The daily morning journal and courier., 1907-06-27

ei of us that we shall so influence the employment of the funds in our trust that the greatest possible economic l en- eft may result, and at the same time, to so guard our resources that we can UT hesitatingly meet all demands upon Us. We should discourage investment of capital in unproductiye and speculative enterprises and in enterprises whose de- velopment may be long postponed. If we accept our responsibility unflinch- ingly, we shall do more than any other agency towarda averting disaster, and in keeping our countrymen on the high road of prosperity and progress.
 The development of modern forms of credit has gone hand in hand with the evolution of modern industry. Banking credit, in particular, makes possible the multifarious business transactions of today. As developed to meet the needs of industry and commerce, banking credit has taken two forms-deposit and currencq, Deposit credit, or deposit cur rency, as it is sometimes called, has reached a high state of perfection in this country-largely because it has been left comparatively unhampered to develop along natural lines, and as a result it easily expands and contracts to meet tho requirements of trade. Through the medium of cheeks, drafts and bills of exchange about ninety-iive per cent, of the business of the country | is transacted. On the other hand, the bank-note currency of the United States flor number of reasons, some histori- eal-has not responded equally well to the needs of industry, While it is true that deposit credit is usually preferred to currency-especially in the active centers of trade, and the relative i'm portance of the bank-note Is dimin- | ishing, 1t is equally true that the de- mand for bank-notes at certain times is imperative, An ideal system of bank ing permits the bank to offer it's credi- tor his choice between a credit on ac- count and a banknote. The act estab- fishing the national banking system of | tho United States was measure hav- ing as its main purpose the establish ment of market for government bonds and incidentally the creation of a safe national currency. Both objects were attained, Government two per cents arc now selling from 104 to 1O6 With- out the market made for them by the national banks, when money is worth five per cent to six per cent. such bonds would probably sell on about a three per cent. basis, making a differ- ence of something like Sl05,0000GO in the market value of the bends held by the national banks to secure currency. It should be clear, therefore that as long as we have a national debt, the prop to the market afforded by the demand of the national banks must not be re- moved, Those responsible for the pass iage of the national bank act evidently failed to comprehend the purpose of banknote currency, and did not foresee the direction that our economic devel- opment would take, so far. at least, as 1t relates to forms of credit. They seem- fly did not understand that a currency whose volume increases or contracts, as the price of bonds rises and falls, would fail to meet the needs of industry-at times hampering and at other times Iunduly stimulating enterprise They
 probably did not anticipate the fact that the banknote would eventually form but a very small proportion of our circulating medium, and that It's chief function would be to constitute the variable element made essential by the exigencies of industry, Yet this IS exactly what has happened, and the problem that we have before us is to provide an auxiliary to our present na- tional bank currency that will supply the variable and responsive element so i necessary to tho industries of to-day. That this is not yet clearly understood is indicated by the fact that the sug- gestion has recently been made at
 Washington that the amount of curren- cy be increased by permitting the banks to issue currency based one-half on government bonds and one-half on oth- CT approved bonds. Such a provision
 would only add to the volume of the currency, which Is not necessary, with out in any degree relieving the situa-
 ton. The rigidity of our present curren- cy makes 1t ill-adapted to carrying an overload. It is the peak of the load'
 that must be provided for. As Robert Baxter said;
 "A provision should be made for such a contingency as a panic, so that when hoarding interferes with the necessary
 flow of currency, new stream may, 1,,,,do. ,,ropar oa eeo,,orde lao o,,ao 4od a,, i the course of business sustained"
 The problem was studied and dis cussed by the American Banks Asso- citation for many years, without reach ing an agreement, until last year. The result of its deliberations is embodied
 in the report of the special currency commission appointed by the American l Do Ia vxttSt