New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1874-02-19
FREE BANKING.

ranks Of the in1atiOnists are divided. To be
sure, no vote has been sQuarey taken on tho
proposition. Shall the currency be increasedf
But the effect OF the vote on Mr.. SCOTS
amendment is to prove that while there is
possible majority in the Senate in favor of
initiation Of some kind, it will be difficult to
combine that strength on any scheme of law.
The question of free banking has not been
fairly reached, though incidentally discussed.
II Mr.. Camerons substitute for the bill re-
ported from the Senate Finance Committee
to equalize the currency, should become law,
we are convinced that the inevitable result
would be the repetition in this country. on
colossal scale. of the experience of the French
with their aSSi9nats and of our ancestors with
their Continental money. We express this
opinion deliberately, and with full sense of
the meaning Of the words we use. We come
to it by a logical deduction from first prn-
ciples and are confirmed in it by the uniform
experience of the many nations which have,
at one time or another. tried the experiment.
Mr.. Cameron's substitute for the Committees
bill is simply to repeal all acts and parts of
acts restricting tho aggregate amount of cir
culation of the two thousand National banks
United States. The practical limit of National
bank circulation would then be 30 per cent of
the entire funded debt of the United States,
say fifteen hundred million dollars.
Our views on this question of the expedlency
OF permitting the unrestricted manufacture
and circulation of irrodeemablo bank notes,
misnamed free banking, are directly opposed
to those which find expression in several of
the daily journals published in this city. The
opinion which we believe to be totally uD-
founded has been summed up in the follow
ing sentence: There never can be OvcrsSues
"Of bank notes and bank loans, because when
"not needed by the community they are in
"variably returned to the issuers TO save the
interest paid for them" This opinion, thus
broadly stated, is not true, even when the
banks are redceming their notes in specie.
The experience Of England in 1926 and 1858,
and that of the United States in 1887 and
1857, disproves it, A conviction of its
groundessness and bitter experience of
the consequences of permitting hundreds
of banks, scattered all over the kingdom. to
displace gold and silver by substituting their
notes in the place of the current coin of the
realm, gave birth to tho celebrated act Of
1874 which was proposed and carried through
Parliament by Sir Robert Peel, and by which
the bank-note circulation of the United King
dom has been rigdly restricted to fixed and
narrow limits ever since. Every note issued
in excess of those limits is the mere phantom
or shadow of its equivalent in specie retained
in the vaults of the issuing bank for the sole
purpose of redeeming the note on preSenta-
ton.
But if privilege enjoyed by two thousand
banks, scattered all over continent, of issu-
ing paper money in specie-paying times Is a
dangerous one, of which this country has had
in former generations most convincing proof,
it IS o hundred fold more dangerous in times
like these, when our currency is irredeemable
and already deprecated ten per cent below
its nominal gold value The deluson that
$50 long as the discount of mercantile bills is
confined to paper of undoubted sOlidity,
"arising out of real commercial transactions,
"and falling due at fixed and short periods"
there can be no overisSue, was exploded fifty
four years ago in the Report of the
Bullion Committee to the House of Com
mons. From the days of Adam Smith to
our own no writer on currency has
escaped oblivion who denied that redemption
in specie on demand was the balance wheel OF
q bank-nOte currency, and the only security
against excessive issues. You may as reason
ably expect people to burn their paper money
in June to get rid of the accumulations at the
money centers at that period of the year, as
suppose that the privilege of demanding one
piece of painted paper stamped with lie. for
another piece of paper differently Ornamented,
but stamped with the same lie, can, by any in
gcnuity, be made to serve IS u protection
against imitation.
But the experiment has been tried under
Tar more favorable circumstances than those
under which 1t Is proposed to repeat it here.
A multitude OF banks were started through
ont England in the paper money period.
These banks redeemed their notes in Bank of
England notes, which at that time were the
counterpart Of our legal tenders. Their notes.
however, differed from the notes of our
National banks in this that the former had only
q strictly local circulation, while our appro-
priately named National" currency is known
and used IA widely as the Government green.
backs themselves. Hence the check on tba
expansion Of the circulation of country banl,
notes in England was far moro eff.
fective than any system of redemp-
ton in greenbacks ever can be here.
so long as the National bank note retains its
National features But the check 10 Tho in