The Bemidji daily pioneer. [volume] (Bemidji, Minn.) 1904-1971, 1906-12-04
CURRENCY REFORM.
Serious Defects In Present System
Pointed Out.

Serious Defects In Present System
Pointed Out.
especially call your attention to the
second subject-the condition Of our
currency laws. The national bank act
has ably served great purpose in
aiding the enormous business develop
ment Of the country, and within ten
years there has been an increase in
circulation per capita from $2141 to
S33.OS. For several years evidence has
been accommodating that additional leg
islation is needed. The recurrence Of
each crop season emphasizes the de-
fects Of the present laws. There must
soon he revision Of them. because to
leave them as they are means to incur
liability Of business disaster. Since
your body adjourned there has been a
fluctuation in the interest on call mon
ey from 2 per cent to 30 per cent, and
the t1uctuation was even greater dur
Ing the preceding six months. The Sec
rotary Of the treasury had to step in
and by wise action put stop to the
most violent period Of oscillation
Even worse than such fluctuation is
the advance in commercial rates and
the uncertainty felt in the suf1iciency
Of credit even at high rates. All COM
mercial interests suffer during each
crop period. Excessive rates for call
money in New York attract money
from the interior banks into the specu-
lative field. This depletes the fund
that would otherwise be available for
commercial uses. and commercial bor-
rowers are forced to pay abnormal
rates. so that each fall tax, in the
shape Of increased interest charges, is
placed on the whole commerce of the
country
The mere statement of these facts
shows that our present system is seri-
ously defective. There is need of a
change. Unfortunately, however, many
Of the proposed changes must be ruled
from consideration because they are
complicated. are not easy OF compre-
hension and tend to disturb existing
rights and interests. We must also
rule out any plan which would ma
terially impair the value Of the United
States per rent bonds now pledged to
secure circulation. the issue Of which
was made under conditions peculiarly
creditablc to the treasury do not
press @uE especial plan. Various plans
have recently been proposed by expert
committees Of bankers. Among the
plans which are possibly feasible and
which certainly should receive your
consideration is that repeatedly
brought to your attention by the pres
ent secretary Of the treasury. the es-
sentia! features of which have bec,,
approved by many prominent bankers
and BUSINESS men. According to this
plan. national banks should be permit
ted to issue a specified proportion of
their capital in notes of given kind,
the issue to be taxed at so high a rate
as to drive the notes back when not
wanted in legitimate trade. This plan
would not permit the issue of currency
to give banks additional profits, but to
meet the emergency presented by times
of stringency
"spasms Of High Money"
I do not say that this is the right
system. I only advance it to empha-
size my belief that there Is need for
the adoption Of some system which
shall be automatic and open to all
sound banks, so as to avoid all posi-
b1lity Of discrimination and favoritism.
Such plan would tend to prevent the
spasms Of high money and speculation
which now obtain in the New York
market, for at present there is too
much currency at certain seasons of
the year. and it's accumulation at New
York tempts bankers to lend it at low
rates for speculative purposes. whereas
at other times when the crops are be-
Ing moved there Is urgent need for
large but temporary increase in the
currency supply. 1t must never be for
gotten that this question concerns bust.
ness men generally quite as much as
bankers. Especially Is this true of
stockmen. farmers and business men
In the west, for at present at certain
seasons Of the year the difference In
interest rates between the east and the
west is from 6 to 10 per cent, whereas
In Canada the corresponding difference
Is but 2 per cent Any plan must, of
course, guard the interests of western
and southern bankers as carefully as
1t guards the interests of New York or
Chicago bankers and must be drawn
from the standpoints Of the farmer and
the merchant no less than from the
standpoints Of the city banker and the
country banker.
The law should be amended so as
specifically to provide that the funds
derived from customs duties may be
treated by the secretary Of the treas
ury as he treats funds obtained under
the internal revenue laws. There
should be considerable increase in
bills Of small denominations. PERMITS
sion should be given banks, if neces-
sary under settled restrictions, to re-
tire their circulation to larger
amount than three millions month.