third quarter of
The Practical Realization of the Milhaud Proposals
By Ulrich von Beckerath
with sample of his writings in German appended
In my eyes...err..ears rather,  he was an unsurpassed composer of cadence and meaning; the former quite lost in these and surely in any, translations unfortunately; the London translater: G Spiller is therefor much less to blame than to thank which I hereby (posthumously?) do of course.

Being one of the pages in 4000 of them comprising a fiche batch by John Zube he sold me in San Francisco in his hotel room almost decades ago.... (My attempt to help work on the second batch failed; see heavy heaves) pages with correspondence between Beckerath and a number of people like Rittershausen who is represented in this batch as well.
Go see what else poetpiet can puzzle you with here
......................................or here.......................................
or check the intro to my first batch of guest appearances
which concerns all sorts of currency issues

Tripod tool Nedstat Nedstat Counter font>installed end of nov 98 but incorrectly till july 99 This file was created in the fall of 98        ???

      The form of a credit cooperative has the decided advantage
that no working capital needs to be raised before business operations commence. All other legal forms, and especially those most advantageous in businesa, postulate, in conformity with the legislation of perhaps all countries, the existence of working capital (mostly in the form of legal tender) before an undertaiking is started.
     Many objections, however, may be raised against the legal form of. cooperatives, and it is just those who are farniliar with the cooperative movement, who will have their doubts. It should be remembered, too, that an espert like Meulen does not recommend the cooperative fonn for note issuing banks and stresses the superiority of undertakings managed by single persons, basing himself on the esperience of the old Scotch banks of issue. Add to which that in some countries a veritable detestation is felt in wide circles for any organisation not governed by the leadership principle. Unfortunately, there exist as yet no leaders in the sphere of banks issuing goods warrants; these have yet to be trained. This, again, can scarcely be attempted outside a cooperative where every member risks losing part of his savings when mistakes are made and therefore closely watches the management and compels it to report at frequent intervals The discussions that take place on this account, impress on an ever larger number of cooperators the principle, and some of them who come to grasp it, may become eventually leaders. A beginning might be made by the cooperatives issuing a special type of shares which, in case of losses, are liable before others and bring therefore greater returns. Subscribers to these shares might also be entitlcd to closer control of the management. To permit this development, the cooperatives should not be too large. In the case of the American Building and Loan Associations (which have 10 million members and should therefore, as a social force, be judged from a quite different viewpoint than the building cooperatives of Central Europe), it has been found decidedly practical to grant credits only to persons who do not reside at more than 25 miles distance from the cooperative offices. Many Building and Loan Associations limit the distance to 10 miles, to their manifest advantage. Only where such a restriction is in force can the management really know its clients. This principle suggests that the issue of warrants should not be entrusted to a huge centre, but that, on the contrary, hundreds or even thousands of issuing centres should exist. Clearing centres, resembling a Central Cooperative Finance Department, would, however, be required, and, in the end, a great Clearing Centre, which, however, would in no way be concerned with issuing goods warrants.
     This development would be analogous to that of the old American and Scotch banks of issue. According to Carey117 (Principles of Political Economy), there «isted in 1852 in Rhode lsland one bank of issue for every 2.000 inhabitants and, in 1850, in Pennsylvania, one for every 40.000. Carey estimates the population of all the New England States at that time at 3,2 million and the number of banks of issue in those States at 491. This means one bank of issue for roughly every 6.500 inhabitants. Adam Smith reports similar conditions in Scotland. In 1845 Scotland still possessed 19 banks of issue for 2,7 million inhabitants, or, roughly, one bank of issue for every 140.000 inhabitants. Such a ratio might also be practicable for Central Europe. The largest Scotch bank of issue in 1845 (the year when English legislation placed further restrictions on the Scottish banks) was the British Linen Company, which was entitled to issue up to £438.024 in notes. (Kerr, History of banking in Scotland.) If such a bank, operating in Scotland, the classical centre once of private paper money and after an experience of many decades, had in circulation less than t;his modest sum, thiB suggesb that for the time being and perhaps for many years to come the contemplated institutions should not go farther and that in case of an increase in turnover, there should preferably be an increase in the number of banks issuing goods warrants.
       A recent development in monetary theory, wherewith even so renowned a scholar as Irving Fisher sympathises, demands that the money circulating should steadily depreciate in order not to allow its circulating speed to fall below the necessary minimum. In German speaking countries, this development is known as the "Schwundgeld-Theorie" (theory of depreciating money) and is associated with the name of Silvio Gesell. (Chatters, in Annals, 1933, no. 2,  such money  "stamped scrip". Apparently the same idea made its way in America independent of Gesell.) Gesell proposed a weekly depreciation of 0,1%. But the paper money issued by the old Scotch banks circulated at least 100 times as rapidly as would depreciating money. Why? Because whilst the Scotch paper money had a strong reflux, depreciating money has almost none. With the old Prussian private banks of issue, a note completed within less than three weeks its circuit from the bank to the public and back to the bank.The Scotch banks of issue, and even more so the old German private banks of issue, provided for the reflux of their notes by only granting such persons advances in notes who had already sold certain goods but had to wait for payment to be made. The notes passed rapidly from the vendor of the goods to the purchaser, the latter paid for the goods with the notes; and the vendor then returned the notes to the bank. To-day it might suffice that the reflux ahould be guaranteed by orders placed, instead of by deliveries already made. This, however, does not
preclude the goods warrants bank from engaging in all ~he operations formerly cuatomary for private banks of issue. (For Europe, the suppression of these banks was a misfortune, only comparable with one of the plagues in the Middle Ages.)
C. Technical Details concerning the Issue of Goods Warrants by Work Supply Banks.
For such a bank the legal form of a credit cooperative would possess some advantages. First, model rulea for auch bodies exist probably in all countries. These model rules could be easily adapted. The cooperative would have further to formulate provisions for the loan of goods warrants as well as settle the conditions governing long-term credits and find the capital required for the latter. In addition, service regulations and forms would have to be drafted which allowed for the fact that these cooperative credits are granted in goods warrants and not in ready money. That, of course, cannot be attempted in this paper.
Here we shall only furnish
       a) a series of provisions not found in present-day model rules;
       b) a series of principles and business provisions governing the loans made in goods warrants;
       c) the same for long-term credits.The inclusion of long-term credits within the scope of the banks will be discussed in a separate section. From a strictly juridical viewpoint the principles and the provisions should have been separated. However, in view of the novelty of the subject, it may be permitted to present the legal basis in a form resembling the legislation of a century and a half back, where both the motivation and the executive provisions were placed in the text of the law. Why we speak here, not of interest but of usufruct charges, will be explained in another section.

