compelled to vacate the old home, which their labor had built and beautified, and find quarters elsewhere. But where? He was compelled to make arrangements with Donothing for the use of a house which he had vacated when he moved into his new one. Donothing, having been on intimate terms with Discount and having learned many fine points, of course had to charge Sledgehammer "something for the use of the house." No other course was open to Sledgehammer — who was now "a poor man" — than to accept the best terms that were offered him. He was no longer the master of his own acts; he became from that time forth the victim of every other man's greed and caprice.

Donothing became a landlord ; Sledgehammer became a tenant; Discount accumulated more "capital."

Do you say, O most considerate and kindhearted reader, that, Sledgehammer being no match for Discount in the transaction just decribed, the law, instead of being on the side of Discount, should have been in favor of Sledgehammer — because Discount was a strong man and Sledgehammer a weak one? Do you dare to say that, if Law is not for the protection of the Weak against the greed and selfishness of the Strong, then there is no use of having any law at all? And are you horrified at the fact that the law, in


the case just recited, was actually in favor of Discount; that it was nothing but an instrument in his hands whereby he could forcibly take from his weaker brother the products of his labor and the very home that sheltered him and his family?

But will you tell us where, in this great Christian, civilized world — where churches flourish and colleges are found in abundance — can there be found a system for the protection. of the Weak against the Strong?


Chapter XV.


DISCOUNT was not slow to learn the fact that.a contraction of the currency had, of course, the contrary effect to inflation. And although he was making a profit on every bank note outstanding, the amount of property which he had acquired by purchasing Sledgehammer's house for a mere nominal price suggested to him that he could make money much faster by occasionally getting his neighbors into a tight place financially and "squeezing them," as he humorously called it. He would therefore occasionally withdraw large amounts of money from circulation — this, of course, being readily accomplished by simply refusing to make new loans or extend old ones.

As a consequence there was a scarcity of money. Reapem and Plowem found themselves.compelled to accept for their grain whatever Grindem saw fit to give, in order to get money enough to pay their taxes and the interest on their mortgages.

Makem and Foreplane, instead of setting the prices on their own labor, were compelled to accept whatever those who wanted their services saw fit to pay.


In other words, when money became scarce prices went down.

And this fact — i. e., the decrease of prices which followed contraction — was one that did not escape the attention of either Discount or Donothing. Donothing readily realized the fact that with low prices his salary, which was fixed at so much per annum, would go much further than when prices were high. He was, therefore, in favor of low prices. Discount soon learned the same thing; and, in fact, he saw that, although he was not getting in as many pieces of money every year as formerly, those that he did get would go as far in the purchase of property, in consequence of the reduced prices, as the larger amount. He was really no loser by the diminution of his interest money receipts after all, and he would stand a chance of making a handsome thing by his "squeezing" programme.

It is an old trick, dear reader that has been played for hundreds of years — though Discount was the first to play it on Money Island.

It was not long before other members of the community were forced to surrender their property and their homes in the manner Sledgehammer had done. For instance, Plowem found it too hard a struggle to pay interest on the mortgage that Discount held on his farm, and at the same time pay the taxes which were assessed to "run


the government." Instead of getting out of debt, each year he kept getting farther in. His farm was finally sold under the mortgage and bought by Donothing. Of course Donothing could not run the farm himself, so he turned around and let it out to its old owner, Plowem, "on shares." The work was done by Plowem, but the crops were divided with Donothing. By his own hard work Plowem had taken the land in its wild, uncultivated state and made it a rich and productive farm. By a system of bad laws, however, Donothing had become possessed of the farm, and as a result was getting annually, for nothing, one half of the products of Plowem's labor.

Foreplane soon followed in the footsteps of Sledgehammer and Plowem, so that, instead of being the owner of his own home and his own master in his work, he became a hired man, working for whoever saw fit to employ him, and a tenant paying so much rent per month.

Makem and Pickaxe were tottering upon the verge of bankruptcy; and poor Reapem was so completely crushed with the mortgage upon his farm that he was many times tempted to follow the advice of a New York paper and give up his farm and become a tenant farmer. He was very little better off than his neighbor Plowem, for it took fully half his crop to pay taxes and interest money.


Those who had accumulated property found it a very easy matter to get along and live luxuriously. They had not only the direct result of their own labor, but by rent, interest, etc., etc., they constantly absorbed a goodly portion of the labor of others. They were constantly getting richer, and the others were as constantly getting poorer. Being independent themselves, they dictated not only the rates of interest and the rates of rent which they should receive, but they dictated the wages which they would pay for labor and the prices they would give for that which they consumed in living.

