The Cambria freeman. [volume] (Ebensburg, Pa.) 1867-1938, 1876-01-14
The Currency Question.

EXTRACT PROM REPORT OF wM. A. RICHARpsON
SECRETARY OF TaE TREASURY FoR iS13-THR
ESoRMoUs AMOUNT OF noSEY EXPENDED IN
THE CONSTRUCTIONS OF RAILROADS ANOTHER
DIRECT CAUSE OF THE PANIC-rHE NEAEDIks
PROPOSED roR rHn EviL-THE TWO OPPOSING
PASios-THE COMPARATIVE UTILITY OF TnE
DIFFERENT MEDIUMS, ETC.
tTHIxD PAPER.l
DsAR FnKsMAN-As authentic statements
t9Tenms ,hs ssjse .hs
Tho prevailing practice, not only Of national
all parts OF the cou TRY to the largo cites, and
especially to New Yc-s. the great financial con-
tire. At seasons OF tAs year when there 10 com
paratively little us. .or currency elsewhere, i'm
mense balances accumulate in New York. whore,
not being required by tbs demand cf legitimate
and o.d nary business. they are loaned on call at
a higher rate of interest than that paid todeposit-
Every year, at the season whom the demand
sets In from the Yves, and South for currency to
be used In payment for and transportation OF their
agricultural products, there occurs q stringency
in the money market arising from the calling in
of such loans to meet this demand.
Until this year though annually creating some
embarrassment, this demand has beon mo: with
During the past summer, anticipating tho
usual autumn etrinyency, the Treasury Depart
currency sbundant, and bonds for sale in shs
market were scarce, and while there was . surplus
of gold in tho Treasury and thereby accumulated
about FOUR rieen million dollars of currency with
the view Of using the same o: such part thereof as
Sn pS sG ss az oI
winter they could be bought at price not above
par in gold, or in meeting demands upon the
Treasury, as circumstances should require.
This year there was great dcmaud Tor cur
rency to pay tor the heavy crops of n bountifu
harvest, for which the European countries offered
a ready market. The suspension OF certain large
banking. houses, the first OF which occurred on The
the safety of banks and banking institutions in
general. Suddenly there began a rapid calling in
banks for the withdrawal Of deposits i. Entire tire
confidence was IN anfested In United States notes
drawn wherever they could be obtained and were
Largely boarded with much uvdty coin WAS
ever hoarded in times of financial distress when
thrt was the circulating medium of the country
The banks found themselves unable to meet the
demands upon them. currency in circulation be-
came exceedingly scarce. and tho business Of the
country became greatly embarrassed.
"Thero can be no doub. that the practice by
banks of allowing interest on depos te payable
demand is pernicous and frauKlit with danger
and embarrassment to borrower and lender. as well
as TO the general bus ness interests.
Deposits payable on demand should be limited
TO that surplus which individuals require ever and
which they expect income. Such deposits are
comparatively stable in average amount. and con-
stitute healthy basis for banking pur,o Wit hin
p oper limits which prudent bankers know how to
determine.
"Bnt if deposit accounts are employed as tenn
porary vestmeuts, the interest sttrncts large
amount of money those cities where such inter
est Is paid and where specu atton is most active
eccur d elsewhere. With the first return OF ac-
tfyity IN Legitimate business these temporary in
vestments are called in. ami jeopardize in their
sudden withdrawal the whole business of he
banks, both affecting.the legitimate depostors on
the one hand by excitement and distruSt, and on
the other creating Il condition of things In which
the borrowers on call are also unable to respond
The banks have borrowed their money of deposit
ors on call. They have loaned In call to spec
ulators, who by its use have contributed to initiate
the prices of the stocks merchan Use which have
beon the subject of their spcculations The spec
ulator wants 1t to carry the stock- till no dis
pose OF them without loss. This he is unable to
do In a stringent money market. The banks
the same time. and of course n strin gcncv Is de
veloped which spreads distress throughout the
country.
Tho system creates immense amount of debts
payable on demand. all of which thus suddenly
and unexpectedly mature at the first shock of
financial or commercial embarrassment in tho
country, and at the vcrytme when most needed.by
debtors and when they are least able respond "
The above extracts show some of the causes
OF the panic. II is certain that the vast sccu-
mutation OF deposits in the banking stabIish-
ments of Now York city. when money was not
needed by their correspondents and The. cOnse-
Qucnt loaning thereof to wild specuiators and
gamblers in stockr, to say nothing of the rns-
cality OF the banks themselves. rendered money
scarce whom large volume Of currency " as
needod Tor legitimate business; aud this con-
trihutt-d largely to produce the hard times.
Auofshr potent agent to the same end WIS ihs
rssi sinUun; Of nAoney us~3:H the eruStru ets sn