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"First in the importance of its evil influence they considered the money monopoly, which consists of the privilege given by the government to certain individuals, or to individuals holding certain kinds of property, of issuing the circulating medium, a privilege which is now enforced in this country by a national tax of ten per cent., upon all other persons who attempt to furnish a circulating medium, and by State laws making it a criminal offense to issue notes as currency.
"It is claimed that the holders of this privilege control the rate of interest, the rate of rent of houses and buildings, and the prices of goods, – the first directly, and the second and third indirectly. For, say Proudhon and Warren, if the business of banking were made free to all, more and more persons would enter into it until the competition should become sharp enough to reduce the price of lending money to the labor cost, which statistics show to be less than three-fourths of once per cent. In that case the thousands of people who are now deterred from going into business by the ruinously high rates which they must pay for capital with which to start and carry on business will find their difficulties removed. If they have property which they do not desire to convert into money by sale, a bank will take it as collateral for a loan of a certain proportion of its market value at less than one per cent. discount.
"If they have no property, but are industrious, honest, and capable, they will generally be able to get their individual notes endorsed by a sufficient number of known and solvent parties; and on such business paper they will be able to get a loan at a bank on similarly favorable terms. Thus interest will fall at a blow. The banks will really not be lending capital at all, but will be doing business on the capital of their customers, the business consisting in an exchange of the known and widely available credits of the banks for the unknown and unavailable, but equality good, credits of the customers and a charge therefore of less than one per cent., not as interest for the use of capital, but as pay for the labor of running the banks.
"This facility of acquiring capital will give an unheard of impetus to business, and consequently create an unprecedented demand for labor, – a demand which will always be in excess of the supply, directly to the contrary of the present condition of the labor market. Then will be seen an exemplification of the words of Richard Cobden that, when two laborers are after one employer, wages fall, but when two employers are after one laborer, wages rise. Labor will then be in a position to dictate its wages, and will thus secure its natural wage, its entire product.
"Thus the same blow that strikes interest down will send wages up. But this is not all. Down will go profits also. For merchants, instead of buying at high prices on credit, will borrow money of the banks at less than one per cent., buy at low prices for cash, and correspondingly reduce the prices of their goods to their customers. And with the rest will go house-rent. For no one who can borrow capital at one per cent. with which to build a house of his own will consent to pay rent to a landlord at a higher rate than that. Such is the vast claim made by Proudhon and Warren as to the results of the simple abolition of the money monopoly.
Benjamin Tucker, State Socialism and Anarchism:
HOW FAR THEY AGREE, AND WHEREIN THEY DIFFER (1888)
http://praxeology.net/BT-SSA.htm
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A Parasite City.
Suppose 5,000 men to own $30,000 each; suppose these men to move, with their families, to some desolate place in the state, where there is no opportunity for the profitable pursuit of the occupations either of commerce, agriculture, or manufacturing! The united capital of these 5,000 men would be $150,000,000. Suppose, now, this capital to be safely invested in different parts of the state; suppose these men to be, each of them, heads of families, comprising, on an average, five persons each this would give us, in all, 25,000 individuals. A servant to each family would give us 5,000 persons more, and these added to the above number would give us 30,000 in all. Suppose, now, that 5,000 mechanics—shoemakers, bakers, butchers, etc.—should settle with their families in the neighborhood of these capitalists, in order to avail themselves of their custom. Allowing five to a family, as before, we have 25,000 to add to the above number. We have, therefore, in all, a city of 55,000 individuals, established in the most desolate part of the state. The people in the rest of the state would have to pay to the capitalists of this city six per cent on $150,000,000 every year; for these capitalists have, by the supposition, this amount out at interest on bond and mortgage, or other wise. The yearly interest on $150,000,000, at six per cent, is- $9,000,000. These wealthy individuals may do no useful work whatever, and, nevertheless, they levy a tax of $9,000,000 per annum on the industry of the state. The tax would be paid in this way. Some money would be brought to the new city, and much produce; the produce would be sold for money to the capitalists, and with the money thus obtained, added to the other, the debtors would pay the interest due the capitalists would have their choice of the best the state produces, and the mechanics of the city, who receive money from the capitalists, the next choice. Now, how would all this be looked upon by the people of the commonwealth? There would be a general rejoicing over the excellent market for produce which had grown up in so unexpected a place, and the people would suppose the existence of this city of financial horse-leeches to be one of the main pillars of the prosperity of the state.
Each of these capitalists would receive yearly $1,800, the interest on $ 30,000, on which to live. Suppose he lives on $900, the half of his income, and lays the other half by to portion off his children as they come to marriageable age, that they may start also with $30,000 capital, even as he did. This $900 which he lays by every year would have to be invested. The men of business, the men of talent, in the state, would see it well invested for him. Some intelligent man would discover that a new railroad, canal, or other public work was needed; he would survey the ground, draw a plan' of the work, and make an estimate of the expenses; then he would go to this new city and interest the capitalists in the matter. The capitalists would furnish money, the people of the state would furnish labor; the people would dig the dirt, hew the wood, and draw the water. The intelligent man who devised the plan would receive a salary for superintending the work, the people would receive day's wages, and the capitalists would own the whole; for did they not furnish the money that paid for the construction? Taking a scientific view of the matter, we may suppose the capitalists not to work at all; for the mere fact of their controlling the money would insure all the results. We suppose them, therefore, not to work at all; we suppose them to receive, each of them, $1,800 a year; we suppose them to live on one-half of this, or $900, and to lay up the other half for their children. We suppose new-married couples to spring up, in their proper season, out of these families, and that these new couples start, also, each with a capital of $30,000. We ask now, is there no danger of this new city's absorbing unto itself the greater portion of the wealth of the state?
There is no city in this commonwealth that comes fully up to this ideal of a fainéant and parasite city; but there is no city in the state in which this ideal is not more or less completely embodied.
Greene, William Batchelder, l8l9-l878.
Mutual banking.
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http://www.the-portal.org/mutual_banking.htm#4