In short, the community became divided into substantially two classes, princes and paupers. Just as this great world is divided to-day — and from the same causes.

As there were paupers it became necessary to build poor-houses; and as criminals are bred by pauperism it became necessary to build jails.

Those who had once been prosperous were now dependent upon charity; and some of them who had once been honest and industrious were now inmates of prisons. The wives were poorly and plainly clothed; the children were compelled to work instead of going to school; the houses which they were able to rent were poor, the rooms were small and the ventilation was bad. No matter


how hot the weather, they were compelled to work or starve. In winter it frequently happened that many of them suffered for want of coal, and even for the want of bread. They had no time to read or study, and they were too poor to buy books for their children. Thus to poverty was added ignorance — and degradation, brutality and crime followed in the wake.

On the other hand the few who were prosperous — measured by their success in accumulating property — being no longer content to live in ordinary dwellings, erected for themselves houses that were in reality absolute palaces. They wore the finest clothes that money could purchase; they had servants to cook, to wash, to scrub, to drive their carriages, to attend to their every want. They had leisure, so that in the hot days of summer they could go to the mountains or down to the seashore, where they could revel in the cool breezes of the sea and the refreshing air of the shady hills. In winter their long evenings were spent around blazing hearths, studying, reading, dancing, feasting, or in other enjoyments and recreations. Their children were educated, well fed and well clothed. Such things as hunger, cold and want were never felt.

The change in the inhabitants of the Island was as marvelous as it was melancholy. Equality no longer existed; an aristocracy of wealth had taken


the place of the old-time democracy; pauperism had succeeded prosperity; the golden rule was forgotten ; envy, jealousy, distrust and selfishness became the order of the day; ava ice and greed, want and destitution everywhere prevailed. It was so unlike the land of earlier days, it seemed as if the Almighty had visited it with a malediction instead of a blessing.

Chapter XVI.


IT has been seen in a former chapter that Discount issued three paper promises-to-pay for every piece of coin that he had on hand. Let us see how the system worked when "specie payment" was demanded.

Things had been prosperous with him for many years; he had accumulated much property — which, however, he had carefully covered up in the name of his wife and his friends. He had set aside a certain limited amount to use in his banking business; the rest of it was so judiciously disposed of that it would be difficult for creditors (should he ever have any who were importunate and exacting) to get hold of it. It is a way bankers have of doing things even in other places than Money Island.

His credit money (bank notes) was still taken readily by the people; no one questioned his financial responsibility. At least, no one questioned it openly. Now and then there were mysterious hints, and strange suggestions concerning his ability to redeem all of his paper money, but no one had dared or desired to incur the displeasure


of such a formidable member of the community by publicly expressing any doubt upon the subject.

He now had 50 coin pieces on hand, and 150 paper promises outstanding. Aside from that he had quite a large amount of "deposits," belonging to his neighbors.

One day Grindem, who held quite a number of bank notes, took 20 of them to Discount and got the coin. This took from the bank two-fifths of the entire specie reserve, leaving only 30 coin pieces on hand. But there were still outstanding 130 bank notes. The proportion of paper to coin was thus changed from three-to-one to more than four-to-one.

The next day Makem called and got 5 more bank notes redeemed. This left only 25 pieces of coin on hand, but there were 125 bank notes outstanding. The proportion was now iive-to-one. Although only one-half of the "basis" had been withdrawn, only one-sixth of the notes had been "redeemed." And this is a fact that specie-basis advocates should not lose sight of.

The very next day, Plowem was in town, and he happened to have some of Discount's notes in his pocket. He overheard a little conversation between Grindem and Donothing about Discount's bank, and, being a little suspicious, Plowem suggested that he had twenty pieces of Discount's money in his pocket, and wondered" if he hadn't better go


and get them redeemed." Suiting the action to the suggestion, he started out for the bank. On the next corner Reapem hailed his neighbor Plowem as to where he was going. Upon being informed, he joined the other, for the purpose of getting some 15 or 20 pieces of paper money, which he happened to have, redeemed.

The action of these men soon aroused the comment and then the suspicion of others; and, true to human nature, no sooner was the subject of money mentioned, coupled with a doubt of its value, than every man thought of the money which he himself possessed, and every one was eager to have it redeemed.

All other business was dropped, and in less than two hours' time every man on the Island who held any of Discount's bank notes was hurrying off to have them redeemed. The air was full of rumors. Some thought Discount would be able to meet his obligations promptly; others expressed the opinion that it was a rotten concern; some said he was honest, and others that he was a knave. But, no matter what people thought, every man was anxious to get to the bank as soon as possible; every one wanted to get ahead of the others. From walking fast, some of them fairly ran, so eager were they to get there and get their notes "redeemed." It might, in fact, have been called in this country " a run on the bank;" and there were


certainly evidences of the existence of a "panic" in the feelings and the actions of the people — so that it might perhaps be called " a panic," as well as "a run on the bank."

