Fergus County Democrat., 1907-11-12
CAUSE Of THE
MONEY STRINGENCY
FINANCIAL SITUATION DIS.
CUSSED BY NEW YORK
PRESS,

"A very small percentage OF the
people of this country really under
stand the meaning of tight money
which is given as the cause of the
present financial furry which is
bringing about serious condition Of
affairs all over the United States
The following editorial, taken from
the New York Press of recent date
gives an explanation of the situation
which is both simple and compre-
hensive:
1t will be very interesting to see
what view Congress takes of the re-
cent panic in its relation to our an
tiquated, cumbersome and inadequate
currency system. First of all the
public became suspicious of some OF
its financial institutions, because OF
the light shed, in one way and an
other, on the practices of high imam
ciers using resources of the people
at large recklessly in the scramble
for big returns or unscrupulously TOR
their own purposes, as against the
good of the real owners of the prop
erty-stockholders, depositors, etc.
But where the panic arose was
through the rush Of borrowers for
their usual loans only to find that
of depositors for their own money
only to find that, in some instances,
there was not enough currency at
hand to pay them, though i'll scarcely
any case was there question Of the
solvency of the institution thus pres
sed for payment The very seri-
Gus trouble that arose in the banking
field was due to the fact that when
the currency was imperatively need
ed, there was no way to get it.
Those who condemn our present
money system and champion a credit
or asset currency have all the bet
ter Of the argument, SO far as funda-
mental principles go. They say that
it is worse than absurd, that it is
financial and economic monstrosity,
for a people to be fabulously pros
porous and stupendously rich, yet to
be tied up where they cannot ship
barter and otherwise handle their
wealth, merely because they lack a
medium of exchange. AS a homely
example, it would be business insanity
to say that a farmer who had raised
a bountiful crop Of potatoes should
be prevented from marketing them
merely because there was no bushel
basket available with which to
measure them; or if a manufacturer
had produced millions of yards OF
cotton goods that he should be shut
down and his employees thrown out
OF work merely because he could not
get hold of yardstick to measure
his goods.
Another simple illustration will
show how easily the bushel basket
or the vardstick of value may become
disarranged, misplaced or destroyed,
so far as its normal function goes.
Suppose bank has a currency cir
of 100000. Suppose, in the
Of that bank, there is
a factory with payroll of $4,000 a |
week. Here is about the way that
stream would flow. At the |
end of week the factory, having
produced something more than $2O,-
900 OF wealth, would draw from the |
bank $4,000 of currency to pay the
wages Of its employees The wage
earners would pay their butchers,
bakers, grocers, etc. These trades
folk would deposit those receipts in
the bank. The twenty thousand dol
ars drawn out OH Saturday for the
would, for the most |
part, find their way back into the |
bank before the next Saturday, to be |
drawn out again for the next payroll. |
And SO on. Thus, though some
thing more than $4,000 of wealth |
was created by that factory every
week, running up through the years
to millions and millions Of added
wealth to the store of the country,
the same $4,000, under normal cir
cumstances, would do all the meas
urlng of labor's weekly share.
But suppose people became fright
ened about having their money pur-
sue. its usual course. Suppose at the
end of week the $4,000 is tucked |
in the stocking, by those who are
afraid to have it in the bank. Sup
pose at the end of the second week
the same thing happens. And at the |
third and fourth. Well, when the
NTH comes around all the currency
is gone. There has been the same
production of value; the same in
crease of wealth has gone on; the
same wages have been earned; the
same share of the wealth is due it-l
and it is there to go to it; but there
is no medium to strike the balance
no bushel basket or yardstick. This
IS the money famine. And if there
is no way to restore the medium to
ITS usual functions or to find another
the bank must suspend, the factory
close and the wage-earners become
idle. Yet all the while there would
before. e'
Now, the advocates of a credit or
asset currency maintain with the
soundest reason that such a result az
we have outlined should be imnos.
slble,. given that production of value.
creation of wealth and increase of
riches. They say that since the
thing. which determines whether we
are rich or pbor is the actual value
produced, the actual wealth of ma
terial property belonging to the pro-
duCerS, not the 1nedi,,,, of ,,,a,..,.