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would not be brought up as largely as may be expected without an increase in the value of the bond unless there is permitted a certain amount of credit currency to be issued after a certain amount of bond or guaranteed currency had been issued.

The CHAIRMAN. If you desire to add anything in a general way, according to the suggestion of Mr. Hendrick, before we proceed to the bills, I hope you will do so.

BANK RESERVES.

Mr. ECKELS. I would like, before the committee takes up the bills specifically, to be permitted, for the purpose of enlarging and possibly clearing up a little, to recur to a subject which was unfinished when I left on Thursday. I wish to recur to the general subject of reserves which Mr. Newlands suggested in the various questions which he asked.

The tenor of his questions was to the effect that an issue by the banks of all the credit currency redeemable in gold would find this country in a position of having its banks undertake to carry a very large amount of bank issues without the requisite gold reserve. He further suggested that in addition to the gold reserve which it would be necessary to maintain against the notes, the necessary amount of gold reserve would have to be held against bank deposits. He reasoned from the amount of bank deposits and the estimate of the amount of bank-note currency which the banks would be compelled to assume, this country, according to the statement of the Director of the Mint and according to my statement as to the amount of the gold there was in the country, would find itself without what he estimated to be necessary and what he stated I admitted to be necessary. It would find it had not the amount of gold which it ought to have for those purposes.

ESTIMATING AMOUNT OF RESERVE NEEDED.

There are some elements which ought to be considered in connection with this question. One of the elements is that you can not estimate what amount of gold is necessary for the purposes that he suggested as a safe reserve by the amount of gold which seems to be carried in the countries which have not a highly developed banking system. For instance, you can not estimate how much gold is needed in the United States by the amount of metallic reserve which is considered to be essential in France or in Germany, for the reason that in those countries the people are not educated to the point of using checks and credit instruments in the paynient of obligations. The fact is that the people least advanced in business use the greatest amount of precious metals in making transfers of property, and that in the highest developed business countries the least metallic money passes from hand to hand in bringing about such transfers of property. Thus, for instance, England, which, I suppose, carries on the greatest transactions of any country in the world, employs the least amount of gold with which to so do.

Because of our development in the lines mentioned, in this country it would be found that there would be less gold required to hold as bank reserves against deposits and for the purpose of note redemptions than in any of the continental countries of Europe, and as little, in proportion to the amount of business, as is required in England.

NO DEMAND FOR METALLIC MONEY, It could not be estimated that in this country it would be necessary to carry the same amount of gold reserve against bank notes as is essential to carry against bank deposits, for the reason that people do not want to carry about metallic money. An illustration of this is shown in the fact that the silver dollars themselves can not be gotten into circulation, because nobody wants to carry a silver dollar if he can get a paper representative of it. The amount of gold reserve required as against the bank notes issued would be found to be comparatively a very small per cent. As an example, take the national-bank notes to-day. They are sustained without any difficulty at all by the deposit in the Treasury of a 5 per cent redemption fund of lawful money, and certainly there could not be any greater amount of gold required as against the new notes to be issued.

Mr. HILL. Without the greenbacks!

Mr. ECKELS. Yes, if banks were properly conducted, if they maintained their credit; because the whole thing turns upon the credit which the bank would maintain.

The CHAIRMAN. In other words, it would be discovered by actual practice

Mr. FOWLER. That is the experience practically in Scotland ?

Mr. ECKELS. Yes; in Scotland; and it is the experience practically in England, because, as I have said, in proportion to the amount of business done the percentage of gold used in England is comparatively nothing.

DECREASING USE OF METALLIC MONEY. As the banks improve the instruments of credit and exchange there will be a corresponding decrease in the use of metallic money. It will come about that the only thing metallic money will be used for will be as a precautionary measure, as reserves in a greater or less amount against bank deposits, as a small reserve against bank-note issues, and to settle international balances. As there is developed in communities or sections which can maintain them systems of clearing houses, the balances to be settled in gold will be still further reduced in amount, because with a properly constituted clearing-house system either cities or communities will from day to day leave only a very small balance to be settled between the members of it in actual money.

Mr. BROSIUS. May I interrupt you with a questisn on that point! Do I understand you to convey the idea that the amount of redemption in a general way will depend largely upon the credit or paper money of the country?

