New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1875-09-27
FINANCIAL NOSTRUMS.
A LETTER FROM Ex-sECRETARY MCCUL-
LOCH.


in the United States is not to be found in r. Kceys
plan of regulating the currency and restoring pros.
| perity by means of an issue Of convertible bonds
bearing interest at the rate of 3G5lOo per cent The
idea Of a convertible bond originated, think, with
Mr. Sherman-the difference between bis plan and
Mr. Kellcys land it was very important one) being
in the rate Of interest which the bonds to bear
Mr. Sherman proposed an Issue of ) per cent con-
yertibie bonds but this proposition was objected to
by the advocates Of an exclusive paper currency, ON
the ground that it would lead IL an early conrac-
! ton which would undoubtedly have been the case,
and in this consisted its merit Five per cent con-
vertibc bonds would have permanently absorbed all
the notes not actually required for healthy circu
| atng Medium They would have accomphsned IN
due time what the provision in the original Tender
act making the lcgal-tendcr notes issued under It
convertible into 800 bonds, was intended to accom-
plish.
| METHOD OF RESUMPTION LOST.
Lam under obligations to Mr.. Sherman for remind
ing me OF this excellent provision, the repeal OF
which he so deeply regrets, because it shows con-
clusivcy that those who voted for the issue Of the
first legal-tender notes did with the intention
that they should soon he retired, and not become
permanent but merely a temporary circulation. III
the provision for the conversion of the notes
into 500 bonds lad been merely suspended dur
the war, JlStPau OF DflnR aDsOiutciS l'Pcdicu,
the legaltender notes would long since have been
out of the way, and the specie basis would hayo
been restored Mr. Kelleys plan is to make the ratio
Of interest OF the proposed convertible bonds 30 low
that they will be q temporary investment only and
rarely that, never permanently absorbing the cur
rency The measure is supported by the pronounced
advocates Of a continuous issue of legal-tonder
notes for the purpose of keeping in circulation
what experience has proved to be yicious currency
Ii has not a single look towards specie payments.
The rates of interest are never reduced by redun
dant currency ; on the contrary, they advance with
the advance OF everything else which Is measured by
it, The usual charge for the use OF money in all, or
nearly all tie States up TO the Autumn of 513, was
higher with a volume Of currency coming closely up
o $500 900 900 than ii was when the circulation OF
paper and gold did not exceed S3jO,OOOoOo. Inc
rates of interest in the United States not often as
low as :,e51oo per cent and if this should happen as
il sometimes might the Government, if the proposed
measure should be adopted, would receive Oh deposit
currency which it could not safely and pay in
eres to the depositors for simply being itscsodian
1t is measure which might at times reduce the de-
posts in banks and savings institutions, bat 1t
would be troublesome and expensive to the Govern
ment and add to the burdens Of taxpayers. 1t is
new dodge of the eXpansionists, and should receive
10 support from those who earnestly in favor OF
q sound currency.
AN IMPASSIyE POLICY CNWfsE
Again: The remedy is not to be fonnd in the lot
alonev policy There are great many well mean
ing persons in the United States who admit that
there should be no legal tender but coin, and that
the present volume of currency is altogether too
large but they seem to think it imprudent to dis
turbD things and that the safer course is TO let the
currency alone in the expectation that it will DO
some day needed Their policy is to let the volume
remain as it is until the country grows up to IT.
But do not these persons perceive that an excessive
and consequently deprecated currency, subject to
constant changes in value, is in itself very great
distrrbance-that it is this which prevents invest
ments in useful enterprises, Keeps check upon reg-
lar trade, and fosters a spirit OF speculati0nf
The United States is a magnificent country, whoss
people excel all Others in elasticity and yigor and
can stand large amount of bad legislation. They
can live and to some extent be prosperous under
laws that conravene the well-sottled principles Of
finance and political economy, but s this a reason
why they should not be promptly relieved Of I'M
necessary burdensi wise physician does not so
deal with q patient struggling with a dangerous
malady; lie does not stop to consider whether o
powerful constitution may not be able to bear up
under the disease without assistance, but he at onco
APPLIES the remedies which books and experience
have taught him will counteract it, and most speed
lily restore his patient to health. The " let aione'
policy is not wise ore for the people of the United
States to pursue in dealing with vicious currency.
Usefulness OF BANKS.
Nor is the remedy 70 be found III the destruction
of the National banks.
Opposition to banks has been the old hobby Of
politicians of the tear-down" school They are
sonllcss corporations; why should we not strike
them ~ "They are hard-hearted monOpolsts why
sbonld they be permitted to exist under republican
institutions r. This is their cry! Now what arc
banksf They are simply corporations, created by
law NJ the medium by which capital can be most
conveniently dfused, and be the most effective help
TO productive industry. Banks of issue exist in all
commercial countries, and when properly managed.
they have been found to be greatly beneficial. Coin
does not exist in Sufficient quantities to supply cir
cuatng medium 70: the large and varied transact
tons of commercial States and bank notes, properly
secured have been found to be convenient and
desirable substitute for it. Had it not been so,
banks of issue would long since have ceased TO exist
The fact that they have existed for SO many years
in the best governed countries in Europe,
as well as in the United States, is
evidence of their utility. 1 have been in
England for n number of years, and although have
met many who think that this feature that, in the
English banking system, might be amended, have
vet to meet an anti-baul man. Banks of issue, as I
have said have been found to be of great value in
all we'll governed countries, but the best illustration
cf their utility is TO be found in Scotland where
there are many banks of issue, some with limited
and others with unlimited liability of their stock
holders and where for yjore than 30 years there has
never been penny lost by their depositors note
holders
The Scotch banks have contributed very largely to
the prosperity of Scotland in encouraging enterprise