Evening star. [volume] (Washington, D.C.) 1854-1972, 1916-06-11

YORK I1ty, are SO "1uSn WITH
money at the present time. Newspapers
describe the situation by saying the bank
vaults are ready to burst or overflow.
That is fgurative, but good many per-
sons really fail to understand why there
should be so much more money in the
banks now than, let us say, two years
ago. Perhaps some folks feel they are
not getting their share of it.
Not long ago financial paper showed
that nineteen large manufacturing COM
panies actually had $3.50 100000 in cash,
or its equivalent, on December 81, 1915.
Probably the total is much greater now.
The United States Steel Corporation
alone had $l00,0O0,000. These great
sums had piled up because of the increased
business in steel, copper, munitions, and
similar products. The manufacturers
either had war orders or were selling ma
terials to companies that were filling war
orders. But corporations do not keep
such huge sums of money in their own
offices. 1t all goes into the banks.
One bank in New Y ork City practically
doubled its deposits in 1915, reaching the
stupendous total of 5000, 100000. Sew
eral smaller concerns doubled their de-
posts in the same time. In Philadelphia,
Detroit, Minneapolis, and other large
cities money poured into the banks al
most as fast. Why should there be so
sudden and tremendous an expansion?
The chief reason is to be found in the
importation of S4OO,OOO,OO of gold into
this country in 1915. Foreign nations
had to pay for vast quantities of sup
plies, and at times they had nothing else
to pay with. But it must not be supposed
that the bulk of the increase in bank
money consisted of gold
Most so-called money in the bank is
not money at all, strictly speaking.
A bank does great many different
things, but the most important work it
accomplishes is not very well understood.
This is to create money in the form of
bank checks. These bank. checks, and
not gold, silver, or notes, are what do
the work of the country. We call de-
post in the bank money and there is
perhaps twenty or twenty-five billion
dollars of such money in this country,
while there is actually less than four
billion in gold, silver, and notes.
A shoe dealer needs money to pay
the manufacturer. He goes to his bank,
gives the bank his note, and borrows
money which is placed to his credit.
He writes out check on the bank and
sends it to the manufacturer. So what
the bank really does is to exchange its
own credit, which is good anywhere, for
the shoe dealers credit, which is good,
but not well known enough to circulate.
The bank is protected because it is care
full to whom it lends and averages its
risks over great many different borrow
ers, besides charging well for its services.
Above all, it is not permitted to make
any loans unless it has certain legally
fixed amount of real money in its vaults.
$500, 100000 Came Here Last Year
lust one more point: Most borrowers
~ not only do not cart away the money
they are entitled to in gold, but they
actually leave on deposit part of what
they have borrowed. Even if borrowers
at once check out all they are entitled to,
which is rare, the loan is used to increase
the borrowers business, and this soon