Mr. ECKELS. The current redemption.

Mr. BROSIUS. Do you mean to distinguish between current and final redemption when you say after the establishment of the credit money, in case that event should come to pass, there would not be any more gold required for redemption than there is now under the present system of redemption?

ULTIMATE REDEMPTION A MATTER OF FANCY. Mr. ECKELS. Yes, for the reason that about all that is to be estimated on in the matter of promises to pay on the part of banks is current redemption, because what is called ultimate redemption is

largely a matter of fancy. Nobody wants ultimate redemption if he can have current redemption, except the man who wants to hoard money.

Mr. BROSIUS. You were speaking of current redemption when you made the statement?

Mr. ECKELS. Yes.

Mr. BROSIUS. My inquiry is, and I would like to know whether or not I entirely comprehend you, whether the amount of current redemption depends largely on the general credit of the paper money, paper currency, and if, in the public belief, all the paper currency and bank notes are equal, the current redemption would be very limited ?

Mr. ECKELS. Very limited, and then
Mr. BROSIUS. And the necessity for that would be very limited also ?

Mr. ECKELS. Yes; that is, as I say, as your bank system improves it makes every dollar an efficient dollar, and instead of bearing a single transaction it will bear a great many.

Mr. SPALDING. Would that change conditions in regard to the demand for gold that has been upon the country for the last four or five years? I am speaking now of the actual demand for gold to go abroad.

GOLD HOARDED.

Mr. ECKELS. I do not think it would. The great difficulty which has caused the demand for gold has been because of the fear that the United States would not maintain its gold payments and a large part of the gold that has been withdrawn has not gone out of the country but has been hoarded.

Mr. SPALDING. That could not have been in regard to Austria; they came here and bought it.

GOLD MERELY A COMMODITY. Mr. ECKELS. And that is what everyone does who requires gold. Gold or any other form of money is simply a commodity, and if a man wants it he has to go and buy it. He either exchanges labor or the product of labor for it. If this country needs $100,000,000 of gold to meet the business demands of the country, the banks in this country will buy that gold. If this country does not need $100,000,000 of gold and some other country needs it, that other country will buy it from us. It will be found that if these needs are permitted to be regulated by business agencies, and not undertaken to be entirely directed by statutory law, the largest portion of the monetary difficulties of the country will be solved.

The CHAIRMAN. Right here let me give you a few figures which will help us all. In the last sixteen years there were only three years, 1889, 1891, and 1893, that our exports of gold exceeded our imports and production, and we accumulated in those sixteen years, that is to say, our imports and productions over exports, $629,274,010. exported $102,575,144, making a net increase of gold in those years of $526,698,866, and of the products and imports it is estimated that $229,672,156 were used in the arts.

Mr. NEWLANDS. I would like to put some inquiries to Mr. Eckels with reference to the statement as to the reserve, but the question comes up as to the orderly course of proceeding.

Mr. ECKELS. If I am to be consulted I would prefer to have the inquiry take just as wide a range as possible. Whatever knowledge can be obtained on the subject, the committee ought to have the benefit

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of it. I do not know how much information I can give on the subject, but if any I shall be glad to give it.

The CHAIRMAN. I think we could cover a broader field in much less time if we ask the questions on the bills we have before us and get the views of the Comptroller on them; but Mr. Newlands has the floor.

Mr. NEWLANDS. I was going to say that when I appeared here at the meeting last Thursday it was about 12 o'clock and I believe the proceedings commenced at half past 10. I found Mr. Eckels was then undergoing cross-examination from different members of the committee and I supposed that he had finished his general statement and it was in order then for any member of the committee to question him. Objection was made to my line of inquiry, and a misapprehension arose between Mr. Hill and myself. I thought Mr. Hill was endeavoring to check that line of investigation or cross-examination, which I thought entirely relevant and pertinent, and which I now understand he thinks was entirely relevant and pertinent, and which certainly Mr. Eckels thought was relevant and pertinent, whereas his real purpose, as I understand it, was to bring the committee down to an orderly method of proceeding and to first exhaust Mr. Eckles upon the general statement regarding these bills and then to have an examination by members of the committee. I do not want to trespass too much upon the time of the committee, but there are some important matters on which I would like to question Mr. Eckels in reference to this general subject, and the question is, When shall I do so; shall I go ahead now, Mr. Chairman?

