The Denison review. [volume] (Denison, Iowa) 1867-current, 1913-03-12

Wy I1ellIV IN. Hall Ill IN. I. w OlIu.
Leslie NJ. Shaw, secretary of the
treasury from 1901 to 1907, sat Dol
upright in his high backed mahogan,
chair and gripped it's two carved arms
in his big, bOny hands as he swuns
round to face me. We had been talk
ing about the probable effect of {
general democratic revision of the
tariff and the possible enactment O.
trust curbing laws which Presiden
Wilson is known to favor.
1t was subject close to Mr.. Shaw
heart. His fine high forehead, bis
cheek bones and strong, virile nose
and chin gave great character to his
face. The eyes are deepset an(
searching-the eyes of an idealist, but
of an idealist whose enthusiasm has
been tempered by experience. 1t il
the kind of face that carries convic
ton, made more convincing by his
manner of speech, the quiet, confident
even tones which tell of a thorough
grasp of his subject. He impressed
me as a man who knew what he was
talking about and was undertaking
his case rather than eXaggerating it
He urged the necessity of banking
and currency reform as a most neceS
sary preliminary to any changes
which might affect the stability OF
business and industrial conditions
and said:
81 am against central bank, wheth,
er we call it a central bank of a
national reserve association of any
thing else, because l do not believe
that a central bank can succeed IN
der our dual system of government.
You see, we have forty-eight sovereign
states, each of which has banking
system of it's own, and we have a
union of states with a national bank,
ing system.
Weakness of the System. ..
"The one glazing defect in our cur
rency system is it's recognized want
of elasticity. Now, remember, elias
ITCHY does not mean the same thing
as expansion. The volume of our
currency expands every year enough
to meet the ordinary growth of the
cOuntry's business. It's weakness is
that it never contracts. We have no
less money, no less currency while
crops are growing and merchants are
on their vacations than when crops
are being marketed and merchants are
filling their stores. Why, the banks
of New York, if they wanted to, could
materially contract the currency dur
ing the summer months. But they do
not do it, You see, they pay interest
on their deposits, and the temptation
to earn something with the money in
hand is too great to be resisted Hence
loans are made on call, sometimes, for
purely speculative purposes, even at
the rate of l per cent per annum,
rather than let the money accumulate
in the vaults of the banks, which
would be the equivalent Of contrac-
ton. The national reserve associa-
tons, if ever We have such thing
in this country, will very naturally
want to make it's permissible per
cent, and to do this it will lower the
interest rate and keep the great vol
ume of it's notes in use at all seasons
of the year.
How Much Contraction?
"HOw much contraction ought there
to be in the currency of the United
States?" was my next question. Mr.
Shaw answered without moments
hesitation. He had all his facts at his
fingers ends.
NEARLY all bankers are agreed" he
said, 'that we should have $15O,O0O,-
900 annual contraction in currency
during the dull season of the year and
an equal expansion during the active
season, sometimes called the crop
moving season.
"NoW the monetary commission
published something like forty-seven
varieties of literature to establish the
fact-the theory, l mean-that a CEN
trail bank, or it's equivalent under an
other name, is the one thing needed
in this country but listen to this:
Nowhere in this great library is at
tention called to the most important
fact that the contraction in Bank OF
England notes seldom exceeds 8 and
ly, if ever, contract or expand as
never exceeds 10 per cent, and that
the notes of the Bank of France rare
much as 10 per cent. This is glar-
ing omission, for if it had published
that information it would have estab-
lished the fact that in order to get
the necessary contraction and eXpan-
sion in national reserve association
notes there would have to be an or
binary volume of these notes of at
least $1,50O,OOO,0OO. That would be in
flation to the limit and would spell
ruin in very few hours. But, clearly,
the normal issue must be $1,50O,OO0,.
900 or the annual contraction and ex-
pansion so sorely needed will not be
forthcoming. No sane man can con-
tend that our dual form of govern
ment of fifty banking systems and our
widely diversified interests will oper-
ate to increase the per cent of the
elasticity beyond that obtained else.
where"
His Plan for Relief.
Mr.. Shaw got up and walked across
to the window. He carries himself
with a slight stoop, but his step is
light and active. l asked him what
he could suggest in the place of a
central bank; what, in his opinion, con
gress could do. He walked up and
down for a few moments, then re-
sumed his seat and, swinging his
chair around to face me, said:
Congress is confronted with very
difficult and delicate problem. 1t is