The Scranton tribune. [volume] (Scranton, Pa.) 1891-1910, 1901-12-05

the public enjoyed total ot credits upon The
BOOKS OF the banks to an amount ~ excess of
| 1901 ,OO0oU These credits Oh ,hc b,ng'S
| books are called "lrposi,s." IL is conven!}n,
| name. but IL Is missioner IL by lis use 1t IL
intended to represent deposits OF actual money
| The truth Is, that although money forms an rle'
| incnt in the daily deposits Of the barl;s, III the
daily average receipts whole not over Nv
| per cent. Is IN cash The other ~ per cent. con
sists oi cheeks or 20 speak n,oic simply, orders
for the transfer OF existing bank credits from one
person to another. II Is these ordcis ioI the
transfer OF bank credits that transact the bust
ness ut the country. and out vt all compact son
with coin OF paper money as 10 extent and vol
| umc they constitute the currency" Of whic!
trade and commerce in all large giiaiis make uSe
| II is important that th, br couprehended Bank
| notes, "grtcnbaeks," gold and silver coin. per.
form IN the field OF circulation very inpor.
tant part b,it their use is substantially limited
to retail transactions, the payment OF wages
| and the sioai,r affairs OF lite. For all large
| matters, bank checks credit Transfers. are the
effective currency. the real medium oi exchange
end means ot payment.
| Now, loan OF credit Wy the bank !. essentially
a manufacture on creation Of the medium Of cA.
| change Banks do not primarily lend money:
| they give credit. Credit given may indeed
| be availed Of hy the borrower to SECURE MONEY,
either in the form Of coin or bank notes. but in
much the larger degree the credit obtained is
made thc s'ihcct of transfer IRON buNer 10 ae!'
90. 10 Oc frtlans'erl@d again ana jgdih IN lht
course OF trade. So ~ have these phenomena.
| III the opri.ttionS OF trade tie dta.ei desires
| larger ii temporary, power 10 obtain goods
| or commoditicS bank credit which lie IAN
| trnsicr TO another bv drawing h- check Is Us
| effective actual money aud is les trouble.
some. lie lcgotiatcs his notes with his bal'Ser
and obtains the desired credit, which, rs h"!ose
described, become. the subject oi multiplied
| transfers. In due co.n-e OF time lac dispo>"s oi
the goods OF c0mn3diticS he iIa' pur' ahd
with the avails he takes mp his hotc at tile bank
The situation is HAS restored to il. oImcl sta
tns The crcdi, Obtained 10y the trader Is can
otlcd. The Total volume OF BAN. ricdits suffice.
t" transfer in the avenues ~ trade has t'oea
contracted t" the amount involved in the trans.
action described. Ii is no strain OF language,
| no does i. to any violence IL truth. 10 say tIht
| through the lo,nirg operation al the banks tie
medium oi exchange is expanded by millions
every day. and is contracted hr millions t,a,y
day. the general average in both directions 'elns
about Con>tani-about constant. because the buy
| ING and the sc!n. in the community must he
| substantially equal.
There are, loweycr at least three causes which
operate TO incrcast the demand up'!! hanits tor
| thc>, credit facilities, and thus 10 augment The
total ot loans, OF bank credits These causes
may he thus cnuneiatcG: \ rise i'll prices Of
| commodities aud sccurticS: increase in the
| volume OF these things: al enlarged activity III
| the sale AMI riilsie: of goods and securities. On
| the other hand there is an influence winch I'm
| its the ability or The banks to continue inheh'
nitclv expansion III their loans. That influence is
the cash reserves held or controlled by them.
responsible duty assumed by the banker Is to
be read" at all time> to rc'iccn in cash any
credit due from him 70 the public. Failure to
do that means Insolvency l'encc MS Cas-" lt'
source, must bear Ircper relation To his la
hiliics i'll this regard, ana the national banking
act fixes minimum percentages, which ii is the
banks legal duty 10 maintain.
Now, it i an observable fact tfai, given bust
ness activity and prosperous course TO Indus
try, there eoe4 on pali pas>u i steady expansion
in the means ot exchange furnished by bank
credits. Bank loans are increased and the 70.
called ''le!orits,' which credits at hlGmen.
tugy rest, SHOW larger totals. At last the ui'
miuishing ratio OF cash reserves puts il strain ON
the cXpemlin@ movement and impcdcs further
development in That direction. When thi- sitn-
ton l., reached, have the familiar symptoms
ot prosperity. Trade il active manulacturcr!
busy, and labor well employed. Within the lin
its ot tho general equilibrium reached. there
ought TO be indefinite continuance in The happy
conditions. But il is a familiar tact in the
ra>t, and it Will be a iccunrnt tact in tic III.
t,rr, that m,vttiing influences come in At ,lrex.
rcctei periods To disturb finances and mant:e
credit operations: Srne large fnani.l natiti-
,ion has been managed with reckless disregard
10 its best Interests; a lngc commercial house
becomes inSolygm, political party c,pol:s,a
doctrines injurious to public and private credit
war i, threatened; 'Lllycsts tail; = high ranaG
of price, send, gold atyo,d Cor better balg in..