LIBRARY 
 
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 University of California. 
 
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 ^ 17.1 
 
An Analysis of the Banking 
 
 and Currency System 
 
 of tfie United States 
 
 INDICATING THE CAUSE 
 OF PERIODIC PANICS AND 
 SUGGESTING A REMEDY 
 
 BY CHAS. W. DISBROW 
 
 27 
 
 lBic^5' 
 
 OF 
 
 THE 
 
 UNfVERSlTY } 
 
 OF / 
 
 Presented by 
 
 The United States Fidelity and Guaranty Co. 
 of Baltimore, Maryland 
 

 ^ 
 
ANNOUNCEMENT 
 
 Believing that one of the most important 
 subjects before the American people to- 
 day is the reform of our Banking and 
 Currency System, we take pleasure in 
 presenting herewith some thoughts on 
 the subject prepared by Mr. Chas. W. 
 Disbrow, of St. Louis, Mo., manager of the 
 Missouri Department of this company.* 
 Mr. Disbrow has been connected with 
 this company for many years, and while 
 manager of its Mountain Department, 
 with headquarters at Denver, Colo., was 
 empowered by it to underwrite bank 
 depository bonds, guaranteeing the sol- 
 vency of banks. This brought him in 
 the closest possible touch with the indi- 
 vidual banks of the West, and made him 
 familiar with the entire banking situation. 
 We believe his views will be received 
 with interest. 
 
 THE UNITED STATES FIDELITY 
 AND GUARANTY COMPANY 
 
 JOHN R. BLAND, President 
 
 Baltimore, Md., December 20, 1909. 
 
 o.'^^P" 
 
 'r%/ 
 
COPYRIGHT i9iQ 
 BY 
 
 CHAS. W. DISBROW 
 
....INTRODUCTION.... 
 
 This pamphlet is designed to show that the periodic financial panics 
 in the United States result from certain fixed and specific causes, and 
 that an analysis of these causes indicates that the approach of such 
 panics may be clearly noted and effectually prevented. 
 
 It is designed to show that of the existing currency in the nation, 
 only a portion finds its way into the banks. That with a given quantity 
 of currency in the banks only a definite amount of credit can be 
 extended by the banks. That periodically, owing to the growth of 
 bi^siness and the expansion of bank loans, the entire banks of the 
 nation reach the extreme limit of their loaning capacity and can grant 
 no more credit, with the result that a ''capital famine" ensues, imme- 
 diately affecting all branches of industry and precipitating a financial 
 panic. 
 
 J It is also designed to show that all of our currency is based upon 
 
 and supported by the gold in circulation ; that a given quantity of gold 
 will only support a given quantity of paper, and that we shall invite 
 commercial disaster and national dishonor by injecting too much paper 
 into our circulation ; so that there is a definite limit to the quantity of 
 currency. 
 
 The amount of our currency can not be indefinitely increased, and it 
 is therefore necessary to get the greatest possible use out of the currency 
 that we have, and to so regulate our affairs that we shall get along on 
 the credit that can safely be granted with such amount of currency. 
 
 It is the opinion of the writer that the trouble with our existing 
 system is two-fold: 
 
 First. That there is no machinery for the regulation and control of 
 bank loans and credits, and no method by which a gradual check can 
 be placed upon the expansion of bank credits when the reserves of 
 currency run low. 
 
 Second. That there is no adequate organization among the banks 
 for mutual support, and, therefore, each individual bank must keep on 
 hand in a dead reserve fund too large an amount of currency, with the 
 result that the amount of bank credit that can be granted is unduly 
 limited. 
 
 The remedy suggested is the creation of a Central Bank with 
 strictly limited powers which shall hold the surplus reserves of all of 
 the banks, and also the moneys of the National Government, and which 
 shall use such moneys solely for the purpose of rediscounting short- 
 term bank paper. This will enable the individual banks to safely 
 operate on small cash reserves, as they will be in position to obtain 
 more currency instantly from the Central Bank while there is any 
 surplus currency available in the nation; while the Central Bank, by 
 manipulating the rate of discount, can regulate and control the entire 
 
bank loans of the nation. The said bank should have no power to 
 issue paper money except temporary emergency paper strictly limited 
 in amount. 
 
 The first portion of this pamphlet is devoted to the study of the 
 uses of currency, and the quantity needed to properly carry on the 
 business of this nation; the second part to a discussion of what that 
 currency shall be composed and the third part to the proposed remedy. 
 
 In dealing with these questions the report of the Comptroller of 
 the Currency of the United States for 1908 is used, and the figures 
 showing the condition of the banks as of November 12, 1906, is made 
 the basis of computation. A copy of the material parts of this report 
 is' attached to this pamphlet for greater clearness. 
 
 The term currency is used to include all kinds of money, whether 
 specie or paper. 
 
 In the opinion of the writer, there is nothing vitally wrong with the 
 currency system of the United States, and the only changes in the 
 existing laws necessary to establish an ideal banking and currency 
 system are to repeal the provisions of the National Bank Act relating 
 to reserves, to abolish the Independent Treasury System, and to create 
 a Central Bank with strictly limited powers, as above indicated. 
 
Quantity 
 
 There are two main questions involved in the currency discussion, 
 first how much currency is needed to properly carry on the business of 
 the nation ; and, second, of what that currency shall be composed. 
 
 In order to ascertain the quantity of currency needed it is necessary 
 to note clearly for what purposes currency is used and the exact work 
 it does. 
 
 From the report of the U. S. Comptroller of the Currency it appears 
 that the total currency of all kinds in the United States on November 
 12, 1906, was a little over three billion dollars. This currency was 
 divided into three portions and served three separate and distinct 
 purposes. 
 
 USES OF CURRENCY 
 
 The first portion consisted of $325,000,000 lying in the vaults of the 
 United States Treasury and its branches. This portion enabled the 
 government to carry on an independent banking system of its own for 
 its own purposes. Currency in payment of taxes and customs is col- 
 lected by the government agents and deposited in the Treasury; and 
 payments by the government are made by drafts on the Treasury. The 
 government frequently deposits with national banks a portion of this 
 currency, but the report of the U. S. Comptroller shows that at no time 
 since 1900 has there been less than $284,000,000 in currency in the 
 Treasury vaults, nor has it amounted to above $349,000,000. The gov- 
 ernment may or may not really need this vast amount of currency; 
 perhaps it would be very much better if it was in general circulation; 
 but the fact remains that it has it, and has had it for many years. The 
 amount of currency >in the Treasury is likely to be greatest during 
 times of the greatest national prosperity, because at such times the 
 government revenues from imports and internal taxes are the greatest. 
 
 The second portion consisted of $1,733,000,000 in the hands of the 
 people, in general circulation outside of the banks, being $20.48 per 
 head of population. This portion served the purpose of a medium of 
 exchange for small transactions. 
 
 While the great bulk of commercial payments are made with bank 
 checks, yet there are a vast mass of petty transactions that call for the 
 direct use of currency, and for that reason every one carries more or 
 less currency on his person, and every merchant carries more or less 
 currency in his petty cash drawer for making change, etc. There is 
 also a vast quantity of currency paid out daily for wages, and, while 
 this currency quickly finds its way back to the banks, there is always a 
 large quantity of it afloat outside of the banks. 
 
 The more prosperous the times the more currency the people will 
 carry on their persons and the more currency will be afloat outside of 
 the banks for petty cash transactions. The men standing in the bread 
 
lines during hard times are not likely to have any currency in their 
 pockets — the same men working for good wages during prosperous 
 times are very sure to have some currency with them. The amount of 
 currency that 80,000,000 people keep at all times outside of the banks 
 is enormous. During the prosperous times of 1893 it amounted to 
 $16.14 per head. During the hard times following 1893 it dropped to 
 $13.65 per head, and then steadily increased as times became better, 
 being $17.11 in 1900, $18.77 in 1904 and $20.48 per head, or $1,733,- 
 000,000 in 1906, as above shown. 
 
 Some of this $20.48 per capita may have been ''hoarded," but there 
 was no apparent reason for people to hoard money prior to November, 
 1906, for we were then in the midst of the most prosperous times the 
 world had ever seen ; stocks were at the highest point and there was 
 not a cloud on the financial horizon — following that date when stocks 
 began to drop in value there might have been reason for uneasiness, 
 and people might have ''hoarded" their money, but the reverse was the 
 case, because the report of the comptroller for 1907 shows that by 
 June 30, 1907, the amount of currency held by the people had dropped 
 to $19.36 per head, or to $1,686,000,000 — so that during the very period 
 that is is claimed the people were "hoarding," they actually gave up 
 to the banks nearly $100,000,000. If figures ever meant anything, these 
 figures certainly disprove the charge that the money stringency of 
 1907 was caused by "hoarding" by the people. 
 
 But for whatever reason the people hold out and keep afloat outside 
 of the banks this vast mass of currency — more than one-half the total 
 supply, the fact remains that they do hold it, always have held it and" 
 have it now — and the more prosperous the times the more they will 
 have. 
 
 The third portion consisted of $1,010,000,000 in the hands of the 
 banks, this being the balance of currency left after the government 
 had taken what it desired for its Independent Treasury system, and 
 the people had taken what they desired for their individual purposes. 
 The banks are but the custodians of the people's money and have only 
 that currency which is voluntarily left with them after all other purposes 
 have been served ; hence the more prosperous the times the less currency 
 the banks will have, because it is at such times that the demands of the 
 government and the people are the greatest. 
 
 This currency in bank served the purpose of a reserve for the sup- 
 port of the deposit liabilities, and was in fact the only foundation for 
 the vast credit system of the nation. 
 
 It is to be presumed that the government had taken all of the cur- 
 rency that it desired for its purposes because it had to its credit with 
 many banks large sums and could have called upon such banks for pay- 
 ment of such credits in currency ; and it is to be presumed that the 
 people had taken all the currency they needed, for they could have 
 taken it all had they so desired; had the banks needed more currency, 
 however, they could not have obtained same, as there was no more 
 currency in existence. 
 
