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494. the Bank of France in Its Relation to National and International 61ST CONGRESS \ SENATE j DOCUMENT 2d Session j ( No. 494 NATIONAL MONETARY COMMISSION The Bank of France in Its Relation to National and International Credit By MAURICE PATRON Barrister And an Article upon French Savings By ALFRED NEYMARCK Editor of the "Rentier" Washington : Government Printing Office : 1910 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis NATIONAL MONETARY COMMISSION. NELSON W. ALDRICH, Rhode Island, Chairman. EDWARD B. VREELAND, New York, Vice-Chairman. JULIUS C. BURROWS, Michigan. JESSE OVERSTREET, Indiana. EUGENE HALE, Maine. JOHN W. WEEKS, Massachusetts. PHILANDER C. KNOX, Pennsylvania. ROBERT W. BONYNGE, Colorado. THEODORE E. BURTON, Ohio. SYLVESTER C. SMITH, California. JOHN W. DANIEL, Virginia. LEMUEL P. PADGETT, Tennessee. HENRY M. TELLER, Colorado. GEORGE I?. BURGESS, Texas. HERNANDO D. MONEY, Mississippi. ARS£NE P. PUJO, Louisiana. JOSEPH W. BAILEY, Texas. ARTHUR B. SHELTON, Secretary. A. PiATT ANDREW, Special Assistant to Commission. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis TABLE OF CONTENTS. THE BANK OF FRANCE IN ITS RELATIONS TO NATIONAL AN& INTERNATIONAL CREDIT. BY MAURICE PATRON. Page. Introduction 7 PRELIMINARY CHAPTER. The Bank of France and its metal holdings: SECTION I.—Cash holdings of the Bank 11 SECTION II.—Immediate results of the dominating position of the Bank 27 PART I. PLACE OF THE BANK OF FRANCE IN THE DEVELOPMENT OF THE NATIONAL CREDIT 38 Chapter I. Place of the Bank of France in the distribution of credit 40 SECTION I.—Local banks and the financial institutions 40 SECTION II.—In what manner the Bank of France promotes the free distribution of credit in France 46 SECTION III.—In what measure the Bank must control credit-- 50 Conclusion 57 Chapter II. Evidences of the activity of the Bank of France in connection with * the national credit: SECTION I.—Development of instruments of credit in the Bank of France 60 Checks 63 Transfers 69 SECTION II.—Popularization of instruments of credit 75 SECTION III.—Territorial expansion of the Bank of France 86 SECTION IV.—The Bank of France and agricultural credit 89 3 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis National Monetary Commission PART II. THE BANK OF FRANCE AND INTERNATIONAL CREDIT 95 Chapter I. International markets: Page. SECTION I.—International financial solidarity 98 SECTION II.—Place of the Bank of France in the international market 105 Chapter II. The Bank of France and crises 113 SECTION I.—Monetary crises 113 SECTION II.—Customary measures of defense against crises 122 SECTION III.—Present policy of the Bank of France 138 Appendix to Section III: Project for an international bank. 146 Chapter III. The Bank and war 149 Conclusion 155 Bibliography 160 FRENCH SAVINGS AND THEIR INFLUENCE UPON THE BANK OF FRANCE AND UPON FRENCH BANKS. BY ALFRED NEYMARCK. Page. i. Some facts and figures 165 2. Formation and development of French savings 166 3. Savings institutions 167 4. French rentes 168 5. Lottery bonds 169 6. Railroad bonds 170 7. Total of securities belonging to French capitalists 171 8. Annual savings 172 9. Improved and unimproved property 173 10. Inheritance statistics 173 11. Importance of French savings and their consequences 174 12. The supremacy of the French banks 179 13. The Bank of France 180 4 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis The Bank of France in Its Relation to National and International Credit By MAURICE PATRON Barrister 5 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis THE BANK OF FRANCE IN ITS RELA­ TION TO NATIONAL AND INTERNA­ TIONAL CREDIT. INTRODUCTION. The interesting evolution of means of exchange which we are witnessing and which is familiar to everybody seems to be leading us, after the well-defined periods of barter and money, to a system of mere clearing of bal­ ances. All exchange operations would then be settled by simple book transfers. Coin, thus reduced to the condition of money of account, would cease to play any real part. Economists are even thinking of a return to barter, which would complete the cycle, bringing us back to the original state after thousands of years and combi­ nations of all kinds. Such would be the course of this evolution. At any rate, the undeniable characteristic of our present system is that it presents a transition between the money system and the clearing system, the ultimate form of which we are unable accurately to define. This period of transition, which began when the idea of genuine credit was conceived, will last for centuries before we can rid ourselves