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287 capital upon which the bank's notes are based, and that therefore the rate of discount charged by the bank for the service of exchanging its notes for those of its customers is governed, under competition, by the cost of that service, and not by the rate of interest that capital commands. The relation is just the contrary of Mr. Matthews's supposition. It is the rate of interest on capital that is governed by the bank's rate of discount, for capitalists will not be able to lend their capital at interest when people can get money at the bank without interest with which to buy capital outright. It is this effect of free and mutual banking upon the rate of interest on capital that insures, or rather constitutes, the realization of the Cost principle by economic processes. For the moment interest and rent are eliminated as elements of price, and brisk competition is assured by the ease of getting capital, profits fall to the level of the manufacturer's or merchant's proper wage. It is well, as Mr. Matthews says, to have the Cost principle in view; for it is doubtless true that the ease with which society travels the path of progress is largely governed by the clearness with which it foresees it. But, foresight or no foresight, it "gets there just the same." The only foresight absolutely necessary to progress is foresight of the fact that liberty is its single essential condition.

PROUDHON'S BANK.

the principle of equal representation of all available values by the notes of the Exchange Bank is what I have advocated these thirty years, I do not perceive how, in generalizing the system, as Proudhon would do (I refer to the paragraphs translated by Greene), we are to avoid the chances of forgery on the one side, and on the other of fraudulent issues by the officers of the Bank.

Such a Bank, moreover, is equivalent to a general insurance policy on the property of a country, and the true value of its notes must depend on security against conflagrations and other catastrophes affecting real estate as well as "personal property."

I hope that the first essays will be local and limited. I think the commercial activity of modern civilization dangerously, if not fatally, exaggerated and disproportioned to production. The Railroad is a revolver in the hands of a maniac, who has just about sense enough to shoot himself. Even were we not, in our blind passion for rapid and facile transportation, hanging ourselves by the slip-noose of monopoly, the impulse which railroads give to and towards city life, coming, as it has, before the establishment of a conservative scavenger system, by which the