The question of how much currency is needed in the nation, there- 
 fore, can be answered by ascertaining whether the banks had, in fact, 
 a sufficient quantity of currency for all legitimate purposes, and if not, 
 how much more was needed and for how long a period. To answer 
 this requires a brief analysis of the banking system. 
 
 "WORKING CAPITAL" 
 
 Before the invention of banking currency served but one purpose — 
 it was merely a medium of exchange and was the only such medium. 
 In every transaction calling for the payment of money the actual 
 currency had to be delivered. Since the invention of banking a small 
 amount of currency in bank supports a large volume of bank deposits, 
 which deposits are, in fact, mere entries on the books of the banks 
 showing that the depositors are entitled to draw money from the 
 banks. In the majority of transactions of today calling for the pay- 
 ment of money a check or order is drawn on a bank which check or 
 order is accepted in place of currency, thus serving as a medium of 
 exchange the same as currency. Theoretically, it is currency, because 
 the banks will pay the actual currency on demand, but practically no 
 currency is used — the check or order goes through the clearing house 
 where it is offset by other checks, and the entire transaction is com- 
 pleted by mere bookkeeping entries without the use of a dollar of actual 
 currency. The total deposits in the banks of this nation, November, 1906, 
 was $12,000,000,000 and checks might have been drawn and issued up 
 to this amount, yet the banks had but $1,000,000,000 of actual currency 
 with which to pay same, or about one dollar of currency for twelve dol- 
 lars of deposits. Had this one dollar not been there the banks would 
 have been declared insolvent and the entire $12,000,000,000 of deposits 
 would have been wiped out, yet with the machinery the banks have 
 devised whereby one check is offset by other checks, and through the 
 universal use of banks by the people and the confidence the people have 
 in the banks, this one dollar of currency is found ample to support this 
 twelve dollars of deposits ; hence while a dollar of currency in the hands 
 of the government or the people can do only the work of a dollar, a 
 dollar of currency in bank may support and keep at work twelve other 
 dollars. 
 
 A bank deposit is a potential medium of exchange, because a check 
 can be issued up to the amount of such deposit and will be accepted in 
 place of currency. The total amount of the available medium of ex- 
 change in the nation is the bank deposits against which checks may be 
 issued, plus the currency in the hands of the people. This medium of 
 exchange may be termed "working capital." 
 
 Business can not be carried on without the use of "working capital." 
 No merchant can carry on a business without an adequate amount of 
 currency or credit balance at the bank against which he can draw. It 
 is immaterial how- much real estate or other kind of wealth he may 
 possess — he can not pay his bills and meet his payrolls without actual 
 currency or bank credit. -He can not pay wages with stocks and bonds 
 or with promissory notes, nor can he pay for material with deeds to 
 real estate. The amount of business a merchant can transact is strictly 
 
limited by the total amount of currency or bank credit he has ; and it 
 follows that the amount of business that can be transacted in a nation is 
 strictly limited by the total amount of currency and bank credit in such 
 nation. A merchant possessing but $10,000 in currency and bank credit 
 can not transact a Marshall-Field business — and a nation of merchants 
 with little currency or bank credit, like Italy, can not do a United 
 States business. 
 
 Without "working capital" business must practically cease. The 
 great bulk of our "working capital" consists of bank deposits. Bank 
 deposits are mere entries on the books of the banks. Let us see how 
 these entries come to be made. 
 
 HOW BANK DEPOSITS ARE CREATED 
 
 When an individual deposits to his credit in bank a check drawn to 
 his order by another, his individual bank credit is thereby increased, 
 but the bank credit of the individual drawing the check is correspond- 
 ingly decreased — the banks merely make entries on their books credit- 
 ing the first depositor and debiting the second — the sum total of the 
 bank deposits of the nation has not been changed by the transaction. 
 Hence it is seen that no matter how many checks are drawn against 
 bank deposits and redeposited in the same or other banks, the sum total 
 of bank deposits is not increased or diminished by a dollar ; neither will 
 the withdrawal of currency from one bank and its redeposit in another 
 affect the sum total of deposits. 
 
 But when a bank grants a loan or discount to its customer the 
 amount of such loan or discount is at once placed to the credit of such 
 customer on the books of the bank, and thereby the bank deposits have 
 become increased by the amount of the loan. If the customer issues 
 checks against this deposit such checks will be redeposited to the credit 
 of someone else, or if he draws out the cash it will naturally flow back 
 through the channels of trade into some bank, as a deposit, so that so 
 long as the loan remains unpaid the bank deposits of the nation will be 
 increased liy the amount of the loan. 
 
 The same effect is produced if the bank invests its general funds in 
 securities or commodities. Money so paid out by the bank will flow 
 back into some bank as a new deposit, but will not be charged against 
 any existing deposit. 
 
 Creating or importing new money and depositing it in bank will, 
 of course, increase the deposits by such amount, but this forms but an 
 immaterial part of the deposits of the nation. The great bulk of the 
 deposits are due to existing unpaid bank loans and discounts and 
 investments made directly by banks in the purchase of securities, 
 commercial paper, etc. 
 
 A LIMIT TO THE EXPANSION OF BANK CREDIT 
 
 The amount of the bank deposits of the nation therefore depends 
 upon the amount of bank loans and bank investments ; but such loans 
 and investments can not be made indefinitely. No matter what secur- 
 ity is offered or how enticing the terms, there is a limit to the amount 
 
of bank loans and bank investments, and hence there is a corresponding 
 limit to the amount of ''working capital" that can be created. 
 
 It is the object of every banker to loan out or invest the money m 
 his charge in order that it may bring a return to the bank in the form 
 of interest, but the banker can not loan out or invest every dollar placed 
 with him by his depositors ; he must keep on hand sufficient currency 
 to meet the daily demands. This is termed a reserve. The amount of 
 reserve that a bank will carry depends upon : first, the law, if any, gov- 
 erning the bank; and second, the policy of the bank. All national 
 banks and the state banks of some States are compelled by law to keep 
 a certain definite amount of currency on hand for every dollar of 
 deposits on the books, ranging from six cents in country districts to 
 twenty-five cents in central reserve cities. Such legal reserve is abso- 
 lutely dead currency and can not be used at any time, no matter what 
 the needs of the banks or the demands of the depositors. So such banks 
 must keep a sufficient amount of currency on hand in addition to the 
 legal reserve, to sei-ve as a working capital of their own. Banks not 
 handicapped by a reserve law can use every dollar of the reserve in case 
 of emergency (which is what a reserve should be for), and, therefore, 
 need not keep so large an amount of dead currency on hand ; neverthe- 
 less, every bank must keep on hand actual currency proportioned to the 
 amount of its deposit liabilities. It is immaterial how much money the 
 bank may have deposited to its credit with some other bank — the point* 
 is that it must keep in its own vaults a certain amount of actual cur- 
 rency for "every dollar of deposit liabilities. 
 
 Every banker must decide for himself, based on his knowledge of 
 the probable needs of his customers at different seasons of the year, 
 just how much cash reserve he will carry. If he carries too much he 
 will lose interest on same; if he carries too little he will be unable to 
 meet the daily demands of his customers and is liable to have a run on 
 the bank. Whatever he carries will be dead currency — ''tied up" — 
 locked in the bank vaults and not usable. 
 
 The bank deposits are mere entries on the books of the bank, but for 
 every dollar so entered the banks must hold in their vaults a certain 
 amount of actual currency; so that if the deposits in a bank grow to 
 such a point that all the currency in that bank is tied up as a reserve, 
 that bank can make no more loans. It follows that if the deposits in all 
 the banks of the nation grow to such a point that all the currency in all 
 the banks is tied up for reserve, then none of the banks can make any 
 loans ; and if no loans can be made the deposits can not increase further 
 and no more "working capital" can be created. Hence, the amount 
 of bank loans and discounts that can be granted and the amount of 
 bank deposits that can be created is strictly limited by the amount 
 of currency in bank. 
 
 RELATION BETWEEN CURRENCY AND BANK CREDIT 
 
 The fact that currency is constantly flowing into one window of a 
 bank and flowing out of another, day after day, leads many to think, 
 in a hazy way, that there is a great stream of currency of indefinite 
 extent that may be dipped into at will by any one who has the proper 
 
security to offer in exchange ; but when we examine the statistics and 
 note that there is only a certain definite supply of currency; that for 
 many years past there has always been a large part of it tied up in the 
 vaults of the government; that the reports sent to the U. S. Comp- 
 troller four times a year for many years show an enormous and steadily 
 increasing amount always in the hands of the people outside of the 
 banks ; and when we realize that the government can not be forced to 
 give up the currency it holds and that the amount in the hands of the 
 people is too widely distributed in too small amounts to be available, the 
 fact is borne in upon us that instead of a stream of currency of indefinite 
 extent the only currency available for those needing it, no matter what 
 gilt-edged security they have to offer for it, is the actual currency in 
 banks. 
 
 There is also a popular impression that there is no limit to the ex- 
 pansion of bank loans and that any one at any time can get any bank 
 loan desired providing he has the proper collateral ; but we have seen 
 that no individual bank can grant a loan unless it has sufficient available 
 currency on hand over and above its reserve ; and it follows that the 
 collective banks of the nation cannot grant a loan if there is no loose 
 cash in any of the banks over and above the reserve. 
 
 Because the bank account of an individual is increased largely 
 through his thrift and ability to make a profit from his business dealings 
 it seems to be presumed that an increase in the total bank deposits of the 
 nation indicates general thrift and general profit-making. But a mo- 
 ment's thought will show that ^^hatever profit one makes must be paid 
 for by some other ; and it certainly requires no argument to prove that 
 the total bank deposits of the nation are not increased or diminished by 
 the mere transferrence of a bank deposit from one individual to another 
 individual or from one bank to another bank. 
 
