The evening world., 1908-01-15
AIdrich Bill Will Provoke Crises.

Was the recent banking crisis really
due to lack of money? ON the con-
trary, ii was due to boarding. boarding
In each n OF the banks in order to
face the possible demands OF another,
boarding because OF the gertrude that
in case they should lack cash no power
on earth would be able TO give them
media Of payment. II one bank alone
regulated TN" amount of currency. there
would not have been any reason for
boarding. Thus the plurality OF note is
suing banks. besides the inelasticity of
bond-secured currency. has been the i'm
mediate cause of the panic.
But. in order not TO complicate the
question, let us admit for a moment
that really the amount of currency
should be increased In emergency cases
of each separate national bank, as
the Aldrich bill provides. What will
be the effect OF this bill? Will boarding
be stopped? VIII the interest rates be
lowered? VIII another crisis become
Not at all. The present situation Will
simply be inflated" The struggle for
currency between the banks will be
worse than ever. The provisions of the
bill can. for the moment, stop Il crisis
when one has brokc out. They annot
possibly prevent any. ! am rather in
clined to say. and | am sure almost all
European economists VII, agree with
me, that this bill Will provoke crises
much more than prevent them. 1t will,
as a matter OF fact, prove 10 be a mar
velLous promoter of speculation. II
empowers the banks - pump up and
they like. The recent panic has evil
IDENTIFY proved that by nero
sary boarding the s~tringency OF money
will attain a dangerous point; Interest
rates will increase In startling ropor
tons, Such boarding for tho benefit of
the banks Is not hindered by the AL
drich bill. On the contrary. For II the
s%tringency attains a degree that might
IN da rOffa for the lOardinR banks
themselves. they will apply for "emer-
gency currency" they will get it. and
thus again depress the Interest rate Just
TO the point they want-whereas up TO
now they have rsked their own exist
ence in such perlous game.
May Stop but Cannot Prevent Panics
But this is only the moral side OF the
morality has nothing to do with interest
earning.
do not insist here on other defects
o. the proposed 'reform''-on the peril
of issuing notes guaranteed on other
than Government bonds. and SO on.
The important point Is the principle.
This is that the bill will cause the
imitation of a currency which shows a
more than sufficient amount. and that,
the other hand, 1t does not provide
able administration. distribution and. /
should say, "canalization" OF these
enormous quantities OF media OF pay
1t is that the bill cannot prevent
panics. but only stop them. when they
are at hand. when s~tringency has made
itself strongly felt. 1t is that nothing
will be changed as 20 what concerns tns
to which the crisis is due.
The great point for American prosper
the eyes OF E~urope.-is not
mass. on the contrary. It Is imitation OF
credit. of exploitation of currency, l be-
that European public. opinion is
unanimous on this point And as the
States Is ooiiged TO appea! on
many occasions to Europe for financing
is enterprises. this general opinion
to be earnestly considered. After
al that has happened for some months
past. the unpleasant aspect that Amer
can economic life has shown Europe
would doubtless take still less pleasant
II, by h Aldrich bill. the United
states, instead Of curing Its monetary
should make II still more an
yerous and perhaps incurable-Just as
n morphine omania the patient who is
afraid Of c~ollaps!ng will instantly take
icme more morphine in order to feel
better for a moment. instead OF having
cured by total ~abstent!on.