In all there were no less than 125 of Discount's promises-to-pay being taken to his bank to be redeemed — and only 25 pieces of coin in the great financier's strong boxes to do it with!

And now, 0 wise and sagacious advocates of "specie-basis" money, tell us how Banker Discount can "redeem on demand" 125 banknotes "payable on demand " with 25 pieces of coin!

And now, 0 high and mighty financiers, who believe in a paper money "convertible into coin on demand," tell us how these men are going to get 125 paper promises "redeemed" when there are only 25 pieces with which do to it!

Rise up, 0 yeshriekers f or "honest money," and tell this "great financier," Discount, how to "redeem" five promise-to-pay bank notes with one piece of coin!

Do not hesitate; do not delay, for there is a crowd of anxious men clamoring for the "redemption "of their "specie-basis "bank notes!

Here is Sledgehammer — only a few years ago deprived of his home by this very banker, because he could not pay "promptly" a note and mortgage — he has a few of this "great financier's" bank notes in his possession, "payable on demand,"


and he now demands their "redemption." Because his promised coin is not forthcoming he denounces Banker Discount to his face as a knave; he calls his banking system a fraud; he threatens punishment and prosecution by law. He recalls the time when this same great financier, who held his head so high and laid down banker's rules and regulations for the people to follow, would not extend the time of payment on his note, but compelled him to sacrifice his home and turn his wife and children into the street. With eyes flashing with anger, with a face expressive of just indignation, he confronts Discount face to face, and exclaims: "Your system is. a fraud, and the man who practices it is a knave!"

And who among you, 0 wise financiers, you specie-basis advocates, you howlers for honest money, dare rise up and say that Sledgehammer was not right?

Aye, the system itself is a fraud — no matter who practices it, be it private individual, corporation, or national government.

Just at the present time there are in the United States some $300,000,000 of greenbacks outstanding — theoretically based, by the so-called Resumption Act, upon $100,000,000 of gold coin in the Treasury; three promises-to-pay for every dollar of coin in the Treasury. Who does not know that it would be an utter impossibility to redeem $300,000,000


of greenbacks with $100,000,000 of coin if they should be presented for payment? And who is so dull-witted that he cannot understand that if these greenbacks were promises to receive instead of promises to pay, the Government could easily redeem them by receiving them for taxes? And who does not smile at the absurdity of the Government's forcing (by taxation) its people to pay into the Treasury 300,000,000 of coin dollars in order that the Government may turn right around and pay it back to the people in redemption of the $300,000,000 of outstanding greenbacks which the people themselves hold? Should there ever be a surplus of greenbacks let the Government tax them in and burn them up, instead of pursuing the ridiculous, round-about method of taxing in coin, exchanging it for the greenbacks, and then burning the greenbacks.

Is this coin basis (with three dollars of paper for every dollar of coin) system any the less a fraud when practiced by a nation of 60,000,000 people than when practiced by Discount on Money Island?

There are tens of thousands of old men in the United States who will recall the old " State bank " system of money, and will readily see that this simple illustration of Discount's paper promises-to-pay is nothing else than that same old system of " wildcat " money. Many of them will recall similar "panics" and "runs upon banks."


It simply and forcibly illustrates the so-called "specie-basis" system of finance.

No banker will issue bank notes if he is compelled to keep an equal amount of coin on hand -for redemption purposes, for there is no profit in that kind of circulation, and any other system is simply a fraud — an ingenious device to rob labor of the fruits of its toil.

The story of what followed the panic and run on Discount's bank is soon told. Not only, did the note-holders demand redemption of their notes, but the "depositors" also rushed to the bank to get the money which they had deposited with the great financier. Of course, no one wanted any more of Discount's paper money; every "depositor" wanted the coin; so that, including note holders and depositors, there were about twenty demands for coin for every piece that Discount had.

It is useless to say that the "great banker" had to "close his doors " and go into liquidation. Of course he had notes, mortgages, securities, etc., on hand, but in the hard times which followed money was very scarce, and all" this property, after paying expenses of settlement — most of which went to Donothing, who acted as assignee — was not enough to pay creditors more than ten per cent, of their claims. The property which had been transferred to his wife and friends of course


was not given up. It was kept for future use. This custom is not an uncommon one, even in the most enlightened and civilized countries.

