The progressive farmer. [volume] (Winston, N.C.) 1886-1904, 1899-08-15
CORRESPONDENCE.
POSTAL SAVINGS B 4NKs.

Correspondence of The Progressive Farmer.
The present Secretary of the United
States Treasury, Hon. L J Gage, Is
an able financier. From the stand
point Of his class, bankers, capitalists,
wealth accumulators as c~ontrasted
with wealth creators, he is beyond
question an able man. What he has
to say on financial matters deserves
calm and careful consideration. There
fore I ask a thoughtful reading Of the
following discussion of the causes of
unstable values, loss of confidence, "
panics. 1t is quoted from the Report
of Secretary Gage on the State Of the
Finances" 1898 Says Mr.. Gage:
''It is a familiar fact that, in the
period of harvesting and crop moving,
the currency is strongly drawn form
the centers to the country districts.
When this movement is over, the cur
n again tends toward the centers.
The currency flows to the center to pay
loans o~ccasioned by it's use and other
general Indebtedness, and also to Sc
cure the benefit of interest," to the coun
try banker for a portion Of his funds
which in a dull perid would other wise
lie unemployed in his hands. At pres
ent, the currency so sent consists al
most entirely of legal tender notes and
Treasury notes-that is to say, IN the
money which the law recognizes as
lawful reserve. Thus received by the
banks in the money Centers, it becomes
q reserve for deposits in the relation Of
one to four. Now, deposits may be in
creased by loans as we'll as by the de-
post Of cash. a loan for ten thousand
or a hundred thousand goes to the
borrowers credit upon the banks
books, and swells the deposit account
by 80 much. True, the borrower may
may check against this fund, but his
check may also be deposited in the same
bank, in which case it is a mere trans
fer to another account or, if it be de
posted in another bank and paid in
money by the lending bark, it is still
q transfer. The total deposits of all
the banks are swelled by this original
loan.
SIN confirmation that this expansive
movement is fairly described, l quote
from the New York Herald Of Novem
Der 13 as follows: Comparing yester
days clearing house, statement with
that of five weeks ago, it appears that
the banks hold Is millions mere money,
and have expanded their loans by the
surprising amount of 81 millions, the
increase in deposits resulting from
these two items being 10 lees than Sc
millions 1t al be easily perceived
that this possibility of increasing loans
against an inflow Of reserve funds in
the proportion of four to one ia a
temptation to which the city bank is
likely to yield. IL must be remembered
that this inward movement Of currency
from the country occurs at the time Of
year when commercial activities are
the least and the general requirements
for the use Of loans In the interior are
VIC ELla4ACEbs 4AC GAGAg "a NAC ba1hG
at the centers to incre Sc their loans
causes interest to fall. The fall in the
rate of interest causes interest and
dividend paying securities to rise. The
rise in securities induces speculative
buying. The speculative buyer be-
comes the banks borrowing customer.
The banker is thus enabled to put out
his funds as he is apt to term it,
though he really does no such thing
He keeps his funds, but, in the way
described, he swells his deposit liability
until his funds on hand are made an
swerable to the rule of one Of cash to
four Of liabilities, or % per cent against
his deposits"
1T is in the condition shove de
scribed, with varying degrees of regu
larity and intensity, that the financial
ia found when the crops in the
West and South approach harvest
that is to say, a maximum of loans
and deposits; a minimum in cash re.
serves. During the season until then,
the country banker has found that his
drafts and checks on his Eastern cor |
respondents, distributed to his custom.
ers, supplied their needs for instru
ments Of exchange and pay ment but
he finds that for the payment Of fam
wages, the purchase and transfer of
farm products, such instruments are
not adequate; cash is required for these
purposes, either in metallic money or
paper currency. This forces him to
make reqisition in the form Of money
by express on mis- Eastern balances.
Nay, more; If crops be large and prices