The CHAIRMAN. Certainly, if that is the disposition of the committee.

Mr. NEWLANDS. If you wish Mr. Eckels to go on with the inquiry regarding the bills I will postpone the examination until later on.

The CHAIRMAN. My judgment is we should go along wholly on the lines of the bills, and then take the other matters up subsequently; but Mr. Newlands has the floor.

Mr. NEWLANDS. Very well. Mr. Comptroller, you think that as yet there is no country in the world which has reached perfection in the use of credit facilities!

Mr. ECKELS. No, I think there is an evolution going on in that respect, just as in the matter of transportation.

Mr. NEWLANDS. The advance of civilization will still further utilize credits and bring about a lesser use of metallic money?

Mr. ECKELS. Yes.

CREDIT FACILITIES IN VARIOUS COUNTRIES.

Mr. NEWLANDS. Now, what country, in your opinion, has reached the highest perfection in the use of credit facilities?

Mr. ECKELS. Well, I think the English people have.
Mr. NEWLANDS. You do not think the French or Germans have?
Mr. ECKELS. No; not as high as the English.
Mr. NEWLANDS. What country next to England, in your judgment?
Mr. ECKELS. I should say the United States.

Mr. NEWLANDS. So, in this advanced condition of the use of credit facilities, England stands first and America next!

Mr. ECKELS. Yes.
Mr. NEWLANDS. What country would you put after America!
Mr. ECKELS. I do not know as between Germany and France.

The CIAIRMAN. In speaking of England, do you refer to the United Kingdom

Mr ECKELS. I mean Great Britain,

Mr. NEWLANDS. I understood you to mean that.
Mr. ECKELS. I spoke of England as being Great Britain.

Mr. NEWLANDS. You say in this country, as to the reserve for the security of a bank issue, the issue of bank currency need not be as large as the reserve for deposits?

Mr. ECKELS. Yes.

Mr. NEWLANDS. And you understand the 5 per cent redemption fund in the case of the national-bank notes has been ample?

Mr. ECKELS. To furnish current redemption.

Mr. NEWLANDS. Is it not a fact that the national-bank notes can be redeemed by the banks in any lawful money!

Mr. ECKELS. Yes.
Mr. NEWLANDS. That includes greenbacks!
Mr. ECKELS. Yes.

Mr. NEWLANDS. So that in addition to the 5 per cent redemption fund the national banks have $346,000,000 of greenbacks in the country to draw upon for redemption, have they not?

Mr. ECKELS. A part of that; of course they are compelled to keep this redemption fund in lawful money with the Treasury. That is the only fund which they have for current redemption.

PLACE OF CURRENT REDEMPTION.

Mr. NEWLANDS. That is the only fund they have, but they can redeem at the bank counters in currency?

Mr. ECKELS. Yes.
Mr. FOWLER. Can you give any information as to how much?

Mr. ECKELS. They do not as a matter of fact redeem at the bank counter. It is done here at Washington.

Mr. NEWLANDS. But they can?
Mr. ECKELS. They can, but they do not.

Mr. NEWLANDS. As I understand you, in this new system greenbacks are to be eliminated from our circulation !

Mr. ECKELS. Yes; because it is rather an absurdity to say you redeem something with a redemption that has to be redeemed itself.

Mr. NEWLANDS. That is the case now!

Mr. ECKELS. It is like undertaking to have two redemption moneys, when, as a matter of fact, one redemption money is redeemable in something else.

RUSSIA AND THE GOLD STANDARD. Mr. NEWLANDS. The report of the Director of the Mint, as I showed the other day, shows that England, France, and Germany have two billions out of the four billions of the gold in the world. You know that Russia is endeavoring to reach the gold standard. What, in your judgment, has prevented Russia from reaching the gold standard and being successful in making gold redemptions ?

Mr. ECKELS. The general condition of the country and the characteristics of the people, the enormous expenditures which the Government has been compelled to make to maintain itself at home, and its enormous rates of taxation upon the people. It is largely because of such adverse conditions.

Mr. NEWLANDS. Is the credit of Russia good in the markets of the world?

Mr. ECKELS. Yes.
Mr. NEWLANDS. Do you know how much gold she has accumulated ?

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