How is it that the rich are becoming richer? The single taxer answers that it is by monopoly of the land, the natural sources of wealth; the Socialist answers that it is by the control of the machinery of production. But if you go among the rich and make inquiry, you speedily learn that these factors, large as they are, amount to little in comparison with another factor, the control of credit. There are hosts of little capitalists and business men who deal in land and produce goods with machinery, but the men who make the real fortunes and dominate the modern world are those who control credit, and whose business is, not the production of anything, but speculation and the manipulation of markets.

"Money makes the mare go," our ancestors used to say; and money today determines the destiny of empires. What is money? We think of it as gold and silver coins, and pieces of engraved paper promising to pay gold and silver coins. But the report of the U. S. Comptroller of the Currency for 1919 shows that the business of the country was done, 5% by such means and 95 % by checks; so, for practical purposes, we may say that money consists of men's willingness to trust other men, or groups or organizations of men, when they make written promise to pay. In other words, money is credit; and the control of credit means the control of industry. The problem of social readjustment is mainly but the problem of taking the control of credit out of the hands of private individuals, and making it a public or social function.

Who controls credit today? The bankers. And how do they control it? We give it to them; we, the masses of the people, who take them our money and leave it with them. A very little real money in hand becomes, under our banking system, the basis of a great amount of imaginary money. The Federal Reserve law requires that banks shall hold in reserve from seven to thirteen per cent of demand deposits; which means, in substance, that when you leave a dollar with a banker, the banker is allowed, under the law, to turn that dollar into anywhere from seven to thirteen dollars, and lend those dollars out. In addition, he deposits his reserves with the Federal Reserve bank, and that bank keeps only thirty-five per cent in reserve—in other words, the seven to thirteen imaginary dollars are multiplied again by three.

Under the stress of war, this process of credit inflation has been growing like the genii let out of the bottle. Under the law, the Federal Reserve banks are supposed to hold a gold reserve of 40% to secure our currency. But in December, 1919, these banks held a trifle over a billion dollars' worth of gold, while our paper money was over four billion. In addition, our banks have over thirty-three billions of deposits, and all these are supposed to be secured by gold; in addition, there are twenty-five billions of government bonds, and uncounted billions of private notes, bonds and accounts, all supposed to be payable in gold. So it appears that about one per cent of our outstanding money is real, and the rest is imaginary—that is, it is credit.

The point for you to get clear is this: The great mass of this imaginary money is created by law, and we have the power to abolish it or to change the ownership of it at any time we develop the necessary intelligence. Let us consider the ordinary paper money, the one and two and five and ten dollar "bills," with which we plain people do most of our business. These are Federal Reserve notes, and there are about three billions of them; how do they come to be? Why, we grant to the national banks by law the right to make this money; the government prints it for them, and they put it into circulation. And what does it cost them? They pay one per cent for the use of the money; in some cases they pay only one-half of one per cent; and then they lend it to us, the people—and what do they charge us? The answer is available in a recent report of the U. S. Comptroller of the Currency, as follows:

"I have the record of the loans made by one Texas national bank to a hard-working woman who owned a little farm a few miles from town. She borrowed, in the aggregate, $2,375, making about thirty loans during the year. Listen to the details of the robbery: $162.50 for 30 days at 36 per cent; $377. for 34 days at 44 per cent; $620.25 for 23 days at 77 per cent; $11. for 30 days at 120 per cent; $21.50 for 30 days at 90 per cent; $33. for 2 days at 93 per cent; $27. for 15 days at 195 per cent; $110. for 30 days at 120 per cent—that was to buy a horse for her plowing; $20 for 48 days at 187 per cent; $6 for 10 days at 720 per cent; $7 for 3 days at 2,000 per cent, and so on; every cent paid off by what sweat and struggle only God knows."

In Oklahoma, where the legal rate of interest is six per cent, with ten per cent as the maximum under special contract, harassed farmers paid all the way from 12 to 2400 per cent, with 40 per cent as the average. In the case of one bank, the Comptroller proved that not a single solitary loan had been made under fifteen per cent. He cited one particular case that he asked to be regarded as typical. In the spring the farmer went to the bank and arranged for a loan of $200. Out of his necessity he was compelled to pay 55 per cent interest charge. Unable to meet the note at maturity, he had to agree to 100 per cent interest in order to get the renewal. The next renewal forced him up to 125 per cent. For four years the thing went on, and all the drudgery of the father and the mother and the six children could never keep down the terrible interest or wipe out the principal. As a finish the bank swooped down and sold him out; the wretched man, barefoot and hungry, went to work clearing a swamp, caught pneumonia and died; the county buried him, and neighbors raised a purse to send the widow and children back to friends in Arkansas.

This is the thing called the Money Trust in action, and this is the power we have to take out of private control. It is our first job, and all other jobs are in comparison hardly worth mentioning. How are we going to do it?

