Orders to him would however nearly always carry the provision that a certain amount of the payment should be in Memoranda. If he did not assent to as large a Memorandum as the buyer desired to give he would probably lose the business if the buyer could deal anywhere else on the terms which he wanted. In the projected economy, prices would probably remain much more stable than today and present haggling on prices would be very largely transferred to haggling on the percentage of Memoranda to be accepted. Present price competition would be altered to a competition both on prices and on the percentage of Memoranda. There would be a new degree of freedom looking at the matter mathematically.

We should find that business firms would carry two bank accounts, one in money, as today, the other a Memorandum account in which they would be debited the amount of the account instead of being credited as with their money account. A business transaction would involve the payment of a sum of money, and the coincident assumption of an obligation of the seller to the Surplus, the Goods Memorandum. The latter, as in the case of the check in payment of the money portion would be expressed in dollars. Presumably both would be combined in one instrument. Deposit of it by the seller in his bank would increase his money account and decrease his Memorandum account the respective amounts stated. The combined instrument would be cleared as now, each successive possessor being similarly credited in the two separate senses, unto its final payment by the buyer's bank. His money account would be debited and the amount of his Memorandum account increased (i. e., he would be debited) the amount of the Memorandum. In terms of absolute figures, it would be as though a deposit had been made in the Memorandum account of the buyer, a negative account in a negative balance. The continual separation of these two types of debiting and crediting, in all financial transactions involving the transfer of and payment for, goods and services, would preserve the underlying necessary absence of competition between the two portions of the total economy, while making it unnecessary for the Surplus to take cognizance of any individual

transaction.

It is obvious that such a mechanism will require more clerical work by the banks. But such work will not be doubled. While a double set of balances will be required, the process of looking up an account and other such work would be done with respect to both accounts of a given customer at the same time. The process of issuing evidences of Surplus Credits, if performed through the bank of an employer, would be identical to the issuance of wage and salary checks; the drawing against them, by the presentation of Discount Stamps, much like that of paying checks, with a further detail. All in all, if banks are allowed to prorate their salaries and wages according to the amounts of Memorandum accounts which they carry, or alternatively according to the Memorandum credits cleared (corresponding to debits in checking accounts), they will presumably be sufficiently recompensed for the extra work which they will be called on to do. If, for example, a bank debited money items amounting to $800,000 to the accounts of its customers in a given wage interval, and in the same interval credited items amounting to $200,000 to its customers' Memorandum

accounts, it could pay its wages and salaries 80 percent in money and 20 percent in Surplus Credits. The exact basis on which this adjustment might be made might vary from this in any equitable way but the principle is clear.

It is interesting to consider what really happens in such a mechanisin with change in a firm's Memorandum account. This account is in theory a statement of a lien of the Surplus on the inventory of the firm, and a Memorandum offered to it in payment of goods or services an assumption by the buyer of a part of this lien. This lien was initiated when the firm assumed such a lien on the materials which it bought. It was increased when the firm allowed the Surplus to act as a silent partner in the furnishing of the service, for which the Service Revenue of the firm is the reward. It was extinguished (as regards these particular goods), when the buyer of them assumed the total lien, the Goods Memorandum given in part payment being the evidence of this assumption.

Such a Memorandum account would be initiated, whether in the case of a new firm, after the system was in operation, or in the case of the commencement of the system, by a firm buying for the moment more goods than it expected to sell, that is, increasing its inventory and paying for the increase with Goods Memoranda, also usually by working up such goods into final form, and executing Service Memoranda whereby the Surplus undertook a proper share of the costs of fabrication. It might do either or both and the increase in its inventory might be in raw materials or in finished goods or both.

A firm would never be interested in decreasing the amount of Goods Memoranda received below the amount given for the goods and services which it bought. Its most favorable position in this regard would be when it was able to buy for a considerable proportion of Memoranda and to sell for a purchase price which was no larger in Memoranda than the amount of the latter given. In such a case its goods would be relatively salable, since a small proportion of Memoranda would be accepted, but no Service Memoranda would have to be given to balance the Memorandum account. The Surplus would not share in the profits of the business. If, however, the total capacity of the productive equipment were not being used, it would always be to the advantage of the firm to broaden its market by accepting larger Memoranda and executing a Service Memoranduni. A portion of the increased Service Revenue would be in the private

economy.

While it would be wise for a firm to have a Memorandum account of sufficient size for working purposes, it would not usually be wise to make it unduly large. Such an account would represent increased inventory, over what would be the situation when no such account. existed. Accordingly the firm would be justified in decreasing its money inventory to at least a part of its Memorandum account. From the accounting standpoint, the total inventory would in part be paid for with money, in part held against a liability to the Surplus through the banks. For a given total output, a lesser working capital would accordingly be necessary. Since, however, the ownership of stocks would be wholly in the private operator, he would have the same

interest in preventing their deterioration or obsolescence which he now has. His obligation would be one measured in money.

