The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1856-1888, 1874-04-25
An Elastic Currency.

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OF money ARIES from the varying demand for it; fr
which a sufficient supply has to be kept on hand in
some form or other, . large proportion Of which re-
naming idle, thus causing q loss Of interest But
occasionally an unlocked for necessity for money
springs up from some cause or other,-eommereial
disaster or new enterprises, and then the supply
proving insufficient for the unusual demand, in
creased disaster ensues, or the obstacles to trade and
business projects become damaging.
Various plans have been proposed to remedy this
trouble and give currency that elasticity which
would not only psOyide fof any demand. but also
would render unnecessary the hoarding Of idle
money for the supply Of such demand.
In the United Safes there are stin many Of those
spurious economics who through either stupidity or
self interest, call hr imitation of the paper currency
at each occasion Il insufficient supply.
A more reasonable plan than this has been much
discussed Of late, and IS familiar to all interested in
American politics. This proposition is that the gov
eminent shall ISSUE bonds of different amounts, pay
able on demand, With interest at the rate Of 3.65 per
cent. per annum, or one cent on one hundred dollars,
per day. The principle Of this system is, that the
government and :he people DO not necessarily need
money at the SANE time. In the Fall, the country
uses great sums il moving the crops; while in the
winter the demands Of trade are much less. Now
under this arrangement, in the winter, for example,
the surplus money! is invested in the 3.65 bonds and
draws interest for the holders, while the government
has the use Of themoney for its many demands; and
in the Fall the bonds are presented for collection with
the interest accrud, and the currency thus realized,
performs its more lctive duties for its owners, and
when that work il over, goes back again into the
government treasury to earn profits and await the
requirements of tnde. This arrangement it is clear
is only for the surplus capital which must remain
somewhere upon all, but it has nothing to do with
permanent investments. This new system seems per-
fectly philosophical and is likely to work well in
practice; at the sane time it cannot fail Of being a
great convenience % trade. The only weak place in
it is the inconvertaIle paper currency of the United
States, which unfortunate feature Of American
money, will certainly not be rendered worse by this
system.
Under our financial condition, in which the gov
eminent is likely to be a steady borrower of money
for u long time to come, the thought suggests itself
whether a similar plan would not be beneficial here.
At present the government borroWs on long terms
and at d high rate of interest;-an infexjble ar
rangement which allows it no control over bonds
before coming due, and consequently no power of
reducing the public debt when desirable, beyond the
opportunity AFFORDED by the maturity Of the bonds.
This arrangement s also imperfect from the fact that
the present bonds are offered to the public as per-
manent investment, and to render them desirable as
such, at least nine per cent. interest must be offered
or there would be few takers.
On the other hand, if the government should issue
bonds to q limited amount, payable to bearer on
demand, with the accrued interest, at the rate of 73
per cent. per annum, or two cents on one hundred
dollars per day, the plan would have several impor-
tant advantages over the present system. A certain
proportion Of capital now lying idle on call, would,
during a large part of the year. eargerly seek in
yestment in these bonds, thus giving the public a
safe and reasonably profitable temporary investment
for the active portion of their capital during its
periods of rest, and furnishing money to the govern
ment at a comparatively low rate of interest. There
would be no probability of any general presentation
of these bonds for payment at any one time during
the year, except in the Fall shipping season, at
which time, the national collection Of taxes would
render the payment of these bonds perfectly conven-
lent. Again, there would be no danger that the
Office of the Finance Department would be continu-
ously harassed with the work of issuing and paying
these bonds, for the demands of local trade would
prvUaUIy necessITate me use Of a certain average
number of them; and in most cases, they would
readily pass from hand to hand as securities and g.
even as money, the simplicity OF the daily rating OF
the interest making a mere glance at the date of the
bond at any time equivalent to reading off the ac-
crued interest. Indeed it seems reasonable that such
bonds would often be preferred to money, as they
increase in value every day, and can be changed into
money at any time.
1t is not difficult to see that under this system, a
less amount of capital would perform the work of
the country, then is required under the present plan.
With these seven-thirty bonds, our coin, and our
silver certificates based upon coin deposits, there is
reason to believe that our currency would possess a
feature of elasticity which it is without at present,
but which it emphatically needs. S. B. Dole.