Evening star., 1911-08-11

rency. unless II De emergency currency.
1t simply provides that all the existing
note-issuing functions of the national
banks shall be turned over to the re-
serve association of America of which
the national banks are constituent MEM
bers The national bank notes during the
past ten years have increased from about
$500. 10000 to over $GOO.O00.OO0 IS the re-
suit of the increase of the percentage or
the bond security available for note issue
and also as the result of the increased
amount of United States bonds. The ma
tional banks have also the power to is
sue emergency currency to the extent or
$500. 100000. the retirement OF which is
forced by a gradually increasing interest
ate or tax.
None of the latter is now eXtant. In
der the Aldrich plan, therefore, the Ma
tional Reserve Association would have
the power to keep outstanding the pres
ent issue of national bank notes of over
5000 1000 COO and I think a similar proyi-
sion should be made that the National
Reserve Association of each state should
take over the note-issuing functions or
it's constituent members. | would see no
present necessity for changing the char
acter Of this issue. / would allow IL to
be gradually retired by the payment OF
the bonds themselves or by refunding
such bonds into national bonds similar to
the Panama canal issue. bearing rate
of interest of about :: per cent and with
out the note-issuing privilege.
Il do not think we need seriously
concern ourselves in the near future
regarding either an asset-secured cur
rency or bond-sccured currency. or
q national currency. The country is
now firmly established on the deposit
and check system, under which banks
are permitted to give credit to their
customers on their books aggregating.
on the average, more than five times
the amount of cash which the banks
have on hand. The borrower turns
his loan into deposit and checks
against his deposit, and his checks
constitute currency admirably adapt
ed to the requirements of the coun-
try. the checks remaining out long
enough to close the particular ex-
change or sale or transaction and then
being retired.
Gives Greatest Efficiency.
Under this method $1,000 900 900 of
cash in the banks as reserves is giken
an. efficiency Of $1,000, 100000 through
tional banks, and a similar amount in
the state banks, so that during the
past ten years, as the result of con-
stantly increasing volume of gold
which has been drawn into the banks
as their cash reserves, we have had
an increase of bank loans and cor
responding bank deposits from about
FIVE billion to ten billion dollars, or, in
other words. an increase of 100 per
cent in the credit facilities Of the
banks, while the population has in
creased only about 20 per cent. This
accounts in great part for the ex-
traordinary rise in prices which has
taken place. and which has seriously
disarranged the relations Of debtor to
creditor. OF employe to employer, and
of customer to producer An era of
constantly increasing prices is almost
as bad as. an era Of constantly fall
variation in the value of the medium
of exchange as the result of the
cumulative theory.
IF stability in the value of the medium
of exchange is desirable, it is clear, all
other things being equal, that as the
number of basic dollars increase the
number of paper representatives should
diminish, and paper representatives
should only be availed of in order to
tide over the time when there Is a dimin-
ution in the production of basic dollars
and danger of fall OF values through
contraction. 1t is. clear, therefore, that
at no period in the history Of the world
has there been so little need OF the issue
of paper money as at present, for the
number of our basic gold dollars has
vastly increased in quantity. in much
greater proportion than the population,
and the loan and deposit system has
opened up such vast area OF credits as
to do away with the need of sO-called
credit money. Indeed, the only occa-
sions upon which credit money is needed
at all under existing conditions Is when
a bank panic comes and depOsitors with
draw from the banks the actual dollars
which stand at the base of the loan and