possibility of two billion of credit expansion with the member banks before the reserve banks are resorted to for their possibilities of expansion?

The railroads will have no credit for their stocks and bonds with the new Federal reserve banks. They are expressly barred in the bill. But the unlisted industrial that desires under our new tariff bill to manufacture for Chinese markets has only to borrow and make deposits and there will be credit expansion enough to assist in the commercial regeneration and elevation of the Orientals. We may yet sell rails and locomotives to China, if not to American railroads.

X

POLITICAL PRINCIPLES.

One must understand the political principles underlying the Federal Reserve Act before one can hold a clear conception of its aims or the ends to be attained.

It is quite another matter as to how wide of the mark aimed at will be the resultant working out of the Act in practice.

The world is moving forward in all forms of human development, materially and financially as well as mentally and socially, and at a pace never dreamed of a hundred years ago..

Only within a few years has the eye become accustomed to the electric light, or the blazing, fluttering electric candle been so subdued that the human eye could become accustomed to it. Thousands of people object to placing a telephone to their ears. The trolley train is still a marvel to grandmother and grandfather when they drive to town. Automobiles are denounced by financiers who regard human progress as possible only by human savings, and envious boys still throw stones at them upon some highways.

Dime novels with Indian scouts and scalpers are no longer interesting. Yellow journals and magazines, after political scalps, are more thrilling for the growing youth. Jules Verne is no longer a wonder when Zeppelin, Grahame-White and Orville Wright are actually building and rebuilding in sharpest rivalry to determine which of the three great nations of the earth shall first make over-theocean by air transportation a reality.

Financiers often forget that the whole body of humanity is moving mentally and socially quite as rapidly as material things are moving within the domain of finance. You must take a broad sweep to see what is really under the Federal Reserve Act politically, for, after all, political movements are but the reflex of human social movements and the endeavor to embody in law the aims of human progress.

All human growth is by mental contact. This is narrowed in the youth of humanity. The family relation is developed and defended. The tribal relation broadens and defends. Next comes the state with its army, and the city with its walled defences. Thence spring nations with navy and tariff walls. And within

family, and tribe, and state, and nation, is the centralized financial power- all for purposes of protection, defence, and individual upbuilding by concentration.

Now in this new age of the world comes the demand for human unity. Neither the Turk, the Bulgarian, nor the Mexican can any longer remain isolated in the human family. Every nation has an interest in the development, progress and trade relations of every other nation. Civilized nations are acting together. Indeed, civilization itself seems moving as a unit throughout the world.

Just so fast as this unit of humanity in civilization unites and solidifies, it is an irresistible power making for the decentralization of the older forces. No family is big enough, whether of kings and queens on thrones, or interlocked finance, or unions of trades or of labor, to now consider itself socially isolated and able to legislate and rule independently within its own borders.

Where formerly the word was "centralization," today the rule and the law is "decentralization." "Shippers, choppers and ploughmen shall constitute à state." Tariff walls are beaten into treaties of reciprocity and commercial unions. If Canada would not have a reciprocity treaty, we commercially annex her by taking down our tariff and making her prices our prices, for lumber, cattle. and food products.

The Federal Reserve Act is an act of decentralization. It seeks the establishment of other financial centers co-ordinated through a Federal Reserve Board at Washington. Finance and banks are for the people and human development. The people do not exist for the banks, or or potential and highly centralized finance.

The financial powers that still contest for the old system of banking concentration will soon find themselves lonesome relics of a bygone age. The new age is upon us, and he who would now argue for a strong central bank for the fifty nations or states within our Union will be found to be of the church or faith that holds that trolleys should be annexed to steam railroads, automobiles should not be cheapened for popular consumption, immigration and the voting franchise should be sharply restricted, that education is too universal, that too many people travel at home and abroad and that crowds do not belong in their church or their street. Nevertheless, the new age is upon us. It is the universal age; it is the age of humanity; it is the age of decentralization of all powers that the individual unit of humanity may enter in.

With this conception we can go forward to a true understanding of the Federal Reserve Act which seeks to promote more banks,

more financial centers, more commerce and more centers of commerce, lower and more stable interest rates, freer interchange of goods, and freer collection in the financial exchanges relating to

commerce.

This is why the new Reserve Bank Act if rightly put into operation may be as big as the Constitution of the United States, as was declared in the first of this series of articles.

Under wrong administration, or inauguration it may become like the Articles of Confederation, which in breaking revealed their defects; but their principles budded forth in a new Constitution which, with amendment, has stood for more than a hundred years.

This Federal Reserve Act, although named for 20 years, or its successor with amendment, is designed to stand for at least a hundred years as the promoter of commerce, the well-being of all people and human development through the exchanges of commerce freed as far as possible from the gambling transactions, either of commerce or finance.

It is regrettable that New York has not better comprehended the purposes of the new Federal Reserve Act. Before Secretaries McAdoo and Houston as the preliminary organization committee, New York argued for the annexation of other commercial and financial centers that a strong bank might be here set up. New York argued over a dead issue.

The whole purpose of the Act is decentralization with centralized direction. New York will be better off before the whole world, and Wall Street—that longest street in the world-will be longer and straighter when the national bank reserves of this country have been decentralized from Wall Street and Federal control over bank reserves set up.

This decentralization with reduction in reserve requirements gives such vast powers of expansion that the reader should study carefully the figures of the previous article before attempting to grapple with the tables to follow.

ΧΙ

EXPANSION AND CONTRACTION.

A clever millionaire, who has his millions sometimes in cash and sometimes in securities, was asked if he had read the ninth article of this series on the Federal Reserve Act. "Not yet," he replied. He was asked if he had read the Bank Act. He replied laconically, "No."

"Why, how can you handle your property and not know the law in relation to which it must exist for many-"

"Tut, tut, I have no time to read. Does not the law say ‘elastic'? That is enough for me. How can it be elastic without expansion?"

While the inauguration of the new Federal Reserve banking system presents the possibility of above two billion credit expansion by member banks before the beginning of note expansion by Federal Reserve banks, the first provision of the Act to go into effect is, most singularly, a measure of contraction.

Until the Secretary of the Treasury announces the establishment of Federal reserve banks there is only one change in the existing national banking system and that is that national banks may no longer count in their cash reserves the 5% fund held at Washington for redemption of national bank notes. This is about 35 million on the 700 million bank notes outstanding.

While the Act was under discussion the reserves of the country were very low and it is inconceivable that Congress intended, as preliminary to the inauguration of this new system of expansion, to withdraw 35 millions from the bank reserves and at a possibly crucial time.

The universal proclamation from Washington was reduction of reserves and easing of money. Yet the first provision of the Act put into effect was "from and after the passage of this Act such fund of five per centum shall in no case be counted by any national banking association as a part of its lawful reserve."

Either there was no immediate necessity for the new bank act in relief of the money situation, or the proposition for the immediate contraction of 35 million in the reserves was an error.

The intention clearly under the general purpose of the Act