New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1875-01-06

listing mass Of credits, Including book accounts;
| notes of hand drafts and bills OF exchange: Ana
new forms of credit machinery are capable Oh De1ns
| invented indefinitely as when. in September 1915
| the New-YOrk Associated Banks created currency
of twenty millions of certificates. to be used In the
exchanges between themselves.
BUT CURRENCY ONLY SMALL PART or ciRcULAToRY
CREDITS.
II Is idle to pronounce the machinery Of credit
maniac, dangerous to the community and thon TO
put only its little finger In straitjaoket
EXPERIENCES or ENGLAND.
The experiment of regulating the note circulation
only has been completely tried in Great Britain In
1884, when. on the recharter of the Bank OF England
the bank note circulation Of that country was SUD-
jected to rules which were supposed to make IL nue.
tuate exactly as il IL coin, IL was thought py
all but few great thinkers that there would ever
after be stability of prices and stability OF business
Bot in I847 In 1857, and in 1896, commercial revul
sions of undiminished severity demonstrated the
fallacy of these hopes and of the system on which
they were founded. While the note circulation has
ever since been confined by law to nearly constant
amount, the deposit circulation has increased many
fold The yicisstudes of credit arc as violent as
ever 1t is apparent that whenever foreign de-
mand for coin arises not caused by domestic over.
trading. the system creates an artificial scarcity OF
an important instrument OF commerce, and SUBJECTS
whenever q panic destroys the credit OF inferior
dealers and the interpositOn OF the highest oredt
called for to supply the vac1uIn ana revive COM.
depce, tho system breaks dOwn-the law limiting
the issues of bank notes IA suspended WIN Tue APP
prevail of tho Ministry. aud with pronlseo appear
10 Parliament for an act OF indemnify
WHY AND HOW INCONvERTIBLE CURRENCY DEERE
GATES.
The depreciation of O currency not convertible
into COIN represents the interest and risk as esti-
mated by the Judgment Of investors, on loan pay
able at the will Of the Government without interest
subject TO such temporary fluctuations as arc IN,
duced by the variations IN the supply and demand
of coin in which that loan Is ultimately payable
THUS INITIATING PRICES.
There is no doubt that the issue of legal tenders
during the civil FASTENED and greatly increased
that imitation of prices which naturally resulted
from the increased consumption and the waste
caused by military operations aud from the dimin-
ished production occasioned by so large with
drawal of workers from their ordinary industries;
1t is the nature of credit to be voluntary. IL IS
founded on confidence. Credit. on cOmpulslon, Is
solecism. SO that forced loan OF capital from all
existing private creditors cannot but be costly.
LEGAL-TENDER FINANCING.
It was made, in this instance, on security which
bore no interest, and interest which could only
be represented in discount from its par value. Ii
gave to the lender an agreement to pay, which,
being instantly due on demand started in its career
holder was left to conjecture when it would be re-
deemed by the issusr-how far it might be absorbed
in the Treasury receipts-whether it could still be
paid out to some private credtor-at what loss II
could be passed away IN purchases, on market
advancing rapidly and rreguarly. Everybody was
advised that the Federal Government nwsely
distressing the intelligence and patriotism OF the
people-shrank from exercising its borrowing power
supplemented by its taxing power; that instead OF
resorng at once to the whole capital Of the country
capable of being loaned, which forms vast fund
perhaps thirty forty times as large as the then
existing currency, il chose to begin by debasng
that comparatively insignificant part or circulating
credits; creating fictitious prices 1or tne conlnoul
ties and services for which it next to exchange
its bonds in expenditure ten times as large as te
whole amount of the legal tenders 1t yentured TO
mt atoat No man could know how often or how
much of legal tenders might be issued under posi-
BILE exgences of the future. lt could not be WnOy
forgotten that such issues, made by our ancestors 10
sustain the victorious war for national independ-
ence were never redeemed. while the public loans
made for the same purpose were all PAID III was
remembered that history affords other warning ex-
trust were needlessly invoked. But the system
stopped short of the logical completeness of the eX-
pedients of the French Convention IN 1913 Wlnle
it compelled the existing private creditor. OF any
body who should grant new credit. to accept pay
ment in legal tenders, it did not assume 10 Regulate
the prices of commodities. The seller. therefore.
gradually learned to represent the depreciation OF
the currency in the price of the article he exchanged
for it, AS compared with gold the currency. during
all the last year of the war, was deprecated to be-
tween 40 and 80 cents on the DOLLAR touching at It's
lowest point 35 cents on the dollar.
HOW 1T RAISED PRICES BY PROVOKING sPEcULA-
TON.
II was not alone by the direct effect of the depre-
citation of the currency that prices were acted uDon
speculation was engendered. Political economy
takes little account of the emotional and magma
e In arsnHl nth I'M
GUS instances, the average deduced as law, may
perhaps discard that element. But in particular
instance, or at particular tme it is often very po-
tent and must be estimated in any calculation which
aims at accuracy.
After period of rest-when the disposition to ae-
tivity begins to revive-a slight circumstance often
excltes a speculation that becomes general. The
opening of new market an apprehended deficiency
in the supply of commodity, any one OF thousand
circumstances. may in certain state OF the public
mind, be q spark to kinde blaze OF speculation
throughout the commercial world How much more,
then, might it have been expected that sueh GOV
ernmental policy would inspire and iniiame the
spirit Of speculation The effect was greatest DUR
ing the process of new issue OF currency, OF while
il was anticipated. After the issue was completed,
there was generally a subsistence, or a reaction.
AND NEEpIEssLY DOUBLED TIE BURDEN OF THE
WAR.
The Government consumption during the war was
mostly of our domestic products. AS soon as the
channels of traffic could be adapted to the new
points of consumption and tho new classes of con-
sumers, there was no difficulty in the transfer
of these products from producers to consumers than
in the ordinary operations of commerce during
peace.
Governments. in times of public danger, cannot
be expected always to adhere to the maxims of eco
nomical science; the few who would firmly trust to
the wisest policy will be often overborne by the ad