, 1923-10-30
Control of Credit

rnited States senator Just returned from
Europe, where he had been looking maO aiia'
"America is headed toward the same destiny
as Europe unless we check the control OF the
credit system of the country. We must restore
to the government and the people the right 10 Is
she the money and control the credit of this great
nation. The German mark is held up to us as a
horrible example of soft money. But our credit
system is virtually the same as p~racticed there
This is a surprising statement for any United
States senator to make. While senators are not
expected to know it all, yet they are not sup
posed to be guilty of such woeful ignorance as
TO the meaning of credit and its relation to bust
ness and money.
Credit primarily is confidence and that is be-
yond the control of any individual or set of in.
dividuals. Credit is belief, and belief is not
measured by n yard-stick, scales or gold or Sill
yer.
This intangible thing called credit is the basis
of all human relations. Without it society could
not exist, machinery could not operate, people
could not travel, business could not be con-
Quoted.
The credit system of the country is founded
on this same confidence and belief. People buy
aud sell, labor and give service, in the belief
that what is agreed to or promised will be car
ried out, and that the same rules and measure
ments will apply at all times. The machinery is
the credit system, the accounting system.
The forms of money employed in this system
are units of account whereby commodities or
service may be translated into these units and
e4c0d0Heu lOT IueIns III OHly esstuIldl IHlnS Is
n unit agreed TO by all, having an approximately
fixed intrinsic exchange value in itself so that
all agree what the unit is and of what it con-
sists.
The volume of these units, whether gold, sill.
yer, bank notes, treasury notes, bank checks or
bills of exchange is controlled and determined
not by any body of individuals, but by business
itself. More money does not make more business;
more business makes more money.
Bank credit is governed and controlled by the
demands of legitimate business. Banks are lin.
tied in extending credit solely by the size of their
deposits and their assets. The Federal Reserve
system simply enables the banks in order to ex-
tend credits 10 rediscount, that is, obtain further
credit for themselves which they in turn ex.
tend TO their customers.
The right to issue money and control credits
Except the coinage of gold and silver and other
coins) never rested with the government, under
the constitution. The only exception in the ma.
tons history was during the civil war when
greenbacks were issued, and that right was ques.
toned in the legal tender cases. Greenbacks now
are kept at a fixed volume. Gold and silver Ger.
t~ificates and treasury notes are issued on depos.
ITS OF coin or bullion. National bank notes are
printed by the government for the national
banks. The same with the Federal Reserve notes.
In the whole history of the country with one
exception paper money has been issued either
on deposits of coin or bullion or by private banks
of issue, under government control.
1t is surprising that n United States senator
should say: Our credit system is virtually the
same as p%racticed in Germany. With notable and
mBoiAdh hllltIelCt. GeTHldu marks nave been
printed and issued by the central government
bank and by four branch banks in vast volumes
without regard TO production of wealth or gold
reserve. Gold or specie payments have been sus.
pended for many years.
The German government has permitted and
encouraged the printing Of billions of paper
marks because it was the only way the govern.
ment and the people could pay their domestic
debts and keep business going. The result is the
horrible example of government issue of money
and control of credits There is no control -
nothing but chaos and disaster.
The United States would soon find itself in tbc
SAME condition as Germany should the govern.
ment print and issue to the people direct ali the
paper money or notes the people demanded on
the theory that the stamp of the government is
chasing power. P'
In Germany credit is all gone. In the United
States credit is maintained and preserved
through private agencies called banks of issue,
under government control.