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The Commoner
DECEMBER, 1913
5
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Senator Shafroth on Gold Reserve
In a speech delivered In the U. S. Benate In
discussing Senator Hitchcock's amendment to
the administration currency bill Senator Shaf
roth said:
Senator HItchocock's amendment to the hill
provides that no less than 33 1-3 per cent of gold
shall be kept as a reserve and that the amount
ordinarily to be kept shall be 45 per cent, with
a permit to let the reserve be depleted to 33 1-3
per cent upon there being paid an Interest
charge of 1 per cent on each 2 1-2 per cent ex
haustion of the gold reservev In other words,
under normal conditions the reserve" required
under the Hitchcock amendment will be 45 per
cent In gold, and the amount required according
to the house bill and the Owen amendment will
bo 33 1-3 per cent.
In most of the issue banks of Europe there Is
no minimum reservo required. The Bank of
France, while it usually holds a very large re
servo in gold, has no minimum fixed by law.
The Reichsbank of Germany prescribes that a
reserve of 33 1-3 per cent shall bojnaintained in
gold. The Bak of Belgium maintains a gold re
servo of 19 per cent.
STRAIN ON GOLD
The result of requiring the maintenance of a
very large gold reserve will be to produce in
creased demands for gold; and as gold is the
international money of the world, any increase
by one nation necessarily makes the struggle for
gold which is now going on a little more severe.
The flow of gold to or from a country is regu
lated by the banks of issue of the various coun
tries raising or lowering the rate of discount.
In order to attract gold the bank of issue of a
European country will raisi the .te of discount;
that is, raise the rate of interest which the banks
charge. That, tempts money from other coun
tries to make investments at the higher rate of
interest, and therefore brings the money with
which to pay for such securities; and as inter
national balances must bo paid in gold, the trans
action tlioroCoro brings gold to the country that
raises the rate of discount.
The other nations that have lost gold by that
process must, in order to get It back, raise their
rate of discount, a little higher. Thus this see
Baw in raising the interest rates with the ob
ject of attracting gold continues until interest
rates become very high. This competition and
raising the rate of discount among the various
nations of the world ta get more gold is counter
acted only when enterprises that are contem
plated are confronted with a rate of interest too
high to make such enterprises profitable, and
thus a less demand sets In for money, whieh,
according to the principle of supply and demand,
effects the lowering of the rate of interest.
HIGH DISCOUNT RATE PRODUCES
STAGNATION
When the rate of discount gets high through
out the world it generally produces stagnation
in business, commerce, and enterprise. Conse
quently, the least strain upon gold that can safe
ly be made and yet maintain the gold standard
comes nearest permitting business and enter
prises to continue in a prosperous way.
It is said that at the present time there is less
gold in circulation in .proportion to the credits
outstanding than ever existed at any other period
in the history of the world. That means that
there is more of a strain upon gold for reserve
and redemption purposes In proportion to the
business conducted than at any other time In
the world's history. In the general policy, there
fore, of relieving the strain on gold there is a
tendency to let commerce thrive, while requir
ing large reserves increases the strain on gold
and thereby makes a depressing effect on busi
ness and commerce.
At the end of the first six -months of thp pres
ent year the aggregate gold reserves of all-the
principal banks and treasuries of the world
amounted to $4,693,104,000.
At the end of the first six months of the year
1911 the gold holdings of the yarious institu
tions were $466,867,000 less than In 1913. Not
withstanding this increase within the last two
years in tho gold holdings of the treasuries and
banks of the gold-standard nations, the great
banks of issue assert that they have not gold
enough and view with each other in raising their
discount rates, so that .they may jealously pro
tect their holdings.
This struggle for gold among the nations of
tho earth in tho last fifteen years has produoed
great increases in tho rates of interest.
At the close of tho nineteenth century tho dis
count rate of the Bank of England remained
normally in the vicinity of 2 to 2 1-2 per cent
per annum, but has sinco been gradunlly climb
ing to 4 per cent, which It reached in 1912; and
recently the rate has gone still higher to 1 1-2
per cent, and later still to 5 per cent per annum.
According to Mr. Paul Leroy-Beaulieu, an
eminent French economist, the following ad
vances in the rates of discount charged by the
banks of issue of various countries have been
made from June 30, 1911, to June 30, 1913:
1911 1913
Per ct. Per ct.
Bank of France '......... 3 4
Bank of England , 3 4 &
National Bank of Belgium 3 5
National Bank of Switzerland.. 3 5
Imperial Bank of Germany 4 6
Bank of Austro-Hungary 4 '6
National Bank of Denmark....;- 4 ,5
National Bank of Norway. ....: 4 Mr fJ V6
National Bank of Spain . 4 Vfc 4
Russian State Bank i 6
Bank of Issue of Italy 5 5 M-
Bank of Japan 4.74 6 . 54
It can be readily seen from these extracts that
the greater the gold reserves are made the
greater the strain upon gold will become, nnd
that the way to retain gold will be by increasing
the rate of discount. This may bo very satis
factory to the bankers, because they reap more
profits when they lend out their money at a
higher rate of interest, but it is not to tho in
terest of the people who are compelled to pay
the higher rate of interest fixed by banks of issue
under the claim that they are trying to get more
gold.
A BOUQUET OF REFORMS
After devoting space to each one of the larger
reforms" the president groups a number of minor
ones which he is not willing to pass by un
noticed a sort of bouquet of remedial flowers,
whose perfume is expected to draw forth a favor
able response from the legislators. These
remedial measures are as follows:
"Three or four matters of special importance
and significance I beg that you will permit me
to mention in closing.