Priciples and Bussiness Provisions regarding Loan Transactions of a Work Supply Bank in respect of Short-Term Credits.

I. Means of Payment.
       a) In connection with loans,The Work Supply Bank shall only engage in loan transactions involving the loaning of its own goods warrants
       b) In connection with repayments.
   If the borrower, instead of returning goods warrants, remits other means of payment, the Bank shall be entitled to demand the same premium which it levies when in opening an account not goods warrants are paid in but other means of payment, viz., at least 2% of the amount not paid in goods warrants

II. Legal Form
The legal form for loaning goods warrants shall be t~he cash loan. At the samc time that he borrows the goods warrants, the borrower shall take over, besides the shares he holds as a member, others, and at least such a number that the total amount of the additional shares shall equal the total amount of the loaned goods warrants. All goods warrants that the borrower pays to the Bank and which are in excess of the amount due for usufruct charges, should be countcd as discharging his obligation to pay for his shares. The Bank shall always take into consideration the value of the goods warrants paid to it as well as whether they are at a discount in the market. When a share is fully paid up it shall be considered balanced against the remaining debt.
III. Guarantees for the Work Supply Bank in Loan Transactions.
The following shall be the Bank's guarantees:
    a) Pledged shares. (See 11.)
    b) Sureties. It must be reasonably shown that the goodswarrants of the Bank could be realised as well against the baileesas against the borrower.
     c) The pledging of the borrower's stocks of goods ready forsale.
     d) Other usual banking and unencumbered guarantees.
     e) Bills, first and foremost the borrower's bills on customers. When the amount of the customers' bills pledged by the borrower is smaller than the borrower's debt, the borrower shall tender promissory notes of his own for the difference. Such notes shall be inadmissible as guarantees so long as the type of busines carried on by the borrower suggests that he is in possession of customers' bills. Claims on the borrower's customers that are not covered by bills, may be accepted as security by the Bank if, additionally, other adequate securities are deposited.
      f) Loans shall not be granted to persons or firms whose business or residence is more than 25 kilometers distant from the Bank's premises.
        g) During the Bank's first financia.l year the loans to singlépersons or single firms may not exceed 5%, and in the succeed-ing years 3%, of the total loans granted or definitely expected to be granted, at the time.
        h) For payments due to him, every borrower shall be obliged to accept instead of money the goods warrants of the Bank at their face value, and this at Ieast up to the amount of the remaining debt. As far as practicable, he shall place the same obligation on his debtors. This obligation shall hold also when the payment of the remaining debt may be discharged in several
instalments. If a borrower, in accepbng goods warranta in payment, values these as less than other means of payment of the same nominal amount, or if in accepbing such payments he does not grant the same advantageous terms aa with other means of payment, he shall be liable to a fine for breach of contract. The fine shall amount to a quarter of the remaining debt at the time the fine was incurred, at least to 50 marks. The Bank shall also reserve to itself the right of claiming an indemnity.
       i) The Bank shall not pay to any borrower goods warrants amounting to more than 10.000 marke. When several loens are granted, the total debt contracted by a single peraon or a single firm may not exceed the said sum.
       k) The loaning of goods warrants shall be aubject to tl.e borrower proving that he has placed orders among the customers of the Bank at least to the extent of the loan applied for the dates fixed for the delivery of goods or services shall not be longer than those corresponding to the repayment datea of the sums borrowed. After due consideration, the Bank may agree that the orders shall not be placed with the Bank's customers, teut with the debtors of those customers, or with the debtors of those debtors. In each separate case the Bank shall so determine the special loan conditions that most probably the loaned goods warrants shall facilitate the fulfilment of the obligations of one of the Bank's obligors, thus augmenting the security of the Bank. Employers shall only be entitlcd to pay the wages of their employces with those goods warrants if they cen prove that the employees have undertaken to buy from the Bank's customers. nis shall be ascertained by an examination of delivery books or in some other satisfactory way.

IV. Usufruct Charges for Loaned Goods Warrants.
The borrower shall pay a usufruct fee for the goods warrants loaned by trim. For
the sake of simplicity the fee shall be calculated in fractions of the initial amount—that is, regardless of the progressive reduction in the debt. In settlement, the instalments on the shares shall yield such interest as the Bank shall determine from time to time. The payment of thc usufruct charges shall be in weekly instalments, provided that no other arrangement shall have been made. The usufruct charges shall include:—
         a) a contribution to the costs of adminisrtation:
         b) a contribution to the reserve fund serving to cover lowes;
        c) a contribubon esclusively intended to induce the debtor to pay off his debt as rapidly as possible, the contribution to be greater than the minimum instalments fixed in the loan provisions. This contribution shall also be credited to the borrower's shares.

If the borrower should fall in arrears with his contractual payments to the Bank, he shall pay in addition to the usufruct charges, interest on arrears in accordance with the conditions made known by the Bank from time to time.
Should the contributions provided for under a) end b) be insufficient, the Bank shall have recourse to apecid assessments. These are to be apportioned at the time of their being used in the ratio of the remaining debt of each borrower. The Bank shall determine the particulars from time to time.

