The independent. [volume] (Lincoln, Neb.) 1902-1907, 1904-12-08

that the money reported by the de-
partment performs, except that in ulti-
mate settlements they will not pay
debts if creditors elect to refuse them
and to demand STANDARD of payment
money.
The increase of bank loans and dis
counts-to which | have before called
attention in discussing the money sup
ply as it is reported by the secretary
of the treasury, and the possible in
crease of demands against it-are only
part of the enormous increase of the
volume of credits that are performing
the money function in commercial
transactions. 1t is this tremendous in
flation of credits-this large incrase Of
money substitutes-that accounts for
whatever increase OF prices and in
crease in the activity of business we
have had since 1896. 1t is in perfect
accord with the quantitative theory,
not as applied to the small increase of
gold to which Mr.. Bryan and Mr..
Towne have referred, but to that great
increase Of the volume of everything
that performs money function in our
economic affairs.
1t has been generally recognized that
evil results follow either the undue
contraction or the undue imitation Of
the money volume, but it is not so
generally understood that under our f.
nancial and commercial conditions
and for which unwise financial legis-
lation and department constructions
are in large degree responsible-we
may have, and do now have, going on
at one and the same time contraction
and an imitation; both dangerous, and
both pregnant with the possibilities of
disaster.
1t is difficult to compress the dis
cussion of such subject into the linn
it's of newspaper articles and make
even the most intelligent readers, who
have had neither time nor opportunity
to study it, understand it; but it ought
to be easily understood that the larger
part of the danger of monetary con-
traction grows out of existing debts,
and out of the increase in the volume
of debts in proportion to the amount of
legal debt-paying money. 1t ought not
to require much economic knowledge,
when the great volume of bank COM
mercial and corporate credits is known,
to understand that if every dollar of
the general stock of all kinds of money
reported in the circulation statement of
November / was legal tender, and ev-
cry dollar available, it is small-dan-
geronsly small and rapidly growing
relatively smaller-in comparison with
the rapidly increasing volume of debts
of credit substitutes for money
that may at any time, at the will of the
holders, turn themselves into demands
against the volume of money reported
Without saying word to detract
from any claim that can reasonably be
made of importance or usefulness of
bank credits, the fact remains that any
financial system that permits and en-
courages such an imitation of bank
credits as has been going on since 1896
is dangerous.
The last abstract of the condition of
national banks issued by the comp
troller of the currency, and covering a
period of eighty-nine days, from June
9 to September 6. shows an imitation
Of loans and discounts, for these banks
alone. of $1,700,00O for every business
day during the time. Assuming that
the law has been complied with, this
means that during the short time not
less than $20,000,000 was added to the
reserves of the banks, while credit
substitutes for money were inflated
over $131 100000.
Alfred Rambaud, in his History of
France, says that John Law was the
first to see the full extent of bank
utility and to realize the Importance of
credits. Law wished to create a bank
in France that was to be the universal
regulator of credits. The interests of
the bank were to be associated with
those of the state. 1t was to be the
depository of all money belonging to
individuals, and the cashier of the
kingdom 1t was to be the great finan-
cial monopoly of France. The regent
of Louis XIV authorized such bank.
All wealth was expected to flow into it.,
and all enterprise to proceed from it..
Laws scheme was based upon the
claim that, by getting all money into