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THE MUSIC TRADE
THE
fflJJIC TRADE
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Directory ol Plaao
The directory of piano manufacturing firms and corporations
~
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found on another page will be of great value, as a reference
MainUctnren
f o r
Exposition Honors Won by The Review
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NEW YORK, DECEMBER 28, 1907
EDITORIAL
SUBSCRIBER to The Review in Portland, Ore., writes an
enthusiastic letter to this publication in which he extols the
condition of the banks in the Pacific-Northwest. H e is positively
exuberant over the showing which they make. He says that the
last returns made to the Comptroller of the Currency show that the
financial institutions of Oregon are richly laden with funds, in fact,
gorged with yellow metal. It seems that twenty-nine out of forty-
five National banks in Oregon, outside of Portland, report an aver-
age cash reserve against deposits of forty-four per cent. This is
three times the amount required by law, and it is just this excess
of the reserve required by law which is, in our opinion, creating
most of the trouble throughout the country to-day. The enormous
reserves which our friend from Oregon says reflect great credit
upon the soundness of the Oregon financial institutions have been
withdrawn from the business arteries and therefore, instead of
assisting trade, are helping to stagnate it. Right in favored Oregon
regular money has been replaced by temporary mediums of ex-
change. Clearing house certificates and railroad checks have been
circulated in the money gorged cities on the Pacific slope.
A
In our humble opinion bank reserves should be decreased in
times of panic rather than increased and certainly they should not
be built up at the expense of the business interests of the country.
It is this same hoarding of funds which to our minds is accentuating
all the trouble. There is just as much money in the country to-day
as ever and surely confidence is returning, but cash has been with-
drawn from circulation and in many instances it is being hoarded
by financial institutions.
B
ANKS, of course, have great responsibility, and to the ever-
lasting credit of banking men be it said that throughout this
entire strain but few weak institutions have been discovered. Re-
sults have demonstrated that the banks are run upon a sound basis.
A few men in New York who were using the financial institutions
as pawns in their great gambling games have been removed from
their position of power. They are down and out, but when we
scan the entire country over it must be admitted that the banks of
REVIEW
this country have demonstrated their soundness and their fitness
to stand any strain, even an extraordinarily hard and sudden one.
But at the present time it seems to us that instead of boasting of
vast reserves in cash the banks should loosen this money and thus
aid the circulating medium of the country. It is just that very
reserve which is being piled up and is therefore inactive which has
been the great lubricator of business. It is the over-legal reserve
which has helped men to meet their obligations, but if it is piled up in
bank vaults it becomes useless as far as its functional powers are
concerned. The banks must aid industry, else in the end there
will be no necessity for banks. Money is their merchandise and it
forms, with confidence, the life of trade.
B
USINESS institutions must have funds in order to carry on
their enterprises and to meet their maturing obligations.
Great factory payrolls require an enormous distribution of cash
weekly to employes and the workmen after all are the great dis-
tributing mediums of money. Suppose for illustration a factory is
located in a town of 30,000 people. The weekly payroll of the
factory is $10,000. Now this money which is paid out to the work-
men is kept in local circulation, it reaches the banks again before
the end of the week, because after it leaves the hands of the wage-
earners it goes to the butcher, the baker and candlestick maker,
and by them is again deposited in the bank at the close of the week.
So that the money which is paid out on Saturday reaches the bank
for distribution again by next Saturday and in the meanwhile it
has paid many thousands of dollars of obligations.
Let us go beyond that and suppose that this amount was ob-
tained from a bank by good commercial paper placed with it by the
manufacturers, who distribute the proceeds of the notes in wages.
Suppose the bank refused to discount, what follows? The manu-
facturers cannot meet their payrolls, the men are discharged and
all the local merchants are forced to close, all real estate depreciates,
capitalists who own business blocks are unable to lease their
buildings at fair rentals, and ruin faces everybody, simply because
there was a stoppage in the circulation of money, and the money
instead of being distributed was piled up in the form of reserve
in the vaults of the banking institution. It may as well be old iron
for that matter, because it is not fulfilling its duty as a circulating
medium. What we illustrate in the case of a small city may apply
with equal appropriateness to the largest enterprises in the greatest
municipalities. So if banks will continue to increase their reserves
and our readers in Oregon and elsewhere gloat over this fact as
evidence of the great prosperity and stability of the country we
rather incline to the belief that what we need is education showing
the fallacy of such a course of reasoning. It isn't the inactive bank
reserves that we require to better the business conditions. Far
wiser it would be to cut down the reserves and get the money out
where it will do good, where it will pay bills and keep factory
wheels spinning. That is where the money should be.
The resources of the country were never greater or manufac-
turing in all lines healthier, but we need an active dollar not a dead
one.
T
H E country banks have stood the strainvremarkably well and
all credit should be given them, but is it not a false policy
to go on now increasing and strengthening their reserves when
the money is vitally needed for commercial purposes? The quicker
we get rid of the idea that accumulated money is a good sign the
better it will be for the commercial interests everywhere. It isn't
the money that is hoarded in banks, in stockings and old tea pots
that makes the factory wheels spin round. On the contrary, be-
cause the money is in those convenient receptacles is just what is
preventing the wheels from spinning. This is an extremely un-
healthy and dangerous sign, and until that money is out perform-
ing its full duty we will continue to face a menace to the business
interests of this country.
Bank reserves look very good to the Comptroller of Currency
but they look' also mighty poor to the business men, because they
show hoarded money rather than active money, and it is the nimble
dollar which helps business.
A large Texas dealer writes: "The New York banks are to
be censured for their action in holding money when we of the
Southwest need it so much to move crops." It sounds very well,
but why should New York be blamed when the Texas bankers are
not doing their full duty. If we study the reports recently sent