19
THE CHICAGO BANKER
December 26, ipo8]
what anxious times there may yet be hope; it is in such times that the seeds may be sown for a better understanding between classes. It is not in surroundings of prosperity that the best characters are formed; and the industrial struggle which the nation has before it to maintain its position among the industrial populations of the world may serve to weld apparently divided forces into a united whole, with sacrifice perhaps on the part of some, yet, if so, sacrifice which would be more than compensated by the invaluable recognition that common effort is essential. These are problems which we bankers have to consider: for bankers are the servants of industry ; and we have to look to the industrial position of the country in order to get an insight into the banking position. It is for our statesmen to consider how far in the endeavor to effect social improvement burdens can be laid on the industrial community, if the results which everyone desires are to be achieved.
As regards the immediate outlook it is probable that just as in times of great prosperity we are too apt to overlook the darker side, so at the present moment we are too much given to depression. Symptoms of improvement are not altogether absent: the values of commodities, after declining considerably, show an inclination to rise; and if only peace is preserved, the outlook does not seem to me to warrant any great despondency. Overproduction has taken place; stocks of goods have accumulated, and are now being gradually taken in consumption. In the interval production suffers. But that stage cannot last very long. South Africa has, by perseverance and study, achieved a considerable economy in the production of gold, and the resulting increased production cannot but make itself felt beneficially throughout the world. Agriculturally also South Africa is in a prosperous condition, and the trade outlook seems to be distinctly improving. In India a year of famine has been followed by abundant rainfall, and promising agricultural prospects. That, again, cannot help being of considerable benefit to commerce in the near future. South America promises an abundant harvest, and the development of the railway systems of its various countries is making quick and important progress. The United States, if reports do not deceive us, are, as usual, rapidly recovering from the setback they have suffered. Above all, there is the significant fact that throughout the severe crisis which the world’s commerce has had to face, credit here has remained practically undisturbed. Probably it may be said of commerce and banking alike that they have rarely been carried out on sounder bases than they are at the present moment. And perhaps a word may be said specially in behalf of the bankers of the United Kingdom for the way in which the crisis of last year has been faced. Though rates have been high, I think it may be safely asserted that there has been no inconvenience to trade through the withdrawal of credit; and in somewhat troubled times no accommodation has been denied to those who were entitled to it. Bankers have grown more powerful, and I believe they have used their power wisely.
And if we advocate, as I do, that gold reserves should be increased, that fact must not be taken to imply that great improvements in this direction have not already taken place. I am convinced, ׳nav, more than convinced, that the position has during the last year or so been considerably strengthened, and I know that much is being done quietly and unostentatiously; perhaps that is always the best way to effect reforms. If each one quietly and steadily does his share, there is no need either for legislation or even for rigid rules and regulations. But to this end the mutual understanding and co-operation for which I plead, and especially co-operation with the Bank of England is essential.
Of the increased production of gold I have already spoken, and of the accumulation of gold by different countries that has taken place. How
maximum amount of their authorized note issue: and in the same year the tax-free note issue of the Imperial Bank of Germany was also raised. Moreover the stock of gold held in the Bank of France has been increased during 1908 by approximately ¿19,750,000; that in the Reichsbank by £15,000,000; that in the Bank of Russia by £10,750,000; that in the Associated Banks of New York by £20,000,000; that in the Austro-Hungarian Bank by ¿3,500,000; and that in the Bank of Italy by ¿9,250,000. In the same period the holding of the Bank of England has only been increased by a little under £2,000,000. It^ is worth noting these facts. It is also worth noting that the chambers of commerce in this country have taken up the question with increasing seriousness. And, finally, it is worth noting that if ever there was a time favorable to the accumulation of gold reserves it is now, when trade is falling off and the production of gold is rapidly increasing. How does the question stand, you will perhaps be inclined to ask, having heard so much about the committees that are sitting. The position is this: the London Chamber of Commerce have appointed a competent and influential committee, of which your president, several ex-presidents, and prominent members of the Institute are members. This committee has collected a great deal of useful information, and is actively at work discussing various proposals made to it. The meetings are well attended; but as the committee is composed of a number of very busy people, the meetings cannot be held from day to day, but only at certain intervals; it will however, not be long before they arrive at their conclusions. The Clearing Bankers’ Committee are awaiting the report of the Chamber of Commerce Committee before proceeding with their deliberations, and I do not doubt that before our next inaugural meeting serious proposals will have been placed before the banking community at large. It will be for bankers as a united body to determine whether they will give effect to these proposals, and the need iri this matter for that co-operation, of which I have already spoken, cannot be too strongly insisted upon. " It goes without saying that the views of the country bankers, as well as London bankers, must receive the utmost consideration. No scheme can possibly work unless it has the support of every one concerned. But I think you will agree with me that the question must be approached not from any short-sighted or selfish point of view, but from the broad standpoint of what is best for the community at large.
