Mr. ECKELS. Yes.

Mr. NEWLANDS. Do you know whether or not they are able to make gold redemption?

Mr. ECKELS. I do not think they have the machinery all perfected for it yet in an unlimited degree; they do it to a certain extent.

Mr. NEWLANDS. Do you think it a wise thing for those countries in South America to adopt the gold standard?

Mr. ECKELS. I think it is a wise thing for any country to undertake to put its standard of value upon the basis of the great commercial nations of the world.

Mr. NEWLANDS. In order to do that and make gold redemption they will require more gold, will they not?

Mr. ECKELS. For the reason only that any country that is not in the habit of using banks and has not banking facilities requires more gold than other countries that have those facilities. I may say in a general way, as applying not only to the question in regard to the South American Republics, but as applying to Italy, Russia, and the other countries you have mentioned, that if those countries had the same facilities for banking that the United States has, they would not proportionately require any more gold than the United States-that is, if their people were in the habit of using banking facilities. The same way with the South American Republics; and when I am asked whether or not I think they would not have to increase their gold to meet the demand of the redemption of their notes, the proper answer should be that they either would have to increase their gold holdings or increase their banking facilities, and have their people use them. If they could increase their banking facilities and the people use the banks, then undoubtedly they would not require more than a nominal, if any, increase in their gold holdings.

That which is to be done in the United States when you come to enact a banking measure can not be gauged by what is done or is necessary in Italy, Russia, or the South American Republics, because in those countries there is a different character of people, differently conducting their banking, with different means of carrying on commerce, and different methods of doing things. And while Italy or Russia or the South American Republics might necessarily require a large amount of gold to accomplish the same thing that the United States does, it does not follow that the United States would require a proportionate increase to do it. The people of the United States understand the use of credit instruments and those people do not, and do not employ them.

Mr. NEWLANDS. But you would expect those countries proportionately to require just as much gold as the United States?

Mr. ECKELS. Yes.

Mr. NEWLANDS. Well, now, Italy, for instance, with 30,000,000 people

Mr. ECKELS. No; I would not, unless you figure the proportionate number of transfers of property in Italy as compared with the number of transfers of property to be made in the United States, because you do not estimate by population-that is the least important thing—you do not estimate correctly by any other thing than by the numbers of transfers of property which are to be facilitated by the use of a medium of exchange.

Mr. NEWLANDS. In other words, the volume of business.

Mr. ECKELS. Yes; the volume of business.

Mr. NEWLANDS. You think that a country that has a very large volume of business, very many transactions, will require more gold as the

basis of its monetary system than the one having a lesser volume of business.

Mr. ECKELS. Unless there prevailed in that country the transfer of property through the intervention of bills of exchange, checks, and credit devices. It would all depend upon these outside circumstances. Mr. NEWLANDS. Now, the South American States have 36,000,000 people and only $40,000,000 of gold. We will assume that they all endeavor to go to the gold standard and that they have equal banking facilities with our own. Would they or would they not require more gold?

Mr. ECKELS. They would not if they had equal banking facilities with us and the people were educated to the use of banking facilities. In such case they would not require any more gold proportionately than we do.

Mr. NEWLANDS. They have $1 per head in gold, whilst we have in this country about $8 per head.

Mr. ECKELS. They might have to increase their gold holdings, but if they did they would be able to obtain them, because there never has been a time yet

Mr. NEWLANDS. We have gone over a number of countries that have a large amount of uncovered paper money and small stocks of gold, and we will assume, now, that they have endeavored to go upon the gold standard. They will certainly require some more gold, will they not? Mr. ECKELS. Or increased banking facilities.

Mr. NEWLANDS. Or else they have got to have a perfected banking system.

Mr. ECKELS. Yes.

Mr. NEWLANDS. Do you think it possible in a few years to accomplish a world-wide perfection of the banking system?

Mr. ECKELS. No, probably not.

Mr. NEWLANDS. Then, the demand for gold will precede the perfection of the banking system, will it not, in these countries?

Mr. ECKELS. Yes; but growing less instead of greater, because in each of these countries banking methods are continually being improved upon, and there is a corresponding lessening of the demand for the use of metallic money. There is, on the other hand, a largely increased yearly production of gold.

Mr. NEWLANDS. But, as I understand it, you regard a proper amount of gold as the basis of a proper banking system?

