The diamond drill. (Crystal Falls, Iron County, Mich.) 1887-1996, 1912-12-28

OF course Sancho Panza hadn { realty
given Don Qnixote three ASS colts. as
the bin states and other Irregularities
are present But the instrument, duly
dated and signed with Don Quixote'
cipher three centuries ago. was pref
~ fair parody on an instrument al
most indispensable To the struc ture OF
modern finance. II is probable indeed
that the bill of exchange Is of almost
immemorial antiquity. Cicero wrote
To Atticus 10 inquire whether the fin
ancial needs OF his son at Athens could
be provided by exchange operations
(permntaril indicating that there was
some form OF exchange machinery in
Rome and Athens
The modern bill of exchange speeds
mp the machinery Of trade by supply
ing cash agains. real goods not yet
marketed. There can be no better ba-
sis of credit because The world will do
without stock and bonds IL need be.
but 1t must feed and ciothe itself In
the vivid phrase OF the market. these
bills pay themselves. The wealth
brought out of the soil or created in
the factory and mill Is instantly trans
mitted through them into cash They
bridge the interval between production
and consumption.
Let US consider concrete example !:
John Johnson. Kansas farmer sells
his wheat crop to Thomas Smith, a
London grain broker. for So. 600 John
son sees no reason why he should wait
month or two for his money until the
wheat has reached London and has
been marketed and Smith sees no rea-
son why he should pay for it before IL
. is delivered. Commerce has devised,
] in the bill of exchange. compromise 10
meet this difficulty. johnson in Kan
!. sas draws bill on Smith for IS. QUO.
payable at sixty days sight. plus the
4
this bill to his bank, with the evidence
! that the grain Is in transit and duly
I insured against loss and gets his
! money. less the current rate OF interest.
The bank endorses the bill and sends
it TO its London agent. On it's arrival
it is accepted by Smith. who writes
his signature across the face with the
date. II then becomes negotiable
instrument
: Or, Smith may have an arrangement
with his banker whereby II accepts the
! bill, lending Smith its credit by pro.
: missing to pay should Smith fail 40 tc
do This makes the paper banker
bill, and gives it wider currency
through the bankers wider reputation
and better standing.
In this brief sketch of the bill OF ex
J change some OF the processes which
| complicate the transaction have beer
I omitted for the sake of cIearness. The
, effort has been to show how coInmercs
g creates an instrument which has .
, ready market in all the countries Of
Europe. Wheat in transit is recognized
$ abroad as a better basis of credit thar
. English Consuls or French ReDtes, thu
Government bonds of these countries
r The banks of the United States
however, cannot accept drafts or bill
! OF exchange as they are accepted a
' broad. The National Bank Act give
J them power ito discount and negotiate
!; promissory notes, drafts bills of ex
: change and other evidences of debt; &
e receive deposits; to buy and sell ex
s change. coin and bullion and TO LOAF
money on personal security" Euro
I pean banks nave similar powers. Blu
{ they have another power omitted from
! those accorded TO our banks, probabl.
through an oversight when the Law
s was framed during the Civil War |
r il Ito accept time drafts drawn oi
z them on behal of their customers.
y A great stream of foreign investmen
I funds Ia thus diverted from the Unite'
T. States. Because we lack the BANKER
{ bill, the great European banks, which
Q buy them outright and lend on then
J. as collateral. invest their surplus fund
g abroad, and do not send them here
I This puts the American business maj
{ who has to borrow money at distinc
disadvantage.
Q The firm which gives its promissor,
: note as an evidene of indebtedness ma,
4 not be known outside it's community
so that this form of paper, commonly
9 dealt in by our national banks. is al
Q most local security, and IL is practi
b cally dead asset until IL natures
But for the bankers bill there is an &C
tive international market. English,
Q French, German, Dutch, Russian and