V. Return of the Loaned Goods Warrants and Sundries.
a) The borrower shall return the loaned goods warrants in weekly instalments. It is not necessary that the numbers and the parcelling of the loaned end of the returned goods warrants should agree. Thc Bank shall not pass into circulation the goods warrants cashed in the course of the day, unless it be a question of a simple exchange or surrender at its counters. On the contrary, the Bank shall, at the latest, cancel the goods warrants cashed in the course of a day on the day following end shall show this in its returns. When the Bank receives legal tender, it shall utilise it preferentially for withdrawing its own goods warrants from circulation. On this matter also, the Bank shall report regularly.
       b) The number of the repayment instalments shall in general not exceed 13, so as to ensure that after the lapae of three months the loaned goods warrants shall have been rcturned. The Bank may fix the instalment rate in such a manncr that fcr amortisation end usufruct payments altogether combined identical amounts shall be payable week by week.
        c) More favourable return conditions, more particularly return periode exceeding three months, the Bank may only grant when and in sofar as its available assets shall permit. In no case may the time limit for a loan granted by the Bank execed the length of notices governing the calling in of the Bank's outstanding assets.
           d) The borrower shall be entitled, without previoua noticc, to return more goods warrants than he had undertaken to return in conformity with the loan contract or the businesa provisions. The borrower may also return simultaneoudy the whole of thc goods warranta covering the amount of his remaining debt.
          e) Should the borrower not fulfil the obligations incumbent on him, the Bank may, without giving notice, demand the rctum of all outstanding goods warrants.
           f) Until the borrower has returned all the goods warrants he has loaned he ahall only transact buainess with any other bank with the express consent of the Work Supply Bank. Such busi-
ness shall comprise all credit or account current transactions with a banker, a financial enterprise, or a loan agent.
           g) The particulars of the business transactions between the Bank end the borrower shall not be deemed business secreta.
            h) By accepting the goods warrants, the borrower agrees that any eventual modifications of the general business provisions or of the rules shall be also binding on him end this retrospectively, including modifications entailing more onerous terms for trim.
       i) When a member shall have formally proposed to borrow goods warrants but has not, within a week after submitting the proposal, offered guarantees satisfactory to the Bank, his proposal shall be deemed as not submitted.
      k) The Bank may stipulate that all transactions with it shall be conducted on set forms.
      l) Expenses incurred throukh examining the garantees offer. ed by the borrower, as welf as through inquiries, objections, etc., on the part of the borrower, may be debited to him by the Bank which, at its discretion, may demand of him an advance on account of costs. Correspondence not accompanied by the business fee fixed from time to time, or at least by return postage, need not be answered by the Bank.
        m) The Bank may stipulate that the borrower shall take out the insurance for his person end his property required for protecting the Bank against loss. Te Bank shall also be entitled to take out itself such insurances end to claim the associated costs from the borrower.
        n) The Bank shall be entitled to demand of the borrower proof that he promptly pays his taxes.
        o) The domicile of the Work Supply Bank shall be its place of jurisdiction.

Inasmuch as in all countries the cooperative federations have elaborated model rules for credit cooperatives, which are as a whole appropriate for our purposes, we shall only indicate the few modifications required in the customary rules. For Germany, the rul es reprint ed annually in the Deutscher Bankbeamten Kalender (German Bank Officials' Calendar) are quite serviceable end the subjoined provisions relate to these rules.
§ 1.
The cooperative shall be called: Work Supply Bank at...
§ 2.
          1. The working capital of the Work Supply Bank shall consist of the assets of the cooperative. This shall be formed of payments for shares, transfers to the Bank assets, end reserve funds. Payments shall be made by surrendering the goods warrants of,  123  the Bank. Alternatively, when other means of payment are used for paying in, a premium in favour of the Bank shall be paid, as stipulated.
       2. The Bank shall be entitled to issue goods warrants, bearing the following text—
This goods warrant
entitles the holder to present it in payment for (at face value) to all
the customers of the Bank in lieu of money. On inquiry at the counters
of the Bank, the holder will be informed of the curtomers bound to accept
the goods warrants.
Those concerned are also referred to the notices posted up in saleasestablishments regarding the acceptance of goods warrants.
No. of the goods warrant and series:..............
Date of issue:.................
The goods warrants, like money, shall be issued in certain denominations. The Bank shall make known from time to time the denominations end text of the goods warrants, more particularly after modifications have been made.
§ 47.
The settling of accounts with retired members shall be on the basis of the annual financial statement. A member's balance shall be paid out or cleared to those who have retired or to their heirs, subject to the Bank's liquid assets end financial position. The retired member shall be bound to accept the Bank's goods warrants in keu of ready money. If the total assets do not suffice for meeting the Bank's liabilities, the retired member must, subject to the decision of the Governing Board, either pay his share of the deficiency to the Bank or wait for the payment o the sum owing to him. The particulars, especially as regards the rotation in waiting, the Governing Board shall decide in each case at their discretion. Payments to a member of less than 50 marks a month may in any case be made, regardless of the general stipulations.
§ 50.
Each member's share shall be 150 marke. Instalments towards this of at least I mark a month shall be permissible. The entrance fee shall be 3 marke. All payments shall be made in goods warrants issued by the Bank. Should other forms of money be paid in, a premium, fixed by the Governing Board, shall be payable.
§ 58.
Subject to the Bank's business provisions, members end nonmembers may have accounts at the Bank.
In accord with its business provisions, the Bank shall grant its members amortisation loens by placing at their disposal goods warrants. 124
The Bank shall be, moreover, entitled to transact every type of banking business conducive to providing work for its members.
§ 60.
No loan may be granted to members of the Supervisory Board, of the Coverning Board, or to employees of the Bank, not in cash, nor in goods warrants, nor in goods, nor in any other form.
§ 63.
No. 4. In addition to the customary profit end losa account, a set statement of the total turnover of the Bank shall be issued, even if the turnover had led neither to a profit nor to a loss. (Remark: This type of statement which is not usual in Continental Europe, is regularly issued as an appendix by English end American cooperative building societies end affords a greatly superior survey of the management of the undertaking. For instance, an exchange of one security for another without altering the assets, does not carry us beyond the customary profit end loss account, teut that is otherwise with the statements headed "The money we received" and "The money we spent" of the American Building end Loan Associations end the English Building Societies, whose arrangements are in every way exemplary.)
§ 76.
Modifications of the rules end provisions may be decided on with retrospective effect.

