Salt Lake Telegram | 1922-09-22 | Page 19 | Elasticity of our Currency

, , Elasticity of Our Currency 1 By Ira C. Tichenor POSSIBLY the most important feature in connection with the plan of (he federal reserve banking nystoni is the arrangement adopted for the changes in the amount of circulation to meet the demands for the movement of crop and manufactured .products or for any emergency of thlt drscrlptton which may arlae. Such an arrang-tintm-ran be placed Into almoat lnatant effect, the circulation cir-culation beine Increased when desired and contracted when the needa for an extra amount of circulation have been met. Thua tha plan aaiurea an elasticity of the currency that la both prompt and efficient, which was not the case under the old national banking act. when note currency dfd not quickly expand or contract In response to seasonal requirements of agriculture agri-culture and business. Under the federal reserve- art elasticity Is given the currency by the provision that federal reserve notes may be partly 'secured by gold and partly hf borrowers" paper. This paper, used as collateral, really affords tha needed elnsticlty. since the volume of borrowers' paper expanda and contracts con-tracts with the needs of business and agriculture. It Is explained that the paper aecuring federal reserve notes may bs that of farmers, manufacturers or other producers representing products in process of production or marketing, or that of merchants representing goods In movement to markets, on hand or In process of export or import. The paper must be Indorsed by a member bank before It Is eligible at a reserve bank, and must mature within ninety days after date of rediscount, T except notes, drafts and bills drawn for agricultural purposes or based on livestock, all of which may run a maximum of alx months. The process is explained tn this simple manner: When business activities increase, the amount of borrowers' paper Increases. The local banks present the paper of the business man and farmer to the reserve bank and tha nnias are isana. Thin l lie- Imui li.inkiT in alii tl 1 JfpT?HfteTieeayrfiti customers with federal reserve notes. When business decreases, the borrowers bor-rowers return the currency to their banks in payment of loans, and, as the hanks ship the currency to the reserve bank to liquidate their borrowinus. the equivalent in federal reserve notes is retired from circulation, "Thus it Is possible to meet seasonable needs without inflation.