ABSTRACT
FROM the preceding chapters it may be seen that the want of credit institutions led to the establishment, among others, of national banks. But on account of the lack of business activity, the depreciated state of the paper currency, and a continuously depressed foreign trade, little benefit was derived from them. The rate of interest in particular remained still very high. The Yokohama Specie Bank did much to lighten the difficulty. But there arose at the same time a spirit of exclusiveness among the bankers, causing, among other things, new diversities in the paper currency. The necessity of co-operation and assimilation prompted the idea of establishing a central bank. The Minister of Finance, Count Matsukata, prepared a memorandum on this subject in which it was pointed out: 1. That the exclusiveness and individualism prevalent among the national banks cannot be remedied except by the creation of a powerful central bank. 2. That without the help obtainable from such a central bank, sudden runs causing panics cannot be avoided in a time of extremity, and even in ordinary times lack of resources prevents the banks meeting the demands for discount to the extent demanded. 3. That the present high rate of interest is unfavorable to the advancement of commerce and industry. But this is the result not of the deficiency of capital but rather of the lack of channels through which capital may flow and its distribution be equalized. Moreover, if the central bank were to discount bills at a low rate of discount, the example will be followed by the others. 4. That to allow the money collected in the form of taxes to lie idle in the vaults of the Treasury, causing thereby a scarcity of funds, is a most wasteful method. If to the central bank were intrusted the receipt and disbursement of the public money, the losses incident to such a practice could be avoided. 5. That while it is true that the efflux of specie is due to the excess of imports, the want of a central bank to regulate the flowing in and out of specie by an advance of rates or by entering into correspondence with foreign banks, has much to do with it. 6. That to unify the paper currency and make it convertible into specie by the aid of the accumulated reserve of gold and silver, can best be done by the agency of a central bank, which must, to some extent, be specially protected.
