Omaha daily bee., 1909-10-17

Bank of England is limited to s14,OOO,OOO
(and It is now els. 100000
Beyond this sum the bank cannot issue
a pound, except of what corresponds to
our gold certificates of deposit, Using
his words, the currency Of England there
fore possesses no greater degree OF elastic
ity han metallic Money" Notwithstand-
ing this fact, with about o%ne-fourth of our
money volume. II manages not only its
own finances. but the finances of the
greater part of the world.
We should not allow dust to be thrown
into our eyes by the assertion that there
Is no real difference between a bank note
liability and a deposit liability.
Upon the bank notes it is made to have
that appearance, but in fact there is little
similarity. Circulation corresponds more
with capital stock than it does with de
posits.'' The loans and discounts made for
a bank are from it's own capital and the
capital of others entrusted to its care and
keeping. The note liability forms a part OF
this capital and is manufactured from its
credit supported by government sanction to
give the notes circulation. Deposits may be
withdrawn by checks at the will of deposit
withdrawn except at the will of the issu-
ing bank.
Gold is the only natural money and re-
quires no law to give It circulation. Paper
or credit money performs exactly the same
service that gold performs as money and
is subject to the same economic law gov
erning the production and circulation OF
gold. 1t forms with gold the currency
capital Of a country.
The material difference between them is
that gold probably I'm the long run costs I'm
labor and capital all the value it possesses
In use, but paper money is created without
the labor and savings ordinarily demanded
in the productions OF capitsl-it costs moth
ing except the on bank notes imposed
by the government.
A practical Illustration will show how
credit may be converted into real capital
The necessities of the civil war caused
the creation Of a public debt far beyond
what the capital supply Of this country
could carry.
To meet the emergency, congress author
lied the creation Of banks with power tC
issue notes to circulate as money, the same
to be secured by government bonds.
The banks created possessed the capita
to purchase the bonds. but IL the process
had ended here they would have been left
without means to do business.
The circulation received was practically
a return to them Of the capital parted with
and enabled them TO meet the commercial
demands of the day the same as in the Or
iginal capital had remained intact.
The creation Of capital Of this character
is a serious matter and Il should not be
done except in great emergencies or &c
serve a public purpose.
II should never be authorized TO serve
merely the personal interests OF indivfd-
uals or corporations.
Our national bank currency was issued
for a public purpose and still maintains
that character by lowering the interest
rate paid on the public debt. II should
however, be limited in its volume just az
the Bank Of England notes are limited
otherwise there is danger that an Increase
In the public debt may cause an excessive
note issue and lead to the export OF gold.
Paper currency, whenever issued, Is al