Third: If credit is granted upon real estate, it should be for a long period, because the security is not readily convertible into cash.
Fourth: Credit granted to a Government, by purchasing its bonds, should be for a long period, unless for some temporary purpose.
Fifth: Neither real estate nor Government credit are a fit basis for currency, because neither is a fit security for a demand debt, nor cash credit, such as consumable commodities are.
Sixth: Government credit should never be used in the form of legal tender money, because it must itself be redeemed in coin. It never has been, and never can be its own redeemer, and is always subject to unlimited abuse which must necessarily result sooner or later in repudiation.
Mr. Banker: Mr. Manufacturer, you have summarized the discussion upon credit remarkably well, I think.
Mr. Merchant: So do I, and I am sure that we all understand what constitutes the difference between the right and wrong basis of demand obligation—convertibility or non-convertibility—quick assets or slow assets—the commercial fund and the investment fund. If we keep this thought steadily in view it will help us amazingly when we come to draw a banking bill demanding the recognition of this fundamental distinction.
Mr. Lawyer: Gentlemen, don't you see that the very nature of things forces the recognition of this fundamental distinction, because you can keep your currency, if of the right kind, and all your credit used in the production and distribution of consumable commodities convertible into gold coin. But you cannot keep all the railroad bonds, all the municipal bonds and all the real estate of the country convertible into coin, practically on demand. That is impossible, and has been proved times without number, as we have already seen.
Mr. Laboringman: Mr. Lawyer, I have been sitting here with a very hazy kind of an idea about this credit matter, until this moment, but that last point you made seems to me to clinch things, for I saw in the "Evening Journal" last night that there was about one hundred and twenty-five billion dollars' worth of property in the United States. Of course you can't cash that all in tomorrow, nor next week, nor next month, nor next year even, and the fortunate thing about it is that the owners don't want to. When you come to think of it, there is a mighty small part of it that the people want to turn into cash each day.
Mr. Banker: Mr. Laboringman, that is the point exactly, and our problem is to make it absolutely sure that those who have a right, and want to demand cash, can always get it. This can only be accomplished by two things, adequate gold reserves to protect all current demands, and such assets or commercial credits as can be converted into gold, at once to meet any extraordinary demands—yes, even satisfy the panic-stricken mob, and carry the country through such crises as 1893 and 1907 without unnecessary loss, indeed, prevent the recurrence of any such experiences again.
Mr. Laboringman: Do you really think that that can be done? What a blessing that would be to labor.