The Fargo forum and daily republican. [volume] (Fargo, N.D.) 1894-1957, 1913-07-14

the government and one which might
u embarrassment.
IF the notes were the obligation OF
the federal reserve banks alone. ard
properly secured, any emergency
which could possibly cause a default
in the payment Of gold would not at
feet the credit of the government and
would leave 1t free and unhampered
to use it's influence II prestige TO
bring about stability, whereas If the
promise of the government to redeem
these notes in gold should be linked
with hat Of the federal reserve banks
and a default should occur neither
would be free to assist the other.
In case OF war with a foreign ma
ton making it necessary for the gov
eminent to use its credit freely, its
guarantee Of the payment OF these
notes in gold would, no doubt, impair
it's ability to Borrow on the most ad-
~Vantageous basis, and it would at the
same time, through SO materially in.
creasing it's obligations, cause more or
less apprehension concerning such
outstanding notes; and If a condition
should be created through which the
public would doubt the ability Of the
government to pay gold against these
notes, gold would be boarded and the
| notes would depreciate in value. Fur
thermore than this, the n in
which they must be gotten into circI-
lation is unscientific and would have
a tendency for imitation, for any plan
which does not force immediate auto
matte redemption of a bank note, once
it has served its purpose, is built upon
u wrong premise.
Much confusion regarding bank
notes Is created through the fact that
many regard them as money. This Is
a fallacy, for nothing could be further
from the truth; they are, in fact, only
instruments of credit given such form
that the public will know they are Sc
| cured and are generally accepted as IA
circulating medium; they perform the
| same functions as a check. and If thew
are effective and are outstanding only
to the extent Of the requirements OF
| business, they, like checks, should be
Cancelled when paid.
Proposition of Bankers.
"Instead of the plan as proposed in
| the bill, we recommend that the notes
| should be issued by the federal reserve
banks, each note to- be similar in ap-
pearance, but that each should bear
upon it's face the number of the issu-
ing bank. We proposed to make 1t the
duty of one federal reserve bank to
daily charge to the account OF, cancel
and send to ,each of the other federal
7 reserve banks, notes received by it in
| any a s DuSlnSSS. Illus, Jain 1NO. L
would daily cancel and send 10 the
other eleven federal reserve banks all
their notes received that day, and the
other eleven banks would in like man
ner charge to the. account of, cancel
and send to federal reserve bank No. l
all of it's notes received by them in n
one day. In this there would
be a constant, automatic redemption
Of notes outstanding, and no more
notes could be kept out than the exact
amount necessary for the transaction
Of our business.
1--WE proposed that n federal re-
serve bank to issue these notes should
carry a so per cent gold reserve
against its liabilities Of all kinds (be-
ing Is 2-3 per cent more gold than is
required in the plan proposed in this
bilD and tina the said notes should be
secured by the liquid assets of the is
suing bank, thus becoming a first lien
on all it's assets. In addition thereto,
they would have behind them the
stockholders double liability. and even
beyond this should be, subject to the
notes issued by such banks, a first lien
on the assets Of all the other federal
reserve banks. O
at is inconceivable that a bank note
could be better secured, n this sort
Of note, while being equally as safe as
the one proposed in the bill, would not,
in any way entail any liability upon
the government, and in the event Of q
default in the payment of gold against
such notes the credit of the govern
mont could not in any wise be affect
ed, thus leaving 1t In the attitude OF
being most powerful to restore order.
I'VE believe that the theory of tax
ing notes to enforce their redemption
is wrong in principle and practice, .an[
as a substitute for this plan n witt
a view of securing a system which
would prevent imitation, we suggested
that q federal reserve bank should is
sue notes without tax so long as II
should maintain a so per cent gold re-
serve against its total liabilities, IN
Guiding deposits, but that such notes
as it should have outstanding when its
gold reserve would fall below SO per
cent should be taxed at the rate Of IL
per cent for each 2h per cent it's gold
reserve should fall under so per cent
down to 33 1-3 per cent. In practice
this would mean that a federal reserve