The Cairo bulletin. (Cairo, Ill.) 1???-1928, 1907-11-12
MONEY SYSTEM
IS N0N-{LAST|C
SAYS FORMER SECRETARY OF
TREASURY SHAW I'M SPEECH
AT NEW HAVEN.
UNPRECEDENTED NEEDS
For Money Caused BY Increased Com
mercial Activity---Would Have
Government Guarantee Ma
tionaI Bank Notes.

New Haven, Conn, Nov. 11.-For
mer Secretary of the Treasury shaw
was the guest of honor and principal
speaker at the annual Chamber Of
Commerce dinner here tonight.
In the judgment of Shaw, the only
weakness OF the American monetary
system liz that the currency is non
elastic. that it's volume does not re-
spend to the changing seasons and
varying needs cf trade.
There were indications as early
as August said Shaw, that the pee.
rle were withdrawing money and
locking it up. 1t was the incipient
system cf disease which alwavs
first shows itself in this way. In adj
,lition, the increased commercial ac.
tiyity incident to the return of bust
ness men from their summer yaca,
tions, the iipening Of crops and the
inlaying Of stocks of merchandise.
caused an unprecedented demand for
money. Still the aggregate volume
remained fixed, inhexible and non
elastic
Had the national banks been em-
powered to issue an additional circu-
lation equal to 80 per cent OF their
capital without deposits to secure its
redemption but subject to a tax Of
s per cent an aggregate increase or
S40O ,000. 0O0 would have been impcs
sible and $200,a00,000 would : very
likely have been issued. The people
would have carried to their safe de-
posit vaults or taken home for con-
cealment national bank note as
readily as gold certificates, aud they
would have been Just as safe.
"The redemption OF existing ma
tional bank notes is now guaranteed
by the government for it is secured
by a deposit of government bonds
which are direct obligations of the
government ! grant it is illogical for
the government to guarantee bank
notes, but the people have become so
accustomed to money, bearing IN one
form or another the obligation of the
government that they should be will
ing TO concede the guarantee to this
suggested additional issuance of bank
notes.
Il don't believe it is possible TO
make an elastic currency based on
collateral security. It would be inn
practicable to have the government
pass upon the solrency of commercial
PAPER deposited as basis OF circu-
latjon. and the banks would find 1t
quite as difficult to get bonds with
which 10 secure the additional cireu-
lation as to get money itself. There
Is no occasion for an increased issue
until the banks have exhausted their
cash resources and when their cash
resources are exhausted they have
nothing available with which to buy
bonds.
"Of course the banks should not be
nermitted to issue this uncovered ad-
ditional circulation without the con-
sent of the comptroller OF currency
When the request is submitted the
comutrolIer will naturally look at the
record Of the bank at time of the last
official examination. or he VIII cause
a special examination to be made and
grant or withhold his consent In the
light of the record in his office. BY
having the additional circulation
identical in form with the bonds Sc.
cured. which we now have the IN
crease would pass unnoticed ana
therefore canse no alarm. a very I'M
portant feature, as | view II.