 It will be seen, therefore, that there is an intimate relation be- 
 tween (l) currency in bank, (2) percentage of cash reserve held 
 against deposits, (3) bank loans and discounts and bank investments, 
 and (4) bank deposits. A change in any one of these items produces 
 a direct effect upon the other three. Bank deposits cannot increase 
 unless bank loans and discounts are granted or direct investments 
 are made by the banks. The banks cannot make such loans and 
 discounts or investments unless (a) there is currency in bank over 
 and above what is needed for reserve, or (b) the percentage of cash 
 reserve held against deposits is reduced, thus releasing the cash from 
 the reserve chests and making it available for loans. Inversely, if 
 bank loans are paid off, the bank deposits are correspondingly de- 
 creased, and this releases currency, from the reserve fund, and such 
 currency is at once available for further loans. 
 
 The quantity of currency needed in the nation therefore depends 
 upon the amount of "working capital" needed in the nation. To increase 
 the "working capital^" it is necessary to increase the bank loans in order 
 that the deposits may increase. Increase in deposits calls for a propor- 
 tionate increase in the reserve. Reserve means currency. Hence, if 
 bank loans are to be increased indefinitely, then the quantity of currency 
 
 10 
 
OF 
 
 must be increased indefinitely. If bank loans are not to be increased 
 then no more "working capital" can be created. Without an increase 
 in "working capital" the business of the nation cannot expand. 
 
 CONDITION PRECEDING THE PANIC OF 1907 
 
 Was the i,oio million dollars in the hands of the banks in Novem- 
 ber, 1906, a sufficient quantity of currency to enable the banks to create 
 as much "working capital" as was then needed to meet the legitimate 
 demands of business ? 
 
 The report of the U. S. Comptroller of the currency for 1908, shows 
 that on November 12, 1906, the banks of the nation had practically 
 reached a state of deadlock — that is to say, their deposits had increased 
 to such an extent that nearly all the currency in bank was tied up for 
 reserve and there was little or no currency available for loans or invest- 
 ments ; therefore no more "working capital" could be created. On page 
 212 of said report is a statement showing the deposits in the various 
 classes of national banks, the cash reserve required by law to be held 
 against such deposits and the actual currency in the banks. From this 
 it will be noted that all the National Banks in the three Central Reserve 
 Cities (New York, Chicago, and St. Louis) had deposit liabiHties of 
 $1,128,900,000, against which the reserve required to be held in cash 
 was $278,300,000 and that the actual currency in the hands of such 
 banks was $281,800,000, so that these banks had but $3,500,000 of 
 money they could use over and above the dead reserve that could not be 
 used. This $3,500,000 was the total working capital of sixty-one of 
 the Nation's greatest banks in the three -financial centers of the United 
 States. It was all these banks had to meet the daily demands of their 
 customers. If they had made loans of only $14,000,0^, thereby 
 increasing their deposits that much, they would have had no working 
 capital left and the withdrawal of any currency by a depositor would 
 have impaired the legal reserve apd made the banks technically 
 insolvent. 
 
 It is seen therefore that these great banks had reached the practical 
 limit of their loaning capacity and could create no more "working capi- 
 tal" unless (a) they could get more currency, or (b) they were per- 
 mitted to operate on a smaller percentage of cash reserve. 
 
 It will also be noted that all the National Banks in the other re- 
 sen^e cities (293 banks in about forty cities) had deposit liabilities of 
 $1,372,500,000 against which the cash reserve (12^/^%) required, was 
 $165,400,000, and that such banks actually had but $167,400,000, or only 
 two million dollars of working capital over and above the reserve. 
 Had loans of only $8,000,000 been made, this working capital would 
 have been tied up in the reserve. 
 
 Hence it follows that all the national banks of the principal cities 
 of the nation had practically reached the limit of their loaning capacity, 
 unless (a) they could get more currency, or (b) the percentage of cash 
 reserve had been decreased. 
 
 It will also be noted that all other national banks in the nation ( 5845 
 in number) had deposits of 2468.5 million dollars against which a cash 
 reserve of 13 1.5 million dollars (6%) was required, and that the banks 
 
 11 
 
actually had 185.3 niiHion dollars of currency, leaving only 53.8 million 
 dollars as a working capital for nearly six thousand banks, an average of 
 less than $10,000 per bank, and an average reserve of only seven and a 
 half dollars of cash for every one hundred dollars of deposit liabilities. 
 Will any sane man claim that the practical loaning capacity of these 
 banks had not been reached, unless (a) they could get more currency, 
 or (b) the percentage of cash reserve had been decreased ? 
 
 The same report, page 31, gives a statement of ''Consolidated 
 returns from State, Savings, Private Banks and Loan and Trust 
 Companies" as of the year 1906, but not as of any specified date in said 
 year. From this it appears that the total cash on hand in such banks 
 was 334.9 million dollars which supported deposits of 8,159.8 milHon 
 dollars or an average of four dollars in cash for every one hundred 
 dollars of deposits. Is it not apparent that these banks had reached the 
 limit of their loaning capacity, unless they could get more currency? 
 
 Many eminent financiers have contended that the cash reserves of 
 the banks were entirely too low at that time, and that in the future the 
 banks should be compelled by law to maintain greater cash reserves. 
 Without going into the question it is quite apparent that the cash 
 reserves of the banks of the nation, taken as a whole, were as low as they 
 could go in safety, and hence the banks could make no more loans. It 
 follows that the bank deposits could not be further increased. 
 
 Hence, in November, 1906, the entire banks of the nation had 
 reached a state of deadlock — they could get no more currency, there 
 being none except that held tightly by the Government and by the 
 people; without currency they could make no loans or investments; 
 unless bank loans and investments were made the bank deposits could 
 not increase, and no more "working capital" could be created. 
 
 We have now shown that the quantity of currency needed in this 
 nation depends upon the amount of "working capital" that is needed 
 in the nation, the said "working capital" consisting principally of bank 
 deposits created by bank loans ; and have also shown that on November 
 12, 1906, the banks of the nation had reached the limit of their capacity 
 to make loans, and, therefore, no more "working capital" could be 
 created, forcing the business of the nation to get along on the "working 
 capital" it had, about $14,000,000,000. 
 
 CAUSE OF PANIC OF 1907 
 
 The sole question in the case, therefore, is was there enough "work- 
 ing capital" at that time and what was the effect of shutting off the 
 supply of new "working capital." 
 
 At that time, November 12, 1906, the great wave of •business expan- 
 sion and development that had started about 1900 had brought about 
 the greatest era of prosperity the nation had ever known. Factories 
 were working night and day creating stocks of merchandise, new fac- 
 tories were being erected, great irrigation works were being con- 
 structed, every railroad was improving its roadbed and purchasing new 
 rolling stock, new railrqads were being constructed in every part of the 
 
 12 
 
nation, the demand for laborers was so great that wages were advanc- 
 ing in every branch of industry, and the daily payroll, paid mostly in 
 currency, was steadily increasing in amount. 
 
 All of this new work required "working capital.'' To meet the 
 demand the banks had been steadily increasing their loans and direct 
 investments and the bank deposits had grown steadily larger. The 
 new currency created during this period was but $775,000,000, but the 
 banks had expanded their loans and investments to such an extent that 
 the bank deposits increased from $7,235,000,000 in 1900, to $12,196,- 
 000,000 in 1906, or about $5,000,000,000. But as the times became 
 more prosperous the government drew more and more currency ' into 
 the vaults of the national treasury, piling up over $300,000,000 of it, 
 thus sucking the life blood from the arteries of trade. The people 
 receiving more wages than ever before, were carrying a steadily increas- 
 ing amount of currency on their persons, as it was perfectly natural and 
 proper for them to do. , So the banks found it increasingly difficult to 
 retain currency at the very time that the bank deposits were expanding 
 and the needs of the currency for the reserve chests was increasing. 
 
 The tim.e finally came, as it mu^t always come in .every great wave 
 of business expansion, when all the currency the banks had or could 
 obtain from any source was tied up in the reserve chests and every 
 bank in the nation had to cease making loans. Immediately there arose 
 a cry of ''money stringency" and it was alleged that the people were 
 ''hoarding." The newspapers took up this cry and implored the people 
 to give up their currency. The people responded to this cry and 
 actually-gave up to the banks over $100,000,000 of currency, reducing 
 their pfcr capita holdings from $20.48 to $19.36. The banks used this 
 additional currency, to increase the loans, so that bank deposits were 
 expanded another $500,000,000, but the demand for "working capital" 
 was greater than the supply. All over the nation there was partially 
 completed work that could not be left in its uncompleted state and had 
 to have "working capital" to complete it. Stocks, bonds and other 
 securities were offered for sale in great quantities by those who had to 
 have "working capital" at any price, with the result of greatly depress- 
 ing the quoted prices for such securities on the stock exchange. This, 
 in turn, not only created a feeling of fear and unrest among the people, 
 but constantly decreased the loaning value of all kinds of collateral. 
 A movement of this kind can not go far without culminating in a finan- 
 cial panic, and the panic of 1907 followed. This panic was the natural, 
 necessap^ and inevitable consequence of the business of the nation 
 expanding to such a point that the existing "working capital" of the 
 entire nation was exhausted and it had to have more "working capital," 
 while no more could be created because as much had already been 
 created as the currency in bank would support, and the banks could 
 get no more currency. Five thousand million dollars of "working capi- 
 tal" had been created by the banks in six years, but James T. Hill, in 
 the spring of 1907, in a public speech stated that the railroads alone at 
 that time needed $1,000,000,000 more to complete work already under 
 way. 
 