But even these direct losses were not the worst. The sudden annihilation of the greater part of their circulating medium, consisting as it did of Discount's bank notes, was a great blow to the commerce of the Island. Money was so scarce that those who bought and sold goods could no longer buy or sell; those who employed labor could no longer dispose of their products, because there Was no money in the hands of customers with which to buy; those who happened to be in debt, being compelled to pay in coin, were forced to the wall, and compelled to surrender their property to the sheriff. Prices were low, and yet no one could buy; labor was plenty, and yet few could find employment.

Inasmuch as Donothing had been intrusted with the duty of looking after the affairs of the government he was called to account for the unhappy state of affairs. Although he, generally, had no reason to find fault — for he had really profited not a little in the matter, through the collection of fees, commissions, services, buying up property at a sacrifice, etc. — he found it necessary to appease the people as best he could. Because Reapem had grain on hand that he could not sell Donothing told him that he "raised too much


grain." To Dressem, who had a large quantity of unsold clothing on hand, he said that he had "made too many clothes." "In fact," he said, "it is evident that there is an overproduction." In vain Sledgehammer, Foreplane and others pointed out the fact that they were not suffering from "overproduction;" in vain did they plead that their families needed bread and clothes ; Donothing persisted that "business had been overdone," that there was an "overproduction" — to prove which he triumphantly pointed out to Reapem's unsold wheat and Dressem's surplus stock of clothes — and that, no matter how wise a financial system might be, "there would be periodical panics and depressions in business." He talked so learnedly, and when talking looked so very wise and solemn, that he found many persons who believed what he said. In fact, so completely did he succeed in pacifying the people that the very next year he found no trouble in securing another term of office.

In the meantime, Banker Discount retired to private life, and lived upon the property which he had so discreetly and kindly transferred to his wife during the times when business was prosperous with him.


Chapter XVII.


AFTER enduring hard times, discouragements and discontent for a number of years, matters became somewhat settled in our little community of Ten Men on Money Island. It is true, in the commercial maelstrom which followed the collapse of Discount's bank and his system of specie-basis money, quite a number went down beneath the waters, only to float to the surface again as the driftwood of a wreck at sea is brought to shore by the shifting winds and tides. But the men were all industrious, and still full of hope and energy. Even Sledgehammer and Foreplane began to pick up a little, though far from being what they once were. They had never regained the lost paradise of the first few years of their existence on the Island. Would they ever see such glorious days of peace and plenty? Why had they fallen? Why could they not recover their lost ground? During the years that they had been there they had toiled early and late; had lived frugally and temperately, and yet they were poor; while, on the other hand, Discount and Donothing, who had produced nothing at all, were living on the fat of the land. Why should such a


condition of affairs exist? Surely, said they, it must be in consequence of the uneven and unjust laws and customs that have been adopted. But exactly where the mistakes had been made they could not tell. They had not yet fully comprehended the blasting effects of usury, banking, laws for the collection of debts, etc. The experience of the community with a private banker's specie-basis money had, however, given them a lesson in the laws of finance that they were not liable to soon forget. But, alas, they did not know how soon the same old enemy was to approach them from a new and unexpected quarter.

It occurred that in course of making internal improvements, acting under the advice and direction of Donothing and Discount, quite an amount of interest-bearing obligations had been issued by the government. They were held by various parties, and in various amounts. Every six months interest had to be paid upon them, Donothing, of course, acting as collector of taxes and disburser of the amounts collected.

Discount had become tired of his retirement; the ill-feeling that existed against him had gradually worn away ; the old injustice had been partly forgotten and partly forgiven. Having had nothing to do, he had invested — for the sake of an income — quite an amount of his money (in his wife's name) in the interest-bearing obligations


(bonds they may as well be called) which the government had issued.

After several conferences with Donothing, he proposed that, instead of issuing bank notes payable in coin, he would deposit with Donothing a bond calling for the payment of 100 pieces of coin, provided Donothing would let him have 90 promises-to-pay, in small denominations, signed by Donothing, as agent of the government. Donothing quite readily fell in with the scheme. There was some opposition among the people, but Donothing and Discount argued the matter to them in this fashion: "Here are these bonds bearing six per cent, interest; the government has to pay the interest every six months; they are perfectly good, of course, because they are signed by the government. Discount will deposit 100 of them as security for 90 of the notes guaranteed by the government, and he is willing to pay a tax of one per cent. on the 90 paper promises-to-pay. This will afford quite handsome revenue to the government that it otherwise will not get. It makes a perfectly safe currency, affords an income, and why should it not be done?"