Principles and Provisions Governing the Obtaining of Long-Term Credits through the Work Supply Bank.

1. Nature of the Long-Term Credits granted by the Work Supply Bank.
Pursuant to these provisions a credit shall be deemed longterm where the borrower is not bound to recognise against himself at all times, at least up to the amount of his remaining debt, the Bank's goods warrants. On the contrary, in respect of longterm credits, the borrower shall be only bound to accept the goods warrants for (at least) the amount of the next instalment cue, inclusive of amortisation end usufruct charges.
Inasmuch, however, as the Bank holds out to every holder of goods warrants the prospect that in exchange for these warrants he may obtain from the Bank's customers goods or services as if paid for in cash, it follows that in the case of the grant of a longterm credit. another person must undertake, at the request of any holder, to exchange the Banks goods warrants for goods or services.
The Bank shall only, end to such esteet, grant long-term credits, as persons other than the credit grantee shall declare themselves prepared to stand aecurity for him with their goods
and services and as, besides, these goods end service a are in daily demand. Nor may there esist an obatacle to the ready disposal of the goods warrants—e,g., the bosinesa premiaea of the persons concerned shall not be aituated at such a diatance as to impede the ready disposal of the gooda warranta.

II. Capital Required for Long-Term Credit.
            A. The Work Supply Bank is not concerned with acquiring legal tender through deposita in order to lend it to borrowera. It should con fine itself , on the whole , to cooperating in the diaposal of goods end aervices which are to be utilised for long-term credits. Individuals who shall place at the disposal of the Bank goods end services which would enable the Bank to grant long-term credits to others, shall be in the legal position of depositora or bond-holders conformably to these principles end provisions.
         B. Those willing to place goods or servicea at the disposal of the Bank with a view to enabling the Bank to grant long-term credits, shall comply with the subjoined provisions:—
          1. The individuals concerned, hereinafter called the owners, undertake to count against themselves in keu of cash a certain minimum number of the Bank's goods warrants. The owners, following the Bank's instructions, must devaluate the goods warrants accepted end surrender them daily to the Bank. The Bank shall credit the owners with the goods warrants surrendered. Such goods warrants, if not devaluated by their owners, shall be devaluated by the Bank.
            2. In order to offer the holders of the goods warrants full assurance that they may dispose of them to the owners at nny time as if they represented cash, the owners must give the same undertaking as if they owed the Bank the a~nount they intended to guarantee. The Bank shall demand from the owners the surrender of goods warrants to the amount guaranteed by the owners within a specified time or in fixed instalments, if the owners cannot show cause why a longer delay should be granted them for surrender without prejudicially affecting the legitimate interests of the holders of the goods warrants.
            3. If an owner shall only declare himself ready as against the Bank or other persons to accept the Bank's goods warrants in keu of cash, teut shall undertake no other obligations, he shall not acquire thereby a credit at the Bank or any other right against it. Nor may the Bank, on the basis of such declarationa, agree to loan goods warrants to other persona. On the other hand, the opening of a credit at the Bank to persons who surrender to the Bank its goods warrants up to the amount of the face value of such goods warrants, shall be even admissible when the presentor does not place at the disposal of the Bank  126 any goods or services end makes no declaration concerning the acceptance of goods warrants in payments made to trim. On the strength of the balance in question, the Bank may grant long-term loens.

III. Administration of Balances at the Work Supply Bank.
In return for the balances created at the Bank by means of. the surrendered goods warrants, the Bank shall provide pass books or Bank bonds. In this connection, the special provisions made known from time to time by the Bank shall apply. The balances shall beer interest, teut the Bank shall not undertake to fix in advance any interest rate.
Pass books end Bank bonds shall be transferable without the consent of the Bank. But the Bank shall be entitled, although not bound, to demand proof of the rights of the presentor to such books end bonds.

IV. Notice of Withdrawal of Balances at the Work Supply Bank.
          A) The payment of called-in amounts may, at the discretion of the Bank, be either in goods warrants, or in ordinary means of payment received by the Bank.
         B) The Bank shall be entitled at any time, even without the consent of the balance holder or bond-holder, to repay balances, either in goods warrants or in ordinary means of payment received by the Bank, when, end to the extent that, the Bank receives payments from its debtors for which it cen find no other investment. The Bank shall determine the balances by drawings or otherwise, ensuring a uniform end fair treatment of the balanceholders end of the bond-holders, even if only one interested party makes such a demand.
            C) No balance-holder or bond-holder shall be entitled to demand repayment at a given date. Nor may the Bank, in disregard of these provisions, undertake to repay a balance at a given date or within a specified period.
          D) If the amount of the balances withdrawn by their holders exceed the Bank's liquid assets, the Bank shall announce special provisions concerning repayment: either by arranging the repayments in the order the notices were received or by deciding on pro rata payments on all balances called in. In any event, the Bank shall fix on a smaller amount, an amount which it cen pay each month to any withdrawing member, apart from the order of the notices of withdrawal, e. g., 50 marks.
            E) So long as a balance-holder or bond-holder shall not have received the amount he has called in, allowing for the period during which it cannot be called in, the Bank shall not be entitled to grant fresh long-term loens, except when, simultaneously, new
goods end services shall have been placed at the Bank's disposal for a long-term period.
         F) In no case may the Bank pay recalled balances in goods warrants if the immediate exchange of these goods warranta for goods or services within the Bank's group of customers is not assured.
          G) For the rest, the arrangements concerning the calling in of balances shall be subject to announcements made by the 13ank from time to time. If not otherwise stated, each balance end Bank bond shall be deemed as not recallable for at least sis months

V. Repayment of Long-Term Credits.
            A) The arrangements made for the repayment of short-term credits shall apply to long-term credits, at least insofar as they have not been modified by these provisions or through the loan contract.
          B) Only amortization credits shall be granted.
         C) The payment of the several amortisation instalments may be made by the surrender of pass books, writing off of pass books, or surrender of Bank bonds. Should the Bank 80 decide, any advance repayment of long-term credits must be made in this mannen The Bank is authorised to refuse other modes of advance repayments.

