Clarksville weekly chronicle. (Clarksville, Tenn.) 1873-1890, 1873-11-15

The Requisites for Resumption.
The London Economist in discus
sing thequestion Of resumption of spe
Gle payment in America, lays down
these Prerequisites as follows
I 1st. The difference of value between
gold and paper ought to be SO far re-
duced that no enormous amount OF /
paper will require to be exchanged for
gold when specie payments are resum-
ed. If gold is at high premium,
say % or 80 per cent, as compared
with paper, it is plain that as soon as
the law says that gold must be given
for the paper on demand, very large |
number of persons will wish to OBJ |
tain so considerable an advantage, and
to exchange the less valuable, and it |
would be difficult to obtain sufficient |
specie to meet so formidable demand. |
But if the premium on gold Is re-
duced to small amount, the smount |
of paper coming in for exchange will
be small too, and the payment of gold
on that small quantity of paper will
be enough to accomplish the desired
effect, and to equalize the value Of the
two.
I'd. The bank or government which
is about to pay in specie, must have
Immediately ready in store as much OF
that specie as will be at once needed
to pay the comparatively small amount
of paper which will so come in.
Sd. The banks of the government
must have in stock such quantity of
gold and silver as will be necessary to
secure the permanent convertibillty of
paper into gold. 1t must provide not
only for the momentous demand, which
is sure at first to happen, in order to
efface the sight premium on gold, but
also for further demands which in the
course of time may be expected to
happen.
It shows that the depreciation of
paper in 1921, when the Bank of Eng
land resumed, was less than two and
twelve hundredths per cent, and that
the coin accumulated to sustain re-
sumption amounted to two-ffths OF
the liabilities, and that even so large
a reserve proved TO be in fact INSULT
cient. In 1925, the till of the Bank
was empty, and the convertibility OF
| the notes was preserved not by the
magnitude of the store of coin and
bullion, but by the happy belief of the
public that no such store was needed.
But the calamities of 1928 were main
| " owing to mismanagementa after spe-
Gle payments were resumed. If the
reserve with which the Bank began
specie payment in 1921 had been main
tanned in 1925, the panic of that year
would never have occurred. The mis-
take was not in commencing specie
payments with an inadequate reserve,
but in afterwards neglecting the re-
serve and letting it dwindle. The re-
sumption of cash payments by the
Bank was an operation In itself fairly
successful.
In America the first condition is not
satisfied. Gold varies between 109 and
10, and if, with premium of 8 to 10,
specie payments were resumed, large
amount of gold might be required
INSCRIPTIONS and combined operators
are ready to seize all advantages, and
they would aggravate the situation.
The premium on gold must, in our
Judgment, be still further reduced bez
fore specie payments can be recon-
mended. In America it is thought
that this panic, by the "shrinkage of
values" is, the reduction of pri-
ces which it has caused-has greatly
increased the facility for return to
specie payments. But the diminution
in the paper prices of articles other
than gold is no aid in effecting this
object; it is by the amount of the
premium on gold in comparison with
paper that its safety is to be measured;
and, by destroying money corner"
and much vicious speculation in gold,
that panic has no doubt been a sensi-
BILE help. The premium on gold,
which had been unduly raised two or
three per cent, has now been reduced
to its natural amount; but so long as
that premium still remains so high as
it now is, the risk of return to specie
payments will be considerable.
Nor are our second or third condi-
tons satisfied. The store of gold now
held by the American government is
altogether inadequate to the resump-
ton of cash payments. The amount
of coin in the Treasury is fl6, 965, 900,
and the actual legal amount of green
backs is f65. 265, 600, and this amount
has just been exceeded by the reissue,
with contested legality, of greenbacks
withdrawn from circulation. The spe-
Gle is therefore just a fourth part of
the liability on the currency, an amount
plainly inadequate to the burden of SO
large liability.
Happily, however. the American
government has no difficulty in obtain
ing any amount of gold which it may
require. 1t receives its customs du-
ties in gold, and these amount to more
than the interest which it has to pay
in gold 1t has for years sold gold
regularly, and has invested the pro-
ceeds in the purchase of its own bonds.
1t has only to stop selling, and it will
receive of necessity as much gold as it
may desire. In this way it may accu-
mulate gradually sufficient reserve
in gold to meet the first demand con-
sequent on resumption, while there is
any kind of premium on gold as COM
pared with the paper, and to meet also
the permanent liability involved in the
promise to pay on demand so many
millions The American government
has no difficulty in accommodating the
gold; its only difficulty is the necessa-
| ~ dimiDution of the Dremium on gold