New-York tribune., 1906-12-06
MR. SHAW AND CURRENCY Reform


Mr. SHAW AND CURRENCY REFORM.
Secretary Shaw's report, so far as ii concerns
currency reform. is OF the nature Of essay.
II embodies reflections arising from his per
sonal experiences in dealing with the intricacies
OF financial stringency during his career as
keeper OF the public purse. He does not at
tempt TO give them the stamp of finality the
last word OF omniscience a temptation which
usually besets writer's upon financial topics.
Money is so difficult n conception that what
IS said about IL Is usually said with an air Of
great cocksureness. Not so with the SeCre-
tary however. His views are presented in
singularly tentative manner. as subjects to be
thought about. 1T is to be hoped" he writes
that the discussion of several ways by which
"the much desired end may be accomplished
"will not tend to bewilder. but rather to make
clear" There are, it will be observed 'sev-
eral ways" and Mr.. Shaw is not sure that any
one OF them is the inevitable way. Wisdom
may come from the contemplation of various
possibilities and various objections.
The Secretary's attitude is doubtless charac
teristic of Congress. too. The inevitabIlity Of
the problem is conceded. but the solution is one
Of several ways and ii is too much TO say
which There is IN Congress no general agree
on the contrary, feeling Of despair at ap
preaching intricate a question. In extenua-
ton Of this attitude OF uncertainty. however it
may be said that there has been until recently
no consensus even among experts. Bankers
have only just now given their unanimous sup
port 10 plan Of reform. The hesitant attitude
is natural, for monetary problems are the most
difficult that come before Congress. 1t took
a panic and a panicky national campaign 10
turn the country from bimetallism TO mOnomet-
allism. Perhaps some similar experience must
occur before the present unsatisfactory currency
system IS improved.
The bankers have agreed upon plan for a
currency which they believe would automat-
ically adjust itself to the needs of the market
When there We're crops 10 be moved. for in
stance, credit notes would be issued by the banks
TO do the work. and when the exceptional de-
mand for money was over the notes would be
retired from circulation. A tax on the notes
making II unremunerative to the banks to keep
them in circulation except when money rates
were high would bring about their retirement
when the money market was IN q normal con-
diton. Demand would bring the notes into cir
culation; the tax would retire them when the
demand ceased. The essential feature of the
system is the leaving to the operation of the
familiar economic law of supply and demand
the determination within certain limits of how
much currency shall have in circulation
Bankers would not determine Of their own voli-
ton whether the currency supply should be in
creased or decreased. They would naturally
issue notes when there was a profit in issuing
them. They would withdraw them when the
tax ate up the interest on the loaned notes
MI Shaw inclines 10 trust rather TO human
Judgment than 10 the automatic operation Of
economic law to contract and expand the cur
ha lie 4J,o
bankers intelligently to anticipate and provide
for periods OF great financial demand If they
did this in cooperation, as he suggests increas-
Ing their reserves against the time when more
money was 10 be needed. the natural periods
OF financial strngency could be obviated; for
the more important Of them are seasonal de-
pending, for instance. on the moving of the
crops But the bankers never anticipate these
periods maintaining the imprOvident attitude
OF the grasshopper in the fable. If the bank
ers did so cooperate they would voluntarily
contract and expand the supply according 10
the needs of business. thus using human iudr-
ment and vOltiOn 10 give elasticity to the money
supply
But the bankers say that such intelligent CO.
operation is practically impossible Mr. Shaw
therefore. instead Of voluntary co-operation
suggests compulsOn. He would "cIothe the
Secretary of the Treasury with authority 10
require All banks, at certain times fixed bv
him. TO slightly and gradually increase their
reserves and hold the same within their own
vaults. with corresponding authority TO release
THE same from time to time as In his iudg-
"ment Will best serve the business interests Of
the country" The Secretary would thus give
elasticity 10 the currency. contracting It and ex
panding il as in his judgment the occasion re-
qured. The choice is between human tudg-
ment and the unimpeded operation of the eco
nomic law of supply and misunderstanding
that the bankers calculation Of the result of
their plan is correct In that case we shouId
rather trust the automatic device than the min.
istratiOns Of the wisest Secretary
Mr.. Shaw thinks that II the Secretary ~ +ba
Treasury had s100OO0OOO which he could de-
posit in the banks withdraw from them at
Will he could regulate circulation so that mo
panic, as distinguished from Industrial stagna-
ton. could threaten either the United States or
Europe that he could not avert" 1t is an am
bilious conception. but, as we have said Mr.
Shaw does not expect it TO be enacted into law
IL is merely something for Congress TO think
about