Such were the arguments used, and so impressive were the ideas that it would afford a perfectly-safe currency, give the people money to use, and, at the same time, bring in a certain percentage of revenue, that the proposition was accepted.


Discount deposited his bond and took 90 promises-to-pay guaranteed by the government. The notes were something as follows:

Discount will pay the Bearer on demand — coin pieces. Discount, Banker.

This note is secured by a bond of Money Island deposited with Donothing.
Donothing, Government Agent.

At first some of the people were a little shy of accepting these notes, inasmuch as Discount was issuing them; but when they saw that they were secured by a deposit of government bonds they accepted them readily.

Discount opened another bank, and, professing to have seen the error of his old system of bank notes, was very loud in his praises of the new system. "Here," said he, "are bank notes based upon the credit of the whole island. It is the combined credit of every man in the community. I have deposited ten per cent, more of bonds than I have issued notes; therefore the government is amply secured as well as the notes."

In a short time Discount was again doing a flourishing business. He had not divulged all the mysteries of the "new system." It was not necessary, he thought, that he should do so. It was quite satisfactory to himself; and, inasmuch as it afforded additional fees, Donothing thought it was


one of the "best systems" that could possibly be devised.

Discount loaned out his 90 new promises-to-pay, upon which he got an average of 10 per cent., making 9 pieces every year as interest upon the notes. And then every six months he called around at Donothing's office and got 3 per cent, more — 6 per cent, during the year — on the bond. This made 6 more pieces; the 9 pieces from the people and the 6 pieces from the government made 15 per cent. It is true that he had to pay a tax of one per cent, on the 90 government guaranteed paper promises, but he still had a net income of 14 per cent., so that his profit was quite satisfactory. He complained more or less about the tax, but, when reminded quite sharply by Sledgehammer that every other member of the community also paid taxes, he had less to say upon the subject.

His double rate of interest — one from the people, and the other from the government — gave him quite a handsome income; but the ""deposits" which soon began to be made were a still greater source of income to him. And the fact that, in some way, he was associated with government in the business, gave additional confidence in his new banking enterprise. Thus it was that even the government itself was aiding a broken-down banker to build up and maintain a banking system


that invited the confidence of depositors — notwithstanding the fact that the government was not at all responsible for deposits.

The new system was unquestionably an improvement upon the old one. It was nothing more or less than a paper money based upon the credit of the whole island in its corporate capacity as a government. The money itself was a decided improvement upon "the specie-basis money" which he formerly issued. There were, however, certain defects in the system which will appear hereafter.

An incident occurred which illustrated one peculiarity of the new system. Plowem had heard the matter discussed, but did not get a very clear idea of it. He heard that Discount was really borrowing money of the government at one per cent, and loaning it out to the people at 10 per cent. He innocently thought that if Discount could borrow money at one per cent, he could. Therefore he caused to be executed upon his farm a small mortgage, not more than one-tenth the value of it, and took it to Donothing and asked that he might deposit it and draw 90 per cent, of its face value. Donothing not only refused to grant the request, but seemed quite amused to think that a sensible man like Plowem should even think of such a thing. He explained


to him that the government simply loaned money upon government bonds, and not upon real estate, no matter how good the latter might be.

"Suppose," asked Plowem, "that I go and exchange my mortgage with some one for a government bond, can I then get the same kind of money that you issue to Discount, and at the same rate?"

"I cannot," said Donothing, "under the law, let you have less than 90 pieces. If you want to get a government bond for 100 pieces and bring it here I shall be happy to let you have 90 government guarantee paper promises-to-pay."

"But," replied Plowem, "I do not want 90 pieces. I only want 9. I should have no use for the other 81 pieces."

"If that is all you want," sarcastically suggested Donothing, "I would advise you to go to Banker Discount and get them."

Plowem left Donothing's office not a little displeased at what seemed to him an injustice. The security which he offered was equal to that of a government bond, for the amount of money which he wanted. He could not understand why the government should let Discount have money at 1 per cent., and at the same time refuse the same favor to another member of the community. The fact that the sum which he required was smaller did not appear to him to constitute a reasonable


ground for the refusal. He could not understand clearly why he should be compelled to go to Discount and pay 10 per cent, for money which the government (of which he constituted a part) loaned to Discount at 1 per cent. Why should Discount step in between him and his government and make a clear 9 per cent, profit on a loan of money?

Other people in this busy land, known as the United States, may perhaps find it difficult to explain why such discrimination should be practiced between people of the same government — but such people are very scarce. Most of the people in the United States seem to think that it is perfectly just and equitable. They even uphold precisely the same system. They grant to certain corporations the privilege of borrowing money of the government at 1 per cent, and loaning it out to the people at whatever rate they can get for it. They allow these corporations to draw two rates of interest — one from the government and the other from the people.

