Iowa County democrat. [volume] (Mineral Point, Wis.) 1877-1938, 1908-01-02
Madison, Dec 50.

Money and Banking; The Asset
Currency Plan of the American
Bankers Association, was the theme
upon which DAVIS r. Dewey of the
Massachusetts Institute of Technol-
ogy elaborated at the meeting of the
American Economic association at
library building Saturday.
1t was the plan of the American
Bankers association of which Mr..
Dewey spoke, a plan to issue add.
t.onal credit notes equal to % per
cent of the capital up to 40 per cent
of the bond-secured circulation, sub.
ject to tax of 21a per cent per an
mum. Provision is also made for
the issue of additional notes subject
to higher tax of per cent.
THE PLAN" said Mr.. Dewey, "is
confessedly a compromise. 1t is be-
lieved by many, however to be a
step toward asset banking. If the
bond circulation should decrease, the
plan provides that the authorized is
sue of credit notes shall be increased
to a correspondingly greater percent
age Of its bOnd-seCured notes. We
must therefore face this contingency
and pass judgment upon the wisdom
of indirectly introducing the banking
prime pie into our monetary circula-
ton. If this principle is to be adop-
ted, we should do it with our eyes
wide open and Judge of the present
proposal by it's possible consequent
ces. If, however, our national in
debtedness increases, so that our
messed to government bonds, will any
real advance be made toward an
elastic credit currency?
Again, it may be asked whether it
rency plan before certain reforms in
our banking system have been put
in operat on. Some of these seem so
obvious and pertinent to the ends
which the bankers commission de-
sres that they fall within the scope
y.
Among sthese defects may be men
toned the question of:
Il. insufficient reserve. particu-
larly OF country banks and the cen
trailing of such reserves in New
York city. The clearing house banks
of that city have repeatedly called
attention to the evil practices of pay
ing interest on deposits of bank bal
anCes.
%. The inadequacy of redemption
facilities. May we not establish a
sat sfactOry system for redemption of
present bank-nOte circulation before
we attempt to introduce further circu-
lation?
SO. The over-investment of banks in
stocks, and securities, which cannot
be rapidly liquidated, and thus try
ing up the funds of the bank for too
long a period.
a. The bad banking methods of
trust companies.
IS. The speculative character Of
the call loan market in New York
city.
IS. The absence of any system
whereby negotiable paper can be
easily rediscounted so that loanable
funds will flow to the place where
they are most needed for commercial
purposes.
u. And finally the rfgidity of ma
tional bank reserves. Might it not
be POSSIBLE to permit our nat onal
banks, in accordance with a 81 gges-
ton of Mr. Schiff, to encroach upon
their reserves, say up to X of such
reserves by payment Of a tax of 6
per cent? This would let loose about
1925, 100000 which might be as ser.
viceable for emergency circulation as
| the credit notes of the American
bankers plan.
''The foregoing suggest ons are
made in spirit of inquiry rather than
that of captious criticism. 1t is easy
to criticize any currency plan, but il
IS also easy when we are over
| Whelmed by mass of conf citing de
tails to be diverted from funda
mental principles. Whether we are
agreed or not in our measure of be
I ief in the cumulative theory oil
money, it seems to me that we must
all be impressed by the profound
changes which must be effected By
the enormous new supplies of gold
We have also been living in a per. Cd
or unprecedented industrial prosper
ity which has straiaed and was
bound to strain, to the utmost. the
adjustment of the supply of capital
to its demand. There should there
fore be sober consideration as tc
whether this is a time to make a
leg. slative change in our currency
| system, without at least an ex
haustive preliminary investigation OF
the rea' changes which are taking
place, the objects which are desired
and whether the agencies proposed
are likely to accomplish such ends.
VIOLATED ORDERS.