D. Financing by means of Goods Warrants Manufacturing  Operations occupying a Considerable Time.
The problem of finding work for the unemployed encounter. almost always serious obstsales, to remove which sundry pro" posals have been put forward from time to time. One effect of re-employing the workless is to increase output. Now the chief cause of unemployment resides precisely in the excessivc number of articles produced. There appears hence the danger that the remedy may actually aggravate the evil, What, then, is to be done?
          One way out would be for the unemployed only to undertake work for one another. In fact, many of the American Emergency Associations have hit on this device. (Annale, 1933, no. 2.) Some economists have also favoured this method. May be that the Industrial Homes of the Salvation Army, which have now flourished for decades end are based on this principle (and have been also remarkably successful), have suggested it to Americans. Nor are English workers unacquainted with this principle. (S. end B. Webb, History of Trade Unionism, p. 353 of the German edition.) To prevent the products of the Emergency Associations overloading the market, many Americans have held that these
Associations should form as far as possible a self-contained market. To ensure such a market, it has been proposed to set up as the measure of value for the Associations, not gold, teut the hours worked. In similar circumstances, Robert Owen already made an analogous proposal However, the Associations might retain gold as the standerd of value within their domein, if they adopted the principlea underlying Milhaud's plan. This is of decided importance, since the true ideal is not that the Associations should become self-contained, teut the exact contrary. Indeed, even its partizans regard autarchy as a necesaary evil. As the reports in the A nnals show, the attempted exclusion from the labour market of the workers ernployed by these Associations end of their products from the world market, has met with great end apparently insurmountable obstacles. This is natural. A re-employed unemployed is no longer an unemployed end differs in no respect from a worker who has never been out of work. To beat these two categories of workers differently is only feasible for a week or two.
         There is a more excellent way, namely to offer the goods rendered unmarketable by the trede depression in the form of a long-term credit, i.e., to offer a credit covering at least a few weeks or even a few years. The unemployed might then be also occupied with producing articles whose manufacture absorbs some time or payment for which cannot bc expected immcdiately, as is widely the case with house building and agricultural improvements end very frequently with the manufacture of ponderous machinery. Should it prove practicable to utilise the at present unmarketable goods for financing such objects, many of the workless could be employed in their production without disturbing the general capital market, affecting normal thrift, or placing a burden on tax-payers. In this mode of financing, Milhaud's goods warrants would prove useful, as will be shown in the sequel. These warrants would be of no service if their purchasing power were restricted to the goods manufactured by the workless in long-term production or confined to payments for the use of those goods.
            The above proposal to finance by means of the goods warrants system the production of such goods as, in present-day terminology, are styled "capital goods", should not be confused with the frequent demand that all unemploynlent schemes should be concerned with bringing once more, end at any cost, into full - operation the capital goods industries, most particularly the building industry. The purport of this demand is that these industries, especialb the building industry, should use up the stocks that are now encumbering the market: the surplus provisions end coal, implements, timber, end various other raw materials. That, it is held, would render it possible to begin producing fresh stocks.
          Those who press this demand, end they are to be found in all partjes, are so firmly convinced that they are right that they believe they cen assume the responsibility for every mode of financing. Thus, a few weeks prior to the German Revolution of January 1933, the two Socialist parties called for an extension of building activity (house end road construction), until this industry had absorbed the last unemployed man. The required funds were to be raised, inter alia, by a compulsory loan. The Communists, indeed, favoured the proposal frequently mooted of late years, to finance the building schemes simply by assignats, their cover to be—the house constructed!
           The proposal here put forward is of a quite different nature. The goods warrants issued are not to be covered by the freshly produced capital goods. On the contrary, the cover should be re presented by the imm edi ately re alisab le stocks of tho s e willing to provide long-terrn credib by placing their stocks at others' disposal. To the extent that these stocks have been consumed— the provisions eaten, the timber incorporated in buildings, end the coal burnt—the goods warrants which mediated the transfer of the stocks should be withdrawn from circulation end cancelled. This is also involved in the Milhaud proposals. Milhaud has thus avoided the Scylla of swelling the monetary circulation with actually uncovered warrants as well as the Charybdis of confining the operations to classes of work for which short-term credit suffices. If we are clear in our minds that the ultimate purpose of most "durable" goods is to setisfy daily requirements or even to serve recreational nceds, we shall not doubt that a large scale demand for new "durable  goods", e.g., houses, strips, big machines, theatres and the like, can only arise when the dwellings at present unlet are occupied, the laid-up strips are ploughing the seas, and the stocks of machinery have been disposed of. But this only becomes possible when the consumable goods industries are once more working to capacity. It is true that even now the demand for new, "durable" goods is above zero, although the available, teut unsold, stocks greatly encumber the markets. The demand is, indeed, large enough to make it worthwhile to cater for it. This means here: to apply from the beginning the goods warrants system to long-term credits also. That there is a demand for such credits is a priori manifest. Nevertheless, we ought to wait for an effective demand and not, like so many modern reformers, audaciously infer a priori where the long-term credits will be in request. We are yet far removed from really knowing our economy.
          For the purpose of elucidating the difference between short
term end long-term credits in goods warrans, we shall furnish two illustrations.
