, 1873-09-29
MONEY AND COM MERGE.
MONETARY.


their dcpoatlors. What Ia It thor, In which poo
rlo have lost contldenco3 UnqucBtionably 1t is |
tho average mercantile credit represented by |
bank balances. The depostors believe TINT |
tho bnnks will bo abundnntly able to |
pay them OF with something rs good as they !
gave, viz: checks and mercantile paper, but tho
dopoaltora want something better than tloy gavc,
uence tho demand for currency.
Instead Of this being struggle on tho part OF
che banks to ro-oBtabliBll public confdonco in
themselves, thoy nre, without knowing It, str1lg- |
Cling to lit tho average mercantile credit OF the
country to par with the credit Of tho Qovorn-
ment.
Much of tho proBcnt confusion Of idcas na to
tho cause Of the panic arlsos from tho popular
misunderstanding OF the functions Of bauk.
Instead Of being repository Of money, as tho
generality of pooplo, and oven great many
"bankers," aupposo, bank Ia merely s'oapper
pf debts. Every ono Of tho ordi nary transao~
Nons Of bank ts simply swap OF Its own
aobt for tho debt of somebody elHo, tho dobts
being balanced most commonly by property
either In transit or In course Of production.
Whom A deposits 800 chock on some othcr
bank, and d s100 groonback in his
bank, his bank Inns only bought tho
800 dcbt Of another bank md tho 800
debt Of tho Government. In placing these
two amounts to AS credit, his bank has givon
him its own dobt Of 1900 in return. This is his
s'dopoeit," debt which he nny demand at my
time shall be paid In $500 OF Government dobs
called greenbaoAs. It is tho aamo with loans
and discounts. Tho bank simply buys tho debt
of tho maker Of tho noto, by giving its own
debt, which is set down to Az account as do
posit" We have no rcal money in circu-
lstion in tho United states now There
ls no real money but apecio Tho
whole business Ct banks Of this country for
ten years has been nothing hut swapping their
debts for other dobts, including Government
debts. But in all those transactions the banks
bsgc contracted to pay their own dohta with
Government debt called illegal lender"
The recent collapse has damaged all mercar1-
tile credit. Tho dopoBitora 500 this. hence there
has beon n rush to obligo tho banks to convort
mercantile debts into Government debt. In re-
fualng to pay large demands in currency, tho
banks nre practically asking an extension of
mercantile liabilities, and q suspension Of tho
Bankrupt law.
But the banks 1aboring away to overcome
what they persist in regarding 81 only MI
abnormal scarcity Of currency, iavo gono to
work in Now York, Boston, Cincinnati, and other
places to supply the temporary deficiency Of cur
roncy by an issue Of Clearing House loan-
certificates. This being ouly anothor kind OF
currency, based on tho average mercantile crodit
which tho banks aro trying to lift to par with
the Government credit, 1t IL not ut all surprising
TINT in Now York these Clearinghouse loan
certificates aro airoaly at a discount Of from 81 to
por cont as compared with greenbacAH. Tho
moro there il iHsued of thom, tho more thoy will
dcpreciate, because they arc good for nothing
except to circulate among q little clique
OF banks in tho clearinghouse. The
result Of their use will bo simply to circulate
round and round among these fow banks until
they winnow every dollar Of greonbacks out of
their vaults and the banks will be In much
worse plight when they come to tho finnl crash
than if they had never used tho
The average mercantile credit of tho country
as basis Of circulating currency of any kind
would perhaps never bo SO good undor any cir
cumstancos as tho credit Of the Government.
But in the present case it must 10 remembered
chat tho mercantile credit Of the country
at large has been much injured by
the recent collapse in speculative schemes. It
Is, however, also true that credit has boon in
iurod more in somo parts Of the country than
othors. It has undoubtedly been damaged more
in New York than in Chicago, and the loan-cor-
tlfcates OF Chicago Olenring- Houae Associa-
tion might not dopreciate 80 much as those Of
q New York Association. But, after all. tho
principle upon which tho certificates are issued
ie wrong, and any issue Of them in any place
can result in no permanent good.
Currency will mover flow into the present
banks again except under one Of two conditions !:
Tho average mercantile credit Of the community
must be raised to d leyel with Government credit
by liquidation OF tho present indebtedness of
the banka to their dopoHitors, or else the credit
OF tho Government must bo depressed to par
with the present average mercantile credit Of the
country by tho issue Of food OF greanbacks.
An unprecedented circumstance in financial af-
normal expulsion Of the currency :, from
tho banks. It has placed Us in
g. position where We arc obliged tc
elect which We will do: whether We will liquidate
and begin on ne,o basis Of mercantile credit, o,
whether wo shall demand q new era of green
back imitation.
II we elect to begin on new basis OF morcan
tile credit. there is also every reason why il
should also be on o specie basis Of prices
There Ia foto tide in our affairs which, If takcl
at its flood, will certainly lead on to tho happ,
result of placing the financial affair
OF this country on firm baHis o
specie values. There is now such
flood OF gold leaving Europe for tho Unite'
States that it oven threatens the suspension O
the Bank Of England. II We remove the obstruc
tion Of tho Legal lTondor act, 80 that this gold vii
circulate as money inatead Of being nero com
modify as now, it will stay with us otherwise
will aow back to Europe again just ga soon A
the foreign demand for our breadstufra ceases
and The rate Of foreign exchange turnB againatuf