Monetary policy

“ This initiative could return about $25 billion back into our economy over the next 12 months, money people can use to help pay for clothing, college, or to get a new car. Finally, working with the Federal Reserve, we will continue to support monetary policy that keeps both interest rates and inflation down. ”

“ BANKING AND CURRENCY REFORM.
The method of impartial scientific study by experts as a preliminary to legislation, which I hope to see ultimately adopted as our fixed national policy with respect to the tariff, rivers and harbors, waterways, and public buildings, is also being pursued by the nonpartisan Monetary Commission of Congress. An exhaustive and most valuable study of the banking and currency systems of foreign countries has been completed.
A comparison of the business methods and institutions of our powerful and successful commercial rivals with our own is sure to be of immense value. ”

“ We recognize that interest rates are potent factors in production and business activity, and for the purpose of further equalizing and of further lowering the rates of interest, we favor such monetary legislation as will enable the varying needs of the seasons and of all sections to be promptly met in order that trade may be evenly sustained, labor steadily employed, and commerce enlarged. The volume of money in circulation was never so great per capita as it is to-day. ”

“ The independent Central Monetary Authority assures us of a new regime of price stability. Opening of the financial system to foreign banks should bring more foreign investment and expertise. We have substantially recovered from the balance-of-payments crisis in the mid-eighties. ”

“ It is also important for our trading partners to do their part-by dismantling protective barriers around their home markets and allowing more open competition; by adopting fiscal, monetary, and exchange rate policies that are in line with goals of stable growth with low inflation ”

“ Those who advocate the return to a gold standard do not always appreciate along what different lines our actual practice has been drifting. If we restore the gold standard, are we to return also to the pre-war conceptions of bank-rate, allowing the tides of gold to play what tricks they like with the internal price-level, and abandoning the attempt to moderate the disastrous influence of the credit-cycle on the stability of prices and employment? Or are we to continue and develop the experimental innovations of our present policy, ignoring the “bank ratio” ”

“ Hence, no matter how much currency there might be in the country, it would be absorbed, prices keeping pace with the volume, and panics, stringency, and disasters would ever be recurring with the autumn. Elasticity in our monetary system, therefore, is the object to be attained first, and next to that, as far as possible, a prevention of the use of other people's money in stock and other species of speculation. ”

“ The cautious and conservative reader will ask: if the evils of our present dollar are so great and the remedy so simple, why did not our civilization improve its monetary units years ago, as it improved all other units? ”

“ V.15 We see, then, that prices will tend to fall through increase in trade, which may in turn be brought about by improved transportation, by increased freedom of trade, by improved monetary and banking systems, and by business confidence. ”

“ With the operation of the Central Bank, we expect to maintain our domestic monetary stability, the inter­national value of the peso, the free convertibility of ­the peso into United States dollars and other freely con­vertible currencies, and the promotion of a rising level of production, employment and real income. ”

“ No country can be subjected to such stress as to consent to part with its entire monetary circulation, or even the half of it. On the contrary, every influence which tends to contract the circulation tends to create a condition which makes further contraction more difficult. Rates for the loan of money are affected, prices of imported goods are influenced, imports fall off and exports increase, and inevitably in the modern money market local equilibrium is restored, often with considerable strain, but none the less without pulling down the pillars of the financial temple. ”

“ We must have a currency, not rigid as now, but readily, elastically responsive to sound credit, the expanding and contracting credits of everyday transactions, the normal ebb and flow of personal and corporate dealings. Our banking laws must mobilize reserves; must not permit the concentration anywhere in a few hands of the monetary resources of the country or their use for speculative purposes in such volume as to hinder or impede or stand in the way of other more legitimate, more fruitful uses.—From the President's Address to Congress, April 23, 1913. ”

“ Likewise the degree of civilization to which a country has attained is reflected by the perfection of its monetary machinery. After having tried nearly every unwise experiment condemned by the teachings of history, the United States has finally reached a position where its currency meets the two fundamental requirements of sound finance, namely, (1) the standard of value is that in use among the great commercial states of the world; (2) all of the currency is either directly or indirectly convertible into the standard coin. ”

“ But assuming that the monetary laws are to continue, and free trade to be persisted in, it will become the people of this country, and especially the trading classes, to consider well the inevitable effect of such a state of things on the monetary concerns of the country, and, through them, on the solvency of every one of themselves. ”

“ The only part of our monetary medium that has elasticity is the bank-note currency. The peculiar provisions of the law requiring national banks to maintain reserves to meet the call of the depositors operates to increase the money stringency when it arises rather than to expand the supply of currency and relieve it. It operates upon each bank and furnishes a motive for the withdrawal of currency from the channels of trade by each bank to save itself, and offers no inducement whatever for the use of the reserve to expand the supply of currency to meet the exceptional demand. ”

“ It may be safely said that for this purpose the United States needs every fall at least one hundred and fifty million dollars of extra currency. Since our monetary system contains no really elastic element, this extra business of the fall has to be done with little or no increase of the country's currency. The crops must be handled by means of a shifting of currency from one part of the country to another. In the spring and early summer the agricultural districts are apt to have more money than they need. ”

