New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1874-03-21
HOW FRANCE RETURNS TO SPECIE.


tbe ranid progress made by the Bank OF
France towards the permanent restoration OF
specie payments in that country The policy
pursued by the French bank clearly indicates,
in orr opinion, the measures which should be
adopted in this country to accomplish the
same result. We will once more summarize
tho leading features of that policy, which Is
throughout the complete opposite OF the imam
cial schemes which seem likely to prevail at
Washington.
|. The maintenance of a rate OF discount
sufficiently high to produce a moderate con-
traction of loans, and to prevent wild specu'
lation. Week before last the discount rate
was lowered from five per cent to Tour anu
half, but it is still higher than the rate OF IN
terest at Berlin, Frankfort, Brussels, and Lon
dom the rate at the two former cities being
two and half, and at the two latter three
and half per cent. The aggregate amount
of loans, exclusive of those to the French
Government, had fallen from S277OOo,OOO'
on the Both of October, to S2ll,OOO,oOO
ON the 9Th of March. In this coun-
try. under the policy of Secretary
Richardson, the banks have been glutted
with idle money, the rate of interest deDre-
cated, and, as consequence, the aggregate
loans of the banks in Ncw-York City have
increased from 1852 100000 for the week ended
Dec. G to 1886, 1000 last week. If the Bank
of France discounted freely at two per cent.
its loans and note circulation would have no
assignable limits. and its paper would de-
preciate from The gold standard III proportion
as the quantity of it was increased
the depreciation beginning at the moment
when coin ceased to circulate. Now ire"
banking. by which we understand the free
circulation of irredecmable paper, provided
only it is secured by the pledge of United
States bonds, and the free expansion OF bank
loans of such paper at the legal rate OF IN
terest, which in times of speculation ana
active business is always less than tho APP
parent profits OF business seem to justify,
would operate in this country precisely as
lending Bank of France notes at two
Der cent would operate in France. There
would be grand speculation and
a grand smash, the same as there was IN this
country in 1887. True money is gold and sill
ver and the amount OF money needed by
country is just that amount which can be
kept equal in value to gold or siver-not
ninety per cent of the Public Debt, or nifty
per cent of the gold value of real estate or
other property, or the indefinite amount which
merchants, capitalists, and spectators may be
temptcd to borrow at seven per cent. Ii Dusl-
ness men think money is worth ten per cent
70 them. there is no limit to the amount they
will borrow when it can be had for eight.
And that is why free banking under usury
law is not safe in this country, even in specie
apk
basis and under the inducement of the boun-
ties given by the National Banking Act,
would be sure destruction.
H. The Bank of France boldly contracts its
note circulation, the instrument made use of
being the comparatively high rate of discount.
The contraction since the 18th of November
has been from 1902, 600 to $685., 100000, being
$64OOO,OOO, or nearly eleven per cent. In the
same time our paper circulation has been ex
banded.
III. The Bank of France accumulates specie,
which is also equivalent to contraction, since
there has not been for some months any
premium on coin in France. The increase of
specie has been from Sl4j,OO0,000 on the 2Sth
of October to $191, 100000 on the 5th of March,
being 100000 or over thirty per cent. The
proportion of specie to the note circulation
now exceeds hUty-tiUe per cent. The last
payment of the German indemnity was made
in September last since which the Bank has
strengthened itself and French credit in the
way we have described. While we are not in
favor of any great accumulation of gold in the
Treasury 50 long as the legal tenders are
deprecated to the extent they are, prefer
ring to see a gradual withdrawal of the
surplus paper, yet this at least is certain
that without great reserve of coin, our cur
rency can never be kept permanently con-
vertiblel Ybetbsg issued by Government or by
the banks. With the exception of little
base copper, silver, nickel and other Junk,
our current money is paper, and paper alone.
The problem is, not only to get rid of the
discount on paper, but to Introduce at least
fifty per cent of good honest coin into the
circulation. If we do not effect this we shall
continue to be subject to frequent and severe
panics, such as We had in 1897 and 1857.
w. The French Government and the Bank
of France are acting in concert to remove the
note circulation from basis of Government
bonds, and place it on one of gold and silver
To that end within the last six months the
French Treasury has paid s7O00O,000 to the
Bank in redemption of Government bonds In
the United States, even with our present
population and commerce, as much as one
hundred millions in specie have been exported
in single year. If we are ever to have
sound banking system, provision must be
made for the maintenance of great specie
reserve from which such immense sums can
be drawn in cases of emergency. In other
words, the basis OF the paper circulation must
be specie, and not bonds. The natural re-
sources of this country are superior to those