LABOUR AND CAPITAL.

Timaru Herald, Volume XIIIC, Issue 14274, 15 August 1910, Page 3

LABOUR AND CAPITAL.

loilis Editor of the "Timaru Herald, —Scarcely any two economists agree- on the definition of capital, but they nil. except Henry George, {igieo that it is :t. of produitiro lnboiii', ' <ii' 5 as 3|ij| j lu i s jt:_ "A stm.'k previously ace unnil'ated of tlie products ol iiu'mcr .labour.''

Very well. When a public, body borrows money in the. London market, • sa . v > it "els money, or its equivalent, from a .stock of previous labour products. Then suppose the demand for loanable, capital (previous labour products) is greater than the supply, some borrowers, however good their security, will have to go unsatisfied'. But suppose the money broker savs to himself. "Hero is an application bv a. firstclass public body for a loan of £IOO,OOO to instal a, trar.iwav system; J don't like to let it go by, but mv stock of capital, accumulated out of'profits, is all loaned out. what, am J to do- \b' i have .it; 1 don't lend cash: 1. don't lend pie-labour products; 1 only ],.,,,| my credit. Of course this is suppos-il to be backed by actual caoital in stock or at least lamely so. Xcvrr mind, f will open a ledger account in favour oi the borrower and credit him wii.h £1(10.001) again-t the municipal bonds and the things done."

Impossible, you may say. but read tin-Hollowing extract from -Major Phipson s ■•Nit Science, of Civiiisation " page :?o(j. chanter 8. -The Token Curloncy ~| Great Britain.' In this chapter he describes the various steps taken n.\ hankers m their onward pnxn-o.ss hirst step, banking only: second'step' banking and money-broking. Ho savs •■J be third and last stop in modern banking is a* inevitable a development from the second step as the .second is 3 1-om the first, Tor the '.rand discovery is made } )V banking brokers that private debts can l„. coined jnfo current money, and it only remains for them to boldly create unlimited debts Jn order to become masters of boundless •sums of money. Accordingly they proceed to create those debts "by cro'ditiu"m their ledgers to multiplying borrowers, against their promises to pav Jegal money, wholly fictitious deposits cheques upon which drawn bv the bor' rowers are so freely accepted as cheques upon real deposits drawn bv depositors, for the two species of cheques are absolutely indistinguishable from eacn other. When this step is reached it can be seen that the loanable resources of banking brokers have became practically unlimited. Tor their loans are no longer restricted, as economically they should be. to such sums of real deposits (savings from prolits, L.Y\.) as arc entrusted to them for investment, i i ; ; but now extend to whatever sums of fictitious deposits they choose to create as advances, their power to create such advances knowm.r ' no other limit than the assumed ability ot borrowers to repay them." After that who will say that our Joans eomo irom capital saved out of profits or pre-labour products? Here Js a means of making money that would have wade Alladiu envious—l am, etc,rT , •, .. . „ E. WOOD. . IJ Jus It-iter is reierrod to in our leading; columns.J