5. Bankers sometimes do these things unnecessarily, for the purpose of making a “bear market”; but it is also true that business conditions sometimes compel them to do so, as was the case in 1857 and 1873.
6. If the banks had on hand as much money as they reported (which is not always true), they, in 1888, owed $6.01 for every dollar they reported; and last year the proportion was $9.98 to $1. The sixty-two national banks in the central reserve cities are required to keep nearly 25 per cent. of their deposits on hand in cash; the 285 in the other reserve cities only 12½ per cent., and the 5,065 in non-reserve cities only 6 per cent. State bank requirements vary greatly, private banks and loan and trust companies are under few or no restrictions, and the loan and trust companies keep only about 2 per cent.
7. Less than one-tenth of the “deposits” in banks are real money—the others being mere promises of the banks to pay money to those who have bought (with notes) the right to draw checks against them—and it is simply impossible to so regulate the system as to prevent it from frequently working disastrously.
8. Contracting the volume of any kind of money that is willingly accepted by producers always causes suffering. Indeed, modern conditions require a large annual increase in the volume of money; and, with an insufficient supply of real money, it is not now possible to prevent the use of hocus pocus money.
9. It is well known that, when their interests seem to require it, great bankers defy the laws made to restrain them.
10. There ought to be places in which people can deposit money and know it will remain there until checked out by themselves.
For ten years I have called attention to the fact that there never has been, in this or any other country, a widespread commercial panic that was not caused solely by the sudden contraction of the hocus pocus money then being used by banks, and have challenged contradiction; but this challenge has never been accepted. Hocus pocus money is the one and only seriously disturbing factor that has always and everywhere preceded these catastrophes. Other causes aggravate them, but, with it eliminated, panics would be impossible, because it is this sudden, absolute destruction of the bank’s manufactured “liquid capital,” used by so many as their medium of exchange, which paralyzes their business operations and makes “the bottom drop out of the market,” as it were.
No words are lurid enough to portray properly the terrible evils and personal suffering that its use causes, and I submit that it is time people should begin to consider earnestly the question, Had we not better insist that some kind of real money shall be substituted for the unreal now in use, and thus permanently remove the cause that so often produces such baleful results? Conditions were never so favorable for doing this as they are now. No election is pending; the two great parties are lazily talking on similar platforms; all financial organs insist that the country is prospering; and, although people are deeply stirred, they are not excited.
The use of hocus pocus money, and its evil results, have increased steadily from the beginning of the deposit banking system. From time to time methods change, but every change increases the power and profits of the few—and the helplessness of the many. The gravest of these changes began to be felt about a decade ago. Leading bankers had always used some of their hocus pocus money for the promotion of their own schemes, but from that time the Rockefellers, Morgans and others have been systematically getting control of the principal deposit banking institutions, and using, not only a rapidly increasing proportion of their depositors’ real money, but also more of the hocus pocus money made possible by those deposits. Mr. Lawson and others have shown how this has been done on a gigantic scale, in specific cases, and of all unfossilized, sober-minded people I ask, can 999 business men afford to permit the thousandth man to continue appropriating to his own use the hocus pocus money their own deposits have made possible—and, in addition, help him to keep the volume of real money ruinously small? Indeed, would it not be idiotic folly to do so?
To me the problem appears to be: How can hocus pocus money be safely eliminated—or so restricted as to be harmless—and the quantity of real money so increased that all will, at all times, be able to exchange their products and services; that commercial panics and long periods of business depression will become impossible; and that a few men in each community will no longer have the power to ruin all who refuse to obey their orders?