New-York tribune., 1875-01-12
THE HISTORY OF INITIATION.
CAUSES, CONSEQUENCES, AND CURE OF OUR
FINANCIAL EVILS.

RESUMPTION.
t1he following letter contributed by Mr. George
M. Parsons of Columbus. Ohio, to The Journal OK
thas city, is sound and clear in it's presentation OF
al important phase Of the currency question that
we give it the benefit of wider circulation.-Edl
II has not been very long since Is seriously mat
ter OF doubt With great many people whether rho
State ought to; permit the issue of paper currency IN
any form. These doubts have now manly disappeared
and may be considered the settled opinion that
pIper currency Is required by the business
OF the world Indeed 1t Is obvious that II the issue or
the actual amount or coin on haad for their re-
dempton-if there were always dollar OF corn
Tor the dollar OF paper. the issue OF TINS paper
would be benefit TO community. The paper
Is much more easily handled In common use. and
IN transportation from place TO paGemore easily kept
about ire person or elsewhere In such manner as not t
tempt eff Jrts at robberyso much desirable ai
these accounts that any receiving would will
ngly exchange t for substitute. provided only that
the substitute coud he converted coin demand
The service however, which paper performs merely AS
temporary substitute for con Il the Simplest FORM OF
relation 10 the business OF society. There other
forms OF complex, more varied ana more
important Fairly 10 understand ana appreciate rlrn
OF banks and the proper object OF their eslaOIshneuI
OBJECTS AND USES OF BANKS
Let us suppose a bank organized and ready 70 begin
business II 1t limited s loans to the stock paid In by
the owners, there would be interest involved but
theirs and the only question that could be asked on the
application for loans would relate to the ultimate
security they offered. There would be Dut one RUE 10
observed-that while the Is better than poor
nOe good IN that it brings interest is better han
idle money. But bank receives deposits be-
longing others which It engages TO pay on de-
mand. and in the ordinary course OF business 10 can
safely loan certain portion OF these depOsts II also
Issues paper 10 circulate as money IN certain ueh
amounts beyond the amount OF coin IN lts Vants ana
this paper is likewise payabla demand. When the
question arises 10 using these resources In making
loans, the lime has arrived when the managers have
things 10 consider besides the eventual respons
Oity Of borrowers. when In fact they must fully under
hat ~ fna
does not consist IN lending money for the purpose
OF speculatng real estate or stocks, or OF building
houses. or railroads useful or useless. lis loans
should made only aid tue ordinary transaction OF
society which yeid OF necessity quick return OF the
nvcs iment, aud II viii be found tnaG transactions OF
this character the most part cOnueced directly
or Indirectly with the handling OF the surplus produG,
ons OF the country The condition Of the issue OF all
paper s that it shall be payable on demand IN
com. To meet this condition II must be empoyen Only OhH
In those operations which, their conclusion, VIII yield
or it's equivalent. common Occur renee WIN
this, well other features OI Legitimate
banking operations
HOW BANKS ASSIST IN MOVING THE CROPS.
