Mexico weekly ledger., 1898-01-13

IL would take 20 send IL 80 far, were
the machinery not 20 perfect"
The Canadian system has been
likened to q ''great centralizing reser-
voir, condensing the moisture OF the
vast areas where it exists in redundant
qualities and dispensing 1t gently like
summer rams over the arid plains"
This is the fuiflIment Of one of the
great fundamental ideas of modern
banking. What was undertaken by
the goldsmiths Of London is perfected
in the branch system of banking in
Canada to-day.
1t requires no argument to demon
strate the advantages resulting from
a system which brings a stable, uni
form and convertible currency to the
doors OF the farmers and the lumber
men in the remote parts of the Domin-
ion at practically the same rate OF
interest prevailing in the large CEN
ters.
But the question arises, upon what
principle does currency iuctuate in
volume in response to the require
ments of trade, and what are the ad-
vantages to be derived from it?
The basis of elasticity Is self interest
manifesting itself in competition.
There mustbe some motive for expand
ing the currency when trade expands
and an inducement for contracting it
as trade contracts. That motive or
inducing force in the first instance
is the profit on the notes issued, and
in the second, the desire of each bank
to float its own issue. 1t is worked
out in this way: Each bank puts out
as many notes as the trade requires
until it reaches its legal limitations.
In order to keep it's notes in circula-
ton it becomes necessary to retire the
notes of competing banks as rapidly
as possible. Consequently, each bank
presents daily for redemption all the
notes of rival banks which come in
their possession. 1t is on account of
this feature of daily redemption that
there has never been any imitation
of the currency under the present
system. Trade may expand and
money will follow trade, but that is
quite different from the existence of a
large volume of money in a country
where there are no requirements of
trade.
The actual fuctuation in the volume
of the currency ranges from about
$50, 600 600 during eight months of the
year to about $37,O 600 during two
months of the year. 1t reaches its
maximum limit in October and its
minimum in April.
BANK INSPECTION.
Another feature of the system is that
there is no government inspection.
The reason for this is, first, the i'm
practicability of efficient government
inspection where banks r as complex
and their business as widespread as
under the Canadian system; and, sec
ondly, the provision for inspection
already adopted by the banks is eff
Gent and in every way satisfactory.
The fact that all of the banks COIL
tribute to the redemption fund and to
that extent are interested in the
solvency of one another makes the
banks very watchful as to all invest
ments and general conduct of other
banks. Their custom is to furnish a
monthly statement of the condition of
the bank, together with a statement
of the condition of its shareholders.
In addition to this, the bank inspector
is a very high official and as a rule a
man of great skill and integrity. Ac-
cording to the opinion of the Canadian
Legislators as embodied in the Bank
Act, a deposition with a chartered
bank is a person capable of looking
out for himself.
l have endeavored to give a brief
outline of the history and practical
working of the Canadian system. The
question which now arises is, should
this system be adopted by the people
of the United States? My answer to
the question is, that the United States
should adopta plan based upon the
principles underlying the Canadian
system. The great feature which
characterizes this and the Scotch plan
is freedom from governmental Q
strictions. Banking in those coun-
tries is a science, and the systems nov
in operation are the result of scien-
tifc and historical development;
with them banking is not a function
of government. In adopting such a
system in this country of course it
would be necessary to modify 1t in
many Of its details. I do not believe
it could be t~ransplanted successfully
from the start. 1t would undoubtedly
require time to adapt the principles
to the business of this country,and its
success here would be, as 1t has been
there, the result of growth. 1t can
not be denied that our banking sys-
tenn Is far from an ideal one. Taking
our present currency system as a
whole, it is perhaps the most unscien-
tifc and indefensible system in 9 by
any great nation in the world to-day.
1t is a creation of a great national
emergency-the civil war-hence was
not originated by, and has not been
developed In accordance with the de-
mands of trade and commerce. In its
operation it is rigid and ~inelastic; far
from having kept pace with the
growth of trade our bank note cur
rency has dwindled as business in
creased. It cannot be said to have
served us well either in periods of
prosperity or in financial crisis.
Under our system of greenbacks,
which Ia also a product of the war,
and national bank note issue, the
natural tendency of our money is to
drift towards the great financial CEN
tiers; this congestion of u money
into the great cities has the effect of
placing our finances In the hands of
a few and putting the agricultural
districts at the mercy of these few.
The chief superiority Of the Canadian
system over ours is that it furnishes
money to all classes of people in