The Washington herald., 1910-05-29
CHECKS PLAY Big
ROLE In BUSINESS
Trade Requires More and
More Use of Credits.
REACHES EIGHTY PER CENT
Report on Such Instruments COM
piled for Monetary Commission
Made PubIIc-DIstrict of Columbia
Uses Them Less Than Any State.
Some Conclusions Suggested.


In the United States" is the title Of an
interesting report compiled for the mone-
tary commission by Prof David Henley.
of the University Of Illinois, The report
with. accompanying diagrams. has been
made public and constitutes an Interest,"
ing contribution to economic literature.
The purpose OF the investigation pur
sued ey Prof Kenley was 20 find a basis
for estimating the proportion Of business
done in the country by means OF checks
and credit instruments. and to ascertain
the effect Of this use OF credit exchanges
on the value OF money or the price level.
In one Of the diagrams the percentage
OF checks IN the aggregate OF deposits by
States is graphically shown. In this
/ diagram New York State stands at the
head with n percentage OF such deposits
at %. Massachusetts comes next with
the percentage at IS. and the District OF
| Columbia is last with a percentage OF
20 in check deposits. Other States occupy
various positions between these extremes,
the average being about 90 per cent.
Credits Cover Eighty Per Cent.
In another similar statement it is
shown that the amount OF the current
! business Of the country settled by credit
! instruments is about 50 per cent. this
having grown from G. per cent in 1896.
with reference to tho general subject
Of the report Prof. Kenley says in the
| introduction;
The amount OF the country's business
| settled with credit paper has long been
matter of dispute. on which widely diff
/ ferent opinions have been expressed on
/ the one hand, men Of affairs. especially IN
/ banking and other business circles i'm
pressed as they naturally are with the
vast volume Of business transacted under
| their eyes by means Of credit paper. have
usually overemphasized the Importance Of
/ credit paper settlements and miuimlzed
/ the Importance of the large volume OF
! currency.
"On the other hand, others. particularly
/ those who from time 20 time urge upon
/ the public the necessity Of a larger vol
ume Of currency. have denied that the
volume Of credit business was as large
as claimed and have minimized its in
! fiuence, urging. on the contrary, the ne
cessity for a larger volume OF money.
Some Of them have gone further and
| insisted that even if the volume Of credit
/ payments were as large as many claim.
/ II is a bad thing TO have business done
so largely IN this way and that il is de
| sirable for the best interests Of the coun-
try that the volume OF credit business
should be diminished and that Of direct
money payment enlarged.
Suggests Middle Course.
More careful students Of the subject.
in both OF the above groups. have insist
ed like Francis A Walker. upon a mid
/ die view They have admitted freely the
/ claims Of the business men. bankers. and
! others. that over 90 per cent of the
/ wholesale" business Of the country was
/ done by means OF checks. drafts. or bills.
/ but have urged that the retail business
/ was mainly done with money. that wages
/ We're mainly paid with money. and that
/ the demand Tor money for these pGr-
| poses constituted the most important
/ part OF the couutry's need for money.
The conclusion reached IN the inquiry
/ Of 1896 was that at least so per cent Of
/ the total business OF the country at that
/ time was settled by means OF credit
paper The average per cent OF the re-
/ tail deposits made in the form Of credit
! instruments. on the basis Of the returns
/ Of that year. was s.. In the present re-
| turns It is % per cent.
/ The discussion I'm the report Of 1896,
which has been repeated I'm part in the
! present discussion. with some additional
points led 20 the conclusion that 80 per
! cent is as low as could in reason be
/ claimed to be correct, and that % per
/ cent is. all things considered. probably
! about correct" This is for retail trade.
Thinks Estimate Low.
From the present discussion the writer
IS Of the opinion that this is probably too
! low. Undoubtedly the use Of checks has
| grown cor -iderably in the past fifteen
years. The number Of national banks In
| creased from 1859 in July, 1896. to GS93
last April, while the number of state
/ and private banks and loan and trust
/ companies is now about 1850. as against
| about 500 thirteen years ago. The per-
! centage Of increase in the number OF
| banks in the past thirteen years IS about
| 12S. The banking power" of the United
! States, as measured by the Comptroller
| Of the Currency, has increased 2l2 per
cent since 1890. In the meantime the
population OF the country is estimated
/ 10 have increased from about 100000 in
/ 1896 TO about N000OO0 now In other
words. the banking power Of the country
! has been increasing more rapidly than
the population. Meantime the business
OF the country, as measured by the total
! bank clearings in 1896 and 1908. has IN
creased from S5l,97I799,l14 TO $l26.23S .69i.-
39S.
The total estimated circulating medi-
um Of the country has increased from
Sl.506, 1886 to S3O3S. 100000. As the popu-
lation Of the country Increases very like
" an increasing proportion Of the peo-
pie belong 70 the wage-carning. class. or
TO the class Just above. with relatively
small incomes. IL so, the smaller num-
Der Of the population with the larger in,
come would do a larger proportion of the
business. and It is this class who must
commonly make thor payments with
checks. These reflections are especially
applicable in period of prosperity such
as this country has on the whole ex-
perienced in the past fifteen years.
Consequently. it is altogether likely
that the percentage Of the volume OF
ordinary payments made by check has
been increasing somewhat. as the figures
OF the bank returns would seem to show.
In the opinion Of the writer Il would not
be far out of the way to assume that
g. per cent Of the retail trade of the
country, under existing conditions IS
paid for with checks
We nave found no reason to think that
the figures obtained for the wholesale
trade ave not reni esnn4ati,n G. =