It clearly appears, therefore, that this quest for simplification in the means of credit, which each nation ardently pursues in the interest of its own industrial and commercial development, demands the greatest circumspection. In developing credit, metallic currency must not be too much overlooked. We must not lose sight of the fact that "credit, in order to be solid and permanent, must have a solid and permanent foundation."
The first care of the architect who is about to erect a great building is to secure for it a broad and firm foundation. Likewise, in the vast and continuous upbuilding of a nation's credit, the metallic base requires the most attentive and enlightened consideration. To provide for it, the entire resources of the State are not too great. It is difficult to understand how, in certain countries, an undertaking of such universal interest should be left to private enterprise. How can the latter be powerful enough to accumulate holdings in currency which may have to remain idle for long periods, and which can unflinchingly resist all assaults and all storms?
In France a system which has already passed the hundred-year mark and has been particularly fortunate as to results, intrusts the Bank of France with the duty of building up and preserving the metal holdings, and this great organisation shows itself fully worthy of the confidence which the Government has always reposed in it. During its long career the bank has never ceased to control credit with rare foresight and a remarkably steady hand.
From 1870 up to the present time the cash holdings of the Bank of France have not ceased to grow. But the bank, of its own volition, could not have made such an accumulation. The exchanges are usually in our favor, owing to our position as lenders to foreign countries and to the extent of our exports, and this for many years past has resulted in the continual flowing of the precious metal into the vaults of the Bank of France.
In thirty-five years the amount of our metallic reserves has increased almost threefold. And it is worthy of note that while the amount of circulation increases together with that of discounts, loans, and current accounts, the fact is nevertheless established that the bank note tends to be more and more exclusively represented by cash holdings. The silver holdings are continually diminishing, while the total holdings have increased. Indeed, the Bank of France avails itself of every opportunity to relieve its coffers of this depreciated currency. Since 1898 a considerable portion of the holdings have been absorbed by the recoinage of a certain number of 5-franc pieces into subsidiary coins.
Place of the Bank of France in the Distribution of Credit
We purpose now to investigate the organs of French credit, and to assign to each of these organs its function, in order then to ascertain what operations the Bank of France can perform and within what limitations. We have therefore to examine (1) the function of local banks and of financial institutions; (2) in what manner the Bank of France promotes the free distribution of credit; (3) in what measure the bank must control credit.
LOCAL BANKS AND THE FINANCIAL INSTITUTIONS
The natural organs for the distribution of credit are the banks, but not all are able to spread it or popularise it in the same degree. Thus the "Haute Banque" (the great banking interests of Paris), solely engaged in operations of higher speculation or in international financial relations, does not interest us. The function of distribution is reserved for the local banks and the financial institutions, while the function of the Bank of France is to preside over this distribution.