Every evening, Wilmington daily commercial. (Wilmington, Del.) 1878-1928, 1922-05-27

WaanlnRtOn, may ne Dunn
England has issued invitations to the
central banking institutions OF the
principal nations Of the world to ct
tend q conference, the purpose Of
which will be to study auestions'relat- |
ing to paper money which have arisen |
az n result of the war. The Federsl |
Reserve Board, which stands at the
head Of the American banking system,
has received euch an invitation ana
probably will participate. Such q CON
ference az TIL, II deemed necessary
at this time because OF the tangled
condition into which the paper cur
rency systems Of the world have been
/, thrust by tho business ebnornslities
Of the war and the post-srmistice per
! Tod.
Money ia an invention. designed Tor
the convenience OF mankind, Just az
|, much as the cotton gin or the print
. ing press are Inventions. In fact there
In less actual value 20 reoney 81 any
/ kind than TO n mechanical invention
( Metal money. such 80 gold, silver
2 and copper. has more real value than
4 paper money but not much more
e These metals have beauty and strength
o but they cannot he eaten nor worn.
They are valuable as money because
h all people have agreed to consider them
SO. They were selected because ri their
:. convenience In handling.
n Paper money merely - another step.
/; a paper dollar has very little actual
8 value, but the American people have
n agreed that they viii pretend that IL
has n fixed value and 80 II passes FOR
. the equivalent for that amount Money
n of all kinds constitutes a striking eX-
Il ample IF what people can do by agree
p ment First the people agree that gold
} shall have a definite value. then they
% agree that A bit ~ paper which prom
ises the payment Of the gold shall
y have an equal value. and the scheme
n works. Paper money in this country
In Ia taken I'm preference 70 gold because
j, II n Is easier 10 handle.
N But the scheme works only 30 long
as confidence exists in the ability Of
- the central bank. or the government
- to come forward with the actual gold
I, when II IL demanded. And the gold
!, Itself only has value so long AS tho ma
: ton I'm which II circulates has goods
- which can he purchased with gold OF
paper promises ID pay gold.
:, There is a old legend Of a man whr
. starved 70 death on mountain Of gold
= In terms If gold he was the riches
man in the world. but his wealth wsi
worthless because there was nothni
20 spend n for. These facts must b.
ny understood thoroughly TO make posi-
- bic q comprehension Of how none.
CT systems work In modern times Their
eo never has been p complete absence n
Irr4h In ~
Cd man who starved n death. But in IN
;" past few years there has been a
1al abundance Of gold In the United state
cd aud ralativa scarcity If things n
no real value. The result has been an in
:. crease i'm prices. That means the EOl
ice has not been worth so much.
X The American paper money systeI
los now Is working better than any in tn
I'D world The bulk Of our paper currenC
sIn is issued by the Federal Reserve Bank
nd and It is based 70 large extent 0
a things Of value rather than on gol'
This is a recognition Of the fact the
Ter gold. after all, Is an artificial vsiue
T. what a Paper BHI Represents
The crisp note you get in your pa
n envelope may seem 10 come out
p. nowhere at the waving Of mag
St wand. As a matter Of fact what 20
hold in your hand Is merely n Toxic
for bale of hay. n bale Of cotton.
bushei Of potatoes or a pair Of ST
- stockings. This is how IL happens:
John Is a shoe dealer. He order
from shoe manufacturer $500
worth OF shoes. He must pay III
manufactures at once. 40 he goes
his bank and borrows $4,000 on h
note which is secured by the shoe
Now the bank has made many simils
loans 70 other dealers. in all kinds
ng things, taking notes secured by III
goods themselves. II finds itself ~
Of money. Therefore the bank gather
up all these notes. which run fro
30 to 90 days. and takes them to II
Federal Reserve Bank. The FEEDER
Bank. The Federal Reserve Bar
lends to the local bank and gives
money in the form of It's own FEEDER
n. Reserve notes. a stock Of these not
always Is kept on hand. fresh fro
the Bureau OF Engraving and Prin
ing at Washington which manufa
lures paper money just as wallpap
ss. or sandpaper are manufactured.
The local bank has these FEEDER
err Reserve notes and they are paid o
over its counters in the routine OF L
days business. Thus they get in
public circulation.
AS John sells his shoes he curtails
makes payments on his note at
ing, local hank. The same Is being do
2. by the other dealers. 49, the 10,
bank collects from its borrower
pays back It's loan 10 the Federal T
serve Bank. All the time these Ft
SO, eral Reserve notes have been ol
standing the actual security for th'
has been Johns stock Of shoes a
. other goods Of the other dealers.
addition tho Federal Reserve Ba
has kept In reserve against all {
notes outstanding an amount Of actl
i gold equal to 40 per cent Of tn
value.
eful This process is going on constan
ali over the United States, the loa
being made and repaid over and o.
again. When business is brisk M
money Is borrowed. and when dull |
money. These notes are issued o
when the briskness Of business crea
a demand, and they are paid ba
when things get dull. Thus there
always enough currency 10 meet bt
lie III