 13 
 
PERIODIC PANICS DUE TO THE EXHAUSTION OF BANK CREDIT 
 
 This nation is subject to periodic panics which invariably occur 
 during times of the greatest prosperity and as a culmination of an era 
 of expanding business. There should be no mystery about these panics 
 — they are the natural and logical consequences of our banking and 
 currency system; and the coming of such panics can be foretold with 
 mathematical certainty if the figures showing the movements of cur- 
 rency are available. When this nation gets into one of its booms of 
 expansion and development the demand for ''working capital" is enor- 
 mous. The banks supply this "working capital" either by direct' pur- 
 chase of stocks, bonds, commercial paper, etc., or by making loans to 
 the promoters of new enterprises, or by making loans to third parties 
 who invest in such new undertakings. Finally the time comes when 
 the banks can make no more loans and the supply of working capital 
 , is suddenly shut off without notice. It is this sudden check that pro- 
 duces the panic. In England they know just how far loans can expand, 
 and they regulate them so that the supply of "working capital" is shut 
 off gradually, as hereafter explained. 
 
 There is one other phase of this subject which should be clearly 
 understood. When a person buys something, giving in exchange for 
 it either currency or a bank check, he has thereby converted his "work- 
 ing capital" into fixed capital, but the said "working capital" has passed 
 into the hands of another, and is just as good and usable in such new 
 hands as it was before, so that at the very time of the panic of 1907 
 there was in existence over $14,000,000,000 of "working capital" that, 
 if it could have been applied where it was needed, would have avoided 
 the panic. 
 
 We have shown that part of the currency itself was tied up in the 
 reserve chests of the banks, and in the government vaults, and the 
 balance of it was so widely distributed in such small quantities among 
 our 80,000,000 people as to be unavailable. It can also be shown that 
 the existing bank deposits of the nation were also "tied up." 
 
 It is to be noted that the banks themselves can not touch the bank 
 deposits — only the individual owners of the deposits can use same. 
 Very few men keep idle in bank a larger sum than they deem neces- 
 sary to meet their current demands. When a merchant finds that his 
 balance is larger than he is likely to need for sometime he looks about 
 for an investment in order that he may receive a return in interest. It 
 is to be presumed, therefor, that the great bulk of the credit balances 
 at the banks in November, 1906, was required by its owners for the 
 current needs of such owners. If the owners of these bank deposits 
 refused to issue checks against same they could not be used. A bank 
 deposit that its owner won't use is just as effectively tied up as is cur- 
 rency in the reserve fund of a bank that the bank can't use. Currency 
 is "hoarded" when its possessor puts it in a secret place instead of 
 depositing it in bank or permitting it to flow out into the channels of 
 trade ; and a bank deposit is just as effectively hoarded when its owner 
 refuses to draw a check against it — in either event working capital is 
 tied up. 
 
 u 
 
At that time tliere was over $3,000,000,000 of deposits in sav- 
 ings banks, credited on the books of said institutions to their many 
 thousand depositors. Had ^hese depositors purchased stocks and bonds 
 or real estate, paying for same with checks or orders drawn on the said 
 savings bank, there would have been no ''working capital famine;" on 
 the contrary, the prices of stocks and bonds would have soared upwards. 
 But these depositors could not be induced to part with their savings. 
 This is shown by the fact that during the winter and spring of 1907 
 while stocks and bonds were oflfered at bargain prices the savings 
 deposits actually increased, as shown by the report of the Comptroller. 
 This is a perfect illustration of how bank deposits may be "tied up" 
 or "hoarded." 
 
 In order to meet the legitimate demands of the expanding business 
 of the nation for "working capital" it is not only necessary that there 
 shall be enough of such "working capital," but that it shall be available 
 for the use of those who require it and have proper security to offer in 
 exchange. The $3,000,000,000 of savings banks deposits held by 
 thousands of small depositors who are notoriously skeptical of stocks, 
 are certainly not available for the use of a railroad promoter, no matter 
 how good a proposition he may have. We know from experience that 
 the large business enterprises of the nation must look to the banks them- 
 selves for their supply of "working capital." 
 
 When the banks can make no more loans the main supply of "work- 
 ing capital" is cut off. While individuals all over the nation may have 
 surplus credit at the bank and are in position to purchase stocks, bonds, 
 etc., or make loans, yet it is difficult and impracticable to reach such 
 parties; and it may be safely stated that under our present system 
 when the banks of the nation reach the limit of their loaning capacity 
 a financial panic will follow. 
 
 The quantity of currency that is needed in this nation depends there- 
 fore upon, first, the amount the government requires for its independent 
 ^ub-treasury system which averages close to $300,000,000. Second, the 
 amount the people hold for their individual needs outside of the banks, 
 apparently about $20.00 per capita. Third, the amount the banks must 
 have for reserve against deposit liabilities. The amount the banks will 
 need for reserve depends upon the amount of bank loans and invest- 
 ments, and these in turn depend upon the demand for "working capital" 
 to carry on the business of the nation. 
 
 If the demand for "working capital" is unlimited, then bank loans 
 must be granted indefinitely. If bank loans are granted indefinitely' 
 then the quantity of currency must be expanded indefinitely, because a 
 bank loan means a bank deposit, a bank deposit means reserve, and 
 reserve means currency. 
 
 If the quantity of currency is limited then the bank loans must be 
 limited, the quantity of "working capital" limited and the business of 
 the nation must be limited. 
 
 16 
 
Quality 
 
 The only real money in the leading commercial nations today is 
 gold — all other forms of money are mere promises, express or implied, 
 to pay gold. 
 
 Silver might just as well have been chosen to serve as money, but 
 as it was not chosen, it is not money. It is a mere commodity. A 
 silver dollar would not pass current at its face value were it not for the 
 implied promise of the government to give a gold dollar in exchange. 
 
 Gold and silver were once used together as money and there was 
 no practical objection to this in the days before the invention of banking, 
 as in those more or less primitive days the slight fluctuation in the rela- 
 tive value of the two metals was not of prime importance, but since the 
 invention of banking one dollar of currency in bank supports an aver- 
 age of twelve dollars of deposits, and every fluctuation in the value of 
 that dollar is multiplied twelve or more times. If the depositors of 
 the banks were permitted to demand payment of such deposits in either 
 gold or silver, at their pleasure, when the deposits themselves consist 
 of mere bookkeeping entries, created through extending bank loans, 
 the slightest fluctuation in the market value of the two metals would be 
 of the utmost consequence to the banks. 
 
 The banks owe depositors $12,000,000,000 and have but $1,000,- 
 000,000 of currency with which to pay. If the depositors ' had the 
 right to call for either gold or silver at their pleasure, then the slightest 
 variation, real or imagined, in the relative values of the metals would 
 have a tendency to cause depositors to withdraw from bank the dearer 
 metal — and anything that tends to withdraw currency from bank is to 
 be deplored. Such withdrawals can not be carried very far without 
 producing a financial panic as it is impossible to pay $12,000,000,000 
 of deposits with $1,000,000,000 of currency. 
 
 VALUE OF GOLD DOES NOT FLUCTUATE 
 
 A dollar will not purchase as much today as it did twenty years ago. 
 This has led to a theory that on account of the increased production of 
 gold it is getting cheaper. There is nothing in this theory, but it will 
 be advisable to dispose of it. Gold has a fictitious value and is the only 
 commodity that has such fictitious value. The leading nations have 
 agreed that a certain number of grains of gold shall constitute a unit 
 of value. In America this unit is termed a dollar. This unit is a mere 
 measure of value. If a bushel of wheat is priced at one dollar and a 
 day's wages at three dollars, this means that the relative value of a bushel 
 of wheat to a day's wages is as one to three. If the nations should 
 decide to increase or diminish the number of grains of gold in a dollar 
 this would not have the slightest effect upon the relative value of wheat 
 to wages. If the producer of gold could take such gold to a jeweler 
 and sell it for more dollars than it would represent if it was minted into 
 coins then trouble would ensue instantly, but while the leading nations, 
 the jewelers and gold dealers and the people agree that a certain num- 
 ber of grains of gold shall constitute a unit of value, and the raw gold 
 
 16 
 
is purchased and sold in terms of these same units, it is a theoretical 
 impossibility that there should be the slightest fluctuation in the price 
 or value of gold. 
 
 REASON FOR HIGH PRICES OF COMMODITIES 
 
 The reason that the purchasing capacity of a dollar is not as great 
 today as formerly is not far to seek. 
 
 If $100,000,000 of new currency is created (either gold or paper) 
 and placed in bank, what is the effect ? The bank will not permit it to 
 lie idle — it will be loaned out that it may earn interest. The borrowers 
 must use the money so borrowed so that it will produce enough to pay 
 the interest to the bank and a profit for themselves ; hence they use it 
 in productive work, such as the construction of railroads, factories, 
 mills, machinery, etc., and when it has thus all been expended for labor 
 and material entering into such construction they go back to the bank 
 to borrow more. Meanwhile the money so expended to the wage 
 earners and material men has either at once been deposited back in bank 
 by such parties to their own credit or has been expended by them to 
 merchants and others for necessities, etc., and the merchants will have 
 deposited it back in the bank, for the natural flow of money is from 
 the bank out as a loan and back to the bank as a deposit. The banks 
 are constantly paying out money, but money is constantly being rede- 
 posited and the amount of money that remains in the hands of the 
 people outside of the banks fluctuates very little from week to week. 
 
 Hence, when the borrowers come back to the banks for more loans 
 the original currency borrowed by them is back in bank ready to be 
 again loaned out and again used for further construction. The process 
 of loaning out money and receiving it again might be kept up indefi- 
 nitely were it not for the necessity of holding a cash reserve in bank 
 against deposits. If all of the banks were operating on a 25% reserve, 
 as the Central Reserve Banks do, then the loans could continue until 
 the deposits had reached $400,000,000, at which time the loans would 
 cease, as the entire $100,000,000 of currency would be tied up for 
 reserve. If all llie banks- operated on a 4% reserve, as the loan and 
 trust companies did, then the loans might continue until the deposits ' 
 amounted to $2,500,000,000 before the $100,000,000 of currency would 
 be tied up for reserve. As some of our banks operate on one per- 
 centage of reserve and some on another, it is impossible to tell the exact 
 figure to which loans and deposits will grow from the creation of a 
 given amount of currency, but the actual figures, November, 1906, show 
 $12,000,000,000 of deposits to $1,000,000,000 of currency in bank. 
 The average in this nation, therefore, seems to be about 12 to i. In 
 England it is 16 to i. 
 
