Show The N New v e Era Era The Banks By A. A M. M Marsden The American people ought to work for a sufficient monetary I I accord to establish a stabilized price level Under our present financial order no commodity is I certain of bei being g measured by the same standard twice save gold Nothing has such drastic effect upon the price level as credit Credit money is created by banks I and they govern its value alue and cir circulation circulation cir cir- through loans and dis dis- dis- dis counts In one sense it is only an extension of the currency issued under the authority authority- of the Federal Feder Feder- I Feder-I al government and hence the gold reserve and In another it is money I actually created by banks There i is private credit but it is unimportant unimportant unimportant for our consideration a bank were without I actual cash or convertible cash assets No one knew of the banks bank's condition but in fact all were fully confident that it was wasp was 1 solvent A applies to the bank for a loan of which it grants grants' and credits to his account A Ai i writes checks against the account and no one questions As solven- solven j cy His checks are cheerfully ac- ac He pays the butcher the the baker and the automobile maker with checks They pass through many hands effectuating numerous numerous numerous numer- numer ous exchanges of goods and services services 1 Ices and finally return to the bank where the last endorsees ask that they be placed to their respective accounts The bank does this and charges the account drawn of A Finally A has the complete amount and it has been to the credit of other depositors A however has been able to pay debts and purchase a lot of goods and the the I bank has had to use no cash Such Sucha a procedure entails the creation of money and through this medi medi- medi-I medi um over 90 per cent of our trade in 1929 was carried on In that year we had about 35 bUll billion on dollars dollars dollars dol dol- lars of gold and approximately 46 billion dollars of currency is issued Is sued against it but we had 59 billion dollars of bank deposits I compared with 45 billion dollars dollars dollars' preceding the National Banking Moratorium Nearly 14 billion dollars of bank credit currency has been destroyed I Our banks and bankers have miserably failed to servo the people people peo peo- pIe and make their Institutions safe Since the stock market crash bankers have been frightened frighten frighten- ed to make extensive loans to in industry industry in in- and prior to that woeful debacle they were all too busy engaged engaged en en- in creating money through loans to brokers brokers for gambling pur pur- puri i poses At that time the volume I of money moncy was large prices were high and speculators were many They permitted the money of the I country to gravitate Into an unrestrained un un-I un restrained gambling orgy pyramiding pyramiding pyramiding pyra pyra- the capital stock of corporations corporations corp corp- dividends were cut orations until i to a minimum Then lenders lenaers ana and bankers became and recalled re re- 1 called loans They have recalled decreased the the and thus so many volume of money to such an extent ex ex- extent j I p I tent that industry has not been able to operate profitably Eventually Event Event- j t lually their own doors have closed I II Our bankers have pursued a foolish policy Their leaders have haver I 1 been been dwarfed intellectually by an r eagerness of finding the most liquid place to make loans Since the market crash this place has hasi i been bonds It seems peculiar that their foresight went no fur fur- ther How they could expect industry industry industry in in- to go on paying taxes and permit the government to operate on a balanced budget pay them interest on their bonds bondS- without I creating money purchasIng money purchasing power pow pow- our industries is beyond beyond beyond be be- er among er-among among yond comprehension I |