The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1935-03-14


various apparently unrelated prob
lens. First there is the problem OF
the banks. There is a clamor for
overhauling our banking system.
Then there is the problem OF debt
and imitation for the purpose OF re-
lieving us of the load of debt
There are the demands of various
groups for money, as for instance
the bonus advocates and the re-
lief advocates. Then there is the
question of money-gold, silver,
managed currency, greenbackS and
so on. Then there is the rapidly
rising and commanding question OF
government borrowing and the pub
lie credit. And there is the equally
rising clamor for balancing the
budget.
Difficult to Understand
Most readers, most business men
do not have time to study these
intricate questions and hence have
difficulty understanding them. But,
by an interesting coincidence, all
these problems are drawing together
tending to become fused into one
big problem-the problem of what
the government is going to use for
money.
To understand it the reader must
keep in mind just a few simple
facts.
First of all, it is not question
of mere money. We have in cir
culation now nearly two billion dol
lars more than we had during the
prosperous days of 1929. We also
have far more gold and under the
new valuation, an enormous in
crease-S3, 900, 100000 in 1929; S4,-
600 100000 in January, 1884; $1,000
100000 in February, 1884, and S.
$4,000, 900 in January, 1885.
Second. we do our business
with bank money-bank deposits.
This is what has shrunk. At the
beginning of 1929 our commercial
banks had deposits of about 35
billion dollars. Now they hold
about 20 billion.
However, in spite of the fact
that this is so much less than in
1929, the banks can not lend it.
1t is actually more than we can
use.
Our need, therefore, is lot for
more money. 1t is for more income.
There is ample money to do all our
business with. All we have to do
is to keep the money we have NOV
ing faster-passing from hand to
hand. We can not do that until the
income, the money income, the pur-
chasing power of the people is in
creased.
Income Chief Need
Of course, I think the money
problem important in that 1 be-
lieve we ought to equip ourselves
with a more intelligent money
system than we have. But that is
another question. Right now what
we need is income.
The income being supplied by
private business is not sufficient to
keep us functioning. And so the
government has had to go on pour
ing more and more money into the
blood stream of trade. The govern
ment has been obtaining this money
by borrowing it chiefly from the
banks.
Still another and powerful objec-
ton comes from the banks. They
insist that the government is load
ing them up with government Sc
curities and that is not good bank
ing.
The banks have already baked
once at taking any more government
bonds. They may do it again. In
the next six months the government
must do two billions in reflnancing
and sell in addition over four bill
lions in new bonds. Can the banks
take these? There is a question.
They probably will. But there must
come a point when they will refuse.
Suppose they refuse, what will the
government do?
In the meantime there is a strong
agitation for improving our banking
system. 1t was, as we know, the
most amazingly weak banking sys-
tenn in the world. Since the crash
very little has been done to change
it fundamentally. The government
guarantees deposits up to $4,000.
That makes the guaranteed banks
reasonably safe, but it still leaves
us with a ramshackle banking sys-
tenn which depends upon a govern
ment backing to stand up.
Are Many Weaknesses
There are many weaknesses, even
vices. The GlaSs-Steagal Banking
Act attempted to correct some, but
it was very ineffective. The simple
truth is that the government has
never made any attempt to deal IN
an intelligent and comprehensive
way with our great banking prob
lem, contenting itself with the
makeshift of government guarantee
rather than building a system which
does not need to be guaranteed.
Now all these problems, simmer
ing away in the minds Of different
groups, have gotten mixed up to-
gether. The newspapers during the
last month have contained stories
about the governments plans to re-
cast and strengthen our Federal
Reserve system. The busy reader
has had no time to examine that.