Referendum on the report of the Special Federal Reserve Committee

Bibliographic data

Monograph

Identifikator:: 1827879114

URN:: urn:nbn:de:zbw-retromon-221388

Document type:: Monograph

Title:: Referendum on the report of the Special Federal Reserve Committee

Place of publication:: [Erscheinungsort nicht ermittelbar]

Publisher:: [Verlag nicht ermittelbar]

Year of publication:: 1930

Scope:: 53 S.; graph. Darst.

Digitisation:: 2022

Collection:: Economics Books

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Currency Restric- tions Not Necessary Notes Against Bankers Bills Counter Money Notes Against Gold 0 COMMITTEE REPORT that is supplied. It has previously been argued that in encouraging the desirable type of member bank operations dependence should be placed largely on the condition of the member banks. So far as con- cerns the general encouragement given to business to expand or con- tract, what counts at any particular time is the amount of deposit credit reserve banks extend to member banks. It is these deposit accounts which constitute the legal reserves of member banks. The problem of the reserve banks is thus to insure that the total supply Of credit is properly adjusted to the country’s requirements. So far 1s note issues and currency are concerned, the problem is merely to relate these properly to the supply of credit. If the outstanding supply of credit is correct, any excessive supply of currency would be promptly returned to reserve banks. On the other hand, under liffering conditions, a deficient supply of circulating currency would de met by member banks requesting currency in place of their credit. (f the credits thus checked against are not provided contraction is liscouraged. By the use of their discount and open-market weapons the re- serve banks must endeavor to provide the country with the proper supply of credit. It is not necessary, or in fact desirable, to impose special restrictions upon currency issuance. Advocates of such spe- cial restrictions appear to lose sight of the fact that credit control is the principal problem of the reserve banks and that in the regulation of their credit activities the reserve banks are provided with certain powers. These powers should not be confused by establishing any -estrictions which might interfere with the free exchange of currency ‘or credit. To prohibit the issuance of reserve notes against bankers bills would produce difficulties. Reserve banks in the interior districts subjected to currency demands may not be provided with an ade- juate quantity of discounted paper to collateral note issues. To ob- ain the necessary collateral they may now purchase bills in the cen- ral money markets. To prevent the use of this type of collateral 15 the security for reserve notes might interfere unduly with reserve banks whose territory does not include any large money market. At the present time, furthermore, the outstanding currency of :he country is very largely utilized for counter-money purposes. In ‘he future some of the present elements in the currency, such as rational bank notes, may be reduced in supply. To prevent the re- serve banks from using bills as collateral for reserve issues might ‘hen interfere unduly with the ability of the reserve banks to provide ‘he country with the desirable quantity of currency. Permitting the issuance of reserve notes against the collateral of gold is now desirable for the purpose of simplifying the enforce- (Continued on page 32)

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