Dear Banker,
I.O.U. 100 shekels at 10% per eon.
Signed, Entrepreneur
He enters that on the books as a bank asset, credits your account with one hundred shekels, gives you a bank book, and some blank checks, and you thank him for the money, which is new money, monetized by your security and existing only as bookkeeping entries. To symbolize this I hand you these hundred chips, which you must think of as bank credit, or check book money, not as greenbacks, nor metal coin. But you may use them as money in every respect for the banker will cash a few of them from time to time out of the small stock of cash he keeps on hand. He can afford to do this because only on rare occasions will all holders of bank credit ask for cash all at once, placing a run on the bank. Usually cash money paid out by the bank comes back the next day and is re-deposited.
“You have your hundred shekels now and can commence operations. You lease a site for four shekels for the eon. Put four chips by the black bishop. You build your factory, eight shekels for raw materials, eight shekels for labor. Pay out your chips. Now pay the inventor four shekels for the use of his process. Your wages for labor during the eon amount to forty-four shekels. Pay it out. And for raw materials thirty shekels. You will have taxes of ten shekels during the eon.”
“I can’t pay them. I’ve only two chips left.”
“Never mind. You’ll be selling some playing cards soon, and can pay them as you go along. You now manufacture during the eon sixty-three playing cards. Stack them there by the factory. You need eight shekels profit in the course of the eon to support yourself and your family. You figure out what your market price must be for playing cards in order to accomplish this. What would it be?”
Perry set down his expenses and added them up as follows:
Land rent 4 shekels
Factory (labor) 8 shekels
——”—— (material) 8 shekels
Production (labor) 44 shekels
———”———-(material) 30 shekels
Royalty to Inventor 4 shekels
Taxes 10 shekels
Profit 8 shekels
Interest on loan 10 shekels
126 shekels to be recovered as price.
63 produced units to be sold; therefore price must be 2 shekels each.
Perry looked up. “I get two shekels per card.”
“Correct. As you can see, I arranged the figures to give round numbers.”
“But I can’t possibly sell sixty-three cards at that price. There are only ninety-eight shekels out there to buy my product.”
“Don’t be in a hurry. Start selling and see what happens. We will assume this time that all these people that received money from you need all the consumption goods they can afford. Sell to them.”
Perry dealt out cards to ‘Labor’, ‘Land owner’, ‘Inventor’, and ‘Owners of raw materials’, and collected two chips for each card.
“How many cards do you have left?”
“Fourteen.”
“You have a lot of money on hand. Better pay your taxes.”
“Okay.” Perry placed ten chips on ‘US’.
“Now I’ll act for Uncle Sam and pay the public servants four shekels, buy raw materials for four shekels, and use two shekels to buy consumption goods from you.”
“Here you are.” Perry handed Davis a playing card who placed it on ‘US’ and gave Perry the remaining two chips.
“Now sell goods to ‘Public servants’ and ‘Owners of raw materials’.”
Perry did so, handing out four cards and receiving back eight shekels.
“Now pay the interest on your loan. You’ll be doing so in the course of the time period.”
“Okay, here’s ten shekels.”
Davis placed them in the bank. “The banker, with his family, clerks, and so forth, needs some consumption goods. Here are two shekels.” Perry solemnly received them and proffered one card to Davis.
“Now pay yourself your profit of eight shekels. Turn it over to your wife. She handles the money in your household. She takes it and spends it for consumption goods.” Perry took eight shekels, placed it by the black queen, then picked it up again and placed it by the black king, and placed four cards under the black queen. Davis added a comment. “That operation is symbolic of thousands of wives of entrepreneurs spending their husbands incomes on all manners of goods produced in thousands of factories.