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Bankers.
Cordially yours,
LORD RIDING.”
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Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5
One Community Banker was too Shrewd —
He Spoke Almost too Plainly in this Intimate Group
The community bankers stared at each other. The large city banker saw that the letter had not
impressed as he desired. He thereupon hastened to amplify by pointing out that cooperation with the
London bankers would give each community banker a much greater diversification on his promises-to-
pay. Instead of all of the promises-to-pay being outstanding in the local community, the small banker
would be able to place some of his promises-to-pay in New York. In fact, it would even be possible for
him to send promises-to-pay to New York simultaneously with his withdrawing them in his local
community. In other words, he could create more local business depressions, thereby getting title to
more properties, and while they were in progress not be without earning income on as many promises-
to-pay as he dared issue.
Then, too, it would be better not to have all of the promises-to-pay in the local community, for there
would be much less danger of some local situation dis turbing the “confidence” of the people. Even one
local situation might cause many people to demand more metal for their promises-to-pay than he
actually held, and thus expose his fundamental self-created insolvency. If a substantial part of his
promises-to-pay were not in the local community, that danger would be diminished.
After he had gone on with the discussion, a banker from one of the local communities decided to ask
some questions. Why wouldn’t he, as a small community banker, be jeopardizing himself when he
allowed the large city banker, and in turn the London banker, to decide when he had to curtail the
volume of his promises-to-pay ? He said that he had found his own judgment as to when to curtail very
good, and he believed he would be better satisfied to continue operating his strong room in a manner
agreeable to himself. He had found that there was no actual overproduction of anything in his
community, for when his promises-to-pay were at the maximum levels commensurate with “reasonable
safety,” the people were able to purchase and consume everything they produced.
He also boldly reminded the group that this country is 95% self-contained. To sacrifice agricultural
prices to London control could, if London saw fit to do so, destroy the purchasing power of a large part
of the population. If control of the situation were taken out of his hands and placed in the hands of the
banker at New York, it might create some very difficult situations. Then, too, he said, if we allow the
price levels of all of the raw materials which we produce to be determined in London, London might not
adjust those prices high enough to cover the cost of production of most of our farmers. He pointed out
that not all farmers had equal costs, and in order for the majority to cover cost of production and have a
reasonable profit, it would be necessary to take into serious consideration the varying costs in different
parts of the country. He knew what the costs were in his own district and he knew when the price levels
were adequate to cover the cost of production and leave a profit. He knew of other districts where
actual costs were less than in his own district. He wisely distrusted “average” figures. He, therefore,
hesitated very much to place the power to control the price levels of raw materials in London, because
London might set a price on basic raw materials which would be high enough for some districts of the
United States, but not high enough for most of them.
He pointed out that if the promises-to-pay were adequately expanded in all districts and kept that way,
excepting when “depressions” were judicious, there would be no surplus problem. Even under a
curtailed volume of promises-to-pay (the result of having intentionally called in loans), he felt that not
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Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5
more than 25% of the wheat could be exported under such conditions. Why should he allow London,
which might possibly take 25% of the wheat, to determine the price levels for the 75% which would
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