Omaha daily bee., 1906-05-20
ELASTIC CURRENCY. ="

IAOAs duSblB VI IldINhIu uhlNtlHlAgt
in his recent address before a meeting
of New York bankers, has done valua-
BILE service in combating the emphasis
| which in some quarters is put on the
necessity Of a more elastic currency as
safeguard against serious panic or
recurrent money market stringency.
There may be substantial reasons for
a conservatively guarded currency of
greater hexibility than our system af-
| fords, but this is by no means what is
aimed at by those elements loudest in
| demanding "a more elastic currency"
| AS a matter of fact those interests
are mainly speculative and what they
want is a method Of suddenly expand
ing the currency when excessive specu-
| lation causes the demand rate of inter
est to go high. But, however high it
may mount, the fact almost invariably
remains that the rate OF time loans,
which is the rate that concerns COM
merce and business, is not much if at
all affected. The rise of the demand
rate, though it may be severe on the
reckless spectators, is in reality a
wholesome restraint on speculation,
which otherwise would go to lengths
disastrous to universal business and
industrial interests.
So far as those interests which en-
brace the public welfare are con-
cerned, no one has brought out more
forcefully than Prof. Taussig the point
that what is needed is not so much
currency reform as banking reform.
The last decade has witnessed vast
alteration, particularly in the east,
whereby strictly commercial banking
institutions, acting independently and
semi-judicially on business PROPOSE
| lions, have been steadily supplanted
| by the idea of direct or indirect iden-
tification with promotion and specula-
/ ton. Various kinds of banking, too,
which we're formerly conducted indie
pendently of each other, are now con-
centrated in one hand, or one set of
hands. Commercial banks, state and
national are closely associated with
investment houses, with large private
banking firms that undertake to
finance and promote great ventures in
new business fields with trust COM
panies and with individuals whose pri-
mary interest is not in banking. While
such a combination means economy in
management expenses and makes it
| possible to earn two or three profits
instead of one. it also makes certain a
greater locking up of capital.
With greater risks and commit
ments, the tendency is to smaller ac-
tual reserve, however it may be con-
cealed, less ability to meet sudden de-
mands and greater danger of embar-
rassment if the unexpected happens.
Clearly the schemes which have been
proposed for sudden currency infia-
ton upon sudden emergency could not
obviate this fundamental defect of
banking, but would rather increase the
danger by encouraging the prevailing
tendency of banking. A wide field ex-
lists for restrictive legislation concern
ing state banks and trust companies as
to cash reserves. reports and exami-
nations, but after all the main reliance
is prudent and conservative manage
ment. 1t is noteworthy that almost
universally western bankers, who have
not been carried away from the ideal
of independent banking as eastern
bankers have been, are more and more
enforcing the vital necessity of conserv-
atism and turning a deaf ear to the
plea for such makeshifts as most
forms of elastic currency"