United States Congressional Serial Set Volume 6146 (Paperback)

This historic book may have numerous typos and missing text. Purchasers can usually download a free scanned copy of the original book (without typos) from the publisher. Not indexed. Not illustrated. 1912 edition. Excerpt: ...National Reserve Association has been criticized on the ground that its enactment would lead to an undue expansion of credit and a dangerous inflation of currency. We have already stated our reasons for believing that this contention as applied to note issues has no foundation. It is true that we propose to create new instrumentalities and provide new facilities for an expansion of credit whenever this is necessary for the welfare of our industries, or to prevent panics or avert dangerous monetary disturbances. We believe that credit properly organized and managed is one of the most potent factors in the development of communities and nations. The broad question we have to consider is whether the facilities which we propose to create can be or are likely to be used in such a manner as to produce dangerous overexpansion. In this connection the experience of other countries where facilities exist similar to those which we propose will afford valuable lessons. In none of the leading countries of Europe are there any statutory limitations upon credit expansion. In fact there is no limitation whatever, either by law or custom. This is true not only of the central banks but also of the joint-stock banks of these countries. None of these banks is required by law to hold reserves. Each bank acts for itself in this respect. Of course, self-interest, custom, and public opinion lead the banks of the great commercial nations to hold cash and liquid assets as reserves against their liabilities. Their cash reserves are kept almost entirely in central institutions and not in their own vaults. In this country we have no legal restriction upon credit expansion except such as is involved in our statutory provisions for fixed reserves. In ordinary times a...