Ex-Sec. Gage's Lecture Yesterday

Hon. Lyman J. Gage, LL.D., delivered an address on "The Proposed Changes in our Banking Laws" yesterday afternoon in the Fogg Lecture Room, under the auspices of the Department of Economics.

Our national affairs will be directed in the future, as in the past, began Mr. Gage, by men of native ability, experience, knowledge and integrity. The danger is that the young man will believe that the world is completed and that he has only to find his place in the machine. Mankind is, however, only beginning his career in the pathway of evolution, and to each obstacle that arises the true law of being must be applied by the individual. In the same way our currency system has a fault which requires the application of ideal principles. For a quarter of a century this has been a matter of debate from time to time, but the discussions have not yet achieved an adequate remedy. The necessity is generally agreed to, but regarding the method of reform there is much divergence of view.

The function of paper money and of the banker is of course to facilitate the exchange of commodities and the payment of labor services. Commerce is carried on by credit and the means it has devised, such as checks, drafts and bills of exchange, while it is the banker who renders credit most effective. It is certain that 80 per cent, of the world's business is transacted by credit, while cash is used only for small payments, such as the adjustment of balances and the payment of wages. The larger possibilities of the system are trammelled by the law that compels the banker who wants to extend his credit in the form of notes, to deposit in the Treasury United States bonds equivalent in value to the amount of notes he proposes to issue. By this rule those who cannot make use of the loan and deposit credit, which is relatively cheap, are obliged to trade by means of monies capital--that is, coin and greenbacks--which is a comparatively expensive process. This is most unjust, because the burden falls chiefly on the rural districts which use deposit credit very little and are the least able to bear the burden. The system is unscientific in that is fails to respond to commercial needs and renders the supply of currency dependent on the price of Government bonds. All these faults are suffered to continue through popular prejudice, inertia in the public mind and indifference or helplessness on the part of the banker.

Credit, then, is of the first importance in our business life, and to support it mutual convertibility of circulating notes and deposits is essential. In this direction, Mr. Gage believes, steps toward reform may wisely be taken, but must be planned without violence to existing conditions.