 Hence, the effect of creating more currency is to put twelve times 
 such amount to work in productive enterprises, thereby creating a 
 demand for labor, increasing the price paid for labor ; thereby through 
 the increased purchasing power of the wage earners increasing the 
 demand for goods and thus naturally increasing the price paid for 
 such goods. 
 
 17 
 
The currency in this nation increased from $2,339,000,000 in 1900 
 to $3,115,000,000 in 1907, an increase of $775,000,000; and the bank 
 deposits increased during the same period from $7,688,000,000 to 
 $13,654,000,000, or nearly $6,000,000,000, of which $5,000,000,000 
 represent bank loans and bank investments. 
 
 It is hardly necessary to advance arguments to show the effect upon 
 prices of putting $5,000,000,000 to work. Everyone knows what hap- 
 pened during the period betwen 1900 and 1907. Constructive work 
 was going on in all directions and the demand for labor became so great 
 that wages advanced in all lines of work — the common laborers, the 
 foremen, the superintendents, the clerks, the managers and so on up 
 the line all got better jobs and better pay than they had before. 
 
 If 10,000,000 workmen and their families who are eating meat but 
 once a week because they can not afford more, suddenly have their 
 incomes increased so that they eat meat seven times a week, what is 
 the effect upon the price of beef ? Until the supply regulates itself to the 
 increased demand the price will necessarily be very high. 
 
 The market for goods depends upon the inclination of the individual 
 to buy and his ability to purchase. The ability of an individual to 
 purchase depends upon his income or his accumulated wealth. The 
 man without wealth or income can purchase nothing, no matter what 
 his inclination. The wage earners receiving but a small stipend per 
 week must deny himself all the luxuries and many of the necessities of 
 life. Increase his wages and he is instantly able to pay more rent, eat 
 better food and buy better clothes, etc., thus extending the market for 
 these goods. The United States is the greatest market in the world 
 because the wages are the highest and therefore the purchasing ability 
 of the people greatest. China is a poor market because its teeming 
 millions of people receive no wages worthy of the name and they there- 
 fore have not the ability to purchase. 
 
 The selling price of an article is governed by the law of supply 
 and demand ; the cost of an article merely governs the volume of pro- 
 duction. The producer sells his wares at the highest price he can get ; 
 if this price is greater than the cost to him, his interest lies in greater 
 production, if the price is less than the cost he naturally stops the 
 production. 
 
 An increase in the wages paid necessarily increases the cost of pro- 
 ducing goods, and the selling price must be advanced to cover this 
 increased cost. If the goods will not sell at the increased cost produc- 
 tion will instantly cease, thus cutting off the supply. With the supply 
 cut off the demand, if there is any, will exhaust the existing stock on 
 hand, and, if the demand continues, the selling price will necessarily 
 rise until it will be profitable to again produce. 
 
 The effect of the general increase in wages, therefore, is two- fold : 
 
 First, it necessarily increases the selling price by the amount of the 
 extra cost of the labor entering into the production of the goods. 
 
 Second, it increases the buying capacity of the wage-earner, thereby 
 increasing the demand for goods. 
 
 18 
 
If the demand is only slightly above or below the supply it will 
 have a great effect upon the price. It is a well-known principle that 
 ''the surplus governs the price." The American manufacturer, know- 
 ing this, dumps his surplus on the foreign market, at cost or below, 
 so as to maintain high prices in America. Were the surplus dumped 
 on the American market the price would instantly fall. A slight de- 
 ficiency in the supply has the immediate effect of putting up prices, and 
 the stronger the demand the higher the price will go. 
 
 The price of most commodities has advanced since 1900, not in 
 leaps and bounds, but gradually, a few pence at a time, the producers 
 carefully feeling the demand. 
 
 High prices today are maintained by the enormous demand created 
 by the great buying capacity of the American people. Cut down to 
 the average of the year 1894 the rate of wages and the proportionate 
 number of men employed, and the price of wheat will drop to the price 
 of those days. 
 
 An increase in the volume' of currency, therefore, whether it be gold 
 or paper, if that currency is put to work, will decrease the purchasing 
 power of a dollar because it will increase wages and the price of all 
 articles produced by labor, and the increase in the income of the people 
 will vastly increase their capacity to buy and thus create a larger 
 demand and broader market for all lines of goods. The demand for 
 currency and working capital in this nation of wonderful and undevel- 
 oped resources is usually equal to the supply, and is likely to continue 
 to be while we have land to be irrigated, swamps to be dramed, canals 
 to be dug, waterways to be dredged, railroads to be built, etc. Hence, 
 the practical effect of increased production of gold is to decrease the 
 purchasing power of a dollar, because such gold tends to increase the 
 supply of money, but it is a very vital point to note the decreased pur- 
 chasing power of the unit is not due to any change in the value of gold 
 constituting that unit, but simply to the increased supply of working 
 capital that has been put to work. It would be very disquieting if the 
 value of our gold was decreasing, for we can not control the production 
 of gold, but we can control the volume of working capital ; in fact, it 
 will regulate itself, for when all the work is done the loans will naturally 
 be paid off, the deposits thereby being decreased and the currency will 
 simply lie idle in bank. It isn't the mere volume of currency that has 
 any effect on prices — it is the putting of that currency to work, so that 
 men are employed at wages that enables them to buy. 
 
 INSUFFICIENT QUANTITY OF GOLD 
 
 If gold is the only real money why should anything else be used for 
 money ? The only possible answer is that there isn't enough gold. 
 
 The total amount of gold produced in the United States from 1792 
 to 1906 was but $2,800,000,000, so that if every dollar of this had been 
 coined and was still extant we still would not have enough, as our 
 present supply of currency is over $3,000,000,000. If we should 
 attempt to substitute gold for our $665,000,000 of national bank notes 
 where would we get this gold? There is no available supply of gold 
 
 19 
 
anywhere in the world. Every ounce of gold ever produced has either 
 been used as money or gone into the arts — there isn't enough gold 
 money now and there is no way of getting any of the gold back that 
 went into the arts. It certainly is not practicable to get gold rings, 
 watches, plate, etc., from the people and melt them down. The gold 
 that is being produced now is not sufficient to supply the demands for 
 new currency. In 1906 there was produced in the entire world gold 
 valued at $4IO,ooo,cxxd and the amount actually coined was $411,000,000 
 in that same year, while there was also issued a large quantity of paper 
 currency, showing that the demand for currency was greater than the 
 supply of gold. We added to our supply of currency from 1900 to 
 1908 over $1,000,000,000, an average of about $120,000,000 per year. 
 There was produced of gold in the United States in 1907 but $130,- 
 000,000 of gold. Thirty million dollars of this went into the arts, leav- 
 ing but $100,000,000 for coinage, or $20,000,000 less than needed. We 
 must face the situation, therefore, that there is not enough gold to even 
 supply our demands for new currency, and it is utterly impossible to 
 ever substitute gold for our present unsecured paper. We have enough 
 gold to redeem our outstanding paper, if the demarid for redemption 
 does not come too fast, but to do so would cut in half our quantity of 
 currency. There are over $3,000,000,060 of uncovered paper in the 
 leading commercial na^tions, as per report of U. S. Comptroller, 1908, 
 p. 489, and these nations are struggling to increase their gold reserves. 
 
 PAPER MONEY 
 
 If there is not sufficient gold to supply the increasing demand for 
 currency, then token or paper currency must be issued as a substitute. 
 A certain amount of paper can be kept afloat if backed by a reserve of 
 gold, on the same principle that enables the banks to maintain twelve 
 dollars of deposits on one dollar of reserve. The amount of paper that 
 can be kept afloat depends on the amount of gold reserve held against it, 
 and the credit of the issuer. 
 
 A bank, as a rule, can maintain and keep afloat a greater portion of 
 paper to gold reserve than can a government, because the government 
 uses such issue of paper to pay its general expenses and for other non- 
 productive purposes, and if its gold reserve becomes impaired it has 
 no way of replenishing it except through taxation or borrowing ; while 
 a bank uses such paper only for loans and investments and in case of 
 need can collect in the loans or sell the investments. 
 
 Most financiers will admit that two dollars of paper can be kept 
 afloat indefinitely with one dollar of gold reserve ; possibly three might 
 be kept afloat. Four is a practical impossibility without suspending 
 specie payment altogether. It is immaterial how strong may be the 
 credit of the issuer of the paper — when the paper is presented for pay- 
 ment the gold must be there to meet it — if it isn't there, there is a sus- 
 pension of specie payment and immediate derangement of the money 
 market. 
 
 20 
 
CURRENCY OF THE UNITED STATES 
 
 In this nation about half our currency is gold and the other half 
 is paper and silver. The government issued $346,ooo,ocxd of paper 
 termed United States notes or greenbacks against which it keeps at all 
 times a gold reserve of $150,000,000. Considering the limited quantity 
 of the issue, the heavy gold reserve, and the great strength of the 
 government there can be no question that these greenbacks will be 
 maintained at face value. 
 
 The government also keeps afloat about $700,000,000 of silver — 
 by an implied promise that gold will be exchanged for it on demand. 
 No specific gold reserve is maintained to make this promise good, but 
 there is usually about $200,000,000 or more of gold in the vaults of 
 the Treasury in the general fund that could be used for this purpose. 
 
 The national banks of the nation have issued $665,000,000 of paper, 
 termed national bank notes, which are ba'cked by the credit of the 
 individual banks and by a deposit of bonds of the U. S. Government. 
 
