National Republican. (Washington City (D.C.)) 1872-1888, 1872-12-03

The reason for these remarks may be found .
In the opinion ! entertain, that the tariff sys- .
tom Of the country has contributed largely to /
the general prosperity, and that such general .
and continued prosperity Ia the only basis on .
which even a wise financial policy can rest.
In discussing the other changes caused by ]
the war, the issues Of United States notes and
Of notes by the national banks should be con !
sdcred together indeed, they are necessary
parts of our financial systen,, and neither can
be substituted for the other without general
disturbance and permanent injury. The
national banking system Il so far superior to
the State bank system, and to any system of
private banks, as to render argument In It's
behalf, In these respects, unnecessary; while
the substitution Of an equal amount Of United
States notes as currency would be productive
Of serious evils and loses.
First. The national banks hold nearly four
hundred million United States bonds, which
otherwise would he thrown upon the market,
discerning domestic capital, or, u purchased
abroad, adding, by the amount Of the Interest,
to the annual balances against Us In our ac-
count current with other countries.
Secondly. Ono office Of bank Is to aggru-
gate the capital Of small pOsscssOrs, and
thereby to furnish means In aid Of important
commercial and financial undertakings, not
only ut the centres, hut In the remote and
nCwy-sCttlcd parts Of the country.
Thirdly. Tho national banks are used as
aids ~ the Government, which otherwise
would require large Increase IN the number
OF designated dcpositaries, aud a proportion
ate Increase OF the public expenses without
the least apprcclable advantage.
FOurthly. They facilitate exchanges between
different sections Of the country, thus d.
miulshing tho cost of commercial transac-
! tons.
Filthy. They are generally less disposed
than private parties, controlling equal CAPT.
tai to demand exorbitant rites Of interest
But II does not follow from these views,
nor would II follow from those Of q similar
character which might be presented, that the
system Is perfect; nor docs II follow that the
| Issue Of notes directly BY the Government
should be surrendered and the business Of fur
nishlng currency yielded TO the national
/ banks,
The circulation Of each bank 10 fxUd arbI-
trarily by rule Of law. The aggregate CIR
culntiOn Is therefore fixed sum, and conse-
queutly there Il practically no reserve to meet
the increased demand for money due occa-
sionally to extraordinary events at home or
abroad, and arising periodically with the In
coming Of the harvest. The old State bank
systcm Is sometimes commended for the
quality termed elasticity; but that quality Us
found In that system was the principal source
Of financial disaster. Under that system, 10
the absence Of present demand for coin,
there was practically no limit 10 the Issue Of
paper currency.
and followed by an advance in prices Cxccs-
} sivc impOrtatiOns, u consequent demand for
coin drawn from the banks TO meet balances
abroad, a simultaneous reduction Of the paper
currency, and the consequent distress Of mcr-
chants and bankers.
As the circulation Of bank II u source Of
profit, and rs the managers are usually dis
posed 10 Obllge their patrons by loans aud ac-
Communications, II can never lie wise To allow
banks or parties who have pccuniary interests
at stake to Increase or diminish the volume Of
currency In the country at their pleasure. Nor
do find In the condition Of things law or
rule on which we can safely rely. Upon these
views form tho conclusion that the Circula-
ton Of the banks should be fixed and limited,
and that the power to change the volume Of
paper in circulation, within limits established
by law, should remain In the Treasury Depart
, npnt.
A degree Of flcxibility In the volume Of cur
rvncy e essential, for two reasons;
: First. The business Of the Department can.
not be transacted properly II a limit Il fixed,
and the power to raise the circulation above
or reduce Il below that limit Is denied.
4 rule Of this nature would compel the Sec
/ rotary to accumulate large currency bal
ance and to hold II, as, otherwise, the credit
Of the Government In meeting the ordinary
T daily claims upon 1t, would be at the mercy
: of every serious business aud political revul-
sion in the United States or Europe
Especially would this be true now that our
. ordinary currency expenditures arc greatly
In excess Of our currency revenue.
Secondly. There Is necessity every au.
= tunn for moving the crops without delay
! from the South and West to the sCubOard
, that they may he In hand for export and con.
= sumption Us wanted. This work should be
done In the main before the lakes, rivers and
canals are closed, and yet II cannot be done
! without the use OF large amounts Of currency
In tho summer mDnfha funha q
T at the centres; but the renewal Of business IL
= August and September gives employment fol
3. large sums, aud leaves little or nothing fol
K forwarding the crops In October and No
q vembeT.
Nor would this difficulty be obvlated by /
4 permanent Increase or permanent reduction
Q OF the volume of currency. The difficulty 4
y due to the natural order Of things, and In
Creases with the prosperity Of the country a.
: shown In the abundance Of It's haryosts.
4 The crops cannot be moved generally by
u the aid of bank balances checks, and letter.
Of credit, but only by bauk notes and United
c States notes paid at once TO the producers
j This money finds Its way speedily Into thu
I channels Of trade and TO the commercial cen
. tres but II 1t be allowed to remain for genera
l. use, after the reason for Its Issue has ceased
the volume Of currency would be increaset
: permanently, and the year following the SAINT
i process would he repeated, with the same re-
suits, and thus would the country dcpart
more and more widely from the policy OF re-
0 sumption.
The problem Il to find a way Of increasing
! the currency for moving the crops aud d.
. mnishing II ut once when that work Ia done
= This is q necessary work, and, inasmuch as II
D cannot be cOnhded to the banks, where, but
7 In the Treasury Department, can the power
be rcpO5cd2
While the currency revenue was Ia excess
OF the currency expenses 1t was practicable Ia
accumulate large balances In the Treasury
! during the summer, TO be used, " necessary,
, In the purchase Of bonds In the autumn,
thereby meeting the usual demand for cur
! rency ut that season Of the year
Hereafter such accumulatiOns must be
made by the sale Of gold, and the sale Of gold
: IN large quantities during the summer, when
business Il the least active, may not always
10 consistent with the best interests Of the
: country. Reliance cannot, therefore, be
placed upon the ability Of the Treasury to ac-
, Cumulatc currency balance each year for
, the purpose Indicated.
} The argument In favor Of paper currCn-
cy composed In part Of United States notes
and 10 part OF national bank notes IL strength
ened by the aid which may thus be furnished
In resunllng and maintaining specie pay
ments In the view am now to take / eX-
clude the idea that the Government will ever
abandon tho issue Of national bank notes,
and undertake the issue Of United States
hOtcH III tntlT pluCt' Inc Itbult VI buCn u
policy may be foreseen. The people, deprived
OF the facilities for business afforded by
banks, would seek relief through State insu-
tutlOns, and without much delay Congress
would cOncede to them the right TO issue
notes for circulation. This concession would
be followed by surrender by the General
Government Of all control over the paper cir
culatiOn Of the country.
The true policy will be found In continuing
the national banking system without, how
ever, yielding 10 the claim for material In
crease Of ltS Issues In proportion TO the vol
une Of paper In circulation.
There arc two effectual and certain ways Of
| placing tic country In condition when spe-
Gle and paper will possess the same CONNER
clal value. By diminishing the amount Of
/ paper In circulation, the difference between
the commercial value Of paper and coin will
diminish, aud by pursuing this policy the DIFF
ference will disappear altogether.
All legislation limited In Its operation to the
paper issues Of the banks aud Of the Govern
ment whether bearing Interest or not, and
which In It's effects shah tend to diminish the
market value Of coin, will be found, Upon an
alysis, to contain plan for contracting the
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