William Batchelder Greene

Mutual Banking




This is an extract from an American advocate of the ideas of Pierre-Joseph Proudhon. His views are now more relevant than ever because of the presence of technological tools that would allow an easy implementation of his proposals. What is still missing is the awareness that it is necessary and possible to gain full control of the managing of our means of exchange.

Source: William Batchelder Greene, Mutual Banking, The Reform League of Denver, Colorado, 1919.



The governments of the different nations have made gold and silver a legal tender in the payment of debts. Does this legislation change the nature of the transactions where gold and silver are exchanged for other desirable commodities? Not at all. Does it transform the exchange into something other than barter? By no means. But the exchangeable value of any article depends upon its utility, and the difficulty of obtaining It. Now, the legislatures by making the precious metals a legal tender enhance their utility in a remarkable manner. It is not their absolute utility, indeed, that is enhanced, but their relative utility in the transactions of trade. As soon as gold and silver are adopted as the legal tender, they are invested with an altogether new utility. By means of this new utility, whoever monopolizes the gold and silver of any country - and the currency, as we shall soon discover, is more easily monopolized than any other commodity - obtains control thenceforth over the business of that country; for no man can pay his debts without the permission of the party who monopolizes the article of legal tender. Thus, since the courts recognize nothing as money in the payment of debts except the article of legal tender, this party is enabled to levy a tax on all transactions except such as take place without the intervention of credit.

When a man is obliged to barter his commodity for money in order to have money to barter for such other commodities as he may desire, he at once becomes subject to the impositions which moneyed men know how to practice on one who wants and must have money for the commodity he offers for sale. When a man is called upon suddenly to raise money to pay a debt, the case is still harder. Men whose property far exceeds the amount of their debts in value — men who have much more owing to them than they owe to others — are daily distressed for the want of money; for the want of that intervening medium, which, even when it is obtained in sufficient quantity for the present purposes, acts only as a mere instrument of exchange.

By adopting the precious metals as the legal tender in the payment of debts, society confers a new value upon them, which new value is not inherent in the metals themselves. This new value becomes a marketable commodity. Thus gold and silver become a marketable commodity as A MEDIUM OF EXCHANGE. This ought not so to be. This new value has no natural measure, because it is not a natural, but a social value. This new value is inestimable, it is incommensurable with any other known value whatever. Thus money, instead of retaining its proper relative position, becomes a superior species of commodity — superior not in degree, but in kind. Thus money becomes the absolute king and the demigod of commodities.· Hence follow great social and political evils. The medium of exchange was not established tor the purpose of creating a new, inestimable, marketable commodity, but for the single end or purpose of facilitating exchanges. Society established gold and silver as an instrument to mediate between marketable commodities; but what new instrument shall it create to mediate between the old marketable commodities, and the new commodity which it has itself called into being? And If it succeed in creating such new instrument, what mediator can it find for this new instrument itself, etc.? Here the gulf yawns! No bridge save that of USURY has been thrown, as yet, over this gulf. Our exposition is evidently on the brink of the infinite series; we are marching rapidly forward to the abyss of absurdity. The logicians know well what the sudden appearance of the infinite series in an investigation signifies; it signifies the recognition of a phenomenon and the assigning to it of a mere concomitant, to stand to it in the place of cause. The phenomenon we here recognize is circulation or exchange, and we ignore its cause, for we endeavor to account for it by the movement of specie; which movement is neither circulation nor the cause of circulation. But more of this hereafter. Let us return to the subject with which we are more immediately concerned; noting, meanwhile, that a specie currency is an absurdity.




