Evening star. [volume] (Washington, D.C.) 1854-1972, 1910-04-02

few. it is possible for band of the rlcn-
est men to create a panic. cause the sui
cides of 900 bankers and destroy q ie"
billion dollars worth Of values
Again the Paris banker meditaleo
II have watched the evolution Tf AmeIi-
can public opinion on this subject lot
twenty years. he said land there IS
tremendous progress toward ceh'i o. a,
bank, whose main feature Wouio NC -
issue banknotes secured on reai eo"i
mercial paper and gold. -;a+,on
/ asked him to give a plain Description
of such a bank Of issue as MS eAp -
ence suggests and as he represele'eSu. Colt
before the Bankers Association OF
fornia. .,,,saa On
tbe plan 7 have outlined the banks Oh .no
United States would be Its only ;, cus sais
mers-apart from the government, az.
Mr. Drummer. when short Of cash the
banks would send to it commercial paper
to be rediscounted by the central pam.
II see said, the banks couio always
get cash. o-c;a, ,
naner and a proportion of legal tenueI
coin on hand the central banR "oui'
Immediately issue new banknotes.
There is the creation OF cash' s >.
IT perceive the elasticity OF the systeH
s~Those new bank notes would disappear
again as soon as the commerclal paper
should be paid continued Mt. Brnnnei.
.'or if the banknotes should not come oa s.Is
keep the cash-for the redemption Oh inc
notes when presented.
.tOn what would it Issue Its original
circulation" l asked.
''Its first banknotes would be assueu
against the purchase Of gold and sllver
coin Of the United States" said the Parls
banker s'The central bank would 80
into the open market and buy. to prevent
it's export at the wrong moment AM, ana
banknotes." ~.
Yes" .oo
"If it issued originally 800, 100000 s
worth of banknotes it would have $780,
600 900 worth Of gold in its vaults?
Eyes: it would have the gold In It's
vaults, and also the cash represented ps
it's capital"
"Rut II could do nothing with the gold
AGAINST which banknotes had been is
sued?" / insisted.
"No" said Mr. Drummer, 1T must keep
it there to meet the outstanding notes.
Let ms continue the case. 1t would re-
discount 500. OOO, coo worth of commercial
paper-issung so much banknotes
against it. Thus there would be $3OO,-
100000 of banknotes issued, and against
them the central bank would hold 500,
100000 worth of gold dor gold purchased,
Soiu "
capital paid in), and 5000 100000 worth
of rediscomted commercial paper from
the various banks. which would be paid
within three months. SO that If all the
commercial paper were paid within the
three months and none Of the banknotes
presented for redemption ct the he central a,a
in its vaults. This would put 1t In con-
dition to discount $jCO.OOO,00O of COM
mercial paper"
..Why that sum- l asked.
ITO maintain its 80 per cent cash re-
serve" said the Paris banker. 1T is sup
posed to have s3O0,OOO,OOO banknotes
outstanding for redemption. 1t can. there
fore, issue s5OOoO0.OO0 new banknotes to
discount that much new commercial pa
per-and still have its 20 per cent cash
reserve in that $4OO. 100000 of gold in its
vaults"
rs that the way the Bank of France
does:" I said.
yes" he answered. 1T has now four
billions Of francs of gold and silver on
hand protecting outstanding banknotes:
and it could rediscount four billions
worth Of commercial paper and yet have
more than 80 per cent of all it's out
standing banknotes in cash on hand