“ Evidently the increase of money of credit is not to meet increased demand, but to increase trade independently of demand; and its decrease is not to meet decreased demand, but because trade, having been increased beyond the demand, under the stimulus of credit, must be returned to its proper support or perish. The rate of the currency is not an element of political economy. Those elements are population, demand, industry, supply, consumption, and savings or wealth, which, being mutually dependent, are not properly subject to great or sudden variations of relations. ”

“ Last week, at the monetary conference in Stockholm, the major industrial countries decided to take a big step toward creating a new international monetary asset that will strengthen the international monetary system. ”

“ The rate of interest should be open to readjustment every ten years, when the estimates for the currency are made. Thus it would come that whenever there should be so much currency in circulation that it would be worth less than four per cent. for business uses, the surplus would immediately be converted into four per cent. bonds; and whenever money for business should be worth more than four per cent., the bonds would be converted into the currency in just sufficient quantities to meet the demand and to restore the equilibrium. ”

“ The proportion which the currency of any country should bear to the whole value of the annual produce circulated by its means is a question upon which political economists have not agreed. Nor can it be controlled by legislation, but must be left to the irrevocable laws which everywhere regulate commerce and trade. The circulating medium will ever irresistibly flow to those points where it is in greatest demand. ”

“ Though tides and currents may for a time disturb, and tempests vex and toss its surface, still through calm and storm the grand level rules all its waves and lays its measuring-lines on every shore. So the business of the country, which, in the aggregated demands of the people for the exchange of values, marks the ebb and flow, the rise and fall of the currents of trade, and forms the base-line from which to measure all our financial legislation, and is the only safe rule by which the volume of our currency can be determined. ”

“ The gradual reduction of the currency is the only measure that can save the business of the country from disastrous calamities, and this can be almost imperceptibly accomplished by gradually funding the national circulation in securities that may be made redeemable at the pleasure of the Government. ”

“ It is patent to the most casual observer that much more currency, or money, is required to transact the legitimate trade of the country during the fall and winter months, when the vast crops are being removed, than during the balance of the year. With our present system the amount in the country remains the same throughout the entire year, resulting in an accumulation of all the surplus capital of the country in a few centers when not employed in the moving of crops, tempted there by the offer of interest on call loans. ”

“ I urge upon Congress the importance of a nonpartisan and disinterested study and consideration of our banking and currency system. It is idle to dream of commercial expansion, and of the development of our national trade on a scale that measures up to our matchless opportunities, unless we can lay a solid foundation in a sound and enduring banking and currency system. ”

“ I suggest this subject for the consideration of Congress, and also, simultaneously with this, the propriety of redeeming our currency, as before suggested, at its market value at the time the law goes into effect, increasing the rate at which currency shall be bought and sold from day to day or week to week, at the same rate of interest as Government pays upon its bonds.
The subjects of tariff and internal taxation will necessarily receive your attention. The revenues of the country are greater than the requirements, and may with safety be reduced. ”

“ But it means not only inflation by a single act and to a fixed amount—it means inflation continuous and indefinite.
The volume of the currency is to be “made and kept equal to the wants of trade.” Is not the volume of the currency equal to the wants of trade now? It is a fact as notorious as daylight that the banks of the country, especially in the centers of trade, are full of money that lies idle for want of employment. No intelligent man questions this fact. ”

“ An inflation of our paper money is demanded of us in any form, the form of greenbacks, the form of national-bank currency or both combined, but an inflation in any event upon one single ground—that there is at present an insufficient supply of currency in this land to fill the legitimate requirements of the business of the country. ”

“ Silver standard, price movements in countries using, 7, 25.
Single taxers, as objectors to stabilization of dollar, 250.
Sixteen-to-one remedy for falling-price movement, 75; campaign of 1896, 266.
Smith, J. Allen, plans of, for stabilizing monetary units, 294.
Social injustice resulting from changing price level, 61-63.
Socialism, cue taken by, from high cost of living, 68; growth of, due to rising costs of living, before the war, 69.
Socialists, objections of, to stabilization plan, 250-251.
Spain, safeguarding of money by, during Great War, 285. ”

“ Another question of very great importance is that of the establishment of our currency and banking system on a better basis, which I commented upon in my inaugural address in the following words:
Our financial system needs some revision; our money is all good now, but its value must not further be threatened. It should all be put upon an enduring basis, not subject to easy attack, nor its stability to doubt or dispute. The several forms of our paper money offer, in my judgment, a constant embarrassment to the Government and imperil a safe balance in the Treasury. ”

“ By the Federal Reserve Act the supply of currency at the disposal of active business has been rendered elastic, taking its volume, not from a fixed body of investment securities, but from the liquid assets of daily trade; and these assets are assessed and accepted, not by distant groups of bankers in control of unavailable reserves, but by bankers at the many centers of local exchange who are in touch with local conditions everywhere. ”

“ The same disturbance of the exchanges and of international trade, which is produced by an increased issue of convertible bank notes, is in like manner produced by those extensions of credit, which, as was so fully shown in a preceding chapter, have the same effect on prices as an increase of the currency. Whenever circumstances have given such an impulse to the spirit of speculation as to occasion a great increase of purchases on credit, money prices rise, just as much as they would have risen if each person who so buys on credit had bought with money. ”