Evening star., 1932-03-07

to perform the purpose for which II
is intended-unemploy would bt
diminished. business would commence
to revive and confidence would take the
place of fear. No one is asked to per-
form an imprudent act or to sacrifice
his resources in foolish enterprise. Al
that is desired, all that can be asked
is that money now boarded shall be
made useful by its employment fol
sound and essential purposes.
Text of Speech.
The text of Secretary Mills speech
follows:
'The Treasury Department whole
heartedly indorSeS the campaign unoer-
taken by the Citizens Reconstruction
Organization to put our idle dollars To
work.
Through the co-operative action oi
the Chief Executive and OF tne Con-
gress, characterized by flne spirit OF
nom -partisanship, great progress mas
been achieved in carrying out the Gov
ernment's reconstruction program. The
mobilizing of available resources has
enormously strengthened our credit
structure and counteracted the causes
that have given rise to all manner OF
fears and apprehenSions. BY balancing
the budget the Government is putting
its own financial house in order. But
after all the most the Government can
do is to aid in the creation OF condi-
tions favorable to recovery. The real
task of reconstruction must be under
taken by the people themselves.
The time has come when We can
appeal to them to take such steps to
help themselves as are definitely within
their power, and in the conduct OF tnelr
own affairs constantly to keep in mind
the welfare of the community and OF
the country. A very real responsibility
rests on every individual citizen.
"The measure of self-help which we
are discussing this evening Is simple,
and. if understood, obvious. 1t consists
in restoring to active use the dollars
that have been withdrawn from circu-
lation
THE need for calling the existing sit
uation to your attention has arisen be-
cause many of our citizens have taken
the dollars which they command and
placed them on the retired list. They
have made of them idle dollars, which
are of no service to the community and
bring no return to their owners. AS a
result we have suffered vast credit
contraction. which in turn has adversely
affected business and employment.
Secret Hoards Assailed.
when I talk of dollars being placed
on the retired list I do not want any
one to understand that I am referring
to savings. What have in mind is the
withdrawal of currency from the ordi-
nary channels of circulation, not the
deposit of funds in a savings or check
ing account in sound bank or invest
ment in sound securities. These are
forms of using currency in a normal
way. What I am referring to Is the
secreting of money in safe deposit boxes
or in socks, or under mattresses, or in
tir can, where 1t lies idle and ceases
to work for its owner or anybody else
Money saved in banking institutions or
otherwise invested represents purchas-
ing power placed at the disposal OF
those engaged in business, beneflting
both the borrower and the lender.
Buried money. on the other hand. Is
so much paper or metal. 1t is inactive.
1t brings in no return. 1t does not
grow
But these negative evils are not the
only ones to which such action gives
rise. From years Of experience banks
have learned how much cash they GUS
tomarily require in their tills to meet
the ordinary demands of their deposi-
tors. Since un6er normal circumstances
q bank is receiving deposits as we'll as
cash and checks which have been drawn
upon it by its depositors. it can operate
with relatively small amount Of cash
and can employ large amount Of its
resources to make loans and invest
ments. which at the same time earn q
return for the bank and interest for the
oepositors, and place funds at the dis
pQSal of borrowers who need them to
finance industrial or commercial opera
tions.
In our credit system banks have for
years done business on just this basis
and have performed most important
service in providing for the credit needs
OF their communities. When depositors
suddenly call for unusual amounts OF
cash far in excess Of ordinary require
ments, this system receives a severe
shock. The banks must obtain addi-
tional cash, and in order to do that
serve banks But debts are apt to worry
bankers as they worry individuals.
Being in debt to the Reserve banks
makes them reluctant to lend to their
customers, and even inclines them to
call in some of their customers loans
or to sell their investments. This is
the process Of liquidation, and 1t is apt
to be cumulative once it commences.
The withdrawal of cash from banks for
boarding has greatly hampered the
banks of the country in the perform
ance of their important functions.
responsible banker faced with the lurk-
ing possibility that he may be subject
to the insistent demand to provide his
depositors on large scale with cash
to be locked up in private boards is re-
luctant to extend credit freely even for
legitimate business uses. Hoarding has
undoubtedly been major factor in the
inability of our banking system to func-
tion fully in this emergency, and has
in fact, been one of the primary causes
of the later phases of the business de-
preston.
Return Flow Indicated.
"The program of financial reconstruc-
ton has done much to re-eStabliSh con-
fldence, and in recent weeks there has
been evidence Of return flow of cur
rency back into the hands of banks
When this occurs the process described
above is reversed. The banks receive
cash for which they have no immediate
need and deposit it with Reserve banks
There it is credited to the depositing
banks account and can be used to pay
off the banks Indebtedness, If it Is in
debt, or to increase its reserves On the
basis of these reserves the banks can
lend several times the amount involved
and serve the needs of many customers
who can then proceed with their busi-
ness plans, increasing employment and
helping toward the return Of prosperity
Currency dollars when returned
through the banks of the country to the
Federal Reserve banks become reserve
dollars, and reserve dollars are high
powered dollars. which in the right
place can accomplish a great deal to-
ward increasing business activity But
these same dollars buried in the grounc
can do great deal of harm to the
country'S economic life.
"As a matter of enlightened self in.
terest, every one who holds these idle
| dollars should put them back to work
through the placing of deposits with