Arizona republican., 1911-11-19
SYSTEM
 |S WEAK ONE
Some of It's Defects Are Pointed Out by Chicago Man in His Address Be fore the Trans Mississippi Congress.


 addresses delivered at the trans Mis- sissippi congress was by George NJ. Reynolds president of the Continental x Commercial National bank of Chi cago, on Credit and Currency in Their Relation to Business" The ad- dress, in part, was as follows:
 MT Chairman. Ladies and Gentle men of the Trans Mississippi Com mercial Congress-In view of the agi- tation for currency leg station wbicn has been going on during the past three or four years, or since the panic or 1907, which brought the citi- Zens of this country to q realization of the pressing need for currency re- | form, l assume that the business pub lie, generally, recognizes the weak nesses and the deficiencies of our present banking and currency system. and I shall not. therefore, ma&e any extended reference to it.
 | In many respects it has great merit but, on the other hand, its faults are so many and so apparent that like | the chain. it is only as strong as it's weakest link and it fails utterly in great crises when confidence has been ] disturbed and there is a tendency Cn the part of the public to hoard 1 money.
 While it has given us 2 uniform circulating medium in tine national bank United States bond secured note. l hoK-a Iae n | ineIastic and thereby unable to re- spond to the requirements of bust ness has made it impossible for the | banks of the country under certain conditions to furnish currency m suf- | ficient quantities to meet the de- mands of trade
 The reserve requirements under our national banking system are such that an effort on the part of one | bank to increase its own reserve must of necessity result in it's with drawing funds standing to its credit with some other bank, thereby re- ducing and weakening the reserve | of that bank.
 The system is unscientific. and tine | fact that it has served us SO well and that we have not had more frequent panics or seasons of severe depres- sion in business is due very largely to the growing use of credit in busi- ness transactions in this country. one of the most used instruments of which is the bank check.
 Where formerly currency had to be sent to the country for crop p-moving purposes. the enterprise of the coun try banker. so called. has resulted in the majority of our farmers opening accounts with the various banks throughout the country, and today the major portion of the products of our soil are paid for in checks given to the farmers, who. in turn. de- posit such checks in their local banks and take credit for them. They. on the other hand. pay their obligations to their creditors with checks on the bank, thus making each transaction one in which credit has been the agent of money itself Indeed. this practice has become so general that fully 95 per cent of the business of the country is done on credit.
 This being so. credit becomes one Dl lilt lllpSl Itlfllb ldtApiS III ciii economies, and credit to be stable must be protected bN system of currency and banking which. while providing for an amount of credit necessary to meet the reasonable re- quirements of business. will prevent an over-eXpansiOn of credit and at the same time make it possible to transfer or exchange liquid credits of solvent concerns of one form into credits of another form, and even into a circulating medium or bank notes when the necessity for such exchange exists.
 Tn business there are different forms of credit. the initial form be- ing that created in transaction be- tween two individuals or concerns through which one gives to the other his note for the amount due or where the other charges the debtor on his books with the amount.
 If the credit thus created is pro- tected by the solvency of the debtor 1t is 4intrinsically as good as any credit. but we will assume that in- asmuch as A" the debtor in this instance. is not known a long dis tance away from home, and the eX tent and character of the property which he owns and which is a pro- tection 'to his debt is unknown to the public generally, it is impossible for As" note to be passed from haas to hand in the payment of ob- lgations between others having busi- ness relations. So the owner of the credit. "B' if he wishes to use his credit in some other business trans action. must transfer it into some other form of credit which will be acceptable to the person with whom he contemplates dealing. To do this he takes AS" note to the bank and discounts the same and takes credit to his own account for the proceeds and draws his check on the bank for the amount of his transaction; or he may with the proceeds of the note thus discounted buy from the bank bill of exchange or bankers draft on it's correspondent. which bill | is given by him in payment of the l debt incurred.
 This, then, is using bank credit in