29
THE CHICAGO BANKER
August 22, 190#]
the expanding commerce of this greatest nation on the globe, and by furnishing us with bank notes which would come out promptly and liquidate our bank credits, would prevent the periodical upheavals which have been the curse of the nation.
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“Some African Highways”
This is a valuable and interesting work by Caroline Kirkland. It comprises a description of a trip made by two American women to Uganda and the Transvaal. It is published with the hope of interesting other Americans in one of the most fascinating and unique tours which can be made with entire safety and great comfort. Where else can you look out from railway carriage windows and see zebras, gnus, giraffes, hyenas, and even lions, as you steam along? Where else would you see utter savagery and the intricate ceremony of modern social life in close contact? Where else will you see such contrasting methods side by side, where English, French, Germans, Italians, Belgians, and Portuguese are addressing the same problems in their different-ways ? To the lover of strong contrasts, of high lights and lack shadows, of wonderful scenery, of great spaces, of all that is new, free, and stirring, we recommend this book. With map and numerous illustrations.
Published by Dana Estes & Co., Boston. Price,
Old Boots their Banks
Washington, August 17.—Val E. Cross, a !)anker of Hays City, Kan,, who is in Washington, says:
"Ellis County has more money hid in tin cans and old boots than is deposited in the banks of the county. Old boots are the proper things, because the people who hide their money in our county as a rule have no old socks to use for that purpose. They do not wear socks. They are Russians who have no working knowledge of our banking system, and who show no disposition to learn much about it.
“They do their own banking. Their strong box consists of a tin can, or an old boot, and their safety deposit vault is a hole under the barn or in the cellar. When they want to buy something they pay cash for it. When they sell something they demand the cash and hide it. It is a conservative estimate to say that more than half of the actual cash of Ellis Count}־ is hidden."
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Shah Raises $250,000
St. Petersburg, Aug. 17.—A special dispatch received here from Teheran says the Shah of Persia has obtained a loan of $250,000 from the Russian Bank, having deposited the Crown jewels as security. This money will be used in fitting out an expedition against Tabriz.
The English Legation in Teheran has protested a second time against the presence of Cossacks near the Legation. General Liakhoff, Military Governor of Teheran, replied that the Cossacks in question had merely halted to feed their horses, but he issued orders that the troops should in the future avoid the vicinitv of the Legation.
Must “Stage” Money Go?
'Washington, Aug. 18.—Chief Wilkie of the secret service proposes to test the law in relation to the right of persons to make “stage" money, freely sold in the form of a roll of $100 bills. A case in which one of these $100 bills has been passed as lawful money has come to the attention of the secret service, and Chief Wilkie believes the issuance of “stage” money wall be adjudged unlawful when a test case is made.
the country for use, and they would stay out only so long as the money remained in the pockets of the people. As soon as it reached a bank of issue, it would be retired, so they could issue one of their own at a profit.
New York banks do not at any time need actual currency for their own use. They have a system of bank credits, checks and deposits. Money circulates only in very limited amounts.
It was wisely provided that the proposed issue of credit currency should be based upon the present bond secured circulation of the banks, and that the total issue of the bond secured and credit money should not exceed the present limitation, which is 100 per cent of the capital. Hence, no expansion is provided for, but greater facilities are afforded for the marshaling of currency to meet the unusual demands for it in different seasons, and indeed, this is the foremost object of the proposed measure.
We have in this country at the present time about 27,000 banks. In this we occupy an independent place in the financial history of the world. Does it not appear to you, gentlemen, that it might be possible, indeed is necessary for us to devise some advanced methods for the handling of such tremendous banking power, and that we must not close our eyes and sit idly by relying upon those methods which have guided the destinies of this country for generations ? Is it necessary to predict distrust and disaster ? Does the panic come when we are looking and prepared for it? Does the country banker have anything to do with moulding public opinion in his community? What person has a stronger hold upon the mental and physical capacities of the people than this self same country banker?
This great body of astute business men, these country bankers, have blazed their way into new countries—have used their money and wisdom in the development and upbuilding of the country—and have been a potent factor in the nation reaching the financial eminence it enjoys to-day. Have they been trusted in the past?
