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Lower Our Standard?— Never!



ADDRESS OF

ANDREW JAY FRAME,

President Waukesha {JVis.) National Bank
— JGAINS T —



FIAT MONEY

In Repl^ to an Address by John L. Hamilton,

ex-President of the American Bankers'

dissociation, Jldvocating the Plan

of the Committee of said

Association



BEFORE THE

MINNESOTA STATE BANKERS' JJSSOCIATION

JT ST. PAUL. JULY 9th and lOih. 1907.



The Fallacies of the Currency^ T^lan of The Ameri
can ^anl^ers' Association Committee.



I thank God that the press of this country is open for a free discussion
of all important subjects. I grieve to disagree with some of my good
f 1 lends, but I yield to no man in patriotism, therefore as I am not hunting
for office I do not fear to charge some of the leaders of the great American
Bankers' Association with side tracking free discussion of the all important
«irrency question at the last annual meeting in St. Louis. Although open
discussion was announced upon the program for Wednesday and also on
Thursday, all discussion was postponed from Wednesday to Thursday ex-
cept two addresses, both favoring asset currency, and then from Thursday
to Friday as a special order al 10 A. M. Even then two addresses on
other subjects filled the period 'till 11 A. M., and because the Association
was to adjourn at 1 P. M. discussion was limited to five minutes for each
siH'aker. How could any one expect anything like an intelligent or free
discussion of this topic under such conditions?

From free comments on the part of members on every hand during the
convention, one could draw no other conclusion than that the perpetuation
of place and power for the insiders rose higher than weighty matters of
groat import to the nation. The wire pulling could almost out-Tammany
Tammany. It did not cease after the convention adjourned, but packed
a currency committee which brought forth what consistently can be called
a wild cat currency plan that Congress would not swallow. Perhaps the
members of Congress had been listening to the ground-swell against the
heresy of an unsecured currency. Perhaps they had been reading the
history of the distressing results of the issue of credit or asset currency by
banks generally during the 18th and even pasr the middle of the 19th cen-
tury, the issue of which seemed somewhat excusable as the best known sub-
stitute for the beads, skins, bullocks, etc., of earlier days, and further, be-
cause of lack of coin as a medium of exchange and apparent necessity to
issue credit currency to supply fictitious capital in the absence of deposits
which represent actual surplus capital. I. O. U's. are not capital according
to the testimony of all sound political economists. The calamitous results
of credit currency banking up to a century ago brought about a campaign
of education which was waged for many years 'till the celebrated bullion
report of 1810 in Great Britain clarified the atmosphere there materially;
but she did not get over serious currency troubles until 1844. That cam-
paign doubtless raised the standard of currency issues by a general demand
for a secured currency based on bonds, stocks, mortgages, etc..

The 19th century experiences lessened materially the comparative losses



to note holders everywhere, but still they were calamitous in results up to
the end of the "wild cat" days in the United States — the "tail end" of which
I saw; and the recollection of the masses generally not daring to sleep over
night with a dollar in their pockets; the thrift of the note shavers, buying
notes at discount; and above all the destruction of the great bulwark of all
progress, confidence; these and other recollections bring on the nightmare,
and the hope never to see any approximation to their like again. Two
generations have passed since then wherein no man has lost a moment's
sleep over his absolutely secured currency (draw one from pocket) such
as I now show you. Like children we ought not to be told to keep away
from the fire, but profit by the experiences of the past before trouble over-
takes us again. It is a well known fact that in 1901 the leaders of the
American Bankers' Association undertook to bring about a sentiment in
favor of Branch Banking and Asset Currency for the United States. The
principal speaker at the convention that year, Mr. A. B. Stickney, declaring
that we should adopt the British System of Banking in the United States,
and that in this country "there is no system," notwithstanding the fact that
our National Banking System has proved the best and safest the world has
ever known. The country repudiated that monopolistic and revolutionary
proposition. Later an Asset Currency scheme.secured by a first lien on
assets which probably would make the currency secure, but it is now ad-
mitted, would rob the depositors, thus bringing distrust in its train, was
also repudiated by the country.

There is no dispute as to the fact that to-day the United States has a
banking power almost equal to the remainder of the world. That power
has increased over 300 per cent, in fifteen years. The individual deposits
are over 12,000 millions of dollars which represents actual not fictitious capi-
tal; our credit system has grow-n to collossal proportions; as a basis for this
mighty structure we hold of the world's standard of A'alue, that stands
through storm as well as sunshine,
In gold coin, say $1,600,000,000

In addition we have

In silver, nearly 700.000,000

Legal tender notes 346,000.000

National bank notes, about 600.000.000

Total soft money -. $1,646,000,000

Therefore, in view of the vast sums of non-standard money in the United
States, which even the National City Bank of New York says, threatens to
force the export of gold under the Gresham Law; in view of the fact that
this country has over $800,000,000., uncovered currency w^hich is double that
of Great Britian, France and Germany combined; in view of the fact that our
per capita circulation of over $32. per head exceeds all other progressive
nations, FVance alone excepted where cash is extensively used and not
checks, because of the stamp tax; in view of the fact that we have fought



successfully the battle of the standards since 1873, 1 cannot understand why
the powers that be in the great American Bankers' Association, who ought
lo be the leaders in conservatism, should undertake to bring about a senti-
ment to commit this country to 18th century fiatism again, by the issue of
over two hundred million dollars of asset or credit currency — as a starter
only according to one of the most aggressive advocates — with only 5 per
r(>nt. secured and 95 per cent. fiat.

This plan undoubtedly would arouse distrust in the minds of the masses,
especially in troublous times, when it is of paramount importance to allay
distrust. Taint our currency issues with even a breath of suspicion, and
our prosperity will be undermined as by an insidious disease. The quick
redemption theory I am convinced will prove fallacious, impractical and even
impossible under our system. The reasons are more fully explained later.
If the plan did not work, then it would either drive gold out of the country
by the injection of this inferior currency, or would produce inflation, result-
ing in increased frenzy of speculative promotions with all their train of evils.

A currency with profit in it spells inflation and inflation spells disaster.
One ardent advocate of asset currency, speaking of the banks exercising the
privilege of issuing such currency, says "which they will be sure to do and
will only do it. if the profit is sufficient to induce them."

As the contemplated issues are subject only to a 3 per cent, per annum
tax; as the issues are entirely at the voluntary command of any national
bank, practically without collateral security; as many good banks pay 3
per cent, and upwards as interest on deposits and the quick redemption
theory will not work, how many banks in their greed for profit would go the
full length of their tether, stretching the rubber currency to the limit, and
thus still further foster the evil spirit of speculation instead of instilling a
spirit of conservatism. The very banks that ought not to be allowed the
right would be the very ones to go to the limit.

QUANTITY VERSUS QUALITY.

I have quoted these maxims before, but deep-seated error requires
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Online LibraryAndrew Jay FrameLower our standard? Never! → online text (page 1 of 2)