Manchester Democrat. [volume] (Manchester, Iowa) 1875-1930, 1914-10-14

Ube Mat1rDf8tfr Bet11ocrat
Subscription. | VI. IN advance, $3.50.
Official Paper of County and City.
&. M. Carr, Hubert Carr. Wade L.
Long, Fred W. Hermann.
Editors and Proprietors.
WEDNESDAY, OCT, IL. 1914.
SECRETARY McADoo AND THE
BANKS, 4
Secretary McAdoo is not alone a
stinancier of generally recognized abil-
ity but he is also a man possessed
of nerve and Judgment to a remark
able degree. Without such a man at
the head of our treasury department
the business of the country would
be seriously intereferred with by.
the worldwide financial conditions.
Gold is the standard of values, not
alone in this country, but in all the
countries Of Europe. Gold, unlike pa
per money, has intrinsic value. Most
all paper money is nothing more than
promises. to pay. For several weeks
before the war commenced in Europe.
the bankers Of that continent com
menced grabbing for gold. They knew
that in the event Of a war credits
in hostile countries and paper ION
t5ey could not be implicitly depended
upon, and to get gold they offered
for sale on the stock exchanges of
this country the best class Of Ameri-3
can securities for any price they
could get but all purchasers were re
quired to pay in gold.
The %financiers who are %contending
that We can export several hundred.
millions Of gold to- Europe without in
any manner disarranging the finances
Of this country are not telling the
truth.
They want to use American gold
in the purchase Of securities from
foreign bankers at much less than
their real value. Such purchases,
while quite profitable to the purchas-
ers, would be detrimental to our bust
ness interests 4 5* ,a
Suppose that bank has fifty thou
sand dollars capital and a merchant
borroWs five thousand dollars from
ut. He does not want gold, but wants
a credit upon which he a draw
checks and many OF the checks drawn
by him are deposited in the bank by
those to whom they are given. 9th
er CUSTOMERS get loans in a like man
ner and the checks given by them
are also deposited in the bank. Thus
in time this banks. deposits run up
into the hundreds of thousands. But
the law interposes check upcnfthis
deposit building process. 1t requires.
the bank to hold a certain percent
age Of its deposits in gold or legal
tender money, which calls for gold
upon demand at the United States
treasury.
To export gold is equivalent to ex-
porting bank reserve, and upon every
dollar of bank reserves several dol
lars Of bank credits rest;and itfollows
that the expectation of large quanti-s
ties Of gold would cause a contrac-
ton Of bank loans and a general dis
arrangement Of business. =
When bankers are unable to
maintain their gold reserves, they
mark interest up so as to curtail loans
and hold their deposits within the re-
$Quired limits.
On the other hand, the banks that
have reserves far in excess of the
legal requirement and refuse to make
loans at reasonable interest rates,
are public enemies instead of public
servants. Such banks have no ex-
cuse, other than mercenary motives
for increasing their interest rates
and curtailing their loans. Secretary
McAdoo is waging war on that class
Of bankers, and he is being supported
by the business interests Of the cou
try. t..