Dr. Vissering begins by proposing an adoption of what he calls a "bank unit" or a theoretical unit with a fixed gold value. A fictitious unit is not new to the history of currency; at present the yen or the Haikwan tael are only book units. The learned doctor states, however, that theoretical units par excellence were the old Dutch Bank Guilder, which the Amsterdam Bank of Exchange kept up for many years with success, popularizing it even in international trade, long after the real coin respresenting that unit had become demonetized in 1622 - and the Banco Mark of the famous Hamburger Giro Bank, which made Hamburg the focus of the book transfer system of banking down to the present day. The establishment of a bank unit necessarily means the establishment of a central bank of issue - which should be endowed by the Government with the exclusive right to issue bank-notes. This bank must correspond to the national banks in European countries. It should be an independent institution conducted on purely business lines, but controlled by strict Government-imposed statutes, with a certain amount of Government supervision. This bank would introduce the new unit and all other banks, foreign or native, should be induced to follow by opening accounts in the new book unit alongside of the existing currency. The working of this system would certainly be complicated in the beginning. The new unit being based on a gold value would, of course, fluctuate with respect to silver currencies. All transactions would certainly depend on the rate of the day according to the fluctuation of silver, but all transfers affecting the bank unit accounts mutually could take place without any conversions whatever. In the same manner transactions between the bank unit and foreign gold currencies would find themselves independent of the fluctuations in silver value. Once the system was extensively adopted a good deal of the uncertain and risky exchange aspect which vitiates all mercantile transactions at present would be no longer operative. The practice of settling exchange in advance, a practice quite common at present, has been adopted to obviate risks arising out of an unstable exchange; under the bank-unit system much of this trouble could be obviated. Eventual settlements would, of course, take place in silver; but as the new system grew such cash settlements would get reduced as the proportion of the settlements which took place in the shape of the book transfers in the bank unit increased.
The next step, of course, would be the issue of bank-notes under the auspices of the central bank. It would be more difficult to counterfeit bank-notes than token coins, through the technical skill required, the numbering on the notes, etc. Considering that paper money in China has existed for over a thousand years, the introduction of Government notes should prove extremely easy. As a matter of fact these could be brought into circulation from the outset, and it is needless to state that the amounts in notes would be expressed in the new bank unit. The fundamental difference between the proposed issue and old issues in the past would be that, while there were no reserves of any kind for the past issues, the reserves under Dr. Vissering's scheme would be represented by gold stocks or gold credits held abroad. By holding the reserves abroad any chance of the notes being redeemed singly or in small amounts would be done away with; even if every bank or large firm should purchase gold credits abroad with a sufficient amount in these bank-notes, any falling of the notes below par would be impossible, as in such case the depreciated bank-notes would, as a matter of course, be bought up by banks and brokers as a cheap way of remitting money. Such anticipations, says Dr. Vissering, are very far-fetched, for where a number of accounts exist at the banks in the same unit, the bank-notes would simply change hands over the counter at par as silver bank-notes do to-day.
Dr. Vissering is anxious to make it plain that the issue of notes in the bank unit should not be a Government issue, although the right to issue notes would be granted to the central bank by the Government. There are two reasons for keeping the Government out of this, as in the past the Governments have abused the right and there is a temptation to misuse such power in times of stress. Concurrent with the issue of notes in the new unit, steps should be taken to arrange for the proper gold reserve abroad, which should be kept strictly and exclusively for the redemption of these notes. This reserve would be created out of nothing, so to speak, by printing and issuing the notes against cash, foreign gold bills and credits, inland bills and credits, duly secured advances, etc. A proportion of the proceeds could then be converted into gold in such a shape as is held to constitute a proper reserve. These notes would naturally fluctuate a little above or below par, but as in the case of exchange between London and Berlin or London and Paris, the fluctuation could be kept well within one to two per cent. Besides the actual gold reserve usually held to include bank credits, short loans and discounts, there would be an additional asset in the shape of advances against security. These advances would not be covered in the shape of bullion or coin, and would constitute practically a part of the working capital of the bank - the proportion of which would vary according to legal enactments and circumstances governing the likelihood of sudden and heavy calls being made upon the metallic reserve.
Dr. Vissering estimated that the gold cover might be eventually reduced to 50 per cent. of the issue, though, however, he believes that the percentage should be larger in the earlier years. Eventually, as a matter of course, a fair proportion of the reserve should be brought back and kept in China.
The adjustment of the balance of trade or the final settlement in metal for the excess of exports over imports or vice versa, is an important adjunct to the study of any monetary system. Shipments of treasure by themselves might mean anything, although it is understood that every monetary system is bound to feel the effect of any considerable movement of treasure very strongly. An adverse balance would probably, to a certain extent, be met in the first place out of the stock of money held abroad, and it is therefore necessary to define clearly the manner of operating the foreign reserve in this respect.' An adverse balance of any magnitude is certain to make its effects felt, with regard to the maintenance of the reserve and the par value of the token coin. A thorough examination of the trade conditions is essential before a decision is adopted with regard to any system of currency. And Dr. Vissering claims that the transition stage, which is provided for under his system, would prove very helpful in this respect. Silver, either in this shape of an addition to currency, in which it would exist during this period, 01 in its character of a mere commodity, which it would always continue to have, could always be used for adjusting the balance one way or the other.