Evening star. [volume] (Washington, D.C.) 1854-1972, 1932-05-29
Three Billions of New Currency
BY FREDERIC ]. HASKIN.


Close study Is being given the type
Of circulating medium. which was pro-
vided under the Aldrich- vreeland
emergency currency act and its ad-
vantages are being assayed by bankers,
economists and legislators. The Fed
eral Reserve Board Is giving the ques-
ton Of bringing about q revival Of this
currency consideration. Inasmuch as the
act expired by limitation on July /.
1915, congressional action would be re-
quired to set the machinery In motion
again. This, however, would not be
difficult and the result would be the
immediate availability Of more than
81, 000, 900 900 Of new currency.
The Aldrich- Vreeland emergency cur
rency act provides that banks may
issue currency to the extent of 125 per
cent Of their combined capital and sur
plus. Were the full amount availed Of
the new supply would be nearer $780,
600 900 than $4,000 900 900.
This prime advantage Of issuing such
currency at such a time is that this
type Of emergency currency Is not d.
| rectly attached to gold. In the case of
other types of money q definite amount
has to be earmArked, set aside as spe-
cific security. In the case Of the Aldrich-
Vreeland currency there Is no such pro-
vision. This does not mean that the
currency Is not secure. 1t has behind
1t the entire credit Of the United States
and the blanket gold parity act Of
March, 1900, under the terms of which
standard The difference Is freedom Of
use Of the gold is retained by the Treas
ury. The gold does not have to be
| locked I'm
When Federal Reserve notes are is
| sued 40 per cent Of their face value
must be definitely set aside as reserve
| against them. This Is the legal mini
mum and, therefore. delimits the guam
| tity of such notes which can be issued.
| There Is q fixed brake on the supply
of a circulating medium. No matter
how much commercial paper or other
security is available, If this 40 per
cent gold cover Is not present, the
notes may not be issued.
Federal Reserve Method.
The Glass-Steagall amendments to
the Federal Reserve act liberalized the
currency issuing machinery to some ex-
| tent They provided that in cases where
banks did not have a supply of COM
mercial paper eligible for rediscount
at Federal Reserve banks. these banks
| might sell to the Federal Reserve banks
a miscellaneous assortment of nom
eligible collateral. The Federal Re-
serve banks could pay for such col
lateral in Federal Reserve notes but
those notes must be secured by Gov
eminent bonds already owned as in
vestments by the Federal Reserve
banks. This provided an additional
means Of issuing currency, but here
again a limit Is fixed. Obviously, the
Federal Reserve banks are limited IN
the volume of notes they can issue by
the volume Of Government bonds they
have to put up as collateral for the note
issues.
Furthermore, even such notes as are
issued in this roundabout manner by
employment of the Federal Reserve
banks Government bonds must also
have the definite 40 per cent gold cover.
All of these issues. therefore. drag down
the gold supply. Should this money go
into boarding. the gold would be tied
up at the rate of 40 cents for every