1216 !Nkw Yokk State Agricultural Society 



rassed if they found that at the moment when needs were greatest, 

 call money in Xew York had risen to 20 or 30 per cent., and that 

 New York banks could not rediscount any paper for the local agri- 

 cultural credit societies. So that, while the two problems stand 

 in a sense apart, the problem of a sane currency and the problem 

 of mutual credit, yet they are in some degree interrelated, just 

 as the question of currency is in fact interrelated with the busi- 

 ness of every man, even the humblest laborer, if he wants to draw 

 his pay in currency instead of some form of credit paper, as he 

 had to during the panic of 1907. 



There must be, before the system of mutual credit can be fully 

 developed, a system of sane and sound banking at the center. 

 That need not prevent the beginning of the organizing of mutual 

 credit, because it will hardly reach magnitude enough to become 

 a serious factor before the problem of a sound monetary system 

 will be solved. But in France and Germany the local district 

 agricultural banks can rediscount at the joint stock banks and the 

 joint stock banks can rediscount at the great banks of issue, which 

 are called either state banks or national banks, but which are dif- 

 ferent from our national banks. They could employ the resources 

 of the country to enable them to meet the demands of the crop 

 moving season or any special pressure. Those banks are substan- 

 tially without limit in their powers, because with their hands 

 upon the foreign exchanges, their ability to control the discount 

 rate and hence the interest policy of other banks, and their ability 

 to issue notes under certain regulations when they are needed, can 

 tap the resources of the money markets of the world. We could 

 not do that in the panic of 1907 because of the deficiency of our 

 monetary organization. You remember how the Bank of France 

 oifered to loan to the l)anks of Xew York almost anv amount thev 

 desired in cold if thev would ii'ive the suarantv of the govern- 

 ment of the United States or of some central banking institution. 

 It was not possi])le for the government of the United States under 

 its constitutional powers ; and there existed in i^ew Y'ork no bank- 

 ing institution wliich conld give such a guaranty. Therefore, 

 only indirectly and at heavy expense, were we able to avail our- 

 selves of the resources of France through the medium of the 

 flexible English money market. 



