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

| tall Gail STE III lSdooll WY SI]il
gress shall now legalize, much less
compel, the association OF banks in
any degree. Let it give to each com
munity the means of self protection.
That will be far better
"When the currency has been eX'
banded, as you suggest, how can all
this money be retired?" | asked. Mr..
Shaw said:
How the Money Is to Be Retired.
Don't you see that it will not be
necessary to gather up these notes
and retire them? That is one OF the
advantages Of the plan. You must
remember that these notes are to be
identical with the ordinary notes Is
sued by the banks. When the bank is
prepared to stop paying the or 6
per cent tax all it will need to do is
to deposit a like amount of currency
at sub-treasury; then the bank Will
have contracted the currency to the
same extent that it expanded it. This
deposit must be held, of course, as
special redemption fund against which
these notes will be charged as they
are returned for redemption. Thus
| in one hour an expansion to any re-
| quired extent can be effected and in
thirty minutes a corresponding con-
| traction can be made"
"Will not banks ask this privilege
at improper times %
Mr.. Shaw shook his head. mo bank
would dare ask it, he said. Sup
pose that some bank should ask the
privilege of issuing supplemental cur
! rency during normal financial condi-
tons. The answer would be bank
examiner, for request at such time
would indicate condition of the bank
that made the request, rather than a
condition of the community. II
thought best the law may provide that
no permission to issue supplemental
currency shall be granted by the sec
rotary of the treasury except by the
joint request of certain number OF
Institutions located within the same
section of the country. There is no
objection to every possible safeguard,
so long as the plan is left workable
without delay. If this plan had been
in operation in 1907, the banks OF
New York could have communicated
with Washington and the secretary of
the treasury could have granted per-
mission and the supplemental cur
rency could have been issued and
there would have been no panic"
Changing the Form Of Notes.
Further discussing the details of
the proposed plan, Mr.. Shaw pointed
out that a slight change would be
necessary in the form of national
bank notes. He said:
"Originally, national bank notes had |
cd CT 70, RI tho Of |
feet that they We're secured by deposit |
of government bonds. 1t would be |
necessary for the national bank note
to bear a statement to the effect that |
Payment on this note is guaranteed |
by the government of the United
States.
Mr.. Shaw drew himself up and laid |
a heavy hand HAT upon his desk. lie
looked at me steadily for moment |
and said:
Frankly, admit do not like this. |
The government ought not to guaran
tee paper. We have gone, however,
too far and the people are not pre-
pared to accept currency with any |
less security than government guar
antee. Today there is nothing back of |
the United States notes except the |
guarantee of the government. Nation
al bank notes secured by government |
bonds have the guarantee of the gov
eminent in it's promise to pay the |
bonds. The principle is bad, but it is
too late to change it. The principle |
is illogical, but our entire system is
illogical. l told you this plan is sub.
ject to objections, but to my mind |
it has less objections than any other |
and the objections to it are stronger
in theory than they would be in
practice"
The Experience of Germany.
"You said the plan was an old one,
Mr.. Shaw" l asked; ''has it ever been
tried?"
YES" he said, ut works we'll in |
Germany. The Imperial Bank of Ger
many issues notes subject to very |
small tax like the ordinary tax we
impose upon national bank circula-
ton, until it's volume of outstanding |
notes exceeds a certain ratio to the |
gold in its vaults. But when this linn.
it is reached expansion is not shut |
off with sudden jerk. The Imperial |
bank continues to issue notes, but |
pays to the government tax at the |
rate of 5 per cent on all the supple |
mental currency. AS the bank nears
the high tax point it raises the inter
est rate. Hence while the volume of
Bank of England and Bank of France
notes expand and contract about 10
per cent per annum, the notes of the
Imperial Bank of Germany expand |
and contract 80 per cent per annum.
1t is elasticity we desire, then the Ger.
man policy of heavy tax upon sup
Elemental or additional currency is not
only the surest and safest way, it is
the only way.
The Credit System at Fault.
$50 much for remedy in times of
stress. But We can improve our COM
mercial conditions to the point where
panic will be almost impossible by
improving our credit system, which is
also faulty. In every other CONNER
cial country in the world when goods
are sold on thirty, sixty and ninety
days time draft is made upon the
purchaser at the corresponding date.
The purchaser examines the goods,
signs the word accepted across the
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