The workingman's advocate. [volume] (Chicago [Ill.]) 1864-1877, 1870-02-19
A New Monetary System,
Br EDWARD KsLLoss
CHAPTER IV.-SEcrIoN V.

CHAPTER IV.-SEcr1oN v.
The Management of The Banks and The
Effects Of their Operations wpon the
Property of Trade and Productive
Industry.
(cONTINUED.)
The following illustration shows the ef-
feet Of differing rates Of interest in different
sections Of the country. A merchant
in New York for goods sold, holds
81 900 note against merchant in Ala
bama, which note be indorses AMI has dis
counted at bank The southern merchant
is not able to take it up when due, and it
is returned to the New York merchant, who,
to preserve bis credit as indorser, must
raise the money and pay It. Money is 90
scarce that he is obliged to sell note hav
ing six months to run, ut discount Of three
per cent month. The Alabama customer
had abundant means to pay bis debts, but
the scarcity &c money made il impossible for
him to pay the note when it was due. Some
time elaPses, and the New York merchant
sends out the note for OIL 900 to Alabama
for collection. Meanwhile, until the note
is collected, he must borrow the money al
three per cent. q month He raises the
money, and pays the returned notes by sell
ing other notes having six months to rue
at discount Of three per cent. month.
Discounts thus
Note at six months, O91p 81
rA,s: per cent. month % for six months !. j
q, 900 o
The note for $1,219 81 falls due, and be
sells another note having six months to run
at three per cent, and with the proceeds
takes up the FIRST note.
Note. si,4sT D
Three per cent q month fol six months
eighteen per cent? 2T
q, no s
This note falls due, and he sells another
six months note at three per cent, and with
the proceeds takes up the second note fol
81, 487 20.
Note Hsls S
ISEe. per cent. month for ak months
sl.4s7 2
This note falls due and he sells another
SIX months note at three peg cent, and with
the proceeds takes up the third note fol
$1,8!3 SIS.
Note, SAM 8
eighteen per cent, as o
sI.sls 5
This note falls due, and be sells anothe
six months note at three per cent, and will
the proceeds takes up the fourth note 70
S2,2l1 "a.
Note, kaos7
Three Der cent . month Fr six uDoushs-
eighteen per cent. ass Z
sa9lI 8
Two and half years have elapsed sinct
the note in Alabama fell due. Being dis
appointed in its collection, the New Yorl
merchant, to save his credit, has raised anC
paid the money for two and half years
From this has grown the note now due fol
$2,697 IL. The Alabama merchant pay
every dollar of this note with interest ant
costs in New York current funds. Thus
Two and . h.f year, Interest Al seven .sr ''''
cent, i5j
j. U.i5s G
From the Increased note Of the N-w ~
| merchant, &9.607 L
Deduct Oh. note and ins.r-a received fsea
| the Alabama merchant, LIS o.
Balanc. due BY Nex York merchant St,sa4 Il
The difference of interest on 81, 600 fol
two and a half years, causes loss to che
New York merchant Of l,522 IL. The
interest amounts to more than one-aud-a hal
times the principal The dollar is said t.
be the product Of labor but is this differ
ence of interest the product Of labor, or is il
change in the measure Of value Ger,
tainly, If the Alabama measure and the New
York measure were the same, the debts
would balance each other. They balanced
each other two-and- a-half years before, but
at this period the thousand dollars in New
York have increased 81, 697 IL, while Il i,
600 in Alabama, during the same time, have
increased but SITS. One has accumulated
nine and-a-half times more than the other
The Alabama merchant pays all be owes The
New York merchant, and the latter appro
propriates it to the payment Of the 81, 00C
which he raised to take up the note Of the
southern merchant but be still owes on thi,
transaction 81 ,522. The third person WIZ
gets the 81, 522, gains it without producing
or distributing any products.