The farmers of North Dakota have shown one way. They took the control of their state government into their own hands, and the most important and significant thing they did was to start a public bank. The interests fought them tooth and nail; not merely the interests of North Dakota, not merely of the Northwest, but of the entire United States. They fought them in the law courts, up to the United States Supreme Court, which decided in favor of the people of North Dakota. Therefore, make note of this vital fact—the most important single fact in the strategy of the class struggle—every state can, under the constitution, have a public bank; every city and town can have one, and no court can ever forbid it!

Therefore, I say to all Socialists, labor men and social reformers of every shade and variety, nail at the top of your program of action the demand for a public bank in your community, to take the control of credit out of the hands of speculators and use it for the welfare of the people. Make it your first provision that every dollar of public money shall be deposited in this bank and every detail of public financing handled by this bank; make it your second provision that the purpose of this bank shall be to put all private banks out of business, and take over their power for the people.

At present, you understand, it is taken for granted that the first purpose of the government is to foster the private credit system. Take, for example, the postal savings bank. The private banks fought this for a generation, and finally they allowed us to have it, on condition that it should be turned into a device for collecting money for them. Our postal bank turns over all its money to the private banks, at the grotesque rate of two per cent interest; and recently I read of the director of the postal bank appearing before a convention of bankers, asking for some small favor, and humbly explaining that it was not his idea to make the postal bank a rival of the private savings banks. Why should he not do so? Let us nail it to our radical program that the postal savings bank is to fight for business, just as do the private banks, and lend its funds direct to the people on good security.

Let our Federal banking system also become the servant of the public welfare, and let its energy be devoted to breaking the strangle-hold of predatory finance on our industry. Let the government issue all money, and use it for the transfer of industry from private into public hands. Do we want to socialize our railroads, our coal mines, our telegraphs and telephones? Do we want to buy them, in order to avoid the wastes of civil war and insurrection? We have agreed that we do; and here we have the way of doing it. If the bankers can create, out of our willingness to trust them, billions upon billions of imaginary money, then so can we, the people of the United States, create money out of our willingness to trust ourselves. And do not let anybody fool you for a single second by talking about "fiat money" and "inflation of the currency." If you are paying twice as much for everything as you did before the war, you are paying it because the bankers have doubled the amount of money in circulation—for that reason and that alone. That double money the bankers own; the only question now to be decided is, who is to own the double money that will be created tomorrow?

Make note of the fact that it costs nothing to start a public bank. If you want to put the steel trust out of business by competition, you have several hundred thousand dollars worth of rolling mills and ore land to buy; but the banks can be put out of business by nothing but a law. The material parts of a bank, the white marble columns and bronze railings and mahogany trimmings, are as nothing compared with the inner soul of a bank, its control of the life-blood of your business and mine; and this we can have for the taking. We can keep our own "credit"; instead of sending it to Wall Street, where speculators use it to bleed us white, we can set it to building up our own community, under the direction of officials whom we select. Also, we can have our gigantic national bank, controlling all our thirty-three billions of dollars of deposits, and likewise the hundreds of billions of credit built upon them.

The first time you suggest this plan to a banker or business man, you will be told that increase of money by the government does not benefit labor or the general consumer; "inflation of the currency" causes prices to go up correspondingly. To this I will furnish an effective reply: that at the same time the government issues new money, the government will also fix prices; and then watch the face of your banker or business man! If he is a man who can really think, and is not just repeating like a parrot the formulas he has learned from others, he will perceive that the combination of currency inflation and price-fixing would catch him as the two parts of a nut-cracker catch a nut; and he will know that you can take the meat out of him any time you please. He may argue that it is not fair; but point out to him that it is exactly what the big banks and the trusts have been doing to us right along—increasing the amount of money in circulation, and at the same time raising the prices we pay for goods, and so taking out the meat from us nuts!

We have agreed that we do not mean to be unfair either to the banker or the manufacturer; we are simply going to stop their being unfair to us. We are going to convince them that their power to catch us in a nut-cracker is forever at an end. We allow them six per cent on their investments, and guarantee them this by turning over to them some of our new money—that is, government bonds. When we have thoroughly convinced them that they can't get any more, they will take these bonds and quit; and thus simply, without violence or destruction of property, we shall slide from our present system of commercial cannibalism into the new co-operative commonwealth.

We have had "cheap money" campaigns in the United States many times, and as this book is written, it becomes evident that we are to have another. Henry Ford is advocating the idea, and so is Thomas A. Edison. The present writer would like to make plain that in supporting such a program, he does it for one purpose, and one only—the taking over of the industries by the community. The creation of state credit for that purpose is the next step in the progress of human society; whereas the creation of state credit for the continuance of the profit system is a piece of futility amounting to imbecility. This distinction is fundamental, and is the test by which to judge the usefulness of any new program, and the intelligence of those who advocate it.