Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1878-04-11
From the Portland Press.
Contraction and the Panic.

Chase's Chronicle still insists that contraction OF
the currency is the Of all the evils, financial
and industrial, which the country is now suffering
from, and questions some recent statements Of the
Press on that matter. Let US see. Up to 1865
there had certainly been no contraction. In Oc-
tober of that year total currency was $780,
900 900 Of which Si2S 100, 500 were in greenbacks
SlSj000,0 600 in national bank notes. $50 057 400
in fractional currency, and the rest in State bank
notes, That was the greatest volume the green
backs ever reached.
On the eighteenth of December 1868, contrac-
ton of the greeuback currency was authorized
by Congress at this rate $40 900 900 to be with
drawn in the next SIX months and 81 900 900 a
month thereafter. In Pursuance of this anthoriz
alton, contraction went on until January 1868
when the greenback circulation stood at 1856 900
900, reduction of S72. 100 .j69 But meanwhile
the national banks were going into operation with
permitted circulation OF $500, 000, 600, and their
notes more than compensated for the greenbacks
Withdrawn. BY January, 1868, the date at which
the contraction OF Greenbacks ceased tue national
bank circulation stood at 1924 800 600, an increase
OF Sl09, 300 900 against decrease of ST., 100 $50
in the volume of greenbacks, making an increase
OF currency IN these two items of S37 l39 i3l. To
this must add the increase of fractional curren-
cy TO about $50 900 900. So reckoning in the frac-
tiohal currency at $50 900 600 the amount of cur
rency IN 1868 was 500, 600 300 against S704 600
wv III lOOJ lnht was lie CONTRACTION made Dy
Secretary McCull0ch denounced severely by
the greenbackers. 1t stopped in 1868, five years
before the panic.
But in 1870 three years before the panic the
amount of national bank notes that ight be issued
was increased by $50 000, 000 and the issuance of
greenbacks having been restricted to S40O. 900 900
the limit of the currency was fixed at $50, OO0,-
O00 THIS amount was not in crcu alton because
neither greenbacks nor bank notes reached their
limit. But had there been any legitimate demand
for more currency the banks would have readily
issued IT. In 1872, however, s., 0g0, 900 of the
S44 600 600 of retired greenbacks were re-issued
Then in 1873 the panic came, came notwith-
standing the fact that contracti0n-a merely nom
mai contraction at that-had ceased 10 1868, and
that there had been since then an increase in the
volume OF the currency. How then Is it possible
that contraction of the currency had anything to
do with that panic /: Initiation certainly did not
cure It, for more of the retired greenbacks were
reis-ued, and without effect.
What has been our fnsIcia history since then
In pursuance OF the act of January IA. 1875, the
much abused Resumption act" S30,6j97 l2 OF
gteent acks were retired up TO and including last
October; but in order to retire these greenbacks
s3S, 324 GAO in national bank notes were issued.
and the contraction of greenbacks resulted as it
necessarily must under the act of 1875, in an in-
crease instead OF contraction of the currency,
Ii is true that from the passage of the resumption
act TO November last $40, $50. 49l in national bank
notes were Withdrawn. But this withdrawal was
entirely voluntary, and would not have taken
place had there been a demand for the currency
1t only took place because there was no demand
for and consequently no profit on the circulation
This same act Of 1879 repealed all restrictions on
the amount OF bank circulation, and were there
any legitimate demand for more currency, banks
would speedily be formed to furnish it.
hus It seems that the contraction previous to
the panic was IN the greenback circulation and
that 1t was more than made good by the ncr eased
issues of the national banks. Ii also appears that
the contraction in greenbacks since the panic has
by law been more than Offset by the further is
sues OF bank notes, and that the net contraction
has been the work of the banks. We NAV feel
sure that they never would have Withdrawn their
notes had there been a sharp demand for those
notes.
The error of Chase's Chronicle and other
greenback papers il in reckoning in the circua-
ton OF 1860 S61l 900 600 of the interest bearing
Obligations OF the government. The .30s were
sparsely y ever used as currency. In the early
years OF the war, when gold had fled the country
and before the national banks had been organ
Zed, there was a great scarcity of currency and
the hrst issue of 80 treasury notes may have
been 10 lew Instances used as currency. But
Their use was an exception, not rule. WHY by
TN. lea. ontng OF the Chronicle we were using in
1860 Sl,37j,000,000 of currency, against 5000
900 900 III 1860, an increase in five YEAR, of over
billion dollars, that IL nearly FIVE times as much
currency. The statement carries its own refuta-
ton.
1t ought not to be Necessary to spaip eynose
the miscellaneous of the greenback papers They
have been corrected me after time; bnt they
are constantly reiterated and mat be as CON
/ stAutIg rCCted