Belt Valley times. [volume] (Armington, Mont.) 1894-1977, 1923-10-04

When Wilson secured the passage of the law creating the fed
ersl reserve bank he received credit for one of the greatest bits o
constructive legislation of the century. Wilson had found a means
of preventing panics in the future. He had invented an elastic
currency which could increase or diminish as the needs OF the peo
pie demanded. The republicans in many instances attempted t.
beltte the work of the Democratic party but falntheartedy be-
cause they in their hearts believed the plan was good.
The system was organized and for a few years functioned as
it was intended to function but soon the possibilities of the system
became apparent to those in power, the war helped the new idea a.
long and now we have the greatest money making institution IN
the banking world and the altruistc motive for the PRONUNCIATION
of the system has been forgotten. No bank ever borrowed money
from the federal reserve but who regretted it ere the note was
three weeks old.
For every bit of money they borrow they must put up as Sc
curity a greater amount of short term notes as collateral They
must pay what interest on this loan the federal reserve sees fit to
charge. Besides all this they must keep with the federal reserve
a cash balance equal to 10 per cent of the loan and on this reserve
they draw not one eentin interest. The result is that If the rate
of interest charged by the federal reserve is 72 per cent, in real
ity the bank is paying 83 per cent. Can anyone see any altruistic
motive in this.
The money issued by the federal reserve is fiat money, not
backed by gold in the United States Treasury in Washington but
issued solely against the credit of the United States and costs the
reserve bank only the cost of printing. True they are required to
put up securities to guarantee their circulation but these securities
come to them in the natural course of business and represent
merely the resources of the business and farming world.
And when the necessities of the farming population in any
community become acute and money is needed to tide them over
their difficulties, does the federal reserve increase the term of
the paper which they will accept as collateral to a year or long
enough to do some real good? Not that any one knows of. The
federal reserve is playing it safe all the time and when any bank,
is in difficulties they have it so arranged that they will get their
money and the good people can whistle for theirs. In their man
agement of the reserve banks affairs they discriminate between
the manufacturing districts, where short time paper is all that is
necessary to bridge the gap between production and sale, and the
purely agricultural communities where short time paper is futile
to carry the borrower until he can harvest a crop or mature stock
for sale but the difference is only 80 days and of what use is that
in the usual farming community.
To a great many people the federal reserve looms in the hori-
zon as another club of some political party growing Justify into
the proverbial four-year old club to compel the banks to do their
bidding and through them the people. Back of the political party
behind a smoke screen is vaguely seen the two per cent who own
65 per cent of the nations wealth.
The federal reserve started off in a blaze of glory which was
the rainbow of promise to the farmer but we have come to that
stage where the average American citizen recalls with feeling the
words of William Jennings Bryan in Free Silver days, "You shah
not cruelty this people upon a cross of gold"