New-York tribune., 1868-12-19

loans and discounts which form the most inilatory
and dangerous element in banking, and need limlta-
tion and regulation even more than does the bank
note currency.
g. We would check the worst form Of imitation. VIZ;
that which results from the banks loaping and dls-
counting on the capital Of their deposltors 10 mus
tratc: A. owns goods, say 1,OCO shares oi r'Iilo""
stOcl; which he does not ned. anu conld ahoiu ~
sell at IS to pay $4,000 which he owes IL has
$4,000 in cash with which he wants 10 buy faiiroao
stock if A. will sell it at 20; but before meeting u
he deposits il in bank a. calls at the bank DofIo"S
BIS $1,000 for GO days audnow wllnot sell bis stock
for less than So The stock has risen TO 80 because IL
and b. both have the possession aud use OF the same
$1,000 b. SAYS it is in my bank, where have dc-
posted it, A. says no. it is in my pocket, where l
have got it. Tomorrow A. deposits II III his Dahh
whence c. borrows it, To-day. y. could nave
bought house of c. for $4,000 because he neeueu
$4,000 cash. Tomorrow, he cannot buy C.s mousse al
ALL because the money which A. fancles Is III HIS
bank is in C's pocket and the house which yester-
day c. would have sold for 10000 to-day he asks
s9lOOO Thus we see $4,000 inflated into yJoooO by
the banks loaning the capital of their depoSitors. il
they loaned only their own capital they coulu loa"
il only once. and no imitation can result. But the
moment they loan the funds of their depositors they
begin to initiate the currency and raise prices This
changes. but is most dangerous, least understood
and needs most an effectual but well graduated
check We have proposed that OF requir-
ing the banks to keep a reserve in gold Oh
20 per cent. of tho excess OF their loans
and discounts over their deposits Some of the banks
of our large cities constantly loan from two TO three
or four times their capital. Every dollar they loan
over their capital is an initiation to that extent OF the
currency.
Towihly. When the other measures above incIl-
ded have accomplished their legitimate results when
The ereenbacks. National Bank notes and private
debts have all been Transformed, without injury TO
any class. from deprecated into redecmabe currency
when taxes are assessed and collected and the judg
ments of the counts rendered mredeemable currency
then we shall emerge from our financial troubles al
the point where we came into them 10y repeal Of
the legal tender act Prior to this, all rredccmablc
notes will have been exchanged for rcdeenable ones
or taxed out of existence. and one invanable stand
ard Of values will have been substituted for the
variable one which noWs forms so great an obstacle
to industry.
IIGhlg: We have not made any scheme OF fund
ing conspicuous part Of this plan, because no pro-
ftabe scheme Of funding is possible until Our bonds
are at or about par in gold Capitalists determine the
vauo of the principal of new security, l. G., WHAT
they will give for it, mainly from its rate OF interest
So long as six per cent, L. ;. bond can he bought
for IS cents on the dollar capitalists will only pay o.
for a four per cent bond Of the same kind The other
terms besides interest cannot be made specially more
desirable than they are in the j.2Os aud lOiOs. To
fund the National debt into four per cent. bonds
enough TO take it all mp, we should have to
issue ono-tlhrd moro bonds at four per cent
than we would ut ski c., increase the
principal Of the debt from S!,4O0OO1COO
10 s. 90OOOOOOO. While our annual interest would
be no less tho ultimate principal which we would be
called upon 10 pay would be one-third greater 30
long as our debt remains at discount III gold II Is
good economy to buy up the principal with whatever
excess Of income over expenditures we can afford to
devote 10 that purpose. But all propositions to les
sen the rate of interest by funding schemes, viii
only run the country still deeper in debt by increas-
ing the principal. All negotiations and exchanges
between the Government aud It's creditors must as
sumo the axiom that the creditors cannot be
cheated and viii make no exchange oi their present
securities unless they get from the Government moro
than tbey give TO IT, And this is trade by
which tho Government necessarily loses. The above
plan therefore provides for perpetual consol TO be
issued after our bonds have reached 50 nt might we
think ns well have said par. but of this there may
be some doubt at which time, doubtless, we VIII
have resumed specie payments and there viii arise
! n serious necessity for funding the bohG' III such
form that the danger ~ the event oil W"F OF paho'
Of several hundred millions Of them being thrown on
| the American market at once and payment de-
manded, OF sales made, may bc obyiated Even TINS
danger would he greatly lessened by the absorption
+ Of so much larger portion Of our bonds by Our N"-
tional Banks involved in the above measures.
| '. H. u.
rive have consented to print tllis out OF
respect for the author; but We wish it distinct
ly understood that THE TRIBUNE does not IN
dorse it.-Ed.l