Society established gold and silver as a circulating medium, in order that exchanges of commodities might be FACILITATED; but society made a mistake in so doing; for by this very act it gave to a certain class of men the power of saying what exchanges shall, and what exchanges shall not, be FACILITATED by means of this very circulating medium. The monopolizers of the precious metals have an undue power over the community; they can say whether money shall, or shall not, be permitted to exercise its legitimate functions. These men have a VETO on the action of money, and therefore on exchanges of commodity; and they will not take off their VETO until they have receIved usury, or, as it is more politely termed, interest on their money. Here is the great objection to the present currency. Behold the manner in which the absurdity inherent in a specie currency — or, what is still worse, in a currency of paper based upon specie — manifests itself in actual operation! The mediating value which society hoped would facilitate exchanges becomes an absolute marketable commodity, itself transcending all reach of mediation. The great natural difficulty which originally stood in the way of exchanges is now the private property of a class, and this class cultivate this difficulty, and make money out of it, even as a farmer cultivates his farm and makes money by his labor. But there is a difference between the farmer and the usurer; for the farmer benefits the community as well as himself, while every dollar made by the usurer is a dollar taken from the pocket of some other individual, since the usurer cultivates nothing but an actual obstruction.

The monopoly of the currency

You cannot monopolize corn, iron and other commodities, as you can money; for to do so, you would be obliged to stipulate in your sales that payment shall be made to you in those commodities. What a commotion would exist in the community if a company of capitalists should attempt permanently to monopolize all the corn! But money, by the nature of the case, SINCE IT IS THE ONLY LEGAL TENDER, is ALWAYS monopolized. This fact is the foundation of the right of society to limit the rate of interest.

We conclude, therefore, that gold and silver do not furnish a perfect medium of circulation; that they do not furnish facilities for the exchange of ALL commodities. Gold and sliver have a value as MONEY; a value which is artificial, and created UNINTENTIONALLY by the act of society establishing the precious metals as a legal tender. This new artificial value overrides all intrinsic actual values, and suffers no mediation between itself and them. Now, money, so far forth as it is mere money, ought to have NO VALUE; and the objection to the use of the precious metals as currency is, that as soon as they are adopted by society as a legal tender, there is superadded to their natural value this new, artificial and unnatural value. Gold and silver cannot facilitate the purchase of this new value which is added to themselves; "a mediator is not a mediator of one." USURY is the characteristic fact of the present system of civilization; and usury depends for its existence upon this superadded, social, unnatural value, which is given artificially to the material of the circulating medium. Destroy the value of this material AS MONEY (not its utility or availability in exchange) and you destroy the possibility of usury. Can this be done so long as material is gold or silver? No.

Whatever is adopted as the medium of exchange should be free from the above-named objections. It should serve the purpose of facilitatIng ALL exchanges; it should have no value AS MONEY; it should be of such a nature as to permit nothing marketable, nothing that can be bought or sold, to transcend the sphere of its mediation. It should exist in such a quantity as to effect all exchanges which may be desirable. It should be co-existent in time and place with such property as is destined for the market. It should be sufficiently abundant and easy of acquirement, to answer all the legitimate purposes of money. It should be capable of being expanded to any extent that may be demanded by the wants of the community; for if the currency be not sufficiently abundant, it retards instead of facilitating exchanges. On the other hand, this medium of exchange should be sufficiently difficult of acquirement to keep it within just limits.

Can a currency be devised which shall fulfill all these conditions? Can a currency be adopted which shall keep money always just plenty enough, without suffering it ever to become too plenty? Can such a currency be established on a firm, scientific foundation, so that we may know beforehand that it will work well from the very first moment of establishment? Can a species of money be found which shall possess EVERY quality which it is desirable that money should have, while it possesses NO quality which it is desirable that money should not have? To all these questions we answer, emphatically, YES!




Our plan for a Mutual Bank is as follows:

