Evening star., 1912-11-24

cided that the public funds must be kept
in government vaults for safety
But in these days of well organized ma
tional banks conducting their business
under the watchful eyes of the govern
ment every one keeps his surplus funds
in some bank. Not only do private IN
dividuals and great corporations oank
their funds from day TO day, but All tne
municipalities and state governments use
the banks for the safe keeping OF theH
money.
The national government alone holds to
the medieval custom of keeping It's 1unos
stored away in vaults. No other great
government does this. In England,
France Germany and other leading coun-
tries government funds are deposited In
banks like the funds of any other pusl-
ness.
Could Cause Panic.
Imagine the storm of Indignation that
would be aroused if the railroads of this
country should insist on being paid for
transportation in money, and then hoard
this money for weeks and months in
strong boxes. The gross receipts OF our
railroads are in the nelghoorhood or
3d. GOo.0D,OOO year II the raliroaos
boarded their receipts in money for only
four months they would pile up billion
dollars or nearly third of all the money
now circulating in the country. IL this
money were taken out of the vaults OF
the banks it would mean such panic
as no country has ever seen or ever will
see.
The banks of the United States have
about s16.C000o0.O0o of deposits on
money foundation of 1,.ao. .oC0,0DO. The
experience of the leading banking coun-
tries is that deposit liabilities can be
built up ten-for-one against cash in hand.
In central banking centers like New
York and London larger metallic funds
are needed. because in these centers are
Cd hn hac eli han
The New York banks, for example. keep
about $500, 600 cash reserves against
s., ,OCO, ,OOO,0 ,0C0 deposits.
Loss of Cash Cuts Credit.
In this country, with our rigid laws
fixing the minimum reserves the banks
must hold. any loss of cash by the banks
means an instant contraction of their
loaning power If the banks of New York
and Chicago lose 500, 100000 cash they
must at once reduce their liabilities by
500, COO, 900. This means that they must
reduce by an amount their loans to the
business community
With the volume of bank credit moving
in the reserve cities four times as fast
as the volume of cash, and throughout
the country ten times fast as the
volume of cash. it is plain that the ma
chinery of credit is extremely sensitive
to variations in the amount of cash held
DIV the DdukS. + OT luIS IedSOu dH IlSll-
tuition like the United States Treasury.
alternately accommodating and disbursing
many millions of cash, is likely to create
widespread disturbance in the money
market.
The funds he'd by the great European
governments vary from $25,O00OOO to
$50 900 OGO. The coin, bullion and paper
money held as assets in the United states
Treasury during the present admin1Stra-
ton have varied from $500. 600 900 to $780,
Tn 9th nna-tpnfh
of all the money in the country Is held
idle in the Treasury vaults. If this money
were all deposited in the banks it would
increase their reserves 20 per cent.
Hoarding by Uncle Sam.
The receipts and disbursements of the
Treasury are most irregular. The Treas
ury receipts in 1907 exceeded the dis
bursements by 9100O,O0O. Two years
later the disbursements exceeded the re-
ceipts by S11SOOO.O0O For the past two
years receipts have again exceeded dis
bursements. The general fund in the
Treasury was $272, 100000 in 1907; three
years later it had fallen to $1O6, 100000.
Under our present system of keeping a
large surplus government fund idle In
the Treasury these wide variations in the
yearly balance not only seriously disturb
the money market and the business OF
the country, put 1OrCe the secretary oL
| the Treasury to enter actively into the
money market as paternal overseer OF
the machinery of credit.
1t not infrequently happens that sur
plus revenues accumulate in the Treas
ury just at the time when the banks are
straining their resources to grant all the
credits needed to finance a business boom.
Taken When Needed. ::
The Treasury then takes money out of
the banks and boards it just at the time
when the country most needs it. If the
business boom goes so far as to strain
credit to the breaking point, then the
Treasury must come Ito the relief of the
situation by depositing some of it's
boarded cash in the banks.
In recent years the Treasury has been
carrying a large surplus. and it has been
in a position to relieve financial tension
by depositing funds ir1'the banks.
In December, 1907, following the money
panic, the special deposits in the banks
by the Treasury has reached $3.50, 100000.