International trade

Bibliographic data

Monograph

Identifikator:: 1758394757

URN:: urn:nbn:de:zbw-retromon-136209

Document type:: Monograph

Author:: Taussig, Frank William http://d-nb.info/gnd/120199459

Title:: International trade

Place of publication:: New York, NY

Publisher:: Macmillan

Year of publication:: 1927

Scope:: XXI, 425 Seiten; graph. Darst.

Digitisation:: 2021

Collection:: Economics Books

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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part II. Problems of verification

Collection:: Economics Books

202 INTERNATIONAL TRADE loans and deposits) to the maximum permitted by law or by cus- tom or by the necessities of the banking and currency situation. With an increase in reserves, say thru an inflow of specie from abroad, deposits will increase too; with a decrease, deposits too will fall. Further : the closeness of the connection between reserves and de- posits may be stated in rigid terms or in flexible terms. In the days when the older legislation regulated the reserves of the national banks of the United States, it was not uncommon to speak of 25 per cent (mutatis mutandis, as the per cent required by law was different) as the fixed and unvarying reserve of American banks. Deposits, it was assumed, amounted to four times the reserve, and in that ratio regularly moved up and down with the reserve. More in accord with the actual course of events was the postulate that the relation is flexible. Even under these earlier legislative requirements and under the traditions built up on them, banks did not always and necessarily expand their operations when in possession of larger reserves than the law prescribed. Banks might wish to expand in this way; but the extent to which they could go depended on the temper of the business community. And so it is at all times and under all legislative conditions. The upbuilding of deposits on the basis of a given reserve does not proceed automatically. If the period be one of buoyancy, opti- mism, disposition to expand, banks will easily and quickly increase their loans and deposits. If it be one of caution and uneasiness, they will not be able to expand, even tho desirous of doing so and equipped to do so. During the upward phase of the business cycle, and especially in its later stages, when trade is active and the future looks bright, deposits will swell to the very utmost which reserves can support. Subsequently, in the trough of the downward move- ment, reserves become larger than the banks need or wish; never- theless, they find themselves unable to extend loans and deposits and use their resources to the full. If, indeed, a smoothed curve be constructed, extending over a considerable period and including more than one business cycle, a close relation will appear; deposits will be found to move in a fairly constant proportion to reserves.

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