The Rock Island Argus and daily union. (Rock Island, Ill.) 1920-1923, 1922-05-24

Bank of England has issued invita-
tons to the central banking instl-
tutions of the principal nations OF
the world to attend a conference,
the purpose of which will be to
study questions relating to paper
money which have arisen as a re-
suit of the war The federal re-
serve board, which stands at the
head of the American banking sys-
tenn, has received such an invita-
ton and probably will participate.
Such a conference as this is deem
ed necessary at this time because
of the tangled condition into which
the paper currency systems of the
world have been thrust by the
business abnormalities of the war
and the post-armistice period.
Money is an invention, designed
for the convenience of mankind,
just as much as the cotton gin or
the printing press are inventions.
In fact there is less actual value to
money of any kind than 70 a me-
chanical invention.
Metal money, such as gold, sill
yer, and copper. has more real val
ue than paper money but not much
more. These metals have beauty
and strength but they cannot be
eaten or worn. They are valuble
as money because all people have
agreed to consider them so. They
were selected because of their con-
yenience in handling.
Paper money merely is another
step. A paper dollar has very little
actual value, but the American peo-
pie have agreed that they will pre-
tend that it his a fixed value and so
it passes for the equivalent for that
amount. Money of all kinds con-
stitutes striking contrast of what
people can do by agreement First
the people agree that gold shall
have a definite value, then they
agree that a bit of paper which
promises the payment of the gold
shall have an equal value, and the
scheme works. Paper money in this
part of the country is taken in pref
erence to gold because it is easier
to handle.
But the scheme works only so
long as confidence exists in the
ability of the central bank, or the
government, to come forward with
the actual gold when it is demanded.
And the gold itself only has value
so long as the nation in which it
circulates has goods which can be
purchased with gold or paper
promises to pay gold.
| There is an old legend of man
who starved to death on a noun
tain of gold. In terms of gold he
was the richest man in the world,
| but his wealth was worthless be
cause there was nothing to spend it
| for. These facts must be under
stood thoroughly to make possible
| a comprehension of how money
systems work In modern times
there never has been a complete
absence of food and clothes as in
the case of the man who starved 10
death. But in the past few years
there has been an abundance OF
gold in the United States and a rel
| alive scarcity of things of real
value. The result has been an in
crease in prices. That means the
gold has not been worth so much.
The American paper money sys-
TEN now is working better than
any in the world. The bulk of our
paper currency is issued by the fed
eral reserve banks and it is based
to a large extent on things of value
rather than on gold. This is rec
ignition of the fact that gold, after
all. is an artificial value.
What Paper Bill Represents.
The crisp note you get in your
| pay envelope may seem to come out
of nowhere at the waving of q
magic wand. AS a matter of fact
what you hold in your hand is
merely a token for a bale of hay
a bale of cotton, bushel of pota-
toes or pair of silk stockings
! This is how it happens:
John is a shoe dealer. He or
ders from a shoe manufactured
$4,000 worth of shoes. He must
pay the manufacturer at once, so he
goes to the bank and borrows
| $4,000 on his note, which is secured
| by the shoes. Now the bank has
made many similar loans to other
dealers, in all kinds of things tax
| ing notes secured by the goods
| themselves. 1t finds itself out OF
money. Therefore the bank gath
ers up all these notes which run
| from 80 to 80 days, and takes them
| to the federal reserve bank The
federal reserve bank lends to the