Present Conditions.
Since last year’s inaugural meeting a great change has come over the money market, d hat reaction of trade which we then anticipated has set in in earnest. As usual, very high rates for money have been followed by excessively low values. A period of abnormal activity has been followed by depression and stagnation. We bankers have not yet obtained the ordinary compensation for loss of profit through cheap money in the shape of an increase in value of our investment securities. These, though slightly higher than they were a year ago, are still at a very low level, hardly proportionate to the value of money in the money market. The same symptoms prevail in other countries; probably as a result of similar causes, vast national expenditure and fears of increasing taxation. One of the burdens that weigh heavily on enterprise and the development of commerce is uncertainty as to what the future may bring forth in this direction. At the present time, moreover, political unrest and the apprehensions suddenly raised in the near East have checked the somewhat more confident feeling that had shown itself. In the United States the uncertainties of the electoral contest have added to the lack of enterprise consequent on the crisis. Social problems in such times come to the fore. The relations between capital and labor are put to the test; not till they recognize that their interests are one will there be peace. But in these some-
meetings of these associations could only be expanded in the direction indicated, a great deal, I think, might be gained. If bankers and bank managers were to get to know one another a little better, I believe we should be more than half way towards the removal of that certain atmosphere of competition, jealousy and suspicion, the existence of which I am afraid cannot at present be denied, and which stands in the way of reforms that would be to the advantage of us all.
One of the functions of these associations is a dinner (the inevitable accompaniment in this country of such gatherings). At these dinners you generally have the opportunity of hearing the opinions on banking questions of a cabinet minister. Last summer we had the advantage of hearing Mr. Haldane, who was listened to with pleasure, but at no time were the cheers more cordial than when he gave an assurance that the government were not likely to introduce any measure interfering with the Bank of England or with the management by bankers of their own affairs. Legislation on banking matters is the last thing any banker desires, but I for one feel that if we are to avoid legislation, we must stand shoulder to shoulder to face the problems, which not only the banking-world, but the community at large are resolved must be dealt with before very long.
Gold Reserves.
We are not the only nation that has to deal with these questions. The world’s trade is increasing; although we are now in a period of reaction and depression, there can be no doubt that, as the populations increase, as virgin soils are brought under cultivation, and the means of communication are improved, the volume of trade must continuously expand. And in the great industrial countries the desire has made itself felt to bring their banking systems more into harmony with this increase. The United States have sent a commission over to Europe to report on the various European banking systems with a view to subsequent legislation in their own country. Many of us have been glad to welcome representatives of the commission, and to render them such assistance as was in our power. We look forward to their report, and we hope to learn much from the impressions they have gathered. The urgency of the need for legislation in the United States has no doubt been recognized in consequence of the crisis of last year; though I have never had the slightest doubt in my own mind that it was not the banking system, but quite different causes which brought that crisis about. No banking system, however good, can prevent the evils arising from excessive speculation and overtrading. At the same time, the crisis could certainly have more easily been faced with a more elastic banking system; and the United States Government is no doubt right in its determination to deal with the defects which were then exposed. That the commissioners were able to learn much in Europe is not improbable, but in devising a system for their country they will no doubt not entirely model themselves on any European example, but study their own needs and their own methods and habits. Every nation, in my opinion, must have a banking system suitable to its own commercial condition and the habits of its people. And when we are considering our own banking system, and our own gold reserve, we shall do well not to look to the systems, prevailing in other countries, but have regard to our own peculiar position as financial center of the world, and as the country which possesses the most highly-developed system of deposit banking. It is not my purpose to-night, even if time permitted, to speak at length on the question of our gold reserves, on which I have so often addressed you. Yet the facts are worth noting that to meet the increasing demands of trade' the Bank of France in 1906 increased the