"Our bureau of mines ought to bo equipped
and empowered to render even more effectual
service than it renders now in improving the
conditions of mine labor and making the mines
more economically productive as well as more
safe. This is an all-important part of the work
of conservation; and the conservation of human
life and energy lies even nearer to our interest
than the preservation from waste of cur ma
terial resources.
"We owe It, in mere justice to the railway em
ployees of the country, to provide for them a
fair and effective employers' liability act; and a
law that we can stand by in this matter will be
no less to the advantage of those who administer
the railroads of the country than to tho advan
tage of those whom they employ. The experience
of a large number of the states abundantly
proves that.
"We ought to devote ourselves to meeting
pressing demands of plain justice like this as
earnestly as to the accomplishment of political
and economic reforms. Social justice comes
first. Law is the machinery for its realization
and is vital only a3 it expresses and embodies It.
"An international congress for the discussion
of all questions that affect safety at sea is now
sitting in London at the suggestion of our own
government. So soon as the conclusions of that
congress can be learned and considered we ought
to address' ourselves, among other things, to the
prompt alleviation of the very unsafe, unjust,
and burdensome conditions which now surround
tho employment of sailors and render It ex
tremely difficult to obtain the services of spirited
and competent men such as every ship needs if
it is to be safely handled and brought to port."
" W. J. BRYAN.
nctual deliberations, after the democratic caucus
had decreed its form. After which ho talked not
to exceed sixty minutes. Copies of tho speech
may bo secured during tho next campaign for
tho republican nomination for president.
GOOD WORDS
Senator Cummins, who hopes to be the next
republican nominee for president, told his fellow
members that he hesitated to participate in the
debate over the currency bill because he did not
wish to give it, before the country, the color of
Lee Rlddlo, Los Angeles, Cal. I wish to state
that I havo been much pleased with tho course
of "Tho Commoner." Tho domandB upon tho
time of an active business man are so numoroufl
as to make it almost impossible for him to got
tho meat of what is going on In political life by
moans of tho dally press. And bosldos, on ac
count of factional interest, ono who desires tho
truth and nothing hut the truth is discouraged
by the loose methods of tho newspapers In re
porting facts. But I find that, by means of
"The Commoner," a holiday or Sabbath day at
home enables me to get the truth relative to
political questions and that from the pon of men
who are broad and patriotic enough to uso as
their bases correct moral and spiritual principles.
I certainly am highly pleased with tho course
which has boon pursued by our preiddont up to
tho present time. If I understand him aright,
ho is using his best endeavors to turn tho
promises of the last platform into enactments of
law and in this he has and will, in my judgment,
continue to have the earnest and faithful sup
port of every unselfish, honest member of his
party, and will gradually seiMirc tho respect,
confidence, and added support of all other con
scientious, intelligent men. To aid him In this
undertaking "The Commoner," In my judgment,
is doing a great work and I hope that it may con
tinue steadfast and faithful to the principles It
now champions and to the cause of humanity ns
now exemplified by Its columns.
Patrick II. Dunn, Bangor, Maine. Enclosed
please find check to renew my Commoner which
I value among the highest periodicals coming to
my notice away down here In Maine. Wo appre
ciate tho valuable service It Is rendering to
humanity nnd are prouder than ever of tho great
Commoner and his associates at Washington In
spite of the criticisms of those who would havo
a nation deluged In blood for a money con
sideration. Edward S. Corser, Minneapolis, Minn. I am
very glad to evidence my continued approval of
tho Commoner, and enclose a renewal subscrip
tion. I am, however, fully aware that my loyal
attachment to the publishers of the Commoner
and my personal admiration of and loyalty to
Mr. Bryan, are well known by both of you, and
1 could not give you any further and stronger
assurance of this than you already possess. Tho
hard work of the administration, which was
certainly known and understood by our citizens
who have average good sense, seems to have
been very carefully scrutinized by the nation,
and has a general and more than usual approval,
with but few openly dissontlng. r Eternal vigi
lance is needed to obtain control of the finances
of the nation by the people, and I am Buro that
the wisdom and high moral purpose of tho ad
ministration has general appreciation and ap
proval. To go as you are now and holding your
selves unshaken to the level of the high purpose
of tho administration, all will bo well with you.
Editor The Commoner: I am highly elated,
and exceedingly pleased with the change in The
Commoner. It is a great inspiration to mo to
read its contents and to know I am reading the
truth of government affairs, although I am like
tho young lady that was receiving tho atten
tions of a young man. Sho was rather anxious
to know when he would call again. Ho hesi
tated a moment and asked how would five weeks
do. She said It would do, but it looked liko ho
never was coming again. So The Commoner,
Seems to me a long tlmo coming, but when It
does come I am well paid and rejoice in read
ing it in every detail. I havo great confidence
in the present administration to do things that
will be an .everlasting blessing to mankind. I
do know that tho light of a new day has dawned
and I thank God we havo men now at tho head
of this government that have the courage to do
right. L. W. Beaman, Sterling, Tex,
Editor The Commoner: I received your big
monthly and highly esteemed Commoner all
O. K., and must say it Is a hummer. It wa3
always good, but I esteem your monthly much
raoro than the former stylo and predict success
for it. Tho articles are more full, explicit and
certainly convincing to the most skeptical, if
fair minded. Vive La Commoner. William Dt
Roop, Marion, Ind.
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