Some people may say that when Discount deposited a government bond with Donothing, and the latter issued 90 per cent, of paper money which could be loaned out to the people, that the amount go issued should have been indorsed upon the bond and the interest stopped to that extent. Such an idea would seem to be even-handed justice. There are few men who, if they were owing a $1,000 note,


would pay off $900, and be kind enough to still continue to pay interest upon the whole $1,000, the same as though nothing had been paid. And yet, such is in effect the national banking system of the United States; such was the system upon Money Island. The government in both cases in effect pays off 90 per cent, of the bonds that are deposited, and yet very kindly and considerately pays interest on the full face of the bonds.

There may be here and there a Plowem who cannot fully understand the "equity" and "wisdom" of the system — but, as a whole, the people seem to rather enjoy the thing, for, like patient oxen, they carry the burden without a murmur. In fact, the greater the load the more enthusiastic they become in their praise of the Donothings who impose the burdens.


Chapter XVIII.


IN spite of the apparent defects of the new system of finance and banking described in the last chapter, it flourished so well that in clue time Discount once more became the dominant spirit in the community. Once more he became the lord and master of the commercial world. He accumulated money as rapidly as in the days of specie-basis money.

By having the power to inflate and contract the volume of money he had the power to control prices. If it was to the interest of himself or his friends to contract thevolume of money he did so. If money could be made by inflation, then inflation was the order of the day.

He had every man beneath his thumb. If a man wanted money to use, he was compelled to borrow it at the bank. If a man was in debt, the burden of interest money kept him in debt. There was no apparent escape from the penalty of usury. No business flourished so grandly as Discount's. He could make 20 per cent, on his capital when others could make but 3 per cent.

Every year the line of demarkation between the rich and the poor became more and more clearly


defined. Beyond a certain point it seemed impossible for the poorer class to pass, while to the accumulations of the rich there was apparently no limit whatever. Though they might work ever so hard, Sledgehammer, Foreplane and Pickaxe could do nothing more that barely eke out an existence. Now and then for a year or so they would do very well; wages would be high, and they lived quite comfortably. But it might happen that the very next year wages would be so low that they and their families actually suffered for the bare necessaries of life. Bickering and quarrels between employer and employee were of frequent occurrence, and occasionally the police force had to be called upon to "put down" an angry employee because he protested too loudly against what he regarded as an unjust exaction on the part of his employer.

Property became more sacred than human happiness. The "rights of property " were impressed upon the minds of the inhabitants constantly — by the owners of property. And the more "property" a man had, and the more questionable the methods by which he obtained it, the louder he talked about the "sacred rights of property."

The sacred rights of life, liberty and the pursuit of happiness were almost entirely forgotten. No doubt they were considered as "cranky notions" peculiar to the class of men who once spent seven


years of their lives upon battle-fields for the purpose of founding a Republic upon the principles of Liberty, Equality and Fraternity.

It is pleasant to record the fact, however, that there was a certain discontent and dissatisfaction existing in the community, which boded no good to the existing order of things. Sledgehammer had not forgotten the loss of his home. Plowem was still cogitating upon the unjust discrimination exercised in the matter of loaning money. Foreplane could not reconcile himself to his present condition in life; the gulf between him and those who did not work a quarter as hard as he did was altogether too wide. There was too close a friendship and too great a community of interests between Donothing and Discount to pass unnoticed. The new banking system began to be discussed, and its aspects pointed out. The reason why the government should loan to one particular person money at 1 per cent., and not to every other member of the community was a cause of a great deal of discussion. The government money that was issued in the earlier days, for the purpose of building a bridge, was frequently referred to and the question was asked: Why should it not be restored? Instead of letting one man issue all the money and control its volume, there were quite a number who grew bold enough, to assert that the government itself should do it.


All of this discussion and agitation helped to educate the people concerning the matters they had carelessly permitted to pass out of their hands into the hands of their agent, Donothing. It prepared them for the events which followed.

When affairs of Money Island had reached the condition described above, an event occurred which brought a new order of things. Whether or not a similar event will ever occur in any other country, where a like condition of affairs may exist, is not even hinted at in this little history of Ten Men of Money Island. But it may be safey said, on general principles, that when affairs reach such a miserable condition that the people become restless and discontented, some unforeseen event will happen — a trifling thing in itself, perhaps, tut mighty in its results — that will precipitate and project a new order of things!

