The Indianapolis journal., 1898-01-26

A defect of the present banking system
recognized for many years past has been
that it did not furnish an elastic currency
nor supply local accommodations to meet
the necessities of trade. There has been
constant tendency towards congestion of
the currency in the money centers with
scarcity throughout the country when
and where it was most needed.
The report of the monetary COM
mission characterizes this defect as "The
want of a natural outflow and inflow of
the currency when and as, and only when
and as, the agricultural manufacturing and
commercial interests of the country require,
at a given time, either greater, or less
quantity of currency in circulation" This
defect in the present system has been felt.
to very marked degree in the agricul-
tural districts when money was needed to
move the crops, and perhaps even more in
the South than in the North. Mr.. J. W.
Fries, of North Carolina, one of the largest
cotton manufacturers in the South and
member of the commission, points out one
of the effects of this feature in the South.
He says:
months in cotton. 1t requires more money
in any one particular town to move this
crop than, the banker or bankers of that
town could possibly hope to use at any 9TH
er season of the year The result is that
those who have capital tie it up in perma-
nent investments. Very little of it goes into
banking, where it can assist the commerce
of the town. When the time for the move
ment of the crop comes, the country bank
er must go to New York and rent money
at AZ and per cent. BY the time he pays
this interest and the express and the inSur-
ance charges, and endeavors to loan money
at per cent, he can make no profit at all,
and we invariably have a local money
stringency whenever the crOp-moving sea-
son comes.
On the same line is the following from a
paper submitted to the monetary commits
sion during it's sittings in Washington:
1 think it can he safely said that the rule
adopted in the United States which REQUIRES
bank notes issued to be secured by de-
posit of bonds is contrary to the rule
adopted in nearly all of the great CONNER
cial nations of the world. Those nations
recognize that banks can be established,
and the notes issued by them secured by
having them issued upon the capital. To
country alone; We have in the fall of the
year, when we need the greater volume of
our currency. the cotton crop. That cotton
has a market value at every railroad station
in the land, and can be converted into
money wherever there is mercantile busi-
ness carried on Its price is all over the
country practically its market price at the
time il is sold, less the cost of transporting
it from the point at which it is sold to
Liverpool. When the cotton is stored in a
warehouse or put upon depot platform for
shipment and covered by insurance any pa
per which is secured by the warehouse re-
ceipt or bill of lading given for such cotton
is as SAFE almost, as United States bonds.
1 cannot see why bank, whose assets con-
sist of good commercial paper, especially
paper based upon such security as that
above indicated, should not be allowed to
issue notes based upon its assets.
To meet this lack of elasticity and auto
matte action in the currency under the
present system the commission recommend
the basing of bank note issues mainly upon
the business assets of the issuing banks,
safeguarded by other securities. There
seems to be Z. rapidly growing sentiment
among financial authorities that this would
supply the elasticity in the currency which
is now lacking and furnish banking facili-
ties and accommodations to many localities
which are now entirely deprived of them.