 While no specific gold reserve is required to be held against these 
 notes the national banks are required to hold a very large reserve of 
 lawful money against their deposits, and they usually have on hand 
 about $450,000,000 or more in gold. It is true that this reserve serves 
 the double purpose of supporting hbth deposits and bank notes and that 
 in case of emergency it can not be used for either purpose; but the 
 fact remains that the gold is there and while it is there the bank notes 
 will probably pass current at par. Remove that gold and all the credit 
 of the banks and the government combined won't keep the bank notes 
 afloat without suspending specie payment altogether. ' , 
 
 In England in normal times practically every dollar of paper issued 
 is backed by a dollar in gold deposited in the Bank of England. In 
 case of sudden emergency when more currency is instantly necessary 
 the bank is empowered to issue half a billion dollars of paper tem- 
 porarily. A very much larger issue could be made with safety because 
 of the great reserve of gold in the bank to support it. 
 
 In this nation we keep afloat in normal times about as much paper 
 as the gold on hand will support safely, hence in times of emergency 
 it is difficult and dangerous to issue much more paper. 
 
 There can be no question about the quality of currency. It must 
 be gold or a promise to pay in gold ; and the promises can not be made 
 good without an adequate gold reserve to redeem such promises as 
 fast as they are presented. 
 
 21 
 
The Trouble and the Remedy 
 
 There is nothing vitally wrong with our currency. It would be 
 better if it was all gold, but in view of the limited supply of gold that 
 is impossible. But even as it is, about 50% of it is gold and that is 
 ample to support it all except under most unusual circumstances. But 
 it certainly will be inviting disaster to inject much more paper into our 
 circulation. The arguments against greenbackism are just as potent 
 today as they were forty years ago. Neither will it be possible to 
 obtain a sufficient quantity of gold to supply all the demands for new 
 currency in view of the determined struggle every nation is making 
 to strengthen its gold reserve. It is utterly impossible for the nation? 
 to ever substitute gold for the $3,000,000,000 of uncovered paper and 
 the best they can do will be to strengthen their gold reserves so as to 
 be able to redeem such paper as is presented for payment. 
 
 Hence it follows that we should get the utmost possible service out 
 of the currency we have. That is just what we do not do, but that is 
 not the fault of the currency ; it is the fault of the Banking System. 
 
 THE DISEASE 
 
 The trouble with our banking system is two fold. 
 
 First, we have no way of controlling and regulating bank loans. 
 
 A giv^n amount of currency in bank will only support a given amount 
 of deposits, and hence only a given amount of bank loans can be granted. 
 If every individual bank loans until it can loan no more without any 
 reference to the condition of the money market, then we must continue 
 to have periodic panics, for the time will always come in this nation df 
 expanding and developing business when every bank in the nation 
 reaches the limit of its loaning capacity, and when that point is reached 
 business receives such a sudden check that disaster must follow. A 
 brake must be put on loans, so that they may be brought to a stop grad- 
 ually and not in the form of a head-on collision. 
 
 In England the reserves of the different banks are largely carried 
 with the Bank of England. When that bank sees the loans expanding 
 too fast so that the deposits are getting beyond the ability of the reserve 
 to support them, it raises the rate of discount, so that a brake is at 
 once put on loans — borrowers are deterred by the high discount rate 
 from renewing loans and existing loans are paid off, and thus the 
 deposits are reduced. Thus by a simple manipulation of the interest 
 rate the loans are regulated and a proper relation is maintained between 
 the deposits and the reserve. Since that plan was adopted there have 
 been no bank panics in England. 
 
 Second, owing to the large percentage of reserve carried, our com- 
 mercial banks do not create as much working capital from a given 
 amount of currency as do the commercial banks of other nations. The 
 
 commercial banks of England create about sixteen dollars of deposits 
 to one dollar of currency in bank. Our largest national banks in the 
 three financial centers of New York City, Chicago and St. Louis can 
 create but four dollars, as they are obliged to carrv a dead reserve 
 of 25%. 
 
 22 
 
The need of the nation is for more working capital. A good bank 
 check is just as effective as the currency. The business men were not 
 crying for currency in 1907 — they wanted bank credit. It was the 
 banks that cried for currency because they could not grant the credit 
 without obtaining currency for the insatiable reserve .fund. If they 
 could have reduced the percentage of reserve, a vast quantity of cur- 
 rency would instantly have been available for loans. If the 293 national 
 banks in the reserve cities had been operating on a 6% cash reserve, 
 as the 5,845 country national banks were doing, they would have created 
 and supported with the same amount of currency, nearly one and one- 
 half billion dollars more deposits. 
 
 The country national banks with but $185,000,000 in currency 
 supported $2,468,000,000 of deposits. The central reserve banks with 
 $281,000,000 in currency could support but $1,128,000,000 of deposits. 
 When the crash came the country banks were in as strong a position as 
 the reserve city banks. A dead reserve does not strengthen a bank any, 
 while it does cut down the working capital the people need. The busi- 
 ness of the nation can not continue to expand and develop unless we have 
 more ''working capital." "Working capital" means bank loans. Bank 
 loans can not be granted without currency for the reserve fund, and as 
 currency can not be created indefinitely we must cut down the percent- 
 age of reserve so as to get larger results with the currency we have. 
 
 THE REMEDY 
 
 To remedy the existing ills of the Currency and Banking System, 
 therefore, it is necessary to devise a plan whereby (i) bank loans will 
 be controlled, and regulated and (2) the commercial banks of the 
 nation will be able to operate on smaller reserves. 
 
 It is useless to attempt to provide sufficient currency if the bank 
 loans are allowed to expand indefinitely — currency could not be created 
 fast enough to m.eet the demand for reserves. It is also useless to^ask 
 a banker to reduce his cash reserve unless he can be shown where he 
 can get sufficient currency instantly to meet unusual demands. 
 
 The only conceivable way to adequately control bank loans and to 
 provide currency where and when needed by the banks so that they may 
 safely operate on smaller cash reserves is by the creation of a great 
 central bank, strong enough to dominate and control the money market, 
 and so organized and constituted that it will not be a mere private insti- 
 tution for private gain, but a great national institution operating under 
 the supervision of the national government and designed to do two 
 things and two things only, to-wit : ( i ) regulate bank loans and keep 
 them from expanding too far, thus regulating the amount of deposits 
 and maintaining a proper relation between deposits and reserve ; and 
 (2) hold all of the surplus currency of the nation for the use of the 
 individual banks, so that the utmost service can be obtained from tne 
 existing currency. 
 
 Notwithstanding a popular notion to the contrary, the object of 
 such a bank should not be to inject more paper into our circulation ; we 
 have about as much paper as we can stand now. This nation is not to 
 
 23 
 
be converted from a gold standard to a paper standard. No commer- 
 cial nation in the world keeps afloat as much uncovered paper and token 
 money as we do, and we shall invite commercial disaster and national 
 dishonor by materially increasing our uncovered paper currency. The 
 object of the bank should be to make greater use of the currency we 
 now have. 
 
 INADEQUACY OF THE U. S. INDEPENDENT TREASURY SYSTEM 
 
 The national government now has a great bank of its own termed 
 the "Independent Treasury System," through which it handles its own 
 fiscal affairs. The Treasury usually has $300,000,000 or more in currency 
 on hand. The government frequently deposits currency with commercial 
 banks, securing itself by taking collateral, but the banks claim that the 
 government makes these deposits at times when the banks do not need 
 the currency and withdraws the deposits at the very time that the cur- 
 rency is needed most. If the government would reverse this process 
 and use this vast fund intelligently, it would act as a great safety valve 
 to the money market. If the government should deposit $200,000,000 
 in currency with the banks with an agreement that it be returned in 
 sixty or ninety days it would be a very satisfactory emergency currency. 
 
 But if the national revenues fell below the expenditures and the cur- 
 rency in the Treasury ran low, as has happened many times in the past, 
 then if our banks were relying upon the Treasury to supply currency 
 they would be disappointed. Again, if the Treasury loaned out its 
 funds to the banks and then found that the banks would not pay back 
 the currency on demand, the credit of the government would be im- 
 paired. Neither can the Independent Treasury system in any way 
 control bank loans. Hence it is obvious that the Independent Treasury 
 system can not be utilized to correct the defects in our banking system, 
 and that a new central bank must be organized. 
 
 CENTRAL BANK 
 
 But this new central bank, in order that it may be strong enough to 
 dominate and control the money market, must have a gold reserve of 
 large proportions. Where is this gold to be obtained? If it is drawn 
 from the banks it will cripple them. To draw it from the banks and 
 instantly redeposit it with them, as has been suggested, will not do at 
 all. The right to withdraw currency from a bank in times of panic 
 is not a very valuable right. 
 
 The only available supply of currency is that in the U. S. Treasury. 
 There isn't enough currency to support both a central bank and the 
 Independent Treasury system. One or the other must be given up. 
 At the time of the money stringency the government had lying idle in 
 its treasury one-third as much currency as was in all the banks in the 
 nation. The banks were supporting a vast superstructure of credit 
 for the benefit of the people with the currency they had ; the govern- 
 ment was doing nothing. It is true that the government came to the 
 rescue of the banks after the crisis and by putting this currency in cir- 
 culation helped to save the situation, but there perhaps would have 
 been no need of a rescue if this vast amount of currency had been in 
 circulation where it belonged. 
 
 24 
 
If the government gives up its sub-treasury system and creates a 
 central bank, turning over to such bank all of the funds in the Treasury 
 and transacting its fiscal affairs through said bank, then the duty will 
 devolve upon such bank of keeping afloat and maintaining at par all 
 the silver and paper currency issued by the government, and for this 
 purpose it must have an adequate gold reserve, which must be main- 
 tained notwithstanding the condition of the national revenues. 
 