of money as a medium. The system of purely fiduciary currency, which is in process of becoming firmly established, is not yet sufficiently stable to prevent us from being thrust rudely back into the old ways when­ ever we exceed the limits of our resources. Crises afford a striking proof of this fact. The initial period, the precursor of the crisis, is nothing but an ab~ 7 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis National Monetary Commission normal extension of credit and of speculation. At such times the need of leaning upon the solid foundation of metallic currency is felt with a new intensity; and when, with the blindness resulting from overconfidence, this need has been neglected, when, from a disregard of the func­ tions of money, a crisis is brought about by the violent rupture of the equilibrium of credit, gold at once resumes its rights, is sought for on all sides, and, according to the seriousness of the offense, exacts complete amends, with the honors of a premium as high as it may choose to make it. It clearly appears, therefore, that this quest for sim­ plification in the means of credit, which each nation ar­ dently pursues in the interest of its own industrial and commercial development, demands the greatest circum­ spection. 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."0 It devolves upon the bank of issue to watch over this solidity and permanence. It can do so by means of its note—that hybrid document, the offspring of both money and credit5—which is subjected to a more and more close dependence on money, in proportion as credit increases, and which constitutes a valuable means of tran­ sition in our time of transition.0 a Sir Edward Fitzgerald Law, in the National Review, cited by A. Raffa- lovich, Economiste Europe'en of November 16, 1906, p. 617. &L6on Say and Chailley, "Nouveau dictionnaire d'economie politique" under the word "billet de banque." "The bank note is at the same time an instrument of credit and a substitute for metallic currency." cLet us for a moment consider these instruments of credit which justly do honor to our modern civilization; their number increases constantly; in addition to bank notes, checks, transfer orders, certificates of deposit, 8 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis T h Bank of France One hundred years ago the bank note, secured almost solely by discounts, was the chief element of a credit which was then little developed.0 But nowadays, the tremendous growth of credit and the necessity of a large metallic basis compel us to provide a heavy gold counter­ part for the bank note. It tends to become nothing more than a token representing money. Its issue is no longer a credit operation, but essentially a mone­ tary operation which, it seems, should secure for the bank note its maximum development. By means of its notes, the Bank is in a position, under all circumstances, to bills of exchange, bills payable to order, drafts, storage certificates, we have stock-market securities, treasury bonds, mortgages, warehouse receipts coupons; in short, obligations of the most varied nature which are to-day in use for credit transactions. All these instruments are employed in making settlements; they sup­ plement advantageously the use of coin, or multiply it, and they gradually lead toward that period of simple clearing which some economists believe is already in sight. There would be cause for unmixed gratification in their great number and the frequent use made of them, if we were not aware of the serious disturbances resulting from the excessive and careless use of credit. We do not deny the unquestionable advantages of these instruments; on the contrary, wTe believe the time has come to give them greater extension; but we lay down as a principle that the importance of the bank note in a fiduciary currency should not be belittled, as some people are inclined to do. To give to the credit structure any other foun­ dation would, in our opinion, be equivalent to building on sand. The bank note alone permits the creation of a metal reserve strong enough to become, in case of need, a valuable war chest and a sinking fund for crises. a This is shown by the following table (Cf. Pantel, " Les fonctions de la Banque de France" Montpellier, 1903, pp. 26 and 27): [In millions of francs.] Circulation. Discounts. Cash. Deposits and current accounts. Year. Maxi­ Mini­ Maxi­ Mini­ Maxi­ Mini­ Maxi­ Mini­ mum. mum. mum. mum mum. mum mum. mum. 1800 22 8 24 5 11 4 6 r 1801 25 15 45 18 10 5 9 1802 45 16 83 36 15 4 16 5 9 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St.
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