All the Bank of the State schemes rested upon a notion of the "credit" of the State as a metaphysical entity which could be called upon to do the work of capital, although capital cannot be produced without labor and frugality. This introduction into finance of the political glamour which surrounds the "State," and which has done so much mischief in politics, was a multiplication of evils. That there may be "psychological elements" in finance is true enough, but it is well to analyze them rigorously when recognizing their existence. Confidence operations and swindles of all kinds would have comparatively little chance, if it were not for the psychological element, and it does not appear that that element has any place except amongst the dangerous delusions. As to the State and its credit we can define it rigorously. The State can tax its subjects, and can deliver the product to those who have acquired a right to it under such contract as may be made. The State can promise to do this, may be believed, and acts may follow which are beneficial according to the plan which was the motive of the State's promise. This is the nature and limit of the credit of the State. The Bank of the State schemes assumed that the prestige of the "State" could be coined into food and clothes; that the imposing attributes of political power could do the work of an actual development of labor into product; and that, if the State talked about what it would do, never meaning to do it, all the same results could be obtained as if it did it. In politics we are very familiar with the notion that "resolutions" are effective social and political forces. They are used to make one set of people believe that they are about to have their wishes gratified while, at the same time, those who seem to be committed by the resolutions to some irksome responsibility are reassured by being told that they will not really have to do anything. Of course somebody is duped. The Banks of the States were attempts to transfer this method of operation to finance, but when capital is at stake the fact that somebody has been duped means that a vulgar crime has been committed. The most far-reaching vice in all these bank schemes was that they led the people to believe that the methods of a "boom" could be successfully employed in the place of the methods of thrift, and their most far-reaching corruption and demoralization lay in the fact that, in practice, they only offered a chance for a favored clique to win at the expense of the community.
To return for a moment to the antagonisms of the groups which have relations through a bank, it should be added that in stock banks which were formed with stock notes and were run for paper-mongering, the stockholder-debtors were the worst bank-wreckers of all. When they had used their bank to get possession of capital, often the best thing they could do with it was to ruin it. The greater the depreciation of its notes the more lucrative the traffic in those notes for the bank itself. When the notes had been bought up and the debts to the bank paid with them, the operation had raised their value. They were then put out again at a distance and the operation repeated. When the reputation of the bank was utterly lost, the
