Cleveland daily leader. [volume] ([Cleveland, Ohio]) 1865-1873, 1865-12-09
Contraction Of the Currency.

Attention is called to that portion of
the Report of the Secretary of the Treas
ury which refers to the necessity for and
the feasibility of 'reducing the amount of
paper money now in circulation. That
thereis a-supply of currency far in excess
of the requirements of trade, is evidenc-
ed by the exorbitant prices prevailing
throughout the eountry.. 1t is useless to
say that prices decline with the reduction
of the premium on gold. The premium
on gold is simply the discount on paper
money. The present deprecated value of
greenbacks is not now caused, as may have
been the case during some of the darker
periods through which the nation passed
in its struggle with armed rebellion, by
popular distrust Of the nations integrity,
but is the legitimate result of an excess of
supply over demand. If it be true that
prices of goods are governed by the rate
of premium on gold, then the most practi-
cable way to reduce prices is to bring gold
down to par by strengthening the curren-
ey until a dollar in paper shall be worth a
dollar in gold. This can only be lone by
reducing the supply of paper money to
the standard of necessity. But it is not
exactly tru that prices of fabrics vary
with the gold market. Prices of most ar
tieles of consumption, both necessaries
and luxuries, are only a small per centum
lower now; with gold at fOrty-seven per
cent. premium, han they were when gold
commanded a premium of one hundred
and eighty-fve per CEN. Why? Partly
because an excessive supply of currency
has tended to reduce its value; or, in 9TH
er words, to establish a new standard Of
values money being superintendent,
more of it is required to procure a given
amount of goods than would be the case
if it were less plentiful partly because
an inflated currency induces a spirit of
speculation, leading to the most reckless
disregard of sound financial principles.
In this lies the great danger of the coun-
try. Excessive importations, e~xtravagant
expenditures, neglect of the various
branches of productive industry, frauds,
entertainments and defalcations, are the
universal concomitants of an expanded
currency and the inevitable precursors of
financial revulsion. Let us view this sub
ject in the light of the past. To do so, we
will go back to the financial crisis of 1887
and its causes. The bank circulation in
1880 was less than sixty-one and a half mil
lions, but it rapidly expanded until it had
reached one hundred and forty-nine mil
lions, and, by inviting over-trading, sPecu-
~latiOn, etc, produced commercial ruin in
1887. Inls4S it was alittle over ffty-cight
and a half millions. AT the time of the
F." panic of 1857 it had crept up to nearly
two hundred and fifteen millions, having
been almost quadrupled in fourteen years.
started of in 1858 with a little over
one hundred and ffty-fve millions, which,
in 1860, had reached two hun
dred and seven millions. On the 3lst
of October, 1865, the currency of the
country reached the enormous sum of
seven hundred and thirty-four millions of
dollars, an increase of five hundred and
twenty-seven millions in five years. Dur
ing a state of war, this condition of af-
fairs may have been unavoidable; but in
season of peace it is absolutely unen-
durable. No one will contend that the
addition of a hundred millions per annum
to the paper money of the country is not
Far in excess of the requirements of legiti-
mate commerce, and we sincerely hope
Secretary McCulloch will persevere in his
sensible and practical scheme of con-
tracing the circulation and relieving the
currency of its present Objectionable