The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1907-11-01
FRIDAY. NOVEMBER i. 1907.
What matters 1t how happy OF
unhappy we have been, II we have
minded our business and advanced
our affairs. -Thorcan'
OUR crnRENcY SYSTEM.

OUR CURRENCY SYSTEM.
The Secretary Of the Treasury is urg-
ing the national banks to take out moro
circulation in order to meet the de-
mands for currency. But why should
the banks need to be urged to do this?
For the reason that 1t does not pay
them to issue notes under the present
plan, and even when the notes are
Issued, they do not adequately meet
the demand for emergency currency.
This entire subject is admirably
threshed out by George Ruhlee, OF New
York, in the current issue of Golfers
Weekly. Mr.. Ruhlee first points out
that money stringency does not mean
a scarcity OF money for circulation.
When money is said to be tight, 1t is
not really money, but credit, that Is
tight. A stringency In the money
market really means that the power OF
the banks to make loans is exhausted.
AS the loaning capacity of the banks
depends upon the amount Of their re-
serves. says Mr.. Ruhlee, the true cur
fe0CS question: Is uOW " sSH0eA~ 49,
banks to keep their reserves at such
an amount that they can supply the
proper demands OF business men for
loans. A bank. in making loan, does
not deliver cash to the borrower, but
gives him credit as deposition. and
authorizesE him to draw checks on the
bank to the amount OF the loan; and
since business men usually make pay
rnents by check, the creation OF bank
loans does not involve the use Of mor>
than a small portion OF their amount in
currency. OF course. bank must al
ways keep on hand sufficient amount
of cash, called the reserve, to meet
the greatest demand for currency that
all depositors combined are likely to
make at one time, and experience shows
one-fourth of the amount of deposits.
But national bank notes cannot law
fully be counted as part OF the reserve.
for they are merely promises TO pay.
From these premises, Mr.. Ruhlee
argues that national bank notes do not
supply the need for elastic currency.
Their issue is not determined by the
requirements of business generally,
and when t<key gre once issued 1t is
practically Impossible to retire them
Bank notes should furnish an increase
in the amount of credit available. This
results from the supply OF bank notes
for circulation in place OF lawful
money. and the keeping of the lawful
money in bank reserves where 1t can
be used as basis of credit. A good
the issuance OF bank notes when there
is a demand for them. and for their
retirement as fast as the demand
abates. Every man familiar with the
facts knows that national bank notes
do not fulfill such conditions ude-
quately. AS a consequence. we have q
steady flow OF bank notes when bust.
ness is active, but In the slack season
the notes are not withdrawn from cir.
culation. and lawful money piles up ir
the banks, Is loaned on call at low
rate of interest. and speculation /.
encouraged. When. on the other hand
the people again need more currency
1.-THE banks are unable to pay out note!
,y--s-instead Of lawful money. because thei
own notes are already out In circula
ton. Nor can they issue an adequate
supply of new notes, because SO man,
are already outstanding they can onl.
b issue new notes gradually. SO they ar
obliged to pay out lawful money; TIL
reserves dwindle; credit becomes tigh,
and interest rates soar.
The real demand of the situation /
for credit notes, amply secured an
heavily taxed. so that they will natur
silly flow into the channels of trad
when there Is an extraordinary demand
and as naturally flow back to the ban
-.-sfor retirement US the demand s!acken
..-If we had such system currenc
Il. famines. 60 called. would be unknow,
81. AS 1t is, in times OF great energenc
b banks. are compelled TO issue clcarln
80 house certificates, which are nothln
Z !. after ALL but credit notes; but the
issuance is SO extraordinary that
IN always excites more or less apprehe,
sion.
se.y This question has been asitated sin
j ss1Saa. when the Democratic conventls
nis declared in favor OF a repeal of Il
prohibitory tax on State bank Issue
but as yet no measure has been adopt
.,-. To give the country an elastic" Gu
rency. But recent events will force
s..o upon. the attention OF Congress, and
s's the farmers are alive to their own |
tercsts, they will takeSa leading pa
10 the movement Ter reform.