The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1912-11-24

institution at the foundation of interna-
tional credit. The treasury is the strong
est bank in the world as regards metallic
reserves. Its enormous store of the yell
low metal is not approached by that of
any Of the great central banks of Europe
At one time the treasury was the great
est note-issuing bank, and it might be-
come so again.
The Bank Of England. regarded
throughout the world as the strongest
of all banking institutions supports the
great structure of English credit on
gold reserve of less than $500, coo, 600. Our
treasury, in addition to 81 900, 700 of
gold held in trust against gold certif-
Gates, carries a net gold surplus varying
from S2O0OO0,0Oo to $500 OoO,h.. Our
treasury's hoard of idle gold, in other
words, would support a greater bank
than the Bank of England
When the Independent treasury system
was established, the idea was that all
The funds of the government should be
stored in the treasury vaults in the form
of money. Just as the medieval war
lords kept their treasures in strong boxes.
tablished in troublesome financial days
when the state banks were not the safest
places for the deposit of money. The
people decided that the public funds must
be kept in government vaults for safety.
Railroads Could Make Panic
But in these days of we'll organized ma
tional banks, conducting their business
under the watchful eyes of the govern.
ment, everyone keeps his surplus funds
In some bank. Not only do private indi-
vfduals and great corporations bank their
funds from day TO day, but all the mu-
inequalities and state governments use
the banks for the safe keeping of their
money. The national government alone
holds TO the medieval custom of keep
ing its funds stored away in vaults No
other great government does this In
England, France, Germany and other
leading countries. government funds are
deposited in banks like the funds of any
other business.
Imagine the storm OF Indignation that
would be aroused If the railroads OF this
country should insist OH 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 neighborhood of So
o00o0e.000 year. II the railroads hoard
81 their receipts IN money for only four
months they would pile up billion dol
lars, or nearly third Of all the money
now circulating in the country. If this
money were taken out Of the vaults OF
The banks it would mean such a panic
as no country has ever seen or ever viii
sec
The banks of the United States have
about $4,000 100000 of deposits on a money
foundation of sl,50o.oooOOo The experience
" the leading banking countries is that
Iiah t,, t,,.f1t
one against cash in hand. In central
banking centers like New York and Lon
don larger metallic funds are needed be-
cause in these centers are accumulated
the basic banking reserves. The New
York banks, for example. keep about
s5oo.0e,o0 cash reserves against S2,ooO0 00-
GOO deposits.
Loss of Cash Cuts Credit
In this country with our rigid laws fix
ing the minimum reserves the banks
must hold. any loss of cash BY the banks
means an instant contraction of their
loaning power IT the banks of New
York and Chicago lose s1Oo000,Ooo cash.
they must at once reduce their liabilities
by $4,000. 600 This means that they must
reduce by an amount their loans to the
business community.
With the volume of bank credit mov-
ing In the reserve cities four times as
fast rs the volume OF cash, ana through
out The country ten times as fast as the
volume of cash It Is explained that the
machinery of credit is extremely sensi-
tive to variations In the amount of cash
held BY the banks For this reason, an
Institution like the United States treasury
alternately accommodating and disburslng
many millions OF cash. is likely to create
widespread disturbance in the money
market.
The funds held by the great European
governments vary from S6,0o0.ceo to $50
10000 The coin. bullion and paper money
held as assets in the United States treas
nry daring the present administration has
varied from s,oo0o0.Coo to S35o,990,oe0 In
otter words. nearly one-tenth Of al FOO
money IN lie country Is held idle IN tae
!. treashry vaults. n this money Were al
&c 3osited In the banks i would Increase
tier reserves 20 per cent.
boarding BY Uncle Sam
whe receipts and disbursements Of The
treasury ale mot irregular. The treas