The Washington times., 1902-12-01

Banking Power Of the World.
The banking power or the world in
lS9O-that is. capital surplus profits note
issues ana depOsits-as stated by the late
NJ G. Mulhall. was E3.197 600 .OOO as fol-
lows:
United Kingdom. e91O.ooo.o 900, Cont
mental Europe. EI.O37. .OOO. GOO; Australia.
Canada, Cape Colony, Argentina, and
Uruguay. G22O, ,00O. 900. and United States.
e1.O30O 100000 In 1894 Mr. Maurice L.
Muhleman calculated the banking power
Of the world at e3,9I5. .OoO.O
Lack of Elasticity.
The most serious objection which has
been urged against the national bank
currency" says the Comptroller. lis its
lack Of elasticity; that fl does not auto
matically respond to the demands of
business. but is dependent upon the price
Of bonds and other considerations. The
first requirement OF any currency is
safety and uniformity in value. Our
bank notes have been from the first is
sue practically perfect in this respect.
No noteholder has ever lost a dollar ex-
cept by loss or destruction Of the notes.
which have always circulated at their
] face value in all parts Of the United
States. being used without discrimina-
/ ticn for payments Of all kinds. the same
as the legal tender and Treasury notes
and other forms OF paper currency.
IAN bank-note circulation is asset cur
rency and depends for its value upon the
assets OF the issuing bank In most
countries the banks are allowed TO keep
| the assets. maintaining certain reserve
in coin and using the remainder for loans
or in any other way. Our national banks
are required TO use their assets. to the
| full amount OF the circulation issued. IN
the purchase OF bonds to be deposited
with the Treasurer Of the United States.
This requires an amount OF assets in
excess Of the circulation received. Il
makes a very safe circulation, but is a
very wasteful use Of the assets.
Asset Currency.
IF. in addition to the amount OF notes
they are now allowed TO issue by law on
bonds deposited in the Treasury. The
national banks were allowed to issue an
additional amount Of uncovered notes.
beginning with 20 per cent and gradual
ly increasing to so per cent. # would
make the circulation more expansible.
The safety OF the notes can be made ab-
solute BY a reserve fund raised by
very small tax. During the almost forty
years the national banking system has
been in existence the total amount Of
the notes OF the banks which have fall
ed. outstanding at the time OF their ialI-
ure. has been less than S21 600. 600. Dur
ing this same period the banks have paid
in taxes on circulation above 500. 600 OOJ.
OF four and one-half times as much as
would have been required TO pay all
these notes II the bonds had not done
so. II there had been outstanding the
full 90 per cent Of uncovered notes sug-
gested above, or 10000, 900 above those
covered by the bonds. the taxes which
have been paid would have been nine
times the amount required to pay, them.
IT, as would, OF course, have been The
case, the bonds had paid for the COW
cred notes.
The present capital Of all the la
tiOnal banks would permit the issue OF
about S14O. 900 600 Of uncovered notes
for the first issue Of 20 per cent and tho
ultimate issue OF $3.50 .OOO. 900 II the
amount was increased to 90 per cent
These maximum figures would PROBABLY
be increased by the Increase In the.
uunlhnr of nnffcraI hauLa
To Move the Crops.
In the latter half OF each year the
problem Is presented to the banks to
furnish currency needed 70 handle from
2,5oO. .OoO. 900 TO 5000 00O. 900 bushels Of
grain 5000. 900 to 10000 900 bales Of cot
ton. and a corresponding quantity OF
other farm products The total
value Of these products for the
year 1902 will not be far from s.. .O0O. .0O0.-
900. This calls for the use OF a vast sum
deposit credits by means OF checks. and
the increased number Of banks and bet
ter means Of communication enable the
people in country communities TO handle
more and more IN this way, or we should
not be able 10 transact such an amount
Of business at all.
80 much OF it. however. must be
handled with currency OF some sort as 20
make a demand for currency In large
amounts, and every year there is a great
deal OF anxiety. and often serious dis
turbaRce IN business, until The CROP ssa-
son % over and the money returns to
those who have had TO furnish It.
In Times Of Panic.
In times Of panic the power TO issue
additional notes would be an element Of
great strength 20 the banks ard MT Of
weakness. Il would enable the banks TO
protect themselves and their customers
when protection IL most needed Panics
or financial crises come generally very
suddenly and as the result OF fear which
spreads among the people that they will
not be able 10 get money 10 meet their
payments and conduct their business.
This spreads and forces Iiqr datlon %
credits which otherwise would have re-
malDed outstanding There never Is
time when the Liquidation Of all credits /
or any large proportion Of those out