Mr. ECKELS. I do; for current redemption.

Mr. NEWLANDS. Would it not be possible for them to perfect the banking system without obtaining the proper amount of gold? Mr. ECKELS. I think not.

Mr. NEWLANDS. That would involve an increased amount, to some amount, at least, in all these countries that have the large amounts of paper money at a discount.

Mr. ECKELS. Undoubtedly it would require an increase, but the increase in production is to-day larger in proportion than the increase in the demand.

Mr. NEWLANDS. Do you think the increased production of gold would meet this increased demand?

Mr. ECKELS. The increased production on the one hand, and it would decrease the demand for the use of gold in countries which are improving their banking methods.

Mr. NEWLANDS. Yes. Now, what country can you point out to me to-day that has a surplus of gold?

SURPLUS OF GOLD IN SEVERAL COUNTRIES.

Mr. ECKELS. I think there is a surplus of gold in England; I think there is a surplus in France; there has been a surplus of gold in the United States, and that is proven by the fact that our people wanted something more than they wanted the gold and they gave up the gold. There may not have been a surplus for the length of a year at a time, but there has been a surplus as the varying conditions of business have changed.

Mr. NEWLANDS. You think that the surrender of gold from a country is purely a voluntary matter?

Mr. ECKELS. Certainly. It is surrendered because the people of the country desire to get something which they consider of greater use to them than the gold.

Mr. NEWLANDS. The United States is, I believe, in the relation of its people to other countries, the greatest debtor nation of the worldI believe it is so regarded, is it not?

Mr. ECKELS. Yes.

THE EXPORT OF GOLD.

Mr. NEWLANDS. When the creditor countries throw their securities upon the American market for sale in gold and the export of gold is caused by that, do you think that the absorption of these securities and the export of gold is a voluntary thing by the people of the United States, and a pleasurable thing?

Mr. ECKELS. Probably at times it is not a pleasurable thing, and there may be immediate periods when it is a detrimental thing, but in the general average it is a beneficial thing.

Mr. NEWLANDS. Then, the export of this gold does not necessarily indicate a desire on the part of the country to let so much gold go to another country, does it?

Mr. ECKELS. No; it doesn't necessarily indicate that, but, on the other hand, it indicates that the people are able to get the gold to meet these demands.

Mr. NEWLANDS. It may mean that they are compelled to pay their debts-reluctantly?

Mr. ECKELS. Well, undoubtedly at times a man pays his debts reluctantly, but even if he does he feels more comfortable after he has paid them. Here is the difficulty in the taking of the gold from this country: It is taken direct from the Treasury of the United States in an unnatural way, instead of being taken through the agency of the banks, for the purposes of legitimate business in the natural course of business.

Mr. NEWLANDS. Now, if there is a surplus of gold in England, France, and Germany, how do you account for it that when the exports of gold increased within the last few months to this country from England, arising from our wheat sales, that the Bank of England rate of discount, which is normally about 14 to 2 per cent, was raised to 4 and 5 per cent? Wasn't its purpose to prevent the export of gold?

Mr. ECKELS. Undoubtedly it was, but it did not accomplish the purpose, because there were some things they wanted more than they did gold.

Mr. NEWLANDS. The fact, then, of that raise in the rate of discount showed that England felt it had no surplus of gold and could not spare its gold?

Mr. ECKELS. No; I do not think it necessarily meant that. I think

it showed that England did not want too much to leave at once, and that it would aid toward having more of these things paid by sixty or ninety days' bills of exchange instead of being paid direct by the gold, during which sixty or ninety days things could adjust themselves, and possibly within that time the large amount of agricultural produce which would be imported to England would be paid by a corresponding demand for the products of the English manufacturers and for other things, so that in the length of the life of a bill of exchange the balance to be settled in gold would be reduced to a very small amount.

Mr. NEWLANDS. Have you observed that when there is an export of gold from this country the price of securities in the New York market goes down, as a rule?

Mr. ECKELS. Yes.

Mr. NEWLANDS. And have you observed that when gold is imported to this country that the price of securities in the New York market generally rises?

Mr. ECKELS. Yes; for this reason――

Mr. NEWLANDS. Is there not, then, some relation between the quantity of gold in the country and the prices, not only of our securities, but of our products?

