The Wichita daily eagle. [volume] (Wichita, Kan.) 1890-1906, 1890-12-26
THE BANKING AND CURRENCY CUES
TIoNIN GREAT BRITAIN.
From m. Cincinnati Price current-


changes in the banking system OF mat
country. General business seems to
have outgrown methods which were
adequate forty or fifty years ago, ana
the recent crisis has demonstrated the
necessity Of legislation to modernize the
banking system, and to provide Tor
f1exibility in the note issuers OF the
Bank of England.
The London Times saws of the neces-
sity of change in the English banking
act:
1--WE understand it is thought probable
in well informed quarters that the cir
cumstances under which the authorities
of the Bank of England had recently TO
replenish their stock of gold by obtain
ing supplies from abroad VIII result In
the appointment of royal commission
to inquire into the whole question OF the
working of the bank act OF 1874.
1t has been known for some
time past that the present chan
ceilor of the exchequer contempiates
making changes in the law affecting
bank note issues, and it Is not unlikely
that Mr.. Goschen may think the time
has arrived to rearrange the whole oasis
upon which the business of the Bank OF
England is carried on. Those who have
more particularly studied such matters
have, we believe, without exception,
been of opinion that the debt due by the
government to the bank should be re-
paid. Had it full command Of Its own
capital, the bank would be in a position
to hold large number of bills OF ex-
change. as the Bank of France does, and
could by that means exercise more eff
fectual command over the discount
market, and consequently over the I'M
ports and exports of gold. Too large
proportion of the banks assets is IN the
form of fixed investments. If 1t trans
acted a much larger discount business 1t
could afford to pay for larger idle bull
lion reserve than at present. For
many years past the gold reserve
has been too small, as we have con-
stantly pointed out. In quiet times, with
the bank rate at 3 per cent, for months
together. no harm follows. But all agree
that the richest capital in the world
ought to be in position to avoid IN tu-
tnre having to dispatch trusty messen-
ger to the Bank of France at moments
notice to communicate TO them the grave
fact that the Bank of England must nave
so much gold at once at any cost, which
is what took place.
The London Weekly Bulletin observes:
"'When Sir Robert Peel passed the
bank act, that piece of legislation may
have been adapted to the condition of
things which existed forty-six years ago.
There was then no joint stock enterprise
at home, and very little British enter
prise in new countries. Everything was
as different as possible from the feverish
condition under which business is con-
Quoted now; and there can be little ques-
ton that the bank act of 1915 has be-
come in 1890 an anachronism, which be-
fore very long must be replaced by the
legislature with some measure which
acts a little less like an iron
shroud. There are, 1T appears
to us, two obvious ways in which
relief might be afforded. The system
of the Bank of England might be assimi-
lated to that of the Imperial Bank of
Germany, to be presently explained; and
a new issue of 81 notes, secured in the
same manner as the larger denomina-
tions, be made the immediate effect of
which would be the partial, if not COM
plete, withdrawal of gold from active
circulation, saving at once the wear and
tear of gold coin, amounting to many
thousands a year, and the introduction
of currency as secure and yet far more
flexible than metallic one.
''We all know, of course, that the
Bank of England may issue notes to
certain percentage in excess of Its gold
reserve, but the mischief of the arrange
ment is that the percentage may never
vary. Consequently where there hap
pens to be a severe gold drain, followed
bv high bank rate and financial cri-
sis such as we are passing through now,
the authorized note currency contracts
exactly at the same rate as the
gold is drained away. The Bank
has only discretion within these narrow
limits. The result is that at a moment
like the present, when an increased note
the depreciation of which
there can be no fear-is the necessity of
the hour, that is Just the moment when
the bank is constrained by act of parlia-
ment TO reduce rather than increase its
note circulation. Now the bank eff Ger
many has an authorized note issue of
about e14, 500, 900, but it may go on issu-
ing notes not only in excess of this limit
but also in excess of the coin and bullion
it holds, provided it pays the govern
ment ) per cent on the excess. The
practical effect of this provision is that
the imperial bank is placed, IN a season
of financial pressure, in this position:
With one hand it is able to afford ample
accommodation at its counters, while
with the other 1t can raise its bank rate
to such a point as will compel gold
to flow into its Golfers. We have not
space to go more closely into the
working of the German system, but
from what has been witnessed, this week
in the city, and system seems to be
change for the better from the cast-iron
one under which we are being
strangled."
as is clear that something is wrong
with our monetary system. lake only
the illustration Of a barbarous country
like Central Africa. We are IN the pos
itior of travellers who would essay to
penetrate the interior without sufficient
supply of cloth with which TO barter
with the natives. We have too limited
currency, and the result Is that, while
we are the richest country in the world,
with an expanding trade, we are contin-
ually liable Of fits of panic. which demon
alize everybody and lead indirectly to
enormous individual losses. Surely
year of such utter financial depres-
sion as that now drawing 10 Its close
must compel the legislature to overhaul
the act Of 1915. which hedges IN our car
with walls Of adamant We do
not say the difficulty is altogether here.
We have been taught. to our cost, that
sl,ifrb intaraSt means had security and
we must rot forget that lesson when
once again the company siren begins to
charm. charm he never 80 wisely. These