The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1913-01-19
IN SAFEKEEPING
FOR ITS OWNERS
Nation Loses Prestige and Po-
tentiality That Would Belong
to 1t if Hoard Was Banking
Reserve Against Which
Additional Curr ncy
Might Be Issued.
By GEORGE T.. ROB ERTS.
Director of the United states Mint,


gold in the world. IL has the creates
store of gold in reserves. and it's re
serves are effective for the maintenance
of its paper currency at par. but lament
ably Ineffective for the support of 1t
great fabric of credit We have no or
ganization for the support of credit. o
by which our ample supplies OF goIt
may be used for that purpose The bill
lion of gold which backs our gold Ger
tifcates gains nothing in i'm portance b.
being gathered together in one great
store II might as well be IN Circulation
In place OF the certificates fIhe gov
eminent 10 simply taking care of IL foi
the owners. Inc country loses the pres
tigc and potentiality that would belong
20 A. If IL was a banking reserve against
which additional currency might be Is
sued when needed instead OF an inert,
nfeiess mass. whose power ID lost IN ns
scattered ownership
There is a very common misuiloei
standing of the meaning OF the VII
credit" when used as a BANGING yer ~
Some people associate II WhOhJ "'NH
advances OF money or goods upon 80.
INT credit is also a substitute Tor money
in ash transactions When customer
gives a merchant d check for Din OF
GOODS and the merchant deposits tne
check for his own bank account ait1
simultaneously draws agalns. IT. u eu's
- being used and great convenience
and economy are effected over pay in men,.
of money from hand TO HAND @
r1aYments are between distant iocaieieD
me advantages are obyIonsy greater
rThe great bulk Of the payments or
tween the East and West are accom-
slished BY offsetting the purchases
they make OF each othe:- ne sIeo
bulk Of the bank deposits OF the coun-
try are created in this way. and not oy
OF this involves the use Of cieq'.
This method Of doing business wiz hoe
be changed - The puoiic VITA hot ~
back TO q greater use OF money lfon'
hand 10 hand on the contrary, IL - ger
tain that the various forms OF oanA
credit will more and more become the
means by which Payments are Eidos-
!, is generally recognized that there
must be some way b. which the banks
80, act together in time OF panic, using
her CONT ineG credit. for mutual sup
mort but many who favor authorizing
currency issues for this purpose give
no thought 10 the organization OF
great reserve behind these issues ana
ve- IL is fundamental in sound finance
ma ali currency issues shall have d
direct relation 20 an ample reserve
Narrower. there is always real basis
for the fear that facilities for extending
rsne credits may result in an undue
initiation Of such credits No provision
against money panics Is sufficient that
does not afford means Of checking the
imitation of credit before II has reached
the po.nt where collapse Is inevitable
and manic results. There must be some
common policy among the banks OF the
whole country II these recurring crises
are to be avoided. An unhealthy state
of initiation and other evils that weaken
the banking situation are TO a great ex-
81
petition. There Is competition not only
between banks of the same city. but
between banks OF rival cities NO lines
can be drawn arbitrarily dividing and
apportioning the business of the coun-
trv between banking districts The
country is one business field, and there
can be no adequate supervision or reeu-
lstion Of the banking business that Is
not national in scope
Superyision Must BE National.
The pending plan for currency reform
proposes a national organization, al
though provided with branches tnst are
10 be in large degree independent on
their operations. The moment IL is
proposed to divide the country into dis
tricfs. and to rely upon a wholly ince-
perdent currency association IN each
district the questions arise. where
shall the gold reserves be maintained
who snail responsible for them, and
tious take 70 protect the gold stock OF
the country,
In countries where the entire banking
system IL affiliated with central insti-
tuition at the head, this institution Is
charged with the responsibility OF pro-
tecting the gold reserve The officials
of the central Institution are in position
10 know tbs demands that are likely TO
be made upon the reserve in the near
future They know the conditions of
trade and industry. the degree to which
credits are expended. the state OF the
foreign exchanges. the rates OF discount
in other financial centres. and all OF the
signs that tell Of financial weather II
n IS time TO check the expansion Of
credits the discount rate Is advanced.
and IL the FIRST advance Is not effective.
another IL made. and others until the
desired result Is obtained. rs the rate
advances. tho other banking institu-
lions. which must look TO the central
organization 20 rediscount their paper
naturally conform - its policy. and
thus an influence nationwide - OK
crfcd 20 curtsii expansion and TO re-
ducc the liabilities which directly or
indirectly are = charge upon the reserve.
Power OF the Discount Rate
In these modern times an advancing
rate for money in one country will
ouioklv divert an important body of
loans to other markets. and this is fire.
oucnfiy sufficient TO restore the bal
ance in tho exchanges and avert the
movement OF gold.
Most Of these central institutions for
ufy their position By the practice %
regularly carrying good amount OF
foreign bills. which constitute thcir
frat limo Of defense against adverse
baianccs These billie are az good an
offsct against the country upon which
they arc drawn 80 gold ~. the reserves.
The practice Of carrying certain high
class securities. particularly govern
rnent bonds Of the copntries an which
the chief financial markets are stu
sted which have a constant market
with narrow fluctuations. 10 similar
method of maintaining an international