“ ‘Never mind,’ said I to him, benevolently, ‘at what loss you sell. I desire to do these honest people a service.’
“The volume of my commerce grew (at a heavy charge!) and even the timid thought there might be something in it. I started the ball rolling by getting my confidant to deposit a hundred pieces of gold, which I had privily furnished. At the end of the week I duly gave him back one hundred and one in the presence of many; and the story went abroad.
“Soon the chief, his uncle and his mother-in-law deposited and were as regularly paid one percent a week. The thing began to buzz—but I watched narrowly my dwindling hoard: it was a close thing! … When I had progressed in this fashion for what I considered a sufficient time, I judged it opportune to initiate my new policy of an expansion of exchange through instruments of credit.”
“Dear uncle—” interrupted the eldest nephew.
“Yes, yes,” said the merchant, impatiently, “I know that the term is new to you, but you will shortly learn its meaning. When I had occasion to buy articles for my private consumption or to make an exceptionally heavy purchase of my wholesale wares, I would frequently affect embarrassment, and approaching the vendor I would beg him to accept, in lieu of immediate payment in cash, a note which I had signed promising payment in gold at sight. ‘For,’ said I to him, ‘in the rapid turnover of my business it is but a matter of a few hours for me to be again in possession of a considerable sum of ready money.’
“I went to work at first with caution. I never by any chance issued a single note for more than ten pieces, and when ever any one of these notes was presented for payment, even though that event should take place within an hour of my issuing it, I promptly honoured it from the reserve of metal which I had kept back for the furtherance of my plan. I was careful to make these notes identical, to stamp them all in the same place with my metal seal, and in every way to make them, so far as I could, a sort of currency, which, as you may imagine, they promptly became. When a man carrying one of these instruments might find himself called upon to pay, at some distance from my place of business, he would at first tentatively offer my note (perhaps at a small discount) to his creditor. But as my integrity was by this time a proverb (and never forget, dear boys, that integrity is the soul of business) the notes were more and more readily accepted as time proceeded.
“The convenience of carrying such paper compared with the heavy weight of metal they might represent, the ease of negotiation, and so forth, rapidly increased their circulation; and in a short time I was able to calculate with assurance what the experts in this amiable science term ‘the rate of circulation’ which my notes had attained. I found that, roughly speaking, for every five pieces to which I had thus pledged myself upon paper two were sufficient to meet the claims of those who presented them at any one moment. And this proportion is known to this day in that happy valley as ‘the proportion of metallic reserve’ which must lie behind any issue of notes—but I hear that since my departure they have got badly muddled.
“Oh! dear, dear!” said the eldest nephew. “I am getting muddled myself, Uncle.”
“Don’t listen to him!” said his brothers in chorus.
“Yes! my children,” answered the old man vividly, “it is indeed a difficult subject. Only a few experts really understand it … and I am one … anyhow, you all see that I could now make new money as I chose out of nothing?”
“Oh! yes, uncle!” they all agreed, including the eldest. “We quite see that!”
“Well,” said their revered relative in a subdued tone, “that is a great advantage. But to proceed.
“After some weeks of these practices I found myself the master of the fruit and grain markets, to which I added certain adjuncts naturally suggested by it, such as catering for public meals, the erection of mosques, the undertaking of marriages, funerals, and divorces, the display of fireworks, and the charging of fixed fees for the telling of fortunes. This last soon became a very flourishing branch of my business. I employed in it at the customary wage a number of expert soothsayers, and these, with the rest of my staff, amounted to perhaps a quarter of the inhabitants; nor were they the least contented or the least prosperous of the population.
“In a word, my dear nephews, when my operations were concluded I found myself in possession of 200,000 pieces of gold, while my notes, which were everywhere received throughout the state, stood for 300,000 more. A simple calculation,” said the worthy old man, smiling, “will show you that my total new fortune was now no less than half a million pieces, when signs of economic exhaustion in the public and the complete healing of my leg reluctantly decided me that the time had come to seek fresh fields of effort and other undeveloped lands.”
As the merchant now puffed at
