The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1912-12-01
BAD LAW FOSTER
RISE Of TRUST"
fcon,lnued From First rasO)


The resources Of a bank. the more must
the bank charge its customers io'
credit. in order TO pay for the carry
ing OF this idle money in It's vaults
A sound banking system is euile up
on a foundation of the precious metals
especially gold. the money Of inter-
national commerce. The efficiency OF
= banking system is largely measured
By its capacity 10 provide with abSo-
lutte safety for payments between the
people with a minimum use Of the
precious metals. Every country must
invest a certain part of its wealth IN
the machinery Of exchange, and II Is
economy TO keep this investment as
small as possible consistent with the
highest efficiency.
The structure OF credit is as delicate
as il is wonderful Enormous credits
against property are built upon
foundation Of very little cash and
great deal Of public confidence on.
$4,000. 600. 600 OF bank credits on
foundation of $500. 100000 cash in the
banks is entirely safe so Ions as ,nere
is confidence in the banking system.
The credit structure would not COL
lapse. as il did in 1897. II confidence
were not shaken.
Barbarfc Struggle TOT tesn'
The banking 81 stem of England IS
built on a much smaller proportion OF
cash than is ours. but IL does not
periodically cceapse. as does ours. De
cause the English people have great
confidence in their banking system
They 90 not rush madly to their banks
in times OF financial stress. as we 40
for the purpose of converting property
into gold.
No banking system can Withstand
mad scramble for gold. or the sl25.-
go0. OO0. coo OF wealth in the United
States. only slSvo, 900. 600 is in the
form OF gold coin and bullion. Any ,
general attempt 10 convert wealth into
gold must quickly result in disas-
IRONS collapse OF the credit machinery.
II the railroads turned all their
freight and passenger earnings into
hard cash" they would empty the
hanks Of money within a few months
II the farmers sold their crops for
cash and boarded the money as fast
as II came in. they would have every
cent Of money in the country long
before they had marketed the pro-
ducts of single season.
The barbarians OF old had some sue
cess in keeping their wealth in the
precious metals, but civilized peoples
do not secrete idle boards OF the
worlds money. II is a Illuminating
fact that in recent years Americans
are the only people who have engaged
IN barbaric struggles to convert prop
erty into hard cash" The 1907 bank
ing collapse was the result of a bar
barrie panic-strikeu attempt OF bank
.IeposItors TO convert their credits al
the banks into cash. The banks could
10 more perform this miracle than they
could convert base metal into fine
gold They had to stop paving cash
strength of the single-Reserve System
England. France and Germany no
longer have money panics. because
bank depositors abroad. even in times
OF financial stress, do not attempt the
imposslbiIity of converting their
wealth into gold. The Bank of Ing
lan6 and the whole English banking
system would collapse II depositors
suddenly demanded gold
single-reserve system commands
public confidence ana prevents the col
lapse of credit 4 many-reserve sys-
TEN so scstters reserves that they are
unavailable and insufficient IN time
81 need.
While We have a many-reserve sys
ten. in which every bank holds It's
own cash reserves. we have. as re-
suit o. rcdepositing. such concentra-
ton Ct banking reserves In New YORK
as 70 give US the semblance Of a sim
gle-reservs system during periods OF
financial quiet But when the emer-
gcncy arises and reserves are aeede1