 To enable the individual banks to safely operate on a smaller per- 
 centage of cash reserve, it will be necessary that the central bank 
 maintain a large reserve of gold with which to supply the individual 
 banks on demand — as the banks will not only require ordinary currency 
 in large volume at various times, but will also need the gold itself with 
 which to redeem any national bank notes offered for redemption and 
 the people must be assured that the gold will be forthcoming on demand, 
 otherv/ise such national bank notes will certainly be offered for redemp- 
 tion in large quantities. 
 
 In order to obtain this large reserve of gold and other currency 
 the said central bank should be the reservoir to which all of the surplus 
 currency of the nation will naturally flow. The present laws relating 
 to the payment in gold of duties and customs should be continued, and 
 of course all such government revenues would go at once to said bank. 
 In addition, all national banks should be compelled, and all state banks 
 be encouraged, to keep their surplus reserves with said central bank. 
 The present system of reserve and central reserve banks would have to 
 be given up, and all national banks would be on the same footing, each 
 operating on such small cash reserve as it saw fit and having on deposit 
 to its credit with the central bank all surplus reserves. 
 
 POWERS AND LIMITATIONS OF THE CENTRAL BANK 
 
 If the bank does nothing with this fund of gold and currency but 
 keep it safely until called for it will defeat the objects of its creation, as 
 it will have no influence on bank loans nor will it be able to supply 
 currency when and where needed. 
 
 If it is permitted to receive other deposits than from the govern- 
 ment and the banks, it must hold a reserve against same, and such 
 reserve will tie up currency that ought to be used solely for the benefit 
 of the general banking system. If our banks are to rely upon this cen- 
 tral bank to such an extent that they will operate on a smaller percent- 
 age of reserve than they now deem safe, in the belief that they can in- 
 stantly withdraw their balances in currency on demand they must- know 
 that the central bank is being operated in their benefit, and is not going 
 to use its available currency to support its individual deposits. 
 
 If it grants loans to individuals it will open the door to political 
 'favoritism and invite disaster — besides if it is not permitted to receive 
 individual deposits it could make a loan only by paying over the counter 
 the actual currency to be carried away to be deposited in some other 
 bank. 
 
 In order to dominate and largely control the money market, regulate 
 bank loans, and aid the individual banks to expand their loans and thus 
 
 25 
 
create "working capital," the central bank should use the currency in its 
 possession solely for the purpose of rediscounting bank paper. Any 
 bank could then take the promissory notes of its. customers on which it 
 had loaned money and on presenting same to the central bank for redis- 
 count receive the face of the loan, less the discount, in currency. No 
 bank will rediscount its paper, thus paying away a large portion of its 
 profit, while it has any available currency of its own on hand, but all 
 banks will avail themselves of the rediscount privilege when currency 
 runs low. X^e central bank will be in position to feel the financial pulse 
 of the nation. When it sees that loans are expanding too rapidly it 
 can raise its rate of discount and this will deter the banks from redis- 
 counting their notes — if they do rediscount they will charge their cus- 
 tomers the higher rate and the customers will naturally reduce the loans 
 as quickly as possible rather than pay too dearly for same. 
 
 As' the central bank should only rediscount short-time paper, that, 
 if renewed, would have to pay the prevailing rate of discount, it follows 
 that an increase in the discount rate will have the immediate effect of 
 causing loans to be paid ofl:', and the reserve of currency will thus be at 
 once increased. In this way the said central bank will have almost 
 absolute control over the bank loans of the entire nation. Each indi- 
 vidual bank will also be able to draw from said central bank in cur- 
 rency at any time the entire balance such bank has to its credit with 
 such central bank so that it need not keep so much cash in its own 
 vaults. This is just what it can not do now. During the panic of 
 1907 the reserve banks of the nation were unable to honor the checks 
 of the individual banks drawn against their own credit balances and it 
 was this failure of the reserve banks that forced the general suspension 
 of specie payment. As a result every bank in the nation has learned its 
 lesson and is now keeping a large cash reserve in its own vaults, thus 
 tying up currency and decreasing the supply of ''working capital." 
 This tendency of the banks must be overcome before we can have that 
 general revival of boom times that we are all looking for. 
 
 A central bank organized and constituted as above described 
 would control and regulate bank loans, thus maintaining a proper 
 relation between bank deposits and reserve, and thereby largely 
 obviating the cause of periodic panics. It would enable the banks to 
 safely operate on smaller cash reserves, and thus make it possible to 
 create more '^working capital" for the use of the nation. In addition, 
 it would put to use the vast accumulation of currency usually lying 
 idle in the vaults of the United States Treasury. 
 
 If, in Novem.ber, 1906, a central bank had been in existence, organ- 
 ized on the foregoing plan, and having in its vaults available for the use 
 of all national banks had they needed it, the $325,000,000 of currency 
 that at that very time was lying idle in the vaults of the U. S. Treasury, 
 then it would have been safe for all national banks to operate on a 
 smaller percentage of cash reserve. And had the 293 reserve and 61 
 central reserve national banks in fact operated on a cash reserve of 
 about 8% as the 5,843 country national banks and all the state banks 
 were then doing they could have created and supported bank deposits 
 of $5,615,000,000. Whereas, operating, as they did, on a large per- 
 
centage of dead and unusable cash reserve, they were able to support 
 but $2,501,000,000 of deposits. With the same amount of currency, 
 therefore, held in identically the same manner, they could have created 
 and supported over twice as much ''working capital" — a great deal 
 more than there was any demand for^ and there would have been no 
 ''money stringency." 
 
 LIMIT UPON THE RIGHT OF ISSUE 
 
 If, in addition, such central bank could issue uncovered paper money, 
 it would be of great advantage to trade, but this it can not safely do 
 without an adequate gold reserve held against such paper. It is not 
 necessary to recite the arguments against greenbackism. We simply 
 must not inject too much uncovered paper into our circulation. The 
 bank will have the duty of maintaining the $346,000,000 of greenbacks 
 now issued and will receive from the government but $150,000,000 in 
 gold with which to do it. It will be obliged to maintain at par with 
 gold the $700,000,000 of silver and it will have to supply the national 
 banks with such gold as they may need from time to time to maintain 
 the $665,000,000 of outstanding national bank notes. It is unsaie, there- 
 fore, for it to issue a new amount of uncovered paper except in emer- 
 gencies for temporary purposes. 
 
 There are times, however, when emergency currency is needed. 
 Once a year, at the crop-moving season, about $200,000,000 is needed 
 in currency for about ninety days. The bank could probably safely 
 issue this amount for so short a period, using its general fund as a 
 reserve. There are other times when, on account of some business 
 disturbance, an unexpected demand is made on the banks, and to meet 
 this perhaps half a billion of currency is absolutely needed. 
 
 In England, the bank of England maintains in its redemption depart- 
 ment 6ne dollar in gold for every dollar of outstanding paper (except 
 for one issue of 15,000,000 pounds), but in case of severe emergency it 
 is empowered to issue up to half a billion of uncovered paper, using the 
 gold in the redemption department for a reserve; so that for the time 
 being the currency of England ceases to be backed by 100% in gold, the 
 entire gold on hand being utilized for the maintenance of the entire 
 outstanding paper. 
 
 We might in case of emergency do the same thing. 
 
 The government now has in its vaults about $1,000,000,000 in gold 
 against which it has issued gold certificates to the same amount, such 
 certificates being in efifect warehouse receipts for gold. These certifi- 
 cates have been considered in this article as the gold itself. It is, of 
 course, possible to make greater use of this gold fund. The bank might 
 be empowered, in case of great emergency, and with the consent of the 
 United States Treasurer, to issue a half billion dollars of paper backed 
 by this fund. Until this issue was redeemed our gold certificates would 
 cease to be warehouse receipts and would simply be uncovered paper 
 backed by a gold reserve ©f 66%. This sort of finance is not to be 
 indulged in without due consideration, but there are times when emer- 
 gency money must be issued and it can't be maintained without a gold 
 reserve. The only gold that will be available at such a fime will be this re- 
 demption fund, and it is better to use that than permit a financial panic. 
 
 27 
 
SUPPLY OF PERMANENT CURRENCY 
 
 To increase the supply of permanent currency there is no reason 
 why any of the existing laws on the subject should be changed. We 
 should obtain as much as. possible of the newly-mined gold, and the 
 central bank will be in a strong position to obtain and retain this gold. 
 There is no reason why the mints shoul'd not continue to turn out sub- 
 sidiary coin as they are now doing. There is no reason why the national 
 banks should not continue to issue national bank notes as at present. 
 Admitting that it is absolutely necessary to have a certain quantity of 
 uncovered paper currency, then no better or safer paper can be devised 
 than national bank notes as at present issued. They are backed by the 
 credit of the Individual banks issuing them and by the credit of the 
 national government, and as the people have the utmost confidence in 
 them it will require a smaller gold reserve to maintain them than any 
 other notes that could be devised. 
 
 RECAPITULATION 
 
 To recapitulate: 
 
 The business of the nation can not be carried on without ''working 
 capital." "Working capital" consists principally of bank deposits. 
 Bank deposits are created largely by bank loans. Bank loans can not 
 be granted unless there is available currency in the banks over and 
 above the reserve fund. 
 
 The need of the nation is for working capital. In ordinary times 
 the banks are able to create as much of this as is needed, but when 
 business expands too far the limit of the loaning capacity of the banks 
 is reached, they can grant no more loans and business receives such a 
 sudden check due to the failure of the supply of working capital, that a 
 financial panic follows. 
 
 The trouble with our present system is that (i) there is no method 
 of regulating bank loans and the business men and bankers know very 
 little about the condition of the money market outside of their own 
 particular communities, and they rely blindly on the ability of banks 
 in other localities to honor their drafts for currency; and (2) our banks 
 operate on so large a percentage of cash reserve that the quantity of 
 "working capital" created is unduly limited. 
 
