The Wheeling daily intelligencer. [volume] (Wheeling, W. Va.) 1865-1903, 1867-07-23
The Rate of Interest and the volume
of the Currency.

of the Currency.
FTonr tse NelO York Commercial and FTnan-
| cidl Chronicle.
1t is we'll established principle that
a redundant currency becomes depreci-
| ated, and to the immense volume of our
paper money we ascribe the fact that
| the paper dollar is worth less than the
dollar in gold. But there is another
effect produced by changes in the vol
ume of the currency, which is not so
we'll understood. We refer to the
| changes produced in The rate of inter-
est. indeed, it is one of the most diff
| cult problems in practical finance to
measure and foresee the effect produced
| on the money market by perturbatiOns
| in the movements of the currency. On
the ease and certainty with which the
man of business in this country rea-
sons on this point, will often depend
the success or failure of his enterprises
and calculations.
The currency system of England has
been frequently designated "a cast iron
SYSTEM" because OF the inelasticity
and want of mobility which prevent
its volume from enlarging or dimin-
ishing at the precise time and TO the
precise extent which are demanded
| by the varying eXigencieS of busi-
ness. To this inelasticity are at
tributed the violent oscillations in the
rate of interest from 2 to s or 10 per cent.
and back again, which year after year
repeat themselves with great violence
at irregular intervals, to the detriment.
of trade and 10 the ruin of large multi
tudes among the productive classes.
The cause of this rigid immobllity is
supposed to reside in the very safe
guards with which the British curren-
cy is furnished against depreciation.
| These safeguards are the various limits
| in. posed by law on the amount of the
monetary circulation. Soiealous Is the
English system of any such increase of
the currency as might depreciate paper
below gold, that even salutary in
crease is sometimes rendered impossi-
BILE, when sucn an increase Is impeTa-
lively demanded by the condition of
business. To ward of the perils that
would come from redundancy an un-
due contraction of the volume OF the
currency afloat is thus maintained with
the disastrous results which such a
contraction never fails TO bring with II.
Such is the explanation often given
of the cause of the financial pHnics and
the variations OF the rate of interest that
constitute the most striking anomaly
which disfigureS the otherwise almost
perfect English system of financial ma
chinery. Whether this conclusion be
correct or not there can be no doubt
whatever OF the truth of the principles
on which it is founded. These princt-
pies are first, that more currency is re-
quired in every country at some times
than at others, in consequence OF the
fluctuations of its business at different
parts of the year; and, secondly, that
the money which circulates in any
country, whether it be coin or paper
money, or mixed currency OF coin
and notes, must vary in its volume,
and must enlarge or diminish respon-
ls.FN In nd inO RiFRn FRnn9fAnHng-
it will fail to meet adequately the
changing wants which its function isto
supply.
we have only to apply these prlnci-
pies to the financial experience of our
own country to perceive their truth.
For example, we find that in the fall of
the year large amount of currency is
wanted to move the crops, and conse-
ouently our banks in this metropolis
have a continual demand for money in
the interior. In the summer the pro-
cess is reversed, the tide sets this way,
and currency accumulRtes here as well
as in the other financial centres OF the
country. Moreover, 1t is one of the
characteristics ofa monetary panic that
the people hoard their money. This
boarding causes lively demand for
currency which depletes the banks for
the time being; and this depletion is
followed on the subsidence of the panic
by an accumulation, for the pockets of
the people are very speedily emptied OF
currency when they regain their conh-
dence and the desire to use their money
more protitably revives. An inspec-
ton of the Bank of England returns
during the past year illustrates very
Significantly this principle in the deple-
ton of the reserve under the Overend
panic last year, and in the gradual ac-
cumulation of gold during the slow
restoration of confidence which has
since followed. Here, then, we nave
| two causes which may give rise TO an
| increased demand for currency. There
is, first, the natural fluctuations in
| business, and, secondly, the abnormal
fluctuations produced by panics and
monetary revulsioDs. Under the opera
ton of either of these causes state OF
things would be induced which would
make legitimate demand for more
currency. And this demand may be
met by the Issue of more currency
without any danger whatever OF pro-
Iduoing dePreciation, IL means are taken
to withdraw the additional currency so
soon as 1t becomes superfiuous, and the
need which has evoked it has passed
away.
Now it is believed to be one of the
great advantages of our system OF cur
rency, and TO be a compensation for
some of its defects, that meets 1t the two
conditions of the currency problem
| DeLteT Indu duy OluGAs AOA
composed of Government currency of
400 millions, which is always out,
and forms permanent part of the circu-
lating current, and also 800 100000 of
bank currency, the amount of which
under healthy system of redemption,
would expand or contract with respon-
sive elasticity under the movements OF
business. How far these expectations
will be satisfied, it is impossible to say,
for two reasons. First, no efficient
system of redeemIng National Bank
Notes has yet been put In operation,
and such redemption Is an essential
condition of the required elasticity.
Secondly, the operations of the Sub
Treasury produce an unnecessary inter-
ruption of the spontaneous movements
OF the money market, and this pertur-
baton threatens to be increased II, as
seems to be probable, the Government
deposits are removed to the Treasury,
and are not allowed, under any circum.
stances, to be placed in the National
banks of our chief cities. To this point,
however, We may probably recur here
after.
AwoMAN writes an indignant letter
of complaint to the New York Post
against smoking in the street cars. She
says that the conductor refused to
make the smoker throw away his cigar
or leave the car, on the ground that it
was "allowable to smoke on the front
platform" ;" and the "nice ride" she an
| In ronSa.