Arizona republican., 1908-03-11
WORST IN THE WORLD
 OUR BANKING SYSTEM
But MT. Carnegie Believes That It Can
 Be Improved Without a Revolution.

NIT. Andrew Carnegie in a late ad- dress before the Economic Club of New York riddled the banking system of ! the United States as follows Americans have many advantages upon which We may plume ourselves as being in advance of other nations, but we have at least one Humiliation to lessen self qualification. Our bank ing system is the worst in the civilized world
 The statesmen of 1860 did not have clean slate to begin with. Govern ment credit was then precarious and needed support. and the temptation to use banking for this purpose was sac rificed to sustain the national credit when it was resolved that the cur rency should be placed upon govern ment bonds, which. in the opinion of MT Gage, eX-secretary of the treas ury. resulted in giving a marketable value to these twenty per cent higher than they would have otherwise reach ed.
 The result is that our banking cap ital is diverted to the extent of $I,- 250,000 invested in government bonds by the banks, because currency issued must be based upon an equal amount Of these bonds deposited in the treas ury. A reserve Of twenty-five per cent against deposits must be kept in cash and a reserve of five per cent against circulation kept in Washington for note redemption. MT. Fowler. the able chairman of the finance committee in the house, states that the loss caused by this reaches s150.0OO.O00 annually. Banking capital in France. Germany. England Scotland, Canada. etc. es- capes this joss. because their currency is based upon the assets of the banks. None of their capital is locked up in bonds as security for notes Banks keep the reserves which experience proves to be necessarw.
 This, then. is clear-that banks in other countries start with a great ad- vantage over ours, which are heavily handicapped.
 There is another important advan- tage which these banks possess over ours. Currency based upon the assets of banks rests chiefly upon trade bills. In the nature Of things. the bank is called upon to issue or redeem notes
 
 business increases or decreases, cur rency required is less or fflorr Busi- ness brisk. more notes are needed. and they remain in circulation; busi- ness dull. less notes needed. and some are promptly returned to the banks for redemption. All is elastic and auto matiC.
 The law in European nations does not restrict the issue of currency to the resources of the banks. except that when the Bank of England was reorganized in 1S44 the government owed it eleven millions of pounds and it was agreed that the bank might is sue uncovered notes to this amount. but any issued beyond this should be covered by gold. The practice in emergencies is for the government tc allow the bank to disregard this and to issue additional currency uncovered. but the bank must at all times re- deem notes in gold upon presentation In ordinary times the amount of notes issued by the banks does not exceed much. if any. one-half the amount is suable. Canada's average is fiftyfOur per cent. SeOtlanG's is iess.
 We hear the reply. "All this would be a great improvement upon our sys- tenn. except that our bank notes have the bonds of the government behind