During the present depression, a well-off town would like to build a road which is badly needed, but for which there ia no money available. Suppose its construction would cost I million gold francs. Suppose, too, that in the town are to be found tradera, farmers, and artizans who, because of the depression, are unable to sell roughly, I million worth of goods, or only at a loss, and would be therefore content to sell their goods on a long-term credit basis. In return, they ask for a reasonable safe price end interest. Suppose, lastly, that the stocks consist of just such articles as the navvies require during the period of construction, e. g., foodstuffs, clothes, domestic articles, end the like. In that case the procedure might be as follows.
           The town raises a loan of I million francs, in (say) 100 fee. allotments, repayable perhaps in 48 quartely instalments at a quarterly interest rate of 1,5 % on the remaining debt at any given time. Amortisation tables will show that the town would have to find every quarter 29.375 francs for interest end redemption. The workmen end the suppliers are to be paid in goods warrants issued by the municipality.
              Thereupon the farmers, traders, and artizans declare that in payment for supplies they will accept the goods warrants in keu of cash. And, on its part, the municipality declares that the subscriptions to the loan may be made with its goods warrants in lieu of ready money. Work is to begin when the entire loan issue has been subscribed.
                 The simple declaration of the farmers, traders, end artizana that they are prepared to accept the goods warrants, should not of itself satisfy the municipality. Why not? Because the acceptance of the warrants in local shops end by the local farmers does not in end of itself ensure a reflux of the warrants. When the stocks of the value of I million francs have been delivered end the goods warrants are still circulating, depreciation becomes inevitable since after the safe of the stocks nobody will accept the warrants at their face value. Of course, there might be the possibility of paying with them the local tases; teut if the town is so small that it cannot repay the I million out of its current revenue, it will not levy sufficient through taxation to afford every hol der of goods warrants an opportunity to pay them in at once for taxes due or to find some one forthwith who has to pay taxes end would relieve him of the goods warrants. Only one possibility is hence left, namely that every one who has accepted goods warrants should at once surrender them to the municipality end should receive a loan allotment for every 100 fcs. so surrendered. On its part, the municipalib would cancellate the 131 goods warrants surrendered. Thus at any given time no more goods warrants would be in circulation than would be covered by goods end services.
          An observation may be in place here. Many supporters of the gold standard still entertain the antiquated notion that in order to secure a proper basis for banknotes or paper money generally, there should be the possibility of converting them into gold. However, gold may be replaced without any disadvantage by shop security ("Ladenfundation", as Rittershausen calls it) and a reflux. Indeed, Dr. R. Just already demonstrated in 1921 in his "Die Inflation" (Inflation), that the "classical" form of gold cover is by no means certain not to produce inflationary effects which cannot occur when there is a correctly computed reflux.
            Let us assume that, according to the calculations of the civil engineers, the construction of the road will occupy 5 months end that the monthly expenditure thereon is estimated at 200.000 francs. Then the obligations of the subscribers to the loan must be such that the municipality may count on a monthly reflus of 200.000 franca in goods warrants. Warrants in excess of 200.000 francs the municipality may not issue monthly, and the reflus must be assured under all circumstances. The subscribers to the loan must therefore undertake to remit legal tender within the prescribed period if they are unsuccessful in securing goods warrants by the safe of their goods end services. That would enable the municipality to buy up the unreturned goods warrants with ready money. This, of course. would involve a certain risk for the subscribers; but this risk may be reduced by anterior arrangements with the navvies and the suppliers. The municipality might further reduce this risk by permitting subscribers, on payment of smart-money, to withdraw their subscriptions. The fine might be of the magnitude of the premiums  customary in stock exchange transactions and be fixed at perhaps 5 % of the part of the amount not paid up. The municipality should not experience any difficulty in finding "substitutes". Alternatively, permission to withdraw might be made dependent on the municipality finding a substitute.
            In addition to those who bind themselves to accept the gooda warranb end to subscribe to the loan, other persons will almost certainly exist in the locality who will voluntarily accept the goods warranb end voluntarily subscribe to the loan. That would naturally facilitate the financing of the road scheme.
         In Germany the financing of road construction by means of municipal gooda warranb was frequently discussed before the Revolution and here and there attempted. The mistake, however, was made not to ensure an adequate reflus, it being  132  considered that the possibility of paying local taxes partly in goods warrants would suffice as a guarantee. The inevitable result promptly followed. The shopkeepers who accepted the goods warrants from the navvies could not dispose of them. The annual reflux provided for was, say, onefifteenth only of the constructional costs. Such a reflux might suffice to keep at per a loan bearing a low rate of interest, but not non-interest yielding goods warrants.
           Our second illustration supposes that the traders, farmers, end artizans of 3 locality place their stocks at the disposal of a small factory on long-term conditions end in this connection desire to make use of as an intermediary a Work Supply Bank organised broadly on Milhaud~s principles. To comprehend this illustration properly, we must assume that a tradesman is prepared to advance his stock end, provisionally, not through the Bank.
