MR. FARMER: I grasp that idea now myself. Do you know I have always thought, until within an hour, that we farmers ought to be able to get something to pay out in the shape of currency that represented our land, or in exchange for a mortgage, just because I knew a mortgage was good or worth its face; but I see now that a bank must not only have something that is good and worth its face, but it must be exchangeable for, and convertible into, real money or gold, at any time, or the bank must shut up. And you can't turn all our farms into some form of currency, and expect the banks to redeem it any more than you can sell a farm every hour. I have been trying to sell one farm for ten years. Now I see that would not make very good currency. Since I cannot sell it, the only way for me to convert that farm into cash capital is to take the net earnings, and lay them aside until they equal its value or what it cost me; that might not be within twenty years, as I might not be able to save for that purpose more than 3 per cent or 4 per cent a year which, at compound interest, would about make it. It is perfectly clear to me, now, that real estate is not a proper basis for a currency, which must be currently redeemed in gold. It cannot be done; that is a sure thing.
MR. LAWYER: Mr. Farmer, you have reasoned out for yourself a thing that has fooled many a man, and the world has had many bitter experiences trying to do the very thing you now so clearly see cannot be done; that is, make currency out of real estate, or, rather, as you would say, make money out of real estate, when, as we have already seen, gold is the only money we have or can have, so long as gold is our standard of value.
Jevons, a great English writer, has well said: "Land is doubtless one of the best kind of security for the ultimate repayment of a debt; and it is therefore very suitable when money is lent for a long time. But representative bank notes purport to be equivalent to gold, payable on demand, and nothing is less readily convertible into gold in an emergency than land."
MR. FARMER: And we cannot have any more currency than we can redeem daily in gold. Therefore we can't make currency out of all of our real estate, even our agricultural land, which is according to our last census worth sixteen billions or $160 for every man, woman and child in the United States. The average value per acre is $15.57. Now, at first thought, anyone would say that it would be safe to issue money for this value, or sixteen billion dollars; but who would redeem it? That is the question. One hundred and sixty dollars for every man, woman and child. That would certainly be absurd; and yet I have always thought that we could do that very thing until tonight. I see how it is, currency must be currently redeemed in our standard of value, or it will become first worth less than 100 cents on the dollar, and if the thing goes far enough, it would actually become practically worthless, although it might be based upon valuable real estate. How perfectly simple and plain this all is now.