Evening star., 1925-04-01
What's Ahead for Business?
No. 3-American Banking Seen by George
Nj. REYNOLDS.
BY John F. Sinclair.
Author Can Europe Hold Together? and Can Your Taxes Be Cu?

I met him in the Continental and
Commercial Bank of Chicago. of
which he Is chairman of the board of
directors. He seemed to have plenty
of time, and his large glass-topped
desk had nothing on it but a large
blotter, unsoiled.
"Mr Reynolds" asked, "just what
does that overworked word initiation,
as applied to money and credit, real
ly mean?"
His smile was pleasant one as he
said
We'll. perhaps I can tell you. The
only definition of imitation that I have
found satisfactory Is this: Imitation
occurs when there Is an increase in
money, in circulation and demand de-
posits, at rate more rapid than the
Increase in the volume of trade. That
sounds a little involved, but II isn't.
The essential fact Is that imitation in
wolves relationship between the
volume of money and credit on the
one hand and the volume of trade
on the other"
I'm other words, imitation Is that
situation in which the volume of
money and demand deposits increase
faster than the volume of trade?" /
inquired.
Way TO Avoid Upsets.
"Eactly," he continued. ITO some
people this definition of imitation may
seem too narrow, but in my opinion
a lot of unnecessary disturbance of
business confidence would be avoided
if this definition were regularly used"
Under this definition, is there
danger of imitation at this time in
the United States?"
ic aSia n
ton than to measure It," he de-
clared But a study of money in
circulation and demand deposits.
measured against the volume of trade
indicated by carloadings and bank
debits-does not suggest that we now
have any initiation. Neither does a
comparison of these figures with the
general price level. Again. multiple
orders for goods, accompanied by
cancellations. are usually a sign of in
flation. l do not now find such
condition.
Half of the worlds stock of none
tary gold is within the United States,
largely In the reserve banks; this
is considered a disturbing factor by
some. The continued inflow OF gold
has been one of the main factors
making for easy money. This gold
could also be made the basis for IN
imitation has made business men
cautious. Bankers are not likely TO
go in for imitation consciously. They
still remember the grief OF tho post
war defiation.
Imitation Not Feared.
NO" continued the banker. "If
ono keeps the correct definition of
imitation in mind and keeps testing
the monetary, trade, and price facts
by that standard. We are likely to
discover and check any initiation at
the beginning. am not worried
about imitation in spite of the huge
stock of gold in our possession"
We'll, what should America do
with her gold stock?"
You assume America can do about
anything she pleases. This is not cor
rect Gold movements result from such
forces as balance of trade. condition
OF the investment market, the senti-
ment of business men, price levels,
monetary programs. foreign loans,
and even political conditions. So long
as the Federal Reserve system is in
operation and confidence is upim-
paired gold may be gathered in the
banks for reserve purposes. or paid
out as so much curreney. That's all.
In other respects, gold Is mined. sold
for use in the arts, or for monetary
purposes, or exported and imported
in response to demand or according
to the influences have mentioned.
"Of course the Government can buy
gold, coin 1t. warehouse it. issue gold
certificates against 1t. pay bills with 1t,
lend it, forbid it's import or export.
or regulate them, and that's about
all.
Conditions of Foreign Loans.
1.-The Federal Reserve Banks can take
gold on deposit, buy and sell bullion,
pay it out or hold it in reserve. Other
banks can do the same. But, under
stand, if Americas gold is to be used
TO aid foreign nations to return to
monetary Soundness, il must be
bought by such nations with promis-
es to pay-a tran saction of borrow
ing or lending-or with goods and
services; both transactions of trade.
This is an important point We
can export gold only If it is so
bought. / take it that we are going
to lend money abroad only IL condi-
tions suit us and the security is sat
isfactory 1t seems that we are am
bilious to sell in foreign markets and
are jealous OF our own markets. In
word, the question Of the disposi-
ton of our huge gold surplus Is not
what we desire to do or what We
should do, but what international
commercial processes dictate. Any