The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1874-06-22
CONTRACTION Or MFLATION-WHICH A!
Two Views Of the Measure
and Its Operation.
EVENTS OF THE WEEK.
The Market in Stocks, Gold,
Money and Bonds.
WALL STREET,


SUNDAY, June q, 1s74.j
Now that the new Finance bill has passed both
houses by such large majority an analysis
OF the same and of its practical operation will
be OF interest. In the 1rst place the imitation
lists in Congress have proved themselves to be lit
tie better than children In the management of this
great question. 1t only through the Presi-
dents veto that they were saved from a violent
contraction that would have resulted from the ap-
proval OF their first bill. And now, although the
measure awaiting the Presidents signature is
wrong in principle and step away from rather
than in the direction OF sound currency, ana 1t
1ails in every particular TO meet the requirements
OF General Grant, as suggested in his memo
Tandum, 1t VIII still prove TO be contractvein its
effect and Will practically lock up $l7,O0OOOO of
legal tenders. So much for the efforts at expan-
slon In order to arrive at correct conclusion as
to the merits OF the bill 1t is necessary to examine
1t from
TWO DISTINCT POINTS VIEW
which may be respectively designated the Con-
gressiOnal and the Presidential. From the Con-
gressional view the bill clearly intends imitation,
Anasmuch as it increases the amount OF legal
tenders from 1856, 100000 to 1892 900 O00 thus as
sorting the right OF Congress to make anything but
gold legal tender in time of profound peace If
sanctioned by the President the result of this
Legislation must be to postpone indefinitely the
capitalists that they at the mercy of the ca.
price OF body OF men who may at VIII, next year
or In some other session, by further increasing,
change the value OF the currency in which the
creditors Of the nation will be compelled at q
duture day to accept their payments; for II Con.
gress possesses the power TO increase the amount
OF legal tenders one dollar 1t has the same
right to carry them to figure that may force re-
Dudiation. One point is indsputable-to wit, that
there can be no restoration of confidence, no sta
bility and no faith in the honor of the American
people until either Congress once more ana for
ever renounces any such power or some decision
Is made by the Supreme Court OF the United States
that such power is illegal usurpation and there
lore null and void The feature of the bill that re-
aers to the redistribution Of bank circulation Is
scarcely worth discussing, because in
ITS PRACTICAL EFFECT
1t is not more likely to be operative than enact
ment for the redistribution of the wheat fields OF
the West for the benefit OF New England. The law
for instance, has been long In existence which
authorized the redistribution of S25,OOO, oOO yet
not one dollar has been taken. In TACT, the total
bank circulation is only about $3.50 ZOO, 900, thus
leaving $4,OoO,OO0 to be taken up without en-.
cr0aching upon the necessity OF redistribution.
Section OF the bill, which provides Tor the re-
demption Of national bank notes through tile
Treasury, IS a practical step towards much
needed reform, but 1t would be difficult to give n
satisfactory reason why the Treasury should be
used for any such purpose. simple repeal OF
that portion OF the National Bank act, which
makes national bank note receivable by the gov.
ernment Tor taxes and other dues, would have
been OF more avail in establishing and enlorcAg
redemption on the part OF the banks. II this had
been done, with the ultimate payments Of the
notes secured, as they are, by deposits of United
States bonds, governments would have performed
its whole duty IN this particular without loading
the Treasury Department with machinery tor re-
demption. The bill is crudely and loosely drawn,
and does not even accomplish, as is hereafter
shown, curtatIment OF the power OF the Secre-
tary of che Treasury over the amount OF legal
tenders actually outstanding. For the foregoing
reasons. given from Congressional view, 1t ought
not to be expected that the President will approve
the bill. From
THE PRESIDENTIAL STANDPOINT
The bill is, and In its practical working will prove
to be, measure OF contraction. First the Execu-
tive Department have heretofore claimed that the
maximum OF legal tenders was $500 900 OO0 This
Dill at strikes or slS, OOo, 600 Of what the De.
partment calls q reserve" but which, If anything
was balance. For instance, last night the Treas
ury reports as currency balance $4,000, 900; add
the reserve tso-caIed) $1s,oO0,000 ana the June
balance on hand is $751; subject to the drafts
SECTION 9. That the amount of United States notes
outstanding end to be Issued as part OF the Cir
culating medium shall not exceed the sum OF
1882 100000. which said sum shall appear In each
monthly statement of the public debt and no part
thereof shall be held or used as a reserve.
1t will be seen that the word s'reservep includ-
ing the sls,oooooo OF so.called reserve is
abolished. Yet 1t must not be understood that the
Treasury is thereby restricted to the amount of
'balance'' that may be kept, Tor II such should be
the Interpretation of section 8 the Treasury would
not be permitted to hold single dollar. Clearly the
bill leaves the amount Of "baance" to be retained
In the Treasury to the discretion OF its chief
Therefore, since it has always been claimed by the
President and by Secretaries Boutwell, and
Richardson that large reserve was necessary for
the safe and easy working of the department. 1t IS
reasonable to expect that with the $Is,00O 600
stricken out OF existence, and no longer a fund
subject to draft for contingencies, the department
will henceforth be compelled to Keep in hand
'balance" instead OF a RESERVE" This is prac-
tical contraction, and the power Of the adminstra-
ZION to
PLAY FAST AND LOOSE
With the legal tenders actually in circulation will
only be limited, as 1t always has been, by the re-
ceipts and payments OF the Treasury. Further
contraction Will result from the passage OF the
third section which says that all national banks
shall at all times keep and have on deposit in the
treasury OF the United States, in lawful money OF
thc united states, a sum equal to Ave per cent
OF us circulation" &c This viii require the with
drawal OF Sl7,5o00O0 in legal tenders the bulk OF
wnlcn must be distracted from the reserves OF the
IeueHptlou cltles. The laws or prudence, which
nave always governed the management OF banks
VIII require that the reserves to be held to meet
their deposits and redeem their bills over their
own country shall not be less than they have been
heretofore. IL Is not to be supposed that because
an act OF Congress no longer requires specified
sum to be held 1t will be any more safe 70 violate
the well known and natural laws OF banking.
Again, there is scarcely bank In the country out
side OF the redemption cities which holds in ,ts
own vaults an amount or legal tenders equal TO