The producers news. [volume] (Plentywood, Mont.) 1918-1937, 1931-06-19
ETHERE AN EXCESS OF MONEY In U.S2
ESUCH EXCESS BURDENSOME TO BANKS2
Observation of Subscriber.)

partment publishes the figures
showing money In circulation"
The amount, in round numbers is
four and one-half billions.
The combined statement of TWEEN
ty-three clearing house banks of
New York City, shows a total of
demand deposits" amounting to-
six and One-half billions. In adj
dition to these % New York banks
there are more than twenty-five
thousand other banks = national,
state, savings, private, and trust
companies, in the United States.
To these financial institutions, may
be added two million business
houses that must have cash draw
ers. In the aggregate, all must do
business with four and one-half
billions of dollars, including the
money carried and controlled by
individuals. IF this statement is
approximately correct, and if all
the banks, business houses and in
dividuals in the United States
were to deposit all cash on hand
(on time deposit) with the % New
York banks. the said % banks
would be able to pay their own
demand" depositors. the sum of
seventy cents on the dollar.
Do banks carry a cash reserve
equal to fifteen per cent Of depos-
it's? Financial reports show depsits
in national banks as % billions,
and state banks at Is billions, or
total of SO billions.
A reserve of fifteen per cent
would require five and four-tenths
billions, in cash, or nearly one
billion more than the total of
Americas money circulation. And
this is only the major part of the
story. Financial reports show adj
ditional deposits of more than 20
billions in savings banks and loan
and trust companies.
The law provides: every bank
shall keep on hand at all times at
least 1870 Of its total deposits.
This would take such amount out
! of circulation.) of which, such por-
: ton as the board of directors may
determine, may be on deposit in
e banks in cities of the first and Sec
: ond class. = This, through
: uniform practice of the banks, prO-
= vides for the legal cash reserve
and keeps the money i'll circulation
at the same time. A specific ex
Z ample follows
l have in front of me a bank
|. statement, as published, and which
shows deposits" of S3,5JS, 675.09
Computation shows that the casl
= reserve of this bank should b.
= S539,801.00. The same statemen
shows:
Resources-Cash on hand
+ and in banks -..-.----.S1, 092, "a;
2 Liabilities = Deposits by
. banks, ---------------------.-------- 1,OOZ,l0
q Net resources, cash and
d in banks .-.--...---.----.---.-.- s 9O,75
y deduction mine.)
= The item, resources, cash o.
hand and in banks, $1,092,943 en-
ables this particular bank to com
ply with the law, with more tina
a 80 per cent of its deposits on hanC
A. but if it were to collect from, an
IN pay to "other banks" the net bal
le ance in its favor would be S90,75
~ or less than four per cent of it
"a then net deposits. And still tn
ID final statement would not sho7
1s how much of the balance, SCOTS!
< were cash on hand. and how muc
in deposited in other banks.
~ AS an actuality, the law n
e quires the locking up in ban
vaults, as legal reserve, a sum I
1e quail to twice the amount of all tn
A. money in circulation in the Unite
fe States.
& It may be true, therefore, tn;
= banks are not burdened with SUI
he plussage of money and that II
x total in circulation is only enoug
Ot to provide for the Systems" leg
Mt reserve, and to take care of shor
'al time loans on liquid security, vii
OF the unlimited backing of the Fe
Of eral Reserve.
". Equally true may be the ia
that, of the ready coin of the real
there is none for the long tin
borrower, except in cases Of 7
rk. newal in preference to foreclo
ures.
In the panic year of 1907 the
was a shortage of money. T.
- banks were allowed to OVerri
y the Constitution by their issuan
of a money substitute at tn
time. Today the volume of bu
ness is between two and thr
times greater than in 1907 b
II the per capita circulation of mo
ey is about the same.
If the financial system and
70 operation are not blamable /
Z the nations pauperism, a publish
report after investigation, shot
so disclose.
!. FRANK J. EDWARDS
. Helena, Montana, June Is, 10