Evening star. [volume] (Washington, D.C.) 1854-1972, 1906-12-20

rency bill agreed upon by the committee.
The report reiterates the committees asser-
tons that handbook credits are identical
with banknote credits. and that it should be
at the option Of the depositor of a bank to
say whether he shall have current credit of
the bank or a book subject to his check
The report continues:
Deposits or Credit Notes.
Your committee asserts that 1t is imma-
terial whether the obligations of a bank are
In the form of, deposits subject to check or
OF credit banknotes, providing that the re-
serves are ample and the same amount is
required for the protection of each. With
the same freedom on the part of the bank
to issue its credit notes that 1t has to ac
cept deposits subject to check the habits of
people will determine whether the de-
posits of a bank or its credit notes are the
larger"
The advantages of a credit currency are
set forth by the report. as follows:
1T will lower and equalize the rates of in
terest throughout the United States.
1T will make the rates practically uni
form throughout the year.
1T will give to the country districts as
economical form of credit as the cities
enjoy where checks are chiefly used.
1t will give to the mass of the people.
WHO use currency IN their smaller pur-
chases. as economical a form of credit as
those enjoy who use checks in their large
transactions.
1T will make 1t possible for the banks
generally to serve such Of their customers
as may want currency without disturbing
their reserves to the great injury of other
customers who have loans which must be
paid before the currency can be advanced:
for it is immaterial to bank whether it
owes a depositor or a note holder.
Would Prevent Panics.
ut will almost invariably prevent any
panic whatever and will always avert
ruinous crisis.
IF at any time contraction of credits
becomes necessary because too much of the
commercial fund has been diverted and
transformed into the investment fund.
credit currency will facilitate liquidation
without that destruction Of values Incl
dent to fixed quantity OF currency such
as We now have"
Effect of the Bill.
The report says that the effect Of the
bill is:
First. Any national bank may issue an
amount Of credit currency equal to 40 per
cent of its outstanding bond-secured cur
rency, whatever that may be, but this
amount Of credit currency cannot exceed %
per cent of Its capital. The bank must
pay an annual tax of per cent upon the
amount Of this issue Of credit currency in
circulation.
Second. The bank may take out an ad-
ditional amount Of credit currency equal
to 1212 per cent Of it's capital, but must
pay upon the amount of this issue Of credit
currency in circulation a tax of per cent.
Third. The total circulation Of bank,
including its credit currency, shall in no
event exceed the amount of its capital.
I Fourth. The bank must carry the same
reserve against its credit currency that it
now carries against its deposit-25 per cent
in reserve cities and Is per cent in other
cities. The committee recognizes no differ
ence between this credit currency and de-
posits subject to check
Fifth. The profit on this credit cur
rency will be precisely the same as on
corresponding amount of deposits upon
which the bank is paying per cent or 5
per cent, as the case may be-
The Practice in France.
The committee calls attention to the fact
that May 81. 1906. the people Of France
held the credit notes Of the national banks
of that country to the extent of $954, OOO, OOO
and there was on deposit in the Bank of
France to the credit of the people subject
to check only one-eighth of this amount,
or $124, 900 900, showing that the people of
France prefer and use current credit in
stead of book credit subject to check. This
according to the report is also true with
the people of Germany. In Canada, how
ever, the habit of using checks largely pre-
walls over those Of current credit.
Conditions in Canada.
Conditions in Canada. according to the re-
port. resemble those in the United States,
for in that country once every year there
is a very great demand for currency which
is supplied with quick facility by the banks.
Fixity Of Circulation.
your committee submits" says the re-
port, that every thoughtful man must in
quire why there is not the slightest varia-
ton in the quantity Of our currency. Espe-
ciany is this fact accumulated when we
know that II we had a true credit currency
system such as exists In Canada our in
crease and decrease would approximate
$3.50 ,OO0, OO0"
The committee goes at some length into
the reasons for this f1xity of circulation,
and says:
Our national bank currency represents
actual capital; every one hundred thousand
of it representing one hundred and four
thousand of cash paid out. The loanable
fund in the country is being actually re-
duced because of this system by more than
$20,O0o.Oo0 in these premiums. and when
compared with a true credit currency there
is a sacrifice of more than four hundred
million of capital.
"Our national bank currency represents
an investment In United States bonds and
ton and in on way to the needs of busi-
ness. Bonds, not business. brought it into
feing.
'-The law prohibits the retirement of
more than $4,000, 900 Of national bank notes
in any one month. 1t would take. therefore
fourteen years to retire the present out
standing circulation.
There are no adequate facilities for the
current redemption Of our national bank
currency, hence, broadly speaking, 1t Is
redeemed only when the paper is worn out.
mo other country now has or ever had
such a currency except Japan where our
system was initiated, but almost Immediate
ly repudiated and a credit currency adopt
ed in its stead"
System Claimed to be Safe.
Reviewing various tables of statistics as
to the life of the various forms of notes
and arguments for and against credit cur
rency the report says:
lowing to our constantly increasing pop
ulation and constantly expanding business
provision must be made for a large annual
increase.
s'This increase cannot be silver tn any
form for we shall not purchase another
ounce Of bullion and 1t would be necessarily
expensive even If we could rely upon an
adequate supply Of gold.