The particular event which occurred on Money Island was a run on Discount's bank by depositors. By loaning out too much of other people's money, in his greed to increase his interest income, the astute banker had strained the canvas balloon of credit a little too much. An idle rumor caused a suspicion that there was something wrong in Discount's affairs, and this — sharpened by the recollection of the former panic — did the work. A few men started for the bank to withdraw their "deposits." In vain did Discount protest that his


bank was in a perfectly safe condition. The more he protested the more suspicious and distrustful his patrons became, and the more eagerly they demanded their money.

As shown in a former chapter, there was not cash enough on hand to pay more than 20 per cent, of what was due the depositors.

The notes were all right, for they were secured by the government; but there was no government security back of the deposits. Every man who deposited his money had trusted solely to the responsibility of Discount. This is the condition of national banks in the United States to-day; it was the condition in 1873, when there was such a rush of depositors that the banks were compelled to close their doors — and wait till they could squeeze enough out of their customers, by calling in loans, to tide matters over.

The scenes of the former panic were almost completely re-enacted. There was some confusion, crimination and recrimination, anger and despair, desperation and disappointment.

Business men were ruined; workingmen were thrown out of employment; suffering from starvation and cold became common; crime increased; the jail and the poor-house were again filled up with criminals and paupers.

A worse condition than that which followed the former panic now ensued. As a consequence, the


inhabitants became so aroused that, when Sledgehammer carried a banner through the streets on which were printed the significant words, "SOMETHING MUST BE DONE," and called upon the inhabitants to meet at a certain place on a certain day to publicly discuss matters, there was such a spontaneous response of the people that they fairly made the hills echo with their shouts.

Just what was done will be shown in the following and concluding chapter.


Chapter XIX.


THE inhabitants of the island met in the public hall, and at the first meeting resolved that the first step in the programme of reform should be a thorough discussion of the cause and cure of the present unhappy state of affairs.

A series of meetings were held, in which nearly every man took part. Donothing did not want any change; he thought that in due time the remedy would come of its own accord. Discount was sullen and quiet, though he had much to say privately about the "sacred rights of property." Sledgehammer and Foreplane did a good deal of talking; Reapem and Plowem did a good deal of thinking; Grindem and Dressem hardly knew what to say, or which way to turn. Pickaxe and Makem were inclined to follow the lead of Sledgehammer and Foreplane, but hesitated about encountering the ill-will of Discount and Donothing.

One of the first things to be accomplished was the adoption of some law which should equalize the condition of the different members of the community as much as the natural abilities and qualities of men would permit, and thus


restore them to their former estate of equality. Some suggested the violent confiscation of accumulated property, and its equal distribution among the inhabitants. Others urged other methods of bringing about similar results. It was finally agreed, however, that a new system of taxation should be inaugurated; that the poor men should be almost wholly exempt from taxation, while the rich should bear the most of the burden. It was enacted that every man should pay into the treasury a certain per cent, of what he made every year in his business — the amount being increased; even, as the income increased. If a man made 100 coin pieces, as a clear net profit a year, he was to be taxed 10 per cent, on the first 50, and 20 per cent on the second. If he made 200 pieces, he was to be taxed on the first 100 the same as the man who made only 100, and on the second 100 he was to be taxed 30 per cent. And so on till the tax in the highest grade amounted to 50 per cent, of the entire net income. By this means the poor man escaped taxation; the rich man not only paid most of the taxes, but his accumulations were gradually cut down and his ability to accumulate was most materially curtailed.

This proved a very successful means of bringing about that condition of affairs most essential to the well-being of a truly republican form of government — viz., a state of comparative equality of


wealth; at least, a state where enormous wealth on the one hand and monstrous poverty on the other does not exist.

This wise arrangement answered a double purpose — the equalization of wealth, and taking the burden of taxation from the shoulders of the weak and putting it upon the backs of those best able to bear it.

The next step was to prevent the concentration and control of money in the hands of one person. This was accomplished by practically abolishing usury (as shown hereafter) and thus making it unprofitable for any person to make a business of loaning money. By engaging in the business of loaning money it followed, as a natural consequence that money would accumulate in the hands of that one particular person. By driving Discount out of the banking business, he could offer no inducements to depositors to put their money into his hands so that he could loan it out. And as he could not accumulate through usury, he had no use for money except as it was necessary as a medium of exchange. Thus was prevented the withdrawal of money from its natural channels of commerce and its concentration in one single center. Money was thus driven out where it belonged, just as a physician will drive the congested blood from the heart or the brain into the veins and arteries of his sick patient.


