The Birmingham age-herald., 1913-01-19
The Wage Garner Suffers
From the Monetary System

coming when depositors will be clamorlnS
for cash. So he calls in all outstanding
loans he can. and selfishly grasps for gold.
II is the fault that he must do this
It is the fault of the system under which
he conducts his operations. Praise should
be accorded to our National bankers for
the fact that the notes ttev issue have
always been redeemable at their face
value. and that they have suffered but
few disastrous failures. But. owing 10 the
defective system under which they carry
ON their work, they have been derelict
time and again to their larger duty which
lies in their obligation TO maintain such
conditions that wages will be promptly paid
and opportunities for employment gener-
ally steady. As the servant of the public,
they should maintain such conditions;
and. since we have excellent bankers,
they would undoubtedly maintain them
were 1t possible.
Effect of Panic
Our national bank act requires that
the banks operating under il ma intain
certain proportion of cash reserves
TO their liabilities. When their reserves
fal TO a certain point they must stop
loaning. That Is what happens when
crisis comes. The consequence is that
the employer--a manufacturer. let us
say--fnds that he cannot obtain ac-
comodation TO carry on his business.
He may have primo security to offer
for a loan His business may be -four
ishing, and he may be eager to con-
tinue II. But IL he cannot obtain cap
ital, he must curtail it or shut down
his plant altogether. His largest cash
outlay is pretty certain TO be his pay
roll. So he sets about to reduce that
He may do 1t by laying off part of
his force, and he may further retrench
by cutting wages lie may, as SO many
manufacturers did in 1907, close his
plant. a
Now this occasions the manufacturer
certain temporary inconvenience
nothing more. He is losing the interest
on the money invested in his plant and
the profits from his business. But he
has an extended credit with. trades
men and life goes on with him pretty
much as 1t did before the crisis came.
How different Is tho situation for his
employesi Even If they have an ac
count at a savings bank, they are as
likely as not to be told that they can
not get the cash. The banks may be
forced TO suspend specie payments. And,
granting that the cash is obtainable,
the wage-earner's slender savings are
soon dissipated when there is no week.
ly pay check to supplment them. So,
finding himself with his earning ca
pacdy annihilated,. through no fault of
his own, the workman faces privation,
perhaps actual hunger
Increase in Poverty
Sherman c. kingley. former secre-
tary of the Chicago Relief and Aid so
ciety, now called the United Charities,
has compiled figures showing the ef-
feet, In a limited measure, of the panic
of 1907 on the worisingmen of that city.
Prior to the panic, the society was
spending from $4,000 to $4,000 year.
and was handling from 5000 to 1000
cases. In the paDic year its expendi-
lures jumped to $l25,000 and the num-
ber of cases doubled. Moreover, Cen
tral Relief association was formed 10
meet the emergency, and it spent about
as much as the other organization.
The explana ton lay in the fact that
many an industrious workman, sudden
|ly disemployed, was put to the humilia-
tion of soliciting public charity. A
banking system under which such q
condition is possible is disgrace to a
great and powerful commercial nation
There can be no permanent safeguard
for the business man, the depositor,
large or small, and the wage Garner,
unless banks have a permanent market
for a certain kind of asset There can
be no assurance that our banks will not
have TO resort to the dissraceful ex-
pedient of suspending specie payments
unless they pool their resources, so as
to put the strength of all the banks
behind each of them.
The kind of asset upon which the
banks should depend, and for which
they should establish a national mar
ket should be commercial paper. In
Europe this paper is regarded more
highly than government bonds. 1t rep
resents actual goods in transit from
the producer to the consumer, and, as
they say in London, pays itself"
Protection for the People
Having such paper in his portfolio,
with the certainty that he could redis-
count 1t with the central cooperative e
agency, banker need never refuse to
accommodate customer who offered
him proper security. No employer
whose business was sound and -four
ishing need ever reduce his payroll or
shut down his plant simply because he
was unable to obtain accommodation.
The wage-earner would never be
thrown out of work solely through the
workings of a bad banking system. He
would always be assured of a steady
position and regular pay as long as he
was equipped to earn his living.
| Our note issues should be based on COM
mercia paper, instead of being bond Sc
cured, as they are now. 1t is only by
| bringing about such a change that we
| can adjust the volume of our currency
nicely to the demands of business. Cur
rorcy founded on commercial paper must
expand to meet the needs of agriculture,
commerce and industry, and automatically
| contract when the need for expansion had
passed. If we had such currency, we
would not experience our seasonal money
strngencies. There would be in the tills
of our merchants and in the. pockets OF
| our workingmen just as much money as
might be needed for the exchange of our
prooucts.
| A cooperative reserve agency. IL one
were established, should publish a dis
count rate, made uniform throughout the
country. This would tend to equalize in
terest rates everywhere, and do away with
the distinct disadvantage under which
business in small towns and sparsely set
tied districts is carried on. owing to
| the high rates of interest prevalen there.
! If manufacturer must paw high rates
of interest for borrowed capital. he must
| increase the price of the goods he has TO
| ssll-the interest rate is an obvious fac
tor in the cost of production. The same
| is true of the farmer and the merchant
of every man who has 70 use borrowed
| capital.
Where the Difference Lies
| 1t NAV make no difference to the man
of means whether he pay little more
! for his shoes or his clothes or his -four.
| 1t may make great deal OF difference to
the wage-earner. 1t may even mean the
difference to him between reasonable conn.,
fort and the pinch of poverty. And here.
again as in everything else. reform OF
our banking system means more to him
| than TO any other man.
| | repeat that the wage-earner suffers