m' 1
I 4 GOODWIN'S WEEKLY
Mr That Inverted Pyramid of Debt
. A DISTINQUISIIED local nnaiicier being
Bj naked yesterday liis opinion of tho new cur-
H roncy law, replied that lie had always believed
H,. in a central bank; that if this present measure
HL could be steadied along and amendments made
Hr as experience dictated tho need of them, his be-
l lief was that it would eventuate in a system that
Hrf would receive the approval of the nation.
Hi When it was suggested that it would at least
M, knock tho club from the hands of the gold com-
Hl bine in the east that had held that club over
W business for so many years, ho answered "That
j combine had to hold that club for there was but
Hj $4,000,000,000 of money with which to stand
Hj off the $13,000,000,000 of monied Indebtedness of
B' the country."
j That is a most interesting statement and
B causes one to wonder what would have happen-
, ed, had not tho mines of Cripple Creek, of the
V Rand and Rhodesia and West Australia, and the
H discovery and practical application of the cya-
nide process for cheaply reducing low grade gold
H ores been discovered, since the demoralization
1 of silver?
H Perhaps there would have been less specu-
J lation, and still the coming of the automobile
B would have given the new demand Qutta Percha;
n tho transformation brought by Ihe new uses of
H electricity would have naturally boomed copper;
H the nations and the great cities would have
H made the call for steel for ships and houses and
H railroads and rolling stock.
H One of two things would have happened; there
Hi would have been a general slowing down of
Hi progress, or a universal smashing of business.
H Contemplating it one easily sees the lack of
H wisdom and the surplus of avarice and wicked-
H ness that prompted a few men in London and
Hl New York to destroy one-half tho metal money
H of the world.
Hi Those two cities, or rather a few men in those
H cities started the cry, they poured out their
H money like water to swell the cry; there was not
D one month between 1873, when our congress, un-
H der a misapprehension of the facts, passed the
H act of demoralization up to 1893, when they
Hj backed Mr. Cleveland to carry through a final
W consummation of the infamy, that they could
B not have stopped the hideous crime. And liow
H are things now? Is their standard a fair meas-
H ure of values, or anything like a sufficient me-
H j dium of exchange? How has their work left our
H ' business with two-thirds of the inhabitants of the
H ! earth?
H And do they not make a grotesque spectacle
H I as they lean their backs against the awful in-
H verted pyramid of debt, which rests upon a point
H of gold, and try to keep the whole from crumbling
H like a rotten iceberg around them?
H The Mining Development League
THAT was a great banquet that the Mining
, . Develpoment League gave on Saturday night.
H I It came as an augury of better times in tho
H Utah mining world. At least that part which goes
H to the development of new mines.
H l Mining booms are not continuous, but the
B iii greatest mines were once only prospects, and the
Bil one thing most needed in the mining world of
!Utah Is to change same prospects into mines.
It is expected that tho new currency law will
, increase the money in circulation. Some of it
B I should flow this way. It will go into mining if
Wm I a sufficient showing can be made. The league
MM proposes to help make the showing, and in the
m 4 effort they- should have the support and full
nl sympathy of all the people.
1
As 8een Abroad
MR. MORETON FREWEN gives his idea of the
effects to follow tho new currency law of the
United States to the London Morning Post atf
follows:
Sir, Tho new Currency Act at Washington
appears to be of unparalleled importance. When
tho hinterland of the world's finance has awak
ened to the use of the new machinery we shall
Jind money cheap and abundant for many a day.
It is incredible that such an act should have
reached the statute book with hardly a word of
notiiication in our press.
Take a bank such as the City Bank of New
York. This bank is now affiliated with one of
the new Federal Reserve Banks. The City Bank
has probably a hundred million dollars of de
posits, against which the national bank act re
quired that twenty-five millions of cash should
bo retained on tho premises. The new law re
duces this 25 per cent to 18 per cent, so that
seven millions of cash will be liberated, permit
ting a further thirty-eight millions of loans and
discounts. iBut what happens to the eighteen
millions? As I read the act only six-eighteenths
of this has to be kept in the bank Teserve, five
eighteenths are to be deposited in the affiliated
Federal Reserve Bank to be the foundation for
federal reserve note issues, the monetary reserve
for these being 33 per cent.
It will take time, probably six months, before
the rather complicated mechanism of the new
act, with its central and eight local boards of
directors, is running under a fair head of steam;
but apparently the act permits an expansion of
the note issue, amounting to no less than eighteen
hundred million dollars, a sum perhaps three
times greater than the entire currency of these
British Isles. The director of the United States
mint, in a very important census of the leading
banks of Europe and America in the last annual
report, presented the following figures:
Census of the Gold Reserves of the Leading
Banks of Europe and America.
Dec. 31, Dec. 31,
1899. 1910.
Bank stocks of gold in
sterling 500,000,000 850,000,000
Increase 350,000,000
Notes in circulation.. 640,000,000 1,404,000,000
Increase 400,000,000
Loans and discounts.. 2,000,000,000 4,000,000,000
Increase 2,000,000,000
The growth of the loan and discounts, the
poor showing of the gold reserves when con
trasted with those figures are the alarming fea
ture of the time, pointing as they do to serious
trouble the next time that credit and credit in
struments show a serious contraction. But the
coming increase in notes issued and in loans and
discounts, while, of course, deferring that period
of contraction, is certain to make the above table
appear as a monument of conservative banking.
The immediate effect of the new low tariff act
will be a great expansion of the import trades of
the United States, especially imports from Can
ada, wheat, meat, lumber, etc. And, again, the
rapid expansion of the American currency is
likely to cause a phenomenal rise of United
States prices, which higher prices will also at
tract greatly increubed imports and be followed
by heavy exports of gold. Canada, suffering
grievously the patit jetu- from stringent and, in
tho west, almost prohibitive bank rates, will find
her financial situation growing weekly easier.
Tho Draconic severity of Canada's Bank act, too,
is likely to make Canada a very favored market
for America investors alarmed by the new tariff
and currency act.
I will not trespass further on your columns at
this time; it is enough to say that at a moment
of great and growing anxiety Washington has
thrown herself into the breach in a way which
really Inaugurates a new era. It is Washington's
reply to that alarming drain of gold to India
which has been set in motion by tho recent re
markable experiments of the Simla government.
I do not propose to criticise the new act; the
tree will be known presently by its fruits.
Enough to say that as a result promoters in tho
city of London are likely a very little later to
find a spring tide under their keels. The act
passed in Christmas weelc on the Potomac was
Indeed a Santa Claus viBit to many millions of
uneasy sleepers. Yours, etc.,
MORETON FREWEN.
Brede Place, Jan. 10.
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I II
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