Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1902-12-04
SHAW FAvoRs ASSET CURRENCY.

i as she was, Roosevelt is better"
SHAW FAv0RS ASSET CURRENCY.
4 The notable feature of Secretary
Shaw's annual report to congress is his
clear and concise endorsement of an
elastic bank note currency. based upon
| bank assets alone. Bankers have divid-
j ed in opinion as to the advisability of
an asset currency, but treasury officials
in almost unbroken succession since
1886 have made recommendations to
congress for the establishment of such
q currency. Secretary Shaw, who is
one of the ablest students of finance
that has ever occupied the secretary's
position, has seen the same needs ex-
listing as appeared to his predecessors,
and comes forward with recommen-
dation expressed in his characteristical-
lily clear and understandable style.
/ The trouble is that the country needs
vastly more money in it's business at
one time of the year than a. another.
In the brisk season banks take out ma
tional bank note currency almost up to
the limit, which, under our present
laws, can be retired only very slowly,
and when the dull season comes the
money piles up in bank vaults every
where. Borrowers in the slack season
are not numerous enough to keep out
an average portion of deposits, and
| bankers grow restless for the interest
| could get their money out. Interest
rates very naturally drop. Small banks
send their surplus to central reserve
agents in the larger cities,where small
interest is paid on deposits, and these
reserve agents in turn either pile up
larger reserves in New York banks for
the use of Wall street operators, or they
lend directly to Wall street themselves.
Wall streets appetite for money is in
satiable. 1t could never be satisfied if
the money volume were multiplied ten
fold, and whenever interest rates are
| low, that is, when money is cheap, spec
| ulation runs rampant.
Such are the unnatural conditions
produced in the dull seasons by an in
! elastic currency. Then comes the fall
season, when merchandise must be
| moved and the harvests realized upon.
| Money is called on demand and every
| body is pinched. Men and business con-
Germs are today being pushed to the
wall because they can not get necessary
loans for their. legitimate enterprises.
Interest rates have jumped up and
money is tight everywhere. Why?
| Because the temptations when money
| was lying idle In the banks led men to
push it out where it was not available
! for business demands when the active
season came on.
| The asset currency plan proposes to
remedy all this. National banks are to
be allowed OF issue their bank notes in
| limited amounts without putting up
government bonds, or any other form of
security. The government is to guar
antee the currency which will make it
perfectly good and the government will
Hook to the banks to keep it good. The
/ government will insure itself against
loss in this guarantee by taxing all such
currency for the maintenance of
guarantee fund, as to which Secretary
| Shaw says: 1.-THE government actuary
has demonstrated that a tax of one
eighth of one per cent upon circulation
would have covered all loss from the
beginning of our national banking sys-
| tenn to the present time. had each bank
maintained its limit of circulation at
reserve cities, and the government
would never have suffered injury or
! embarrassment as an insurer against
ultimate loss Not only is this circu
/ lation to be taxed to compensate the
government for insuring the payment
/ of all such notes, but it is to be further
/ taxed to insure its prompt cancellation
and retirement whenever the bank has
/ any other form of money on hand for
4
promptly retired from circulation when
/ the excessive and emergency demand
ceases.
The great value of such bank cur
rency would be that it is always avail
able when needed and will be forced out
| of business by the tax when the de-
mand let's up, where it will not be a
temptation to over speculation. Such
a circulation would save the legitimate
| enterprise from embarrassment in
times of stringency, and would not en-
courage the questionable investments
/ in times of easy money. 1t would rise
/ in volume as the business to be tran
| sacted rises In volume, and would fall
/ with the same tide. AS to its soundness,
Secretary Shaw says in his report
When thus guaranteed and primar-
lily redeemed by the government at the
expense of the bank of issue, currency
based on general assets, would be as
accountable and as secure as the present
/ national bank notes on specific assets"
| He recommends legislation for such an
elastic currency, tltho he advises eau
ton and would not allow 1t to be issued
to the full extent of a banks capital
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