Rock Island Argus. (Rock Island, Ill.) 1893-1920, 1919-02-08
'W0RLDBANK'
PROPOSEDBY
U. S. RESERVE
Federal Agency Suggests
Plan for international
Gold Exchange.

Washington, Feb. S.-Willingness
to unde take development of an in
ternational gold exchange fund TO
facilitate financial transactions be-
tween nations without actual ship
ment of gold, was expressed today
by the federal reserve board in its
report for 1918. This arrangement
would be similar TO that now main
tanned by the board to settle bal
ances between banks within the
United States.
The fund might be developed
among the entente nations and d
few leading neutrals, but il is con-
ceivable that all civilized cOun-
tries may eventually be partici-
pants" said the board. The gold
would be deposited in trust in some
government bank or banks to guar
antee exchange obligations and it
was proposed that the fund should
be limited to current commercial
and exchange transactions.
Referring to the settlement of
trade balances in this country
through the federal reserve clear
ing channels, the report said:
THE successful operation of the
gold settlement fund has suggested
the possibility of avoiding ship
ments of gold from one country to
another in settlement of balances
arising out of ordinary CONNER
cial transactions. and the board is
ready to assist in any way in its
power in negotiations which may
be begun with its development look
ing to that end.
THE saving of loss and expense
incident to abrasion and transpor-
tation charges and interest on gold
the advantage to the commerce of
the world will be incalculable."
Reveals Great Task.
The report disclosed for the first
time the extensive operations of the
federal reserve boards s-stem of
regulating exchange transactions of
the past year to prevent dealings
on enemy account.
The report told how the federal
reserve system in this country func-
toned in cooperation with the
treasury in the tremendous war
tasks of raising Liberty loans. float
ing certificate issues, settling trade
balances, discounting billions of
commercial paper, assisting in the
rationing of capital and providing
free channel for flow of credits
to all parts of the country where
they were most needed.
THE ability of the country to alb
sorb investments has proved TO be
far greater than had been antici-
pated,' said the report, and our
credit structure, although expend-
ed, is unshaken We have no cur
rency problems, and conditions are
not comparable with those which
existed at the close of the Civil war
True, the purchasing power of mon
ey has declined, but this is due to
the urgent and abnormal demand
for goods and services and the ac-
companying expansion of credit and
currency"
The board predicted that bank
ing credits now concentrated in
this country soon would be extend
ed throughout the world with the
development of foreign trade.
Warns of Post War Danger.
Warning against danger in the
postwar readjustment, the board
said:
Drastic contraction would be
followed by results no less disas-
trous than those which would at
tend undue expression. and the pro-
cess of defiation must therefore be
- nI tn tInvr,nnI,-ap
in a gradual and orderly manner
discount rates, which for the past
Is months have been based on the
rates born by the government is
sues, must for the time being con-
tinue to be fixed with regard to
treasury requirements. but when
The war obligations of the govern
ment have been digested and the
invested assets of the federal re-
serve banks have been restored to
a commercial basis, rates can he es-
tablished with reference to the com
mercial requirements of the coun-
try"
An idea of the service rendered
by the federal reserve system in
connection with war financing NAV
D6 SdlItu lIOLi Llle report IDdl since
the war began s31. .452 100000 of
Liberty bonds and certificates of in
have been subscribed for
and collected through the IL re-
serve banks.
Re-discount operations between
tie reserve banks during the year
were reported as $685., ,63S 900.
Stands Strain Well
Despite the big strain on the re-
serve system the surplus over the
J required reserves have fallen only
SIT. 100000 since the declaration of
war. The so-callei free gold or
surplus of reserves on Dec. 27, 1918,
was reported as 1928, 100000 Ag-
gregate net earnings of the banks
were $55,446, 900 last year
The federal system now includes
926 state banks and trust companies
with aggregate capital and surplus
of $750.000.000 and aggregate re-
sources of about $7.339. .000. 900 the
hoard reported. The number of
state institutions eligible for ad-
including those now mem
bers. is $500 with resources OF
about $13,500, 900, 900