Ashland tidings. [volume] (Ashland, Or.) 1876-1919, 1913-08-28
ASHLAND TIDINGs
year. the government to retire the notes at that


terprise justifias this means and that the plan
does violence to established national financial
precedents. In support of this 1 refer to the
national banking act under which the government
issued $50 million dollars of national bank notes
and loaned them to the banks of the country
government bond security. These notes are still
in circulation. 1 further encouraged in my
belief of its soundness, in finding a provision in
the proposed currency measure now before
congress by which it is proposed that the govern
ment issue 500 million dollars more loaning the
sum to the proposed federal reserve banks accept
ing as security federal, state and municipal bonds
and prime commercial paper. This new currency
measure goes farther even, than that, for it pro-
poses to discontinue the of national bank notes
and substitute therefor federal reserve bank notes.
secured by prime commercial paper, state and mu-
nicipa bonds
This is neither the time nor place to discuss the
merits of the proposed Owens revision of the
currency measure. 1 contend only that to issue
federal good roads notes. based on state bonds
security, is sound in principle as to issue ma
tional bank or federal reserve bank notes based
on prime commercial paper state and municipal
bonds. No argument is needed to enforce the
economy of it.
But, let here dwell for moment on the ex-
pedency of the government increasing it's promises
to pay in gold to the extent of 1 billion dollars.
The government has now in circulation in promises
to pay on demand $50 billion dollars in national
bank notes and $50 million dollars in treasury
notes. besides gold and silver certificates enough
to equal the total bullion in the government vaults
Some contend this is about much as can be
kept at par with gold without opening the way for
expensive manipulation against the national treas
ury. This conclusion, l think, is not justified by
the facts except upon occasion of such battles with
windmills as was engaged in by the government
under the Cleveland administration. The govern
ment is wiser and the recurrence of such an
attempt would meet with signal failure.
The banks of the country flourishing under
a system of bank promises to pay in the proportion
of IT dollars in promises to " of lawful money
with which to liquidate
On June go last year, according to the report
of the comptroller of the currency, there
billion 964 million 500 thousand dollars in coin
and other lawful money in the United States
OF this 1 billion 700 million 700 thousand was
in the pockets and tills of the people.
Leaving but billion 563 million 500 thousand
D. in lawful money in the banks.
Statistics show, however that the same date
there was on deposit in the banks of the United
States II billion "a million 67 thousand 6O6 dol
lars and SO cents.
That is, the banks had deposit 13 billion
759 million 567 thousand dollars more than there
lawful money in the country at the time.
They owed their depositors Is billion 759 mil
lion 567 thousand dollars more than they had law
full money to pay. Under this situation we
slider the banks solid and they for, where they
lack in lawful money they have ample assets in
solvent promissory notes.
Under our present financial system bank depos-
its largely represent, lawful money, but credit
The proportion of coin and currency in all forms
averages less than per cent of the total deposits
The American people, through our banking system
the creators of currency upon which 95 per
cent of the business of the country is transacted.
r. In effect deposits credit and checks
rency. Currency, then, is simply lquified solid
assets. The individual asset is liquified through
promissory notes and made current through
checks 1t is proper to say then, that 95 per cent
of our circulating medium is bank money based
upon interest-bearing promissory notes secured or
unsecured 1t develops under this system that
banks are machines for the liqufying of solid
assets and the interest charge is the toll. Like
grst mill converting wheat into flour and charging
toll for the work. In theory the function of bank
ing is to trade in money; in practice 95 per cent
of the transactions are in credits.
In pursuing this argument l shall apply the
term legal tender to all forms of coin and paper
money issued by the government in contradstinc-
tion to "banl credit money"
In practice every individual corporate, govern
ment, municipal and state bond note when
accepted by d bank and placed in open check
ing account is transformed at once from solid
asset to currency, and the bank has coined its
equivalent in ''bank money which performs the
same function as legal tender. Technically the
government is the only agency empowered by law
to coin money, but in practice every bank in the
country every day, coins, issues and retires it's
fiat currency, and in doing so it is found to
be altogether profitable to the bank, because for
every dollar it coins it charges interest rate
In other words, when society borrows from the
bank it borrows credit not money, and the bank
takes toll for liquefyng solid asset. Under this
system credit has expanded that 95 per cent
of the currency of the people is interest bearing
bank-created money while government promises to
pay constitute less than per cent of the whole.
1 submit that the high cost of living, rather,
the low purchasing power of the dollar, is charge
able more to excessive expansion of credit than to
over-production of gold The interest element in