This plan should not be confounded with any "fiat money" or unlimited "greenback" proposals. Its main point is directly the opposite of these, to secure a more complete control of money volume. It is not an attempt to make something out of nothing, or to create value by government fiat or authority where none existed before, or to coin the government's credit,--although there is no valid objection to doing the latter when properly limited.
It is simply an exchange of credit, analogous to the operation of every bank. The government would loan a command over immediate goods (represented by its promise to deliver such goods on demand) in exchange for a promise to return such command over goods at a future time, and secured by a deposit of collateral; and in payment for the difference between the value of present and future goods it would charge interest. This is precisely what the loan department of every bank does. Every man who accepted the money in payment for goods would deposit, for the time being, with the government the command over commodities in general which he owns; the money being his certificate of deposit. This would constitute the fund from which the loans were made, just as the deposits in a bank constitute, in the main, its loan fund. When the money was used to purchase goods, it would be redeemed, so far as the purchaser was concerned, and the claim would be transferred to the seller of the goods, who in turn would become a depositor.
Like every bank, the government would rely on the probability that all claims against it would not be presented for payment at once, but this probability would amount to a certainty in the case of the government, for there would be no probability of _any_ of the claims being presented for direct redemption, as every one who had goods to sell would redeem the notes, so far as the holder was concerned.
The honesty of the government as an agent for all the people is, of course, assumed in this plan; but the credit of the government, in any other than a trust capacity, is neither assumed nor involved, since it would hold secured claims against others for every dollar issued (unless, of course, a portion of the money was left as an unsecured issue, which, as above stated, is no necessary part of the plan).