Another thing to be accomplished — and that was the most important of all — was to enable people to rid themselves of debt. And this was accomplished by a law permitting the government to loan money direct to the people at a low rate of interest — so low that Discount could not compete with the government, and was thus driven into other business. The income derived from interest money on loans to the people was turned into the treasury and used to pay the expenses of the government, and thus lightened the burden of taxation. In this way, even those who had no occasion to borrow money of the government derived a portion of the benefit which accrued from the system.

The only man who opposed the proposition of government loans to the people was Discount. He saw in it the destruction of his business as a money loaner; he saw that he would, no longer sit beneath the shade of the leafy trees and gather in the products of the labor of those men who toiled in the sunshine and rain. But the people were thoroughly aroused, and they made short work of the "great financier's" objections.

By being able to borrow money at a nominal rate of interest — just high enough so that every one wanted to get out of debt and rid himself of interest money altogether — every man who was weighed down with a burden of debt was able to lift it off and once more put his feet on solid ground, and


breathe the breath of a free man. The system injured no one (except Discount) and benefited nearly every one — and surely any system which will accomplish that end ought to find favor in any nation.

Another reform that was inaugurated was the passage of a law forbidding any person issuing money, or any substitute for money. The government alone was henceforth to issue all money and control the volume thereof — and, strange to say, gold and silver were absolutely discarded! The paper money of the government, redeemable by being received for taxes, was the only money to be used.

This saved the labor of delving in the mines for the "precious metals" — for they had learned the lesson that every day spent in the mines was a day's labor thrown away.

Another reform was the repeal of all laws for the forcible collection of debts. As one of them said — by a strange coincidence using the same language used by an eminent writer and statesman in the United States — "he did not see why every other man should turn in and help one man collect a bad debt."

Thus was the cost of suits and courts dispensed with; men were put upon their honor in the matter of paying debts; and, more than all, it tended to destroy the pernicious credit system.


Still another law which was passed was one to at once pay off all government bonds and a rigid restriction against the issuance of another interest-bearing bond so long as the government should exist.

The above were some of the various reforms inaugurated. Other laws were passed, but, as this history refers principally to financial affairs, it is not necessary to record other changes that were made.

The following is a recapitulation of the more important changes that were made:

Government paper money; no gold or silver

Government loans direct to the people.

A graduated income tax.

No government interest-bearing debt.

The repeal of all laws for the collection of debts.

Laws tending to a comparative equalization of property, and the abolition of the debt and credit systems.

YEARS have passed since the social revolution which ended in the inauguration of the reforms set forth in the preceding pages.

Another visit to Money Island shows a most marvelous change.

Peace, prosperity and plenty reign.

Want and misery have disappeared.


The jail was long since torn down, as there is not a criminal upon the Island.

The poor-house has been converted into a museum for the preservation and exhibition of a large collection of curious things and valuable relics of the past — among the latter being a few gold and silver coins, and one of Discount's specie-basis bank notes.

The former occupation of Discount having been abolished, he has gone to farming, and he became so disgusted with his former name that he has changed it to Useful.

Donothing had so little to do as a government official that, to better suit his present occupation, he has changed his name to Do something.

Sledgehammer had recovered his former home; and, in fact, there was not a single tenant on the whole Island — consequently not a single landlord.

Every man is out of debt. So that there is no need of a law for the collection of debts.

The products of labor are so equitably distributed that less than four hours' work per day suffices to provide sumptuously every man, woman and child upon the Island with all the comforts and even luxuries that they seek or desire.

Envy, jealousy, hatred, covetousness, greed and avarice have become completely eradicated from the breasts of all — for where each and every one has


all that he can reasonably ask, and no one has an undue proportion of what has been created by all, the cause of all these hateful and sinful passions has been thoroughly removed.


If what has here been written shall suggest even a single thought, or inspire a single act, toward the consummation of that great era when Peace, Prosperity and Happiness shall reign throughout the world, then the writer will feel amply repaid for the work which he feels he has, though earnestly, yet most imperfectly, performed.




1. Whoever will read the history of banking will find that the system originated in the manner above described. Private bankers issued notes, not only for the convenience of their patrons, but as a protection against robbery (the notes being payable to the person named in the note), and also as a means of increasing the value of coins on account of the fluctuations of coin through the constant changing of size, amount of alloy used, etc. — so that in that way the origin of paper money arose in part through a necessity of something by which to measure the value of coin.

2. This custom was practiced by the people and government of Venice for more than live hundred years, and the credits sometimes commanded a premium so high that they were limited by legislation.

3. 1884.

4. Of course this system will he readily recognized as the old State-bank system, irl vogue in this country prior to the war. A bank that kept one-third as much of a coin reserve on hand as it had bank notes outstanding was regarded as sound. And this was the rule that Discount established.