Tracing the responsibilities involved, between the Surplus, the banks, and their customers, they would be precisely like those set up by money balances but reversed. When a man deposits a $100 bill in a bank, he transfers an obligation of the Government to him, to the bank. He accepts a similar obligation of the bank to him. The same, mediately, is the case when he deposits a check. The bank looks to the Government, he looks to the bank. Each obligation continues until demand is made for its discharge. In the case of Memorandum accounts, the Surplus would look to the banks, the banks to their customers. Both individual firms and banks could transfer such obligations among themselves. Such transfers would, however, only affect Memorandum accounts. Whenever a firm desired to discharge such an obligation in money, it would have to do so through the Surplus. It would receive a Satisfaction for such a money payment, together with an equivalent amount in Discount Stamps. It would deposit the former to the credit of its Memorandum account.

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Such transfers of Memorandum obligations would require the same faith in the ability of the drawer of the instrument to perform, as would be necessary in the case of the coincident transfers of money by check. As regards the obligation of the customer of a bank to the bank on a Memorandum account, he would always have a money balance larger than the Memorandum account. In the case of a firm in active business, the account would always be tending to vanish and would have to be increased by the making of Service Memoranda. The problem of such accounts becoming so large as to force the bank to take a risk would hardly ever arise. It would be proper for a bank to inquire into the reasons for unduly large Memorandum accounts in comparison with the money accounts of the same customers. It would usually be due to large inventories. As the latter were built up, money balances would fall and Memorandum accounts rise, and conversely. The remedy would, of course, be to decrease the amount of inventory. Actually, the situation would not seem to be very different from that where a bank lends money today to a customer to permit him to increase his inventory in a way in which he otherwise would be unable to do. If the Memorandum account exceeded the money account, the bank would be guided by similar considerations to the above situation. It might be proper to specify that the Memorandum account should never exceed the money account. Under such an arrangement, the firm would have to increase its money account, by borrowing from the bank in the usual way, to the point where the Memorandum account was the smaller. This appears to be an unsatisfactory solution, as it requires use of the firm's credit to aid the Surplus Economy. On the other hand, such inventories would be the unquestioned property of the firm, and it would profit or lose. from changes in the value of them. Some method of hypothecating a portion of such inventories with the Surplus, thus removing the bank's responsibility in the matter, may be the solution of choice.

* Satisfaction: A release of obligations under Memoranda. From a banking point of view, essentially a Memorandum of the Surplus.

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A bank's relationships with the Surplus would be of several types. The Surplus would always be a heavy money depositor, owing to the fact of Memoranda being constantly paid off in money. The total of such deposits would not tend to increase, as these funds would tend to flow back to the consumers where they came from, in the redemption of Discount Stamps and debiting of Surplus Credits. Additionally, the Surplus would have large balances in money derived from the sale of goods in foreign trade under a special mechanism later to be described. The banks would act as agents of the Surplus in receiving Service Memoranda and in setting up the latter in Memorandum accounts. All such accounts would start with such Service Memoranda, and Goods Memoranda would simply be assumptions of the responsibilities of the makers of such Service Memoranda. It follows that the total Service Revenue of the country would always be larger than the total amount of Memorandum accounts. The banks, however, as above noted, would be wholly responsible to the Surplus for the total amount of their Memorandum accounts. In theory and in practice, the amount of the Memorandum account of a firm would represent an increment to the amount of its inventory, which would not exist if our system did not exist. It is, therefore, proper to specify that the Memorandum account of a firm would be a prior liability on its current physical assets. In case of receivership or bankruptcy of a firm, its current assets, if sold en masse, could be sold for a sum including a Memorandum to the extent of the Memorandum account of the bankrupt firm plus whatever amount of money was considered to be a fair price. If sold at retail, the money received would first go to setting up a fund sufficient to extinguish the Memorandum account. As Discount Stamps were demanded by the retail customers, money would be taken from this fund to pay off the Memorandum account of the bankrupt firm and Stamps furnished to the receiver to the same amount. Any money received by the receiver after the fund was constituted would go to the creditors of the firm on the money accounts owed them by it.

It will have been observed that under such a system we would have, as today, an increasing value in goods and services as they were elaborated on until they reached the final consumer. At each transfer, however, this value would be represented, not by a single money payment, as today, but by the sum of a payment in money and an assumption of obligation to the Surplus, also measured in money units of value. In general, both elements would increase from transaction to transaction, but at entirely independent rates, depending on the amounts of the Service Memoranda, and for that part of the Service Revenue of each firm over and above the amount of Service Memoranda which it executed. We might represent this state of affairs by the diagram in Chart I. The resemblance to two parallel watercourses, where each tributary of the one watercourse is represented by a tributary of the other, is obvious. At each point the cross section of the main stream is the total value of the goods and services so far contributed, while that of the portion of the stream coming from each side is the portion in one or the other economy.

In each portion of the economy but especially in the Surplus Economy the amount of salaries and wages issued will be less than

the retail value of the goods or service produced. The same is true of Producers' goods. The result would be that if this situation were not adjusted for the amount of wage and salary Surplus Credits issued would not be enough to extinguish the total amount of Memoranda issued in the production of consumers' goods produced in a given interval. Moreover producers' goods would in general never be purchased by Surplus Credits. It is necessary therefore, that first consumer purchasing power in the Surplus Economy be supplemented by an additional purchasing power to that afforded by wage and salary

Surplus Credits. As above briefly noted it is planned that this should be done by the issuance of additional Surplus Credits in a way which we shall term the Consumers' Distribution. Just how this Distribution should me made is a matter of sociological interest rather than of economic interest. We shall, however, assume that such a distribution would be made on a per capita basis. The only requirement from