The right system of currency, he said, would be patterned after those of the great nations of Europe, which employ the medium of a great central bank. But Mr. Scott knew full well the popular prejudice in the United States against the central bank system and did not hope for restoration of the Hamilton plan of government credit, which he always defended. Perceiving the futility of overcoming this prejudice he had little hope that the American currency system soon could be brought to needed efficiency. The "fundamental error" of our currency he pointed out as follows (March 8, 1908): "There is a fundamental error in our monetary system. It is the parent of all other errors that beset the system. This error is the fiat notion of money . . . But these notes are not money. They are merely substitutes for money whose value depends on their redeemability in gold or the prospect of it . . . This, it is asserted, is cheap money, for it costs nobody anything. But the government's fiat money is dearest of all forms of currency. It requires gold to be banked up in enormous sums for its protection . . . It is an impeachment of the intelligence that tolerates such a financial or monetary system. . . The Treasury is simply warehousing gold against its own obligations. . . . With the enormous sum of one billion dollars in gold held by the Treasury under our inelastic and immovable system, we are unable to keep circulation afoot. Every now and then it congeals, freezes up, simply stops. But the Bank of France and the Bank of Germany make their gold support a paper currency twice in excess of the proportion of our own."
The great need, he said, in order to give control and steadiness to financial affairs and the currency system, is a central bank and branches modeled after the United States Bank founded by Hamilton in 1791, and after government banks of Europe. On November 23, 1909, he wrote:
"Our people, believing they can regulate by their votes, the value of money, and calling notes issued by authority of the government, money, will not permit any rational currency or rational banking system to be established in the United States.
