, 1874-12-10
FREE BANKING FOR GoLn nArra

/ 6oAA AGNOkAEa JRkIL OF our ElrCt1.
iAting medium, tho gold banks provided for
oy our present laws will doubtless start into
operation throughout the country, instead of
po'ng confined, as they now aro, to tho
Iaclftc Slope. Tho act of July 12, 1870, pro
woes Tor tho issr1e Of any amount of National
bahK notes redcc'nablo Oh demand in gold,
provided the corporation asking for them has
deposited IN the Treasury 800 gohl-bcar-
ing bond Of tho United states for every $50
of notes. The only restriction On tho
amount issued Is contained III tic clo,so
TINT no single association formed under
this law shall have circulation of moro
than Sl,o00,o00 This does not limit tile
total lssne at MI. These gold banks must
lteop rcsorvo Of Is per cent Of their circ,,ln-
ton in gold or silver coin of this country, and
must receive at pnr tho notes of each other.
Tho provisions Of the National Banking Inv
npply, in tho main, to them, but its rofor-
enccs to "lawful money" mo to DO construed.
whore thoy are concerned, as meaning silver
and gold.
Tho repeal Of the Legal Tcndar net, and Of
the kindred section Of tho National Baukiur
Inv, would result in tho transaction of b,,s;-
hess on specie basis, and consequent de-
manu for gold notes. Banks would ba
formed, under tho act We Lave ouotod, to
meet this domand
When the greenbacks were retirod or srf-
ficiently funded to make the part outstaud;u,
equnl to gold' it would 10 necessary to ochango
the oct of July 1s, 1870, or else tic General
l'ankng law in such way ns to mike tile
percentage Of notes issued to all the banks
equal. For, if this were not done, tho banks
organized under tile general law would got 90
per cent Of thoir bonds returned in tho
Shape OF notes, while those formed under this
supplemental act would get only so per cent,
AS all tho bills would be rodcemablo in specie.
this distinction would DO unjust. Tho best
way to produce oquality would probably DO
to simply repenl the restriction of tho general
law on tho amount of curroncy issued. They
could all, then, bo organized under that law,
Since they would all bo gold banks, it would
boperfectly safe to lot anybody who could de-
posit gold-boaring bonds start such q CORPORA.
ton.
FREQ banking on gold basis would work
in tllis way: If the country was in need of
moro currency to effect its exchanges, IT would
pay capitalists to start banks to supply the
need, and they would therefore do so, If too
much currency were issued, it would doprcci-
alto at first only fraction of e. cont. Then it
would be presented for redemption, ro-
deemed, and kept in tho bank-yaults until it
was again in demand. Thus tho elasticity of
the currency would bo secured, Wo nub- |
lished, during the heat of tho fight for FREQ |
banking ut the lost session of Congress, III
editorial argument for II which was read |
III tho Senate by tho ablest on
ponent OF tho measure, mud declared by
linn ut that time, to bo the best possible pre-
sentatlon OF tho case. Tho editorial ,yaa
written upon tho assumption tint banking
would be nlado FREQ before the eroenbaelss
reached par. It's conclusions apply, however.
whether tho Government currency is ut par
Or below it. We reproduce those portions NJ
it which refer to the overwhelming proof fur,
nished BY tho English prccclents
Inc greenhaoka correspond to tho Bapk Of England
1otea an1 tho National Bank notea to those of tla
english country banhs. Our readers will f1n IN tna
lrst volume of TooKE'a 1Iistory Of prces contors
'att"c's 'son tie testimony OF Eug!iah country
'a'ikesa on tho working Of tho system thora
inter Ruspcllston Of Rpoctc.paynlents. This
es.naony ,'s.l % shows that tho amount OF currency
ae5 ~ "oolo keep ntioat rat4et regularly With
ho season Of tho year. Dursua the snrno ,n1
al trade thOy discounted freely but. soon
'tcf their noes woro presented for relen,ntion +;
hank OF England nocs) until tho s,rplus isa,e was
gum etored away III tlcir vaults When tho Dau1 of
.neaau contracted its tsane0 clrs sncreaaoj: when
Increased ita isaaes theirs contracted. III other
foeas' !ho currency issued by banks which could
'Gaay circulate any amount whatever contracted md
apnnded IN precise proportion to the neels Of tho
ounsry. 1t WIS thoroughly elastic.
II such currency was thoroughly elastic :
'hon redeemed i'll paper, it would certainly !,
equally so when releolned III gold, It il y
v'tlent from these facts TINT President c
'nAsra and Secretary BN1srow's advocacy Of q
'ee banking on gold bnsis Is wiso aud II
Il