Evening star. [volume] (Washington, D.C.) 1854-1972, 1913-10-15

changes in our banking system, said
Mr.. Gardin, is the protection of our
gold supply. The United States is the
only absolutely free market for gold in
the world, and we have to suffer for
our liberality.
IF conditions are normal and ex-
changes are against us, it would neither
be wise nor good business policy to place
any restrictions upon the export Of gold
at all, but If We see that an export of
metal under such circumstances would
still further aggrevate an already strain
ed condition, it would be perfectly prop
ed to apply the brakes, particularly SO as
recent legislation has made it easier to
obtain bars than formerly.
Executive Power Deterrent Effect.
Now, how to do this is the question.
We could add a premium to the cost Of
gold, but this premium could not be
placed higher than one-quarter Of 1 per
cent, as that is about the difference be-
tween bars and coined gold. This pre-
MUM could be made on a sliding scale.
about the limit of arbitrary action. OF
course all Of this is predicated on a
legitimate export demand on the basis
of exchange rates.
IF the demand, however, is an arbi-
trary one, such as recently took place in
connection with gold shipments to
Paris, the President Of the United
States should be empowered to proclaim
an export duty on all gold exports UNI
less 1t can be shown that the export is
taking place strictly on the basis of pre-
vailing exchange rates. This power
would never be invoked, but it
would have deterrent effect.
Must Stand Three-Fold Tests.
A bank note system, to be successful.
must stand the three-fold test of ultimate
security, prompt convertibility and elias
ITCHY, and by this test the note issue
provisions of the Glass-Owen currency
bill should be judged. Prof. Z. w. KEN
merer of the economics and finance de-
partment at Princeton University declar-
ed today in a paper read before the con-
ference.
Prof Kemmerer in his address subject
ed the bank note system provided for in
the pending currency measure to the test
he outlined. Taking up first ultimate Sc
curity, he cited a need for government
responsibility that shall be legal as well
as moral. The chief criticism Of the Sc
curity feature of the bill, he said. re-
lated to the manner of the government
responsibility for the ultimate redemp-
ton of the notes, "a corollary of which
is that the notes should be issued by the
regional banks by an official or body
representing the government.
Responsibility of Government.
Critics have argued, Prof. Kemmerer
pointed out, that in time Of great ma
tional danger the governments response
bility for the note issue might greatly
impair its credit.
But suppose the provision making the
government ultimately responsible for the
bank notes is stricken from the BILL"
Prof. Kemmerer continued, will the gov
eminent thereby be free from the respon-
sibility? A lawyer, with his eye on the
letter Of the law, might say yes. A states
man or a social philosopher would I'M
hesitatingly say no.
when the government gives to politl-
calIy appointed body like the federal re-
serve board great power. it assumes,
through that board, great responsibility.
1t would be morally responsible for the
integrity of the note issue even without
any legal responsibility, and the public
would hold 1t so.
Force Of Responsibility.
THE force Of this responsibility is made
more evident when We remember that
these notes are receivable for all taxes,
customs and other public dues; that they
viii presumably be held as legal reserve
money by non-member banks. and that
the banks issuing them are the sole de-
positories of government funds and the
fiscal agents OF the government. With or
without the guaranty the government
credit is at stake. Why not frankly admit
it and make the obligation legal as well
as moral?'
Prof. Kemmerer in discussing the por-
ton of his test relating to prompt con-
yertibiIity expressed opinion that the bill
would be strengthened If both notes and
deposits were made payable In gold. The
fact that deposits in regional banks count
AS reserves of member banks, while bank
notes of regional banks cannot be counted
as reserve money by member banks.
makes it especially desirable that the
deposits as well as the notes be made
redeemable in gold" he said
Another Defect in Bill.
Prof. Kemmerer described as another
defect in the bill' the small minimum re-
serve requirement for regional banks. de-