Evening star. [volume] (Washington, D.C.) 1854-1972, 1872-12-02
dered and the business Of Furnishing currency

dered and the business Of furnishing currency
yielded to the national banks.
The circulation Of each bank Is fixed arbitra-
rily by rule OF law. The aggregate circulation
is therefore fixed cum, and consequently there
demsnd for money due occasionally to extraor-
binary events at home or abroad and arising
periodically with the incoming of the harvest.
The Old state bank system is sometimes COM
mended for the quality termed elasticity; but
that quality, as found in that system was the
principal source Of financial disaster. Under
That sy ste %, In the absence of present demand
for cein, there was practically no limit to the
issue OF paper currency.
The increase OF the circulation was attended
and followed by an advance in prices, excessive
importations, consequent demand for coin
drawn from the banks to meet balances abroad
simultaneous reduction of the paper currency,
bankers.
AS the circulation of bank is source of
pront, and as the managers are usually dispos-
ed TO obllge their patrons by loans and accom-
modations, il can never be wise TO allow banks
or parties who have pecuniary interests At
stake to increase or diminish the volume OF
currency to the country at their pleasure. Nor
do find in the condition of things a Law or
rule on which we can safely rely. Upon these
views form the conclusion that the circulation
OF the banks should be fixed and limited and
tbst the power TO change the volume of paper
IN circulation, within limits established by law,
should remain in the Treasury Department.
rency is essential for two reasons:
First The business of the Department can
not be transacted properly if limit is fixed,
an d the power TO raise the circulation above or
reduce il below that limit is denied.
rule of this nature would compel the Sec
Rotary TO accumulate large currency balance
and to hold &c as, otherwise, the credit of the
government, In meeting the ordinary daily
claims upon IL, would be at the mercy OF every
serious business and political reyulsion in the
United States OF Europe.
Especially would this be true now that our or
binary currency expenditures are greatly in
excess OF our currency revenue.
Secondly. There is a necessity every autumn
Ior moving the crops without delay from the
South and West to the seaboard that they NAV
he in hand for export and consumption as W wanted
This work should be done in the main before
the lakes, rivers and canals are closed, and vet
1t cannot be done without the use OF large
amounts Of currency.
In the summer months funds accumulate at
the centers, but the renewal of business in Au-
gust and September gives employment for large
sums, and leaves little or nothing for forward
ing the crops in October and November.
Nor would this difficulty be obvisted by per-
manent increase or q permanent reduction of
the volume OF currency. The difficultyi s due to
the natural order of things, and increases with
the prosperity or the country as shown in the
abundance Of its harvests.
The crops cannot be moved generally by the
aid of bank balances, checks, aud letters OF
credit, but only by bank notes and United States
notes paid at once TO the producers. This money
Snds Its way speedily into the channels OF trade
and to the commercial centres but If it
be allowed to remain for general use, after the
reason for Its issue has ceased, the volume of
currency would be increased permanently and
the year following the same process would De
repeated with the same results, and thus would
the country depart more and more widely from
the policy of resumption.
The problem Is to find a way of increasing the
currency for moving the crops and diminishing
it at once when that woik is done. This is
necessary work, and, inasmuch as ft cannot he
COnfirpi kS lint in ha
ury Department, can the power be rep0sed
WINE the currency revenue was in excess o {
the currency expenses, it was practicable to &C
cumulate large balances in the Treasury during
the summer, to be used, il necessary. in the
purchase of bonds in the autumn, thereby meet
ing the usual demand for currency at that sea-
son of the year.
Hereafter such denominations must be made
by the sale of gold and the sale OF gold in large
quantities during the summer, when business Is
the least active, may not always be consistent
with the best interests of the country. Reii-
ance cannot, therefore, be placed upon the
ability OF the Treasury to accumulate currency
balance each year for the purpose indicated.
The argument in favor OF a paper currency
composed in part OF United States notes and in
part OF nationa! bank notes, is strengthened by
the aid which may thus be furnished in resum-
lbg and maintaining specie payments. In the
view am now to, take, exclude the idea that
the Government will ever abandon the issue of
national bank notes, and undertake the issue of
United States notes in their place. The results
OF such policy may be foreseen. The people
deprived of the facilities for business afforded
by banks, would seek relief through State insti-
buttons, and without much delay Congress
would cOncede TO them the right to issue notes
Tor circulation. This concession would be fol-
lowed by surrender by the General Govern
ment OF all control over the paper circulation of
the country.
The true policy will be found in continuing
the national banking system, without, however,
yleldlng to the claim for material increase of
IFS Issues in proportion to the volume OF paper
in circulation.
There are two effectual and certain WAYS of
placing the country in condition when specie
and paper will possess the same commercial
value. BY diminishing the amount OF paper in
circulation, the difference between the COM
meTcial value of paper and coin will diminish,
ana by pursuing this policy the difference will
disappear altogether.
All legislation limited in its operation to the
paper issues OF the banks and Of the Govern
ment, whether bearing interest or not, and
market value of coin, will be found, upon
analysis, to contain plan for contracting the
volume OF paper currency and all legislation,
80 limited, which does not contain such plan
will prove Intellectual
Accepting this proposition, and believing hat
the country is not prepared to sustain the policy
of contraction, it only remains for me to con-
slider the means by which the value of our cur
rency may be improved.
The basis OF a policy of improvement must
be found in sturdy refusal to add to the paper
in circulation, until it is OF the same value sub
staDtially as coin.
This being accepted as the settled purpose of
the country, there can be no permanent in
crease of the difference between paper and
coin, and an opportunity will be given for the
influence OF natural causes, tending, upon the
whole, to better financial condition.
We may count, first, among these, the in
crease of population and its distribution over
new fields of business and labor. Secondly, in
the South especially, the number OF persons
having property and using and holding money
will increase. Next we may anticipate a more
general use Of paper in Texas and the Pacific
States, by which, practically for the rest of the
country, the volume Of paper viii be diminished
and the quantity of coin increased-two facts
tending to produce an equality of value.
The influence of these natural causes will be
counteracted In some degree by the increasing
facility for the transfer of money from one
point TO another, and by the greater use OF bank
checks and certificates OF deposit. The rapid
transit of merchandise, in bringing the period
of its consumption nearer to the time OF its pro-
duetion, is an agency of a similar sort. Giving
to these views their full weight, am prepared
to say that the experience of the last three years
comedies with the best judgment L can form,
and warrants the opinion that under the indu-
ence OF existing natural causes our financial
condition will gradually improve. During the
last fiscal year there were several circumstances
of an unusual character tending to couuteract
the natural course Of affairs, Our exports OF
cotton fell OFF thirty-seven million dollars, and
there were excessive imports of wool, tea, cOf-
fee. and sugar.