Kansas City journal. [volume] (Kansas City, Mo.) 1897-1928, 1898-01-04
BANKS AND CREDIT MONEY.

Commenting upon the issuance OF credit
notes by the banks on their assets, State
Senator Young. who sets up to be the
financial seer of the Populist party in
Kansas, uses the following language: IF
| one class of men who have business as
sets are to be permitted to issue notes
against them in the form of money and
to circulate as money, what l want to
know is why other classes of men who
have business assets should not enjoy the
same privilege? But when the common
Business mar issues his promissory note,
no matter how much in the shape of
business assets he may have behind 1t, he
pays interest upon that note. 1t is only
the bankers who are permitted TO issue
their notes as money and receive interest
on them. Why the Discrimination"
Senator Young must be ignorant indeed
If he does not know that any citizen is
privileged to issue his note and have it
pass as money if he can find people who
are willing to take it. AS a matter of fact,
more than 90 per cent of the entire bust
ness of the country is transacted with
credit money treated by the people who
! are not bankers. There is no law COM
polling any citizen to take n bank note
and there is no law forbidding any citizen
to issue any amount of his own credit pa
per. When a man draws a check upon his
| bank account he practically issues so many
dollars in credit money. If the people have
faith in his honesty and his commercial
solvency they TAXI his money at its face.
u~t,.z " k~- lzL;.I -
| check. The bank on which it is drawn
may never nave seen a dollar of his mon
ey. He may have created a credit there
by pledging his business assets" or by Sc
curing the Endorsement of some other cit
izen in whom the bank has confidence, and
in such a a case the element of credit car
ries back indefinitely.
The extent to which the people use their
own credit money may be appreciated
through an estimate recently made which
placed the daily business of the United
States, from the woman who sells a dozen
of eggs to the man who buys a railroad,
at si00, OJ0, 900. OF this sum 1887 ,000, 900 is said
to he transacted with checks and drafts,
and only SIS, OeO.0 900 with cash. During the
year just closed the bank clearings of the
country amounted to the bewildering sum of
So, 900. 600, 600. every numeral of which rep
resents the employment of a credit dollar,
for the greater part issued by private cit
liens. Add to this the vast check business
not reporting to the clearing houses and it
may readily be discovered hat less than
10 per cent of the business of the country
is transacted with cash.
The credit system permeates every finan-
cial transaction. 1t doesn't stop by any
means with the man who draws a check.
The man who draws the check knows very
well that it will be unusual if the bank has
more than one-third of his money on hand.
Collectively the depositors are trusting the
banks for two-thirds of their deposits. The
banks have passed this two-thirds over to
the credit of other persons, who. in turn,
have pledged business assets or the credit
of a third party. From the report of the
comptroller of the treasury just issued We
compile the following table of deposits by
individuals in the different kinds of banks:
National banks 81 500, 349. 600
State banks 23.64O,O D
Savings banks ................... 1.9S2, 4l3, 900
Security companies .............. 566, 1922. 900
| Total :. III .32i,O go
The greater portion of this enormous sum
is subject to check. The money of every
sort in the United States amounts to only
sl,61S. $40. Ot0, and If the banks had it all they
would still be short SO. AS. 4S4. coo Of enough
to redeem the credit money which might be
issued by their depositors. More money is
deposited in the savings banks alone than
there is in the whole country, and this
seeming paradox finds explanation in the
fact that the people are constantly making
and using an intangible money which is
better for their urposes than the money
issued by the government.
Returning to the query of Senator
Young. we will say again that every citizen
enjoys the privilege of issuing credit money
at his own convenience. No more privi-
leges are accorded to a bank note than to
the II. o. T." of Senator Young. The
people accept the bank notes because they
believe the security behind them to be first
class. When any citizen establishes the
same confidence, his notes pass just as free
ly among the people as those of any bank.
And by the same token any citizen with
first-class credit can draw interest for the
of 1t.