New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1873-10-31

PAPER MONEY AND ABUSES or CREDIT
| If we compare the state of things now with
that existing before the panic, we find that we
have in the country as much money, as many
laborers, as much raw material and as great
a quantity of the products of labor now rs
then. What then has changedf Simply the
minds of men. Rash, unfOunded confidence
has passed away and been succeeded by ex-
cessiye caution and distrust. Credit has
ceased to be the enormous purchasing power
it was. Half a dozen boys, with less than
dollar each in their pockets, may seat them
selves round table and gamble for tens and
hundreds, so long as an |. o. .. passes current
With the winner. But it is obvious that If
cash is called for the game must stop. SO 1T
is with nations Sooner or later there is
general calling for cash, and the paper riches
of spectators and gamblers melt away. When
credit cOllapses in this manner prices fall,
since it is impossible that money alone should
sustain them at the level to which they had
been lifted by money and credit together. OF
course we do not mean to assert that credit
can be absolutely and altogether destroyed by
any panic, but it is painfully evident that its
volume may suffer an immense contraction.
If we compare the panics which take place
in the same or different countries, it will ap-
pear, speaking generally, that the worst
panics happen to countries using irredeemable
paper money, especially if the paper itself
bappens to blow up. If the paper is osten-
sibly convertible, but issued greatly in excess
of the gold and silver laid by for ITS redemp-
ton, the effects of the crisis are not so severe
as those before noted, but still it takes
long time to recover from them. If the cur
rency is like that of England's, varying ex-
actly as the gold and silver which form its
basis fluctuate, and as coined money would
fluctuate if the paper were destroyed and
specie alone used, panics are diminished both
in number and intensity. We know that we
are here advancing propositions which it is
fashionable to ridicule, but we will give the
reasons why things should be as we state
them.
1t is said that excessive issues of paper
money are not the cause of speculation and
high prices, but that speculation and advancing
prices precede and make excessive issues
necessary. This is partly true, and, at all
events, sufficiently so for the purpose we have
in view. If the currency fluctuates strictly in
correspondence with the gold and silver laid
by for its redemption. as do our gold certif-
Gates and the notes of the Bank of England
the advance in prices, caused by speculation,
is soon checked by rise in the rate of inter
est, or tight money Market" as we call it.
Under either of the two currency systems first
mentioned, the check is usually not applied so
soon. Prices, consequently, are apt to climb
higher under the unrestricted issues Of banks
OF Governments, than under currency regu-
lated solely by changes in the stock of coin
in the country. Every intelligent observer
must have remarked that stock gambling
operations and speculations generally are far
more colossal in New-Y0rk than in London,
though by no means unknown in the British
metropolis.
History confirms the view here taken.
England has been under its present currency
system since 1874, or about thirty years Dur
ing that time there have been three panics,
but, taking into consideration the business of
the country, the destruction they produced
was far less than that wrought by the panics
of 1908, 1925, and 1s34-s. The prosperity of
England since 1874 far surpasses that of any
previous thirty years in her history. In manu-
features she has grown quite as rapidly as the
United States, and in her commerce and
carrying trade she has fairly distanced us. If
we impute part of her wealth and growth to
sound currency, always convertible into
gold, panic or no panic, we are, we think,
fully iustifed by the facts.
Credit may be abused under any kind Of
currency, but Generalization and gambling
could hardly be carried to the lengths they
have been with us if our paper money had
been merely the representative and substitute
for an equal quantity of specie kept in one
or more secure repositories, Between such