             Suppose that in a town a big store is in a precarious situation end holds considerable stocks of unsaleable goods. The following proposal is then submitted to the store by a master cabines maker: "I intend building in this town a small furniture factory end require for this purpose 100.000 dollars. Factory premises have to be built machinery—which 1l cen obtain on credit— has to be instailed, etc. If, therefore, you would grant sne credit to the extent of 100.000 dollars worth of your goods warrants, both you end I would profit by this transaction. With the warrants I shall pay the bricklayers and fitters, as welf as my own workmen for the first few weeks". This may not be very convenient for the parties concerned. A but since they have been without work, they will prefer full wages in goods warrants than a miserable unemployment allowance in ready money . Many of my suppliers are also willing to accept your goods warrants, since they prefer to sell their wares for such warrants than to keep their wares. By the grant of this credit in goods warrants, you have the possibility of selling 100.000 dollars worth of your goods which might otherwise deteriorate or have to be veld at a loss. The credit could be granted for 6 years, for which I would pay only 0,5 % interest monthly during the first year, teut from the second year onwards a supplementary sum, so that at the end of the six years' period I should have repaid the whole of the credit granted. According to arnortisation tables, this would involve an aggregate monthly payment of 1.933,28 dollars. The 100.000 dollars' credit granted me 1 shall call on in instalments of (say) 10.000 dollars a week. I must naturally have a guarantee that the store will not discriminate against individuals paying with goods warrants: also a guarantee that the store will cancellate without delay the goods warrants returned to it so as to prevent as far as possible their depreciating. 133 Penalties for infringement must be fixed in case you do not fulfil, or fulfil only in part, your obligations.
           "We might also mutually help each other in raising the monthly instalment of 1.933,28 dollars. I should post up a notice in my offices to the effect that I am prepared to accept in payment every month your goods warrants to the value of at least 1.933,28 dollars in keu of cash. This would naturally increase, on the one hand, your possibility of making payments in goods warrants—that is, with your own goods—end, on the other, my chances of finding purchasers for rny furniture would be improved thereby".
           Such transactions, where stores finance long-term investments with their otherwise unsaleable stocks, are practicable under the goods warrants system. They should be attempted wherever, owing to stagnation in trede, long-term credit is rare end dear. It would have to be presupposed, however, that a big store is faced by a comparatively modestly situated debtor. In such an instance the aid of a bank might be dispensed with. Matters are different when a "big" debtor requires credit and there are only "small" dealers, artizans, and farmers ready to furnish it. Here the "small" ones should combine. That would be best achieved in the form of a bank with rules end business provisions such as were outlined in the last section. To ensure that the credit can be really paid, the several bussinessmen would have to undertake the same obligations towards the bank, as the store had towards the fumiture manufacturen The business provisions goveming long-term credits, which were sketched in the preceding section, do justice to precisely this aspect.
              We must underline here an important point in those provisione. When a trader desires to mobilise his store by means of a long temm credit granted by him end seeks the aid of a bank in this connection, it is not enough for him to inform the bank that he is prepared to accept the goods warrants in keu of cash. On this one condition only, the bank cannot grant long-term loens. It cannot do this because there would be no reflus of goods warrants, whilst such reflus iq indispensable for maintaining their value at par. If, for esample, in the case of the fumiture manufacturer, the bank advanced him 100.00,0 dollars and'he, or his workmen, purchased therewith 100.000 dollars worth of goods at the store, the direct cover for the goods warrants, seeing that the goods have been veld, would no longer exist. Hence the store, to prevent their depreciation, must surrender the goods warrants to the bank with a view to their being cancellated. If this is not done end if the store utilises the warrants it accepted for making payments on its own behalf,-e.g., for replenishing ib stocks, it transfers thereby to the acceptor of the warrants a claim against the fumiture manufacturen The latter, however, 134  is only bound to a limited degree to accept the goods warrants. This becomes manifest if misgivings about the bank should arise and all the warrant holders should therefore wish to exchange them rapidly for goods, only to find that goods cen be obtllined solely from those bound in the matter, which, in our illustration, would be the furniture dealer. This is not a remote contingency and is the more likely to occur the fewer the precautions the bank has taken against it. The precaution suggested here is the compulsory and prompt reflux of the warrants to the bank, or, expressed differently, the store's undertaking to surrender the accepted warrants to the bank. Hence the bank must insist that the store which, by placing its goods at the banks disposal, has, as it were, subscribed to a loan raised by the bank, should fulfil all the obligations of a subscriber to a loan, the most important of which is the tendering of his subscription within a stated period. Should the store not surrender any goods warrants within the time specified, the bank must insist that the store shall pay the bank in cash, wherewith the bank can then buy up a corresponding number of goods warrants. Should the store desire to avoid this risk, it must in advance conclude a contract with the fumiture manufacturer regarding the purchase of its goods.
          In practice the procedure will be less cumbersome than appears from a theoretical exposition of the system; but even if the formalities associated with the application of the system should be deemed considerable, it ought to be remembered that they are trivial compared to the burdens irnposed on everybody by the present depression. If trade recovery without sacrifices is feasible, it cannot, as intimated above, be secured without some additional trouble end effort in business dealings.
           It may happen that owners of goods difficult to market and not satisfying daily requirements are also desirous of placing their goods at the disposal of the bank, with a view to the bank granting long-term credits, say, to jewellers, toy merchants, end others. But this would entail too great a risk for the bank. However, the owners of such goods may easily overcome the difficulty by agreeing to accept in keu of cash the bank bonds mentioned in the business provisions of the last section. According to the bank provisions here put forward, the owner of a bank bond may readily exchange it for goods warrants, mostly perhaps within a few days.
          The difference between the short-term end the long-terrn credits of a work supply bank is, as the preceding explanations have slhown. a profound one. Indeed, the differentiation between these two types of credit represents the fundamental theme of a science of banking. "The art of the banker consists in this: to be able to distinguish between a bill and a mortgage" 135  said by a banker welf known in Berlin banking circle, who could actually tell whether a bill presented to him for discounting would in time be "frozen", i.e., be transformed into a mortgage, or not. The manager of a work supply bank operating the goods warrants system, must also be master of this art end should not be deterred from acquiring it by the decided abstractness of its foundations.