1st. Any person, by pledging actual property to the bank, may become a member of the Mutual Banking Company.
2nd. Any member may borrow the paper money of the bank on his own note running to maturity (without endorsement) to an amount not to exceed one-half of the value of the property by himself pledged.
3rd. Each member binds himself in legal form, on admission, to receive in all payments, from whomsoever it may be and at par, the paper of the Mutual Bank.
4th. The rate of interest at which said money shall be loaned shall be determined by, and shall, if possible, just meet and cover, the bare expenses of the institution. As for interest in the common acceptation of the word, its rate shall be at the Mutual Bank precisely 0.
5th. No money shall be loaned to any persons who are not members of the company; that is, no money shall be loaned, except on a pledge of actual property.
6th. Any member, by paying his debts to the bank, may have his property released from pledge, and be himself released from all obligations to the bank, or to the holders of the bank's money, as such.
7th. As for the bank, it shall never redeem any of its notes in specie; nor shall it ever receive specie in payments, or the bills of specie-paying banks, except at a discount of one-half of one per cent.
Ships and houses that are insured, machinery, in short, anything that may be sold under the hammer, may be made a basis for the issue of mutual money. Mutual Banking opens the way to no monopoly; for it simply elevates every species of property to the rank which has hitherto been exclusively occupied by gold and silver. It may be well (we think It will be necessary) to begin with real estate; we do not say it would be well to end there!




To the Honorable the Senate and House of Representatives of the Commonwealth of Massachusetts.

This prayer of your petitioners humbly showeth, that the farmers, mechanics and other actual producers whose names are hereunto subscribed, believe the present organization of the currency to be unjust and oppressive. They, therefore, respectfully request your honorable body to republicanize gold, silver and bank-bills, by the enactment of a GENERAL MUTUAL BANKING LAW.

A law, embracing the following provisions, would be eminently satisfactory to your petitioners:

1. The Inhabitants or any portion of the inhabitants, of any town or city in the Commonwealth may organize themselves into a Mutual Banking Company.
2. Any person may become a member of the Mutual BankIng Company of any particular town, by pledging REAL ESTATE situated in that town, or in its immediate neighborhood, to the Mutual Bank of that town.
3. The Mutual Bank of any town may issue PAPER-MONEY to circulate as currency among persons willing to employ it as such.
4. Every member of a Mutual Banking Company shall bind hImself, and be bound, in due legal form, on admIssion, to receive in payment of debts, at par, and from all persons, the bills issued, and to be issued, by the partIcular Mutual Bank to which he may belong; but no member shall be obliged to receive, or have in possession, bills of said Mutual Bank to an amount exceeding the whole value of the property pledged by him.
5. Any member may borrow the paper money of the bank to which he belongs, on his own note running to maturity (wIthout endorsement), to an amount not to exceed one-half of the value of the property pledged by him.
6. The rate of interest at which said money shall be loaned by the bank, shall be determined by, and shall, if possible, just meet and cover the bare expenses of the institution.
7. No money shall be loaned by the bank to persons who do not become members of the company by pledging real estate to the bank.
8. Any member, by paying his debts to the Mutual Bank to which he belongs, may have his property released from pledge, and be himself released from all obligations to said Mutual Bank, and to holders of the Mutual-Bank money, as such.
9. No Mutual Bank shall receive other than Mutual-Bank paper-money in payment of debts due to it, except at a discount of one-half of one per cent.
10. The Mutual Banks of the several counties in the Commonwealth shall be authorized to enter into such arrangements with each other as shall enable them to receive each other's bills in payments of debts; so that, for example, a Fitchburg man may pay his debts to the Barre Bank in Oxford money, or in such other Worcester-county money as may suit his convenience

* * *

The existing bank reproduces the aristocratic organizations; it has its Spartan element of privileged stockholders, its Laconian element of obsequious speculators, and, on the outside, a multitude of Helots who are excluded from its advantages. Answer us, reader: If we are able, at this time, to bring forward the existing banking system as a new thing, and should recommend its adoption, would you not laugh in our face, and characterize our proposition as ridiculous? Yet the existing system has an actual and practical being, of the present civilization of the Christian world; it has substituted itself, or is now substituting itself, in the place of monarchies and nobilities. Who is the noble of the present day, if not the man who lends money at interest? Who is the emperor, if not Pereire or the Baron Rothschild? Now, if the present system of banking is capable of actual existence, how much more capable of actual existence is the system of mutual banking! Mutual banking combines all the good elements of the method now in operation, and is capable of securing a thousand benefits which the present method cannot compass, and is moreover, free from all its disadvantages.


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