Evening star. [volume] (Washington, D.C.) 1854-1972, 1906-12-05
NATIONAL FINANCES
Secretary of the Treasury's
Annual Report.
SOME RECOMMENDATIONS
Action Taken by Him to Relieve
Stringencies.
COOPERATION BY STATUTE
The Matter Discussed if This is Posi-
ble-New Buildings for Engrav-
ing Bureau.

Secretary Shaw, in his annual report to
Congress today. reviews the actions taken
by him in the last five years to relieve
the money stringencies that have occurred
and uses the dangers of an imperfect cur
rency system to appeal to Congress for
Congressional legislation in favor of more
elastic currency.
He declares that the money Of the United
States remains a fixed quantity, Whale
everything else in the business world shows
elasticity. The Secretary then makes the
following recommendations:
Various methods have been suggested
by which this well-recogniZed defect In our
monetary system may be corrected. Com
mittees composed of prominent hnanclers
have met. deliberated. devised and mace re-
ports Financial writers. doctrinaires'
practical business men and impracucal
theorists, men Of experience and those
wholly without, have DISGUST the question
with much learning and occasionally In
much ignorance. This is all very welcome'
Frequently the most impra cticable and I'M
thinkable plan will suggest something wise
or help to eliminate what is unW1se.
Divergent Views.
unfortunately, but naturally, even the
reports of committees appointed because
of their recognized experience and inteill-
gence are quite divergent. On one thing
only is there well-nigh universal agree
mental recognize the necessity of a cur
rency system that will contract when
money is redundant as promptly as II VIII
expand when money is scarce. !nnatlon
is not the remedy. currency that VIII
not as promptly contract as II Will eApaho
would be harmful.
Partial Agreement.
"Most of the reports of committees IN
dorse all the essential features OF the sug-
eestions contained in recent reports Of the
Secretary of the Treasury, where heavily
taxed additional national-bank circulation
is recommended. The most important Tea
ture of this plan Is the certainty of re-
tirement when the extraordinary demand
ceases Its retirement will be accomplished
not by collecting in the actual notes ana
redeeming them, but by allowing the pank
issuing the same to make corresponding
deposit with the Treasury or at subtreas-
ury. This accomplishes the contraction
and the bills themselves will sooner OF
later be returned and charged against THIS
denosit Interest on the issue Will OF
course cease when the deposit Is made
The direct guarantee of the Government
would not change this essential feature SO
far as the public is concerned, and the TAX
collected would cover the risk MANIFOLD.
Credit currency.
"Much can be said in favor of credit cur
rency for permanent maintenance. The ad-
dition thereof to our present currency sys-
tenn has been urged for half century
Many bills have been introduced embody-
ing the plan; Congressional committees
have from time to time made favorable re-
ports thereon; and it has quite recently re-
ceiyed the unqualified Endorsement Of a
Joint committee representing commercial!
and banking organizations and composed OF
men Of the very highest business ana IMAM
cial standing.
eff a new currency system were being de-
yised, unquestionably this plan would be
included, and it might possibly take the
place of the present bond-secured c1rcula-
ton No one now. however. recommends
1t as substitute. Those who favor 1t pro-
pose It's incorporation into. rather than Its
substitution for. our present system;
THE circulation of the country has IN
creased during the last five years more
than 5000 900, 600, or $120, 100000 per an
mum. and business interests have certainly
kept pace with this increase, and interest
rates thruout the world are now unusually
high / would not, therefore, view even
with apprehension of evil any credit cur
rency legislation SO restricted as to render
impossible the permanent maintenance OF
more than $200,O0O,OOO.
Limitation of 100000 Per Month.
1T has frequently been suggested that II
the limitation of 100000 In the amount
that may be deposited by national banks
for the retirement of circulation were re-
moved greater elasticity would ensue.
very seriously doubt the proposition and
beg to cite some experiences
mo sooner was the new issue Of Panama
bonds advertised in July, 1906, than banks
turnout the country commenced to retire
their circulation that they might sell their
bonds process which but for the provi-
sion limiting the amount of retirement to
g 600, 600 per month, would have probably
nounded the price Of per cent bonds ap-
proxmately to par. Several times when
deposits have been made, resulting In an
advance in the price Of consols, national
bank circulation has been retired and the
bonds sold at an advance.
Central Bank.
Several other plans have been proposed
for supplying the element Of elasticity In
our currency system. Many practical and
well-informed fnanciers have recommended
central Government bank patterned, In
some measure at least, after those of the
principal financial countries of Europe. The
abolition of the Independent treasury would
be of course involved in such plan Gov
eminent money would be then regularly de-
posted in this central bank from which
disbursements would be made, and the Gov
ernments supervision of and interference
with the monetary operations and the fnan-
cial condition of the country would be eff
fectually eliminated.
.At first blush this seems desirable. but in
practice l fear it would soon be found to
work less satisfactorily than the present
system.
Possibly central bank could be kept
forever free from operations having for
their end larger dividends, but there is little
justification for such a hope
Cooperation.
'If some method could be devised by which
the national banks Of the country could
be made to cooperate, the major portion of
legitimate criticism to which our present
system is now subjected would soon vanish.
That the banks do not now cooperate in
the slightest degree is self-evident. New
York city, for instance, has the only call
money market in the world, but so impossi-
BILE Is it to secure cooperation between the
financial institutions of that great city that
the current rate on call money, as I have
already shown, on the morning Of GER
tain day was IL per cent, with some loans
as high IA per cent, while In the after
noon 1t dropt to 81 per cent. During a
Df xhn mill