ADVANTAGES

In his monograph, "The Discount System in Europe," Warburg declared that the effective utilization of the discount policy was one of the most impressive victories for central banks in Europe during the Panic of 1907. The only structure that is safe, he concluded, is one that provides for effective concentration of cash reserves and their freest use in case of need, enabling banks, when necessary, to turn into cash a maximum of their assets with a minimum disturbance to general conditions. He noted further that a central bank is able to guard the cash reserve of the country and accommodate nonreserve banks by accepting prime security, like bank-accepted bills.

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