The Portland daily press., 1865-11-25
Saturday Morning, Nov. 20. 1850.
The Scarcity of Money.


We published yesterday communication
from "E. Il. IT," in which the ground Is DIS
tinctly taken, that "money is scarce, because
the volume of currency is practically dimin-
ishing.n We believe that this view is foIndcd
in errcr; that the enormous volume OF cuI-
renew is the cause of the ruling, inflated
prices; that inflated prices, requiring larger
amount of money for the transaction OF busl-
ness, do really constitute the basis OF an I'M
precedented demand for money; and that this
demand running ahead of the supply In the
loan market is the cause of the actual scarcity,
though the contraction of credit incident to
period of uncertainty and distrust, has pow
erfully co-operated in producing the recent
panic. So far as "E. FL. TBS" representations
tend to produce the impression that con-
traction of the currency is to be deprecated
and postponed, we regard them as unsound
and mischievous, and are very glad to find the
statements which to his mind, and doubtless
to others, seem most powerfully to sustain MS
view, so clearly presented that we can grappie
with them directly.
We proceed to consider ses-iatirn the three
reasons assigned by "E. II. T." for believing
that "the volume of currency is practically di-
minishing." o
1. aThe recent funding of $50,0O0,000 OF
the six per cent. compound interest notes."
How and why these compound interest notes
were issued, "E. 81. T."must surely remember.
They were issued in payment of the current
expenses Of the government, in the well
grounded hope that they would not enter into
the mass of currency but would be boarded
by banks and individuals, constituting an indi-
rect loan to the United States for three years
at compound interest. Most of them were at
once absorbed by the banks. 1t is very rarely
that they have been seen performing the office
of money in the markets. These notes have
not constituted part of the currency; their
withdrawal does not diminish the volume OF
currency. A reduction of the amount of
money actually in circulation, by $4,000, 900,
must have produced some effect on prices
Prices, however, have not changed materially
since the compound interest notes were fund
ed The loan market UaS disturbed, but there
was no reduction of the volume of currency.
g "The diversion of a large amount of
currency from the North to the Southern
States" So far as Northern capital seeks in
vestment at the South, undoubtedly there will
be diminution OF the amount offering in the
loan markets at the North. The exchanges
of the South are provided for, however, by
Southern National banks, organized as fast as
rrI.1 4 ox,J Gov
has not been etsolely or mainly by with
drawal of currency from Northern markets.
s. "'The gradual reduction of the local
currency" "Reduction" is not a proper word
to express the substitution of National for 6
State currency. The focal currency" has no,
even been withdrawn to make room for the
National issues 1t has been found that the
circulation authorized by law docs not meet
tue necessities of trade under its present dis
advantages 1t takes now twice as much
money to move thousand barrels of -four, as
it did in 1860. To accommodate the legiti-
mate demands of business, our banks have
been compelled again and again to reissue
their old State bills. True, these notes will be
withdrawn, but as yet they VIGOROUSLY are
not, and in our opinion could not have been,
under existing circumstances, without disas-
ter.
We fail to see then, in the three reasons ad-
dueed by "E. FL. T." any ground for admitting
that the volume of currency is diminishing.
We wish it were. The banks Of this country
used formerly to find employment for a circu-
lation of about $500, 100000. The authorized
circulation of the National banks is now
about $200O00,O00. How much of the cur
rency issued under their State charters is still
a1oat, it is impossible to say. But we know
that some $45O,000,OOO are in circulation in
United States legal tenders and fractional
currency, and there can be little doubt that
the entire body of currency is more than
tscice as great as it was before the suspension
of specie payments. The advance in prices
since 1851 is largely, though not wholly, due
to this enormous expansion of the currency.
The evils flowing from this source were endur-
able while the prosecution of the war render
cd them necessary. 1t is time now to think
of some remedy.