There been u favorable season and there Is an
abundant harvest Of grain. The producers arc numer
GUS, and naturally the crop finds its way to- market
through the shippers. Now this crop OF grain is new
creation OF the year, it is something that did not exist
before To collect 1t ana carry to market makes new
demand for money one that would not nave arisen
there had failure Of the crop. The shippers not
they are not sufficiently known TO the farmers To
credit besides, the latter, for sufficient rea-
fore made a bank. Tue managers OF the bank, salts
the responsibility Of the shipper, his integrity
ami mis- business capacity take his bill drawn on the point
which the grain - sent tOr SAFE ied Dlu tnc ereu'
OF the bank, which is good IN the cOnmumtyIIhaI s
issue 10 notes, which pass current ana answer
him all the purposes OF money BANKS take the FISK OF
issuing their notes payable on denanl IN con because
i'm addition to having certain amount OF gold IN their
vaults they know that by the tine the notes may be
returned S9r nayment the grain will have reached the
market and Ire oil Of the shipper VIII be paid with
money that III redeem the notes The managers or the
h senI f m fheir lnowedge tnat the borrower is
aper rpopdl n "a p
honestly conduct and finish IN due time, ana the pubic
- fe IN receivng the notes which have issued
because in addition 10 Government bonds which are
ulrd yet and the winch the bank possess they
arc ased ON thts legitimate business TRANSACTION Before
Inc noes were issued by the bank they were not money
they only possessed the power OF Delng maue money
On 1oino maid ont Tie issue OF them Was a creation
money for the time being 10 meet a new demand, an
expansiOn OF the required by tue needs OF
Inttness when the demand mas ceased when the
% be been taken 70 market the indebtedness of the
shipper paid and the notes or the bank IN 1e natural
course OF business returned and redeemed, there Is
contraction Of the currency natural IA its ex-
pausIon legitimate. The bank notes cease 20 DC
money, and prudent banker VIII hoo feeIh neih rs
money, nor them as such, until an0;her legitimate
demand for them arises. HIS power OF making profit
from ths resource Is Tor the Time suspehue Dui "h
he engaged in banking ne OF course TOOK INTO account
the business OF the society with viii he has 10 deal rs
well dali Ito active periods IA.s variation IN me
demand for money always Bankers avs LOOK
for it, and after little experience Rno" no" " meet IT,
EVILS OF THE PRESENT SYSTEM
TIE return OF the bank for redemption is the re-
sut Of their being redee abe II follows there
-
compulsory contraction as well to expansion accord
n to the ebn and flow of business must be payable in
cou II tuch ia not the case. coin becomes a COM
nouitS 20 be- bought and sold as any Olher comnodty
ana The paper currency becomes nxed Iu1ty ~ vi wia Ga
OIL 10 the c0hdtlOhn 81 psness. IL Dot
turued for redemption, nut continues III accu
mulating at me places O depVsii, a"a, De & t
show and semblance OF money Al present tle OdhA noe
currency l., unable in paper currency OF tAe OV
ernment which 10 not redeehrd a. All DGH = Ge ~ ,p
fore OF the same value anu one IS ds aViIp lo lug
nrcnase Of com the other When, therefore, SLACK
times occur. t4ey accunuLI,S @ tt b - o
bank vaults. l, Is now griveIy prop seu .hat 'no et
tender notes when there Is no demand Tor hen may 10
converted into nerestDesllS 2oAs 10 " sSgeG ,G W
the Government demandoI the hoder ana paiu Isain
on ike demand. farmer at the close OF tlie harvest
Inas nIlStn % ,ooI tIng for him If me Government
would undertake TO feed them through tAe winter Dul
~ woud he difficult O IN what manner the 9IQYGfn
| ment would DO benefited Dy ute drIdHsei"cnt. IL
| ma b,nk notes were redeenahe u coin they would
gradually be returned 70 the OauS and by me failure Of
demand for ther circui wuiu ose tneIr cuardc'er
of money but being irredtcmabie they available
idle money, ana Tor TINS there is always round mis-
chief vel. for ldIe hands 10 40 4ne temptation 20
M profit becomes TOO strong TO De resisted and Il
gradually comes emplOycdln ala ot operations not
connected win he legitimate business OF oankng Tue
result obvious. Win II by the creation OF new crop
of grain there the necessity for the creation
| Of more money to make easy the proper DIS
| pOsal OF II, whatever changes or prices may
have occurred were natural as t9ey were
| bas1 MOD 4 new and subsiah'al Droduc-
tou Wnen the money is created-ihaI is, when the
currency is Increased without the necessity for IT, or
which is the same thing when ~ IL not contracted and
when the ssity for 10 has ceased, the In
crease Of prices being without the basis OF continued
new DroductOn fictitious, and IN the end vicious.
sueh Is one the results Of an irredeemable cure ncy,
but fully TO appreciate them IL Is only necessary TO
recur 10 tine experience Of sAe country since the passage
OF the Legal Tender act.
THE FINANCIAL SITUATION DURING AND AT THE
CLOSE OF THE WAR.
After the Government was fairly engaged IN the war
to which the Rebellion rtse the great problem was
to provide means prosecution The main reliance
was upon oans peculiar feature OF which was the
issue at different times, with but short intervals,
of between eight and nn9 hundred millions Of
Treasury notes. which were made a legal ten
der Tor the payment OF all deDts ex-