Mr. ECKELS. No; not necessarily. The explanation of that is this: That with the present financial system maintained throughout the United States the General Government is a partner in everybody's business.

The CHAIRMAN. Isn't it a fact that you have seen bonds and stocks in New York being depreciated in price when gold was being exported, without its having any visible effect upon the price of other products? Mr. ECKELS. Yes.

The CHAIRMAN. Isn't it much more frequent that a money panic occurs without it in any way affecting the industrial conditions?

Mr. ECKELS. I think so. The falling off of the prices of stock is no indication at all of the falling off of the prices of other things, because the stock market is the one thing which is most affected by manipulation, by rumors, and by things which in no wise affect the price of products of a different character.

The CHAIRMAN. So the increasing or the diminishing of the price of bonds has no connection with the question whether the masses of the people are prosperous or otherwise?

Mr. ECKELS. No, sir; and it does not indicate the value of those stocks or bonds particularly.

Mr. NEWLANDS. Would it not be a fair statement, Mr. Eckels, to say that the effect of the export of gold is first felt upon securities, because they are the properties upon which quicker realizations can be made than others, and that is but a part of the general effect on the property and products of the country?

Mr. ECKELS. Only as the flurry in securities on the stock market tends to create a condition of mind upon the part of the public which curtails credit in every branch of business.

Mr. NEWLANDS. I was referring to England. I said that an export of gold from England would have a tendency to lower the prices of securities there, and imports of gold, I presume, would have a corresponding tendency to increase the prices of securities there. You have observed that?

Mr. ECKELS. That is undoubtedly so. I think that temporarily any sudden increase in the amount of money you have affects things. Any sudden decrease in the amount of money you have affects things.

Mr. NEWLANDS. That is caused, as I understand it, by this, that the

export of gold gives us a curtailment of credit in the exporting country, does it not?

Mr. ECKELS. It would depend upon the conditions which surrounded that export. For instance, I imagine that when the Baring failure occurred any large export of gold from England at that time would have created a great curtailment of credit, not because of gold itself going out-because I don't think England could lose by its going out and something coming in in exchange for it--but because the public mind had been so affected by so great a failure that the solvency of perfectly solvent institutions was doubted. So that the effect of either an exportation or importation of gold upon the country can only be esti mated by the business conditions prevailing in the country at the time the one or the other thing occurs.

Mr. NEWLANDS. The effect will be accentuated if the public mind is in a state of apprehension?

Mr. ECKELS. Yes; and doubly accentuated if public credit was involved in addition to that of individual credit.

Mr. NEWLANDS. I see. There is, then, a relation between the volume of redemption money and the volume of credit in a country; is there not? I do not ask what relation.

Mr. ECKELS. Yes; as it affects the mind of the public, going toward the ability of the redemption of that money, and undoubtedly during a time of public apprehension you would be compelled to increase your volume of current redemption money. During that time everybody who has any instrument of credit, whether it be one issued by the Federal Government or by a bank, would desire to put that thing in another form-to put it into the form of actual property or actual payments, instead of simply a promise to pay. And there might be a time when 5 or 10 per cent or 15 per cent of gold would not be sufficient for current redemption, if the public mind was in a disturbed condition. On the other hand, there would at times be a condition where 1 per cent would not be required.

Mr. NEWLANDS. How do you account for it if France has a surplus of gold, that she holds on so tenaciously to the $850,000,000 of gold she has now?

Mr. ECKELS. For the reason that there is a continual apprehension in France, in Germany, and all continental European countries, that war disturbance may arise and the necessity of having immediately within their power the means of sustaining themselves in a war. Å further reason is that the French people do not use banks of deposit, and therefore there is necessity of having a large amount of metal money to use in the daily transactions of life. They estimate their amount just as a grocer estimates the amount of stock he has to carry in his store, or any other man engaged in business-by experience with the demands of people for the particular article which he has to sell. They estimate that amount to be necessary in France because the habit of the French people in the matter of the transfers of property is to make transfers by paying the actual money itself instead of by giving redeemable promises to pay, or checks or bills of exchange.

The CHAIRMAN. I would like to ask two or three questions right there, if there is no objection.

EXPERIENTIA DOCET.

You spoke of the quantity of gold in England. Is it a fact, in the continuation of your idea, that these things can only be known by experience that is the only way to know how much gold is necessaryisn't the experience of the English system the only thing that the