I do not believe that, after giving such valuable assistance to the people in time of need, they should now be relegated to the background. A plan for issuing currency must be adopted. One has been devised by the currency commission, which while different in some essential points from other plans proposed, will give equal issuing advantage to every bank and meet the situation with safety. We have built up a great commercial center along new lines, and our currency problem must be met in a new way.
I believe that the plan proposed by the currency commission is not only safe, but will furnish us the tools with which to carry on our commerce in a more scientific and economic manner, providing currency to move our cotton crop amounting to hundreds of millions of dollars, and our enormous agricultural products without creating disturbances in our money market, particularly in the money centers in active seasons. Such a money system would show to the world that our unprecedented prosperity is tempered with a safe and adequate currency system much in advance of methods used by foreign countries.
It will be seen that if the Suffolk, Indiana and Canadian systems have proven safe, elastic and satisfactory, a currency secured by the assets of banks and a guarantee fund, protected by a moderated but ample tax, subject to daily redemption in gold, with privilege of issue optional but extended alike to large and small banks, unusual in its safeguards and limitations, if given an opportunity would operate automatically to meet our needs, would prevent redundancy and contraction, would be absolutely safe at all times and would give us the elements so much needed in taking care of
account, and forwarded to them just as checks are to-day, and also as clearing house certificates were last fall; or if sent by one bank direct to the other, the issuing bank would pay for the same in gdld or a draft upon which gold or its equivalent could be secured elsewhere. Hence, the method of redemption would be very simple, and banks would only follow a practice of handling their business which has been in vogue for generations.
Operation of Credit Issues
The operation of the issue would be very simple. In the fall, the demand comes from the country for actual currency to pay for the crops, for it is a well known fact that only a very small amount of currency can be used in the cities, and that a large percentage of currency is used in all agricultural districts during the movement of crops; hence, in such season, this money would be issued and shipped to the country, and there used so long as the activity continued and the money was passing from hand to hand. Redemption would be taking-place daily all the time, as it is intended that no bank of issue shall be more than twenty-four hours distant by railroad from its designated redemption agent. It will be seen that these notes would be continually presented to the bank for redemption, being the exchange for other kinds of money; and it would be the average amount outstanding which would assist monetary conditions. Banks would go on forwarding bills of other banks for redemption, so they could issue their own at a profit, until activity ceased, which in Iowa usually occurs in March or April; then notes would begin to accumulate in the country banks, as is the case every year when banks can no longer circulate their bills, as there is no demand for currency. Then the selfish desire to make money exhibits itself again, and banks begin to ship currency to their reserve agent or correspondent in order to get interest on their account. Their correspondent in larger cities is having no demand for currency, bence, has no place to ship it and cannot circulate the credit notes, so they are selected out and forwarded for redemption; and if some of those happen to be their own bills, they cannot afford to put them in their vault and pay interest upon them and carry a reserve against them, so they retire them.
Measure not Inflation
Some regard the measure as inflation. Permit me to say that it is absolutely impossible to have inflation where the demand for the notes has been created in advance of the issue. Take it in Des Moines, when the bank with which I am connected is having a heavy demand for currency and we are shipping $100,-000 to $150,000 per day to take care of the demand from the country, it is immaterial whether we supply it with gold certificates, bond secured notes or credit notes—the currency must be supplied. Hence, the issue of credit notes cannot be regarded as expansion.
This credit currency would not enable a bank in New York to expand its loans a dollar. As has been explained, banks loan on reserve— credit notes cannot count for reserve. Hence, if a New York bank paid out $100,000 of these credit notes in payment of a check, the bills would be deposited in another New York bank, and within an hour the bills would be presented by the latter to the former for redemption in order to get reserve—gold. So it will be seen they could not be kept in circulation over the day.
The practice now among New York banks is to collect $5,000 to $10,000 of bond secured bills and immediately forward them for redemption and get the gold. Banks do not pay them out over their counters at all; in fact they will not circulate in New York. The operation of credit notes would be the same.
In the fall, however, the banks in New York would issue the credit notes and ship them to