 To regulate and control bank loans so that every business man and 
 banker may know the condition of the money market and the available 
 supply of working capital; and to enable the banks to operate on a 
 smaller percentage of cash reserve, so that they may create more work- 
 ing capital with our existing currency, it is necessary to create a central 
 bank, empowered only : 
 
 1. To hold the government funds and transact the fiscal afifairs of 
 the government. 
 
 2. To receive on deposit the surplus reserves of the banks of the 
 nation. 
 
 3. To rediscount short-time bank paper and by manipulating the 
 rate of discount control bank loans and maintain the reserves. 
 
4- To issue ninety-day emergency paper once a year for crop-mov- 
 ing purposes not exceeding $200,000,000, to be backed by its general 
 fund. 
 
 5. To issue in time of severe emergency and with the consent of the 
 national government, half a billion dollars of emergency paper, backed 
 by the gold fund now held for the redemption of gold certificates, and 
 by any other gold available. 
 
 The only changes in the existing laws necessary are to abolish the 
 provisions of the National Bank Act relating to reserves, and repeal 
 all laws relating to the creation of the Independent Treasury system. 
 
APPENDIX 
 
 Extract from the report of the Comptroller of the Currency for 
 1908, page 212 : 
 
 "No. 55. — Deposits held by national banks, amount and ratio of 
 lawful money reserve required, also amount, ratio and classification of 
 reserve actually held on November 12, 1906, * "^^ *." 
 
 
 Number 
 
 of 
 Banks 
 
 Deposits 
 
 Reserve Required 
 
 Classfication of Reserve held 
 
 Location of Banks 
 
 Ratio 
 
 Amount 
 
 Lawful 
 Money 
 in Bank 
 
 Due 
 
 from 
 
 Reserve 
 
 Agents 
 
 Redemp- 
 tion 
 FuQd 
 with 
 Treas- 
 urer 
 
 November 12, 1906 
 Central Reserve Cities 
 Other Reserve Cities . . 
 Not Reserve Cities — 
 
 6L 
 
 293 
 
 5,845 
 
 Millions 
 1,128.8 
 1,372.5 
 2,468.5 
 
 P. Ct. 
 25 
 25 
 15 
 
 Millions 
 282.2 
 343.1 
 370.3 
 
 Millions 
 281.8 
 167.4 
 185.3 
 
 Millions 
 
 160.3 
 212.2 
 
 Millions 
 
 3.9 
 
 6.1 
 
 16.6 
 
 Total 
 
 6,199 
 
 4,969.9 1 995.6 634.5 372.5 
 
 26.5 
 
 NOTE. — The National Bank Act requires that banks in central 
 reserve cities (Nev^ York, Chicago and St. Louis) shall hold a reserve 
 against deposits of 25% of such deposits, and that all of this shall con- 
 sist of currency in the vaults of the banks, except that the redemption 
 fund with the United States Treasury may be counted as cash on hand. 
 
 The "other reserve cities" are required to keep a reserve of 25% 
 against deposits, but only one-half of this, to-wit, $12.50 of every $100, 
 need be kept on hand in the form of currency; the balance may be a 
 paper credit with some other bank. 
 
 The "not reserve cities" are required to keep a reserve of 15%, 
 but of this sum only two-thirds, to-wit, $6.00 of every $100 of deposits, 
 need be kept on hand in the form of currency; the balance may be in 
 the form of paper credit with some other bank. 
 
 The currency on hand in national banks to be counted as reserve 
 must consist of "lawful money." This excludes national bank notes 
 and some other classes of currency. 
 
 30 
 
APPENDIX— Continued 
 
 Extract from the report of the Comptroller of the Currency for 
 1908, page 31 : 
 
 "For the purpose of comparison, a table exhibiting the principal 
 items of resources and liabilities of banks other than national in the 
 years '-!«** 1906, is submitted herewith :" 
 
 CONSOLIDATED RETURNS FROM STATE, SAVINGS. PRIVATE BANKS 
 AND LOAN AND TRUST COMPANIES 
 
 Item. 1906. 
 
 Loans $ 5,656,832,201 
 
 Bonds 2,790,159,501 
 
 Cash 334,938,185 
 
 Capital . ; '. 739,163,401 
 
 Surplus and undivided profits 893,679,524 
 
 Deposits 8,159,894,029 
 
 Resources 10,363,350,846 
 
 NOTE. — It will be seen from the above statement that the actual 
 currency on hand was $334,000,000 against deposits of $8,159,000,000, 
 or about $4.00 of currency for every $foo in deposits. A few of the 
 States have laws relating to reserves in vState banks, but the majority 
 of the States are without such laws and the banks keep on hand such 
 reserves as they see fit, and an analysis of the bank statements shows 
 that a very large portion of the currency kept on hand by such banks 
 is other than "lawful money." 
 
 It will be seen that the State banks, savings banks and loan and 
 trust companies with about one-half as much currency on hand as the 
 national banks had, were able to create and support about twice as much 
 "working capital." ■ 
 
 31 
 
APPENDIX— Continued 
 
 Extract from the Report of the Comptroller of the Currency for 
 i9o8, pag^e 46. 
 
 ''Distribution of Money in the United States." 
 
 
 
 Coin and Other 
 
 Coin and Other 
 
 Coin and Other 
 
 
 Coin and 
 
 Money in 
 
 Treasury 
 
 Mouey in 
 
 Money not in Treasury 
 
 Year 
 
 other 
 Money in 
 
 as assets, a 
 
 Reporting J 
 
 Banks, b. 
 
 01 
 
 • Banks 
 
 
 the United 
 
 States 
 
 
 
 
 
 
 
 
 Amount 
 
 Per Cent 
 
 Amount 
 
 Per Cent 
 
 Amount 
 
 Per Cent 
 
 Per 
 Capita 
 
 
 Millions 
 
 Millions 
 
 
 Millions 
 
 
 Millions 
 
 
 
 1892 
 
 $1,752.2 
 
 $150.9 
 
 8.60 
 
 $ 586.4 
 
 33.48 
 
 $1,014.9 
 
 57.92 
 
 $15.50 
 
 1893 
 
 1,738.8 
 
 142.1 
 
 8.17 
 
 515.9 
 
 29.68 
 
 1,080.8 
 
 62.15 
 
 16.14 
 
 1894 
 
 1,805.0 
 
 144.2 
 
 7.99 
 
 688.9 
 
 38.17 
 
 971.9 
 
 53.84 
 
 14.21 
 
 1895 
 
 1,819.3 
 
 217.4 
 
 11.95 
 
 631.1 
 
 34.69 
 
 970.8 
 
 53.36 
 
 13.89 
 
 1896 
 
 1,799.9 
 
 293.5 
 
 16.31 
 
 531.8 
 
 29.55 
 
 974.6 
 
 54.14 
 
 13.65 
 
 1897 
 
 1,905.9 
 
 265.7 
 
 13.95 
 
 628.2 
 
 32.96 
 
 1,012.0 
 
 53.09 
 
 13.87 
 
 1898 
 
 2,073.5 
 
 235.7 
 
 11.37 
 
 687.7 
 
 33.17 
 
 1,150.1 
 
 55.46 
 
 15.43 
 
 1899 
 
 2,190.0 
 
 286.0 
 
 13.06 
 
 723.2 
 
 33.02 
 
 1,180.8 
 
 53.92 
 
 15.51 
 
 1900 
 
 2,339.7 
 
 284.6 
 
 12.16 
 
 749.9 
 
 32.05 
 
 1,305.2 
 
 55.79 
 
 17.11 
 
 1901 
 
 2,483.1 
 
 307.8 
 
 12.39 
 
 794.9 
 
 32.02 
 
 1,380.4 
 
 55.59 
 
 17.75 
 
 1902 
 
 2,503.2 
 
 313.9 
 
 12.24 
 
 837.9 
 
 32.69 
 
 1,411.4 
 
 55.07 
 
 17.90 
 
 1903 
 
 2,684.7 
 
 317.0 
 
 11.80 
 
 848.0 
 
 31.59 
 
 1,519.7 
 
 56.61 
 
 18.88 
 
 1904 
 
 2,803.6 
 
 284.3 
 
 10.14 
 
 982.9 
 
 35.06 
 
 1,536.3 
 
 54.80 
 
 18.77 
 
 1905 
 
 2,883.1 
 
 295.2 
 
 10.24 
 
 987.8 
 
 34.27 
 
 1,600.1 
 
 55.49 
 
 19.22 
 
 1906 
 
 3,069.9 
 
 333.3 
 
 10.86 
 
 1,010.7 
 
 32.92 
 
 1,725.9 
 
 56.22 
 
 20.39, 
 
 1907 
 
 3,115.6 
 
 342.6 
 
 11.00 
 
 1,106.5 
 
 35.51 
 
 1,666.5 
 
 53.49 
 
 19.36 
 
 1908 
 
 3,378.8 
 
 340.8 
 
 10.08 
 
 1,362.9 
 
 40.34 
 
 1,675.1 
 
 49.58 
 
 19.15 
 
 # a. Public money in National Bank depositories to the credit of the Treasury of the United 
 States not included. 
 
 h. Money in Banks of Island possessions not included. 
 
 Of THE 
 
 UNIVERSITY 
 
 OF 
 
 ^IFORKiJ 
 
UNIVERSITY OF CALIFORNIA LIBRARY 
 This book is DUE on the last date stamped below. 
 
 NOV 5 1947 
 
 APR 10 1958 
 
 50DF 
 
 LD 21-100m-12,'46(A2012sl6)4120 
 
 JUL 13 1960 . 
 
 ?^■.i■» 
 
 ^o^yisv 
 
 ,f,# 
 
 -D 
 
 ^^'? JAN 20 1963 
 REC'D LD 
 
 INTERL!BRARY 
 
 JUj. 2 5 19B4 
 
 UNIV. OF CAL-IF 
 
 
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 , BERK.