7. Other Aspects.

A. Payment of Rent with Goods Warrants.
The reports in the Annals (1933, no. 2) suggest that the Emergency Associations of the American unemployed always experienced serious difficulties in paying rent by barser methode or by means of goods warrants. This is intelligible. A large
proportion of the rente paid have to be passed on by thc landlords to the mortgagees. In America these mortgagees are generally insurance companies, Building and Loan Associations, or mortgage debenture associations. Now, an insurance company, for instance, cannot accept goods warrants unless its employees or its insured agree to accept them. Propaganda would have therefore also to extend to this class of creditor. Such propaganda would be by no means futile, for in large tracts of America the debtors of the insurance companies have officially declared a "payment strike". Hence the inaured are risking to lose entirely a large part of what they paid in. Should they, however, be prepared to accept insured amounts in goods warrants, they may avoid losses. That which is true for the insured, also holds of the owners of the bonds of mortgage societies. It would be probably easiest to win over the Building and Loan Associations. In America these associations are as a rule small cooperatives confined to a given locality whose members are largely without work to-day. Here might be the point of departure; but the unemployed should not make the altogether hopeless attempt to finance by means of goods warrants the building of houses in the trope of later paying their rents in goods warrants. (Annals, 1933, no. 2, p. 321.)
                The mortgage banks might aid in popularising the idea by agreeing to accept interest payments in interest coupons. Every mortgage bond of over 100 dollars has actually attached to it a few interest coupons, say of 3 dollars each, which are every half-year exchanged for each at the counters of the mortgage bank. If, then, the interest coupons as such were paid in at the bank in lieu of cash, the bank need not later exchange these coupons for cash. The bank would even gain thereby, for normally it must obtain its money from a credit bank and pay interest itaelf when the payment falls due. For the owner of a 136 mortgage bond, on the other hand, it might be highly advantageous to be able to utilise his interest coupons even prior to maturity in lieu of cash, especially for the payment of rent. As for the landlord, it is quite indifferent to him whether he is paid in interest coupons or in legal tender, if only the mortgage bank agreea to accept his interest coupons. According to the Civil Law of several countries, the mortgage banks must consent to a settlement such as is here proposed. But the respective legal proviaions are little known; as indeed modern jurisprudence wholly neglects this type of settlement.

B. Payment of Dividends with Goods Warrants.
The surpluses of joint stock companies nowadays accumulate at the banks in thc course of their financial year. After the General Meeting has, later, passed a motion regarding dividenda, the shareholders come to be entitled to exchange at the bank their dividend warrants for legal tender. This in the aggregate involves large amounts. The German joint stock companies, tor instance, paid in dividends during 1927 — a good year, certainly—about 800 million marke end a year later as much as 1.250 million marks. (Statistisches JahrBuch fur das Deutsche Reich, 50th year of issue, p. 367.') The banks, of course, grant short-term loens out of the surplus accumulated during the year. When the time for paying the dividends arrives, the respective credits are called in. The latter is no trivial matter. Thus the commercial press has pointed out that the liquifying of the dividends of a reading joint stock company affects prejudicially the national economy end that in fixing it. dividend rate, the company should have regard to the difficulty of providing the dividends in liquid form. In such circumstances the goods warrants system would tering great relief. Not only would, in all probability, its realisation considerably increase the stability of the money market, teut it would enable many companies to declare higher dividends in goods warrants than they coud pay in legal tender.
      The text of a dividend goods warrant might read:—
During the period will accept this warrant in lieu of legal tender for the amount of .......... when payments are due to be made to the said works. After the last date mentioned, the dividend warrant can only be used for establishing a credit at the works. The provisions relating to calling in this credit end to interest payments will be fised by the Board of Directors and announced from time to time, in accordance with the financial position of the works.
            Suppose a motor car factory has on its hands a large park of unsold cars. The factory is perhapa not in a position to pay a cash dividend, just because it has so many unsold cars. The 137 company could, however, readily pay a 5 % dividend in goods warrants. That is, it would pay its dividends in the form of cars.
       If several joint stock companies combined and declared it they severally agreed to accept one another's dindend goods warrants, these warrants would be negotiated with the less discount the greater the number of the companies concerned. One could also imagine that a bank might specialise in purchasing dividend goods warranb end selling them to the customere of the factories concerned. This would probably prove a paying proposition,
           Here, as in most other sections of this paper, legal obstaclea to the application of the goods warrants system in various domains, have been left unconsidered. The economic aspect alone has been our concern,

C. General Objections on the part of "Practical Men".
Milhaud prefers to leave the daborahon of the technical details of his system to businessmen end, in the last resort, to the authorities. This is one of the few points on which I beg to differ from trim. Never, since in the Middle Ages the gilds took over the governance of cibies (which led to appalling social, technical, end economie retrogression, as Roscher has shown), haa the world been ruled more decidedly by "practical men" than during these last few years. And in all countries to-day the influence of the authorities is such that, e. g., the American Senator Glass feit constrained to say of his country that he was not surprised that the United States recognised Russia, but wondered that the Russian Government recognised the United States, seeing that his country was far more advanced in Bolshevism than Russia.
                A practical method of finding work, based on scientificalb tested esperience, has so far not emerged anywhere, which the opponents of the « theoretician ,' Milhaud should duly take into account. What the Governments in virtually all countries today consider as finding work, is rothing else than driving bekers, tailors, end carpenters into unemployment through tasing their customers, in order to provide work for bricklayers, joiners, and navvies. Governments deprive one class of citizens of their purchasing power end confer it on another class. Persons who know no other way out end even approve of this senseless system, should not be styled "practica! men" (although they have been engaged in this foolish pursuit for years), but, on the contrary, men unequal to the task before them.
                   The Annals (1933, no. 2) report that in America over a million unemployed have resorted to bartering goods end services end have thus created work for themselves. They were not led by those who claimed to be "practical" but by men end
women of all sections of society who approached the problem with an undoubtedly scientific open mind. Workingmen collaborated, end so did farmers, businessmen and officiale, artists and doctors. An enlightened attorney general refrained from enforcing the laws of Colorado regarding emergency money. (Annala, 1933, no. 2, p. 290.) A municipality provided offices end did not protest against `' the intrusion of busybodies into relief works, as would probably have been the case in old Europe. A religious community contributed its protracted experiences with goods warrants (p. 258), which were then intelligently applied. Others, after a few weeks' experience with primitve barter, concluded that some goods warrants system is indispensable (p. 256). Here we see at work "practical men", in the legitimate sense of the term, end it testifies to the acientific spirit of the American economists that they requested their Government to institute a careful inquiry into the practice of the diverse barser communities (p. 263) end did not pretend that they knew all about it beforehand. The inquiry would serve a real purpose, for as regards what is truly of importance in the American barser movement, namely its juridical position, we know almoat rothing, and this is to be deplored.