The Portland daily press. [volume] (Portland, Me.) 1862-1921, 1878-04-09
Contraction and the Panic

Chase's Chronicle still insists that contrac-
ton of the currency is the cause of all the
evils, financial and industrial, which the coun-
try is now suffering from, aud questions some
recent statements of the PRESS on that mat
ter. Let us see. Up to 1865 there had Ger
tanly been no contraction. In October OF
that year our total currency was $704. .000, 600
of which $42S, ,160,569 were in greenbacks,
$1S5, ,OOO, 900 in national bank notes, S26, ,O57,.
469 in fractional currency, and the rest Ia
state bank notes. That was the greatest
volume the greenbacks ever reached.
On the eighteenth of December 1865, con-
traction of the greenback currency was au-
thorized by Congress at this rate: S1O,OOO,OOO
to be Withdrawn in the next six mouths and
$4,000, 900 month thereafter. In pursuance
of this authorization contraction went on un-
til January 1868, when the greenback circu-
lation stood at $3.50, ,00O,O 900, a reduction of
$72, 160, $50. But meanwhile the national banks
were going into operation with a permitted
circulation of $500, 100000, and their notes
more than compensated for the greenbacks
withdrawn. By January 1855, the date at which
the contraction OF greenbacks ceased, the ma
tional bank circulation stood at S294, 100000
an increase of $1O9 100000 against
decrease Of $72 .16O,569 in the vol
ume of greenbacks, making an increase OF
currency in these two items of $37 ,139, ,431.
To this we must add the increase of fractional
currency to about 5O,OOO,0 900. So, reckon
ing in the fractional currency at $4,000, 900
the amount OF currency in 1868 was $780,.
OOO,3O0 against $7O4,OOO.OOO in 1866.
That was the contraction made by
Secretary McCulloch denounced 50 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
might be issued was increased by $50, ,OOO, 900,
and the issuance of greenbacks having been
restricted to $4OO, ,00O,0 the limit of the
currency was fixed at S750,0OO,O 900. This
amount was not in circulation, because
neither greenbacks nor bank notes reached
their limit. But had there been any legiti.
mate demand for more currency the banks
would have readily issued it, In 1872 however
$4,000, 900 of the s44, ,OOO 900 of retired green
backs were reissued.
Then in 1878 the panic came, came not
withstanding the fact that contraction = a
merely nominal contraction at that-had
ceased in 1868, and that there had been since
then an increase in the volume of the curren-
cy. 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 reissued,
and without effect.
What has been our financial history since
thenP In pursuance of the act of January
IA, 1875, the much-abused resumption act"
S30, ,659, 712 of greenbacks were retired up tc
and including last October; but in order to
retire these greenbacks S3s, 1924 $40 in nation
al bank notes were issued, and the contrac
ton of greenbacks resulted, as it necessarily
must under the act of 1875, in an increase
instead of a contraction of the currency. 1t
is true that from the passage of the resump-
ton act to November last $40. 966, ,491 in
national bank notes were Withdrawn. But
this withdrawal was entirely voluntary, and
would not have taken place had there been
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 1875 repealed all restric-
tions on the amount OF bank circulation, and
we're there any legitimate demand for more
currency banks would speedily be formed to
furnish it.
Thus it seems that the contraction prevl-
GUS to the panic was in the greenback circu-
lation, and that it was more than made good
by the increased issues of the national banks.
1t also appears that the contraction in green
backs since the panic has by law been more
than offset by the further issues of bank
notes, and that the net contraction has been
the work of the banks. We may feel sure
that they would never have withdrawn their
notes had there been sharp demand fol
those notes.
The error of Chase's Chronicle and other
greenback papers is in reckoning in the circu,
lation OF 1865 $671 ZOO, 900 of the interest.
bearing obligations of the government The
1905 were sparsely if ever used as currency.
In the early years of the war, when gold had
fed the country and before the national binks
had been organized there was great scarcity
of currency, and the first issue OF 7 80 Treas
ury notes may have been in few instances
used as currency. But their use was an ex-
ception, not a rule. Why by this reasoning
of the Chronicle we were using in 1866
~ Oon q
ono in 1850, az increase in five years of over
billion dollars, that is, nearly five times as
much currency. The statement carries Its
own refutation.
1t ought not to be necessary to again ex-
pose the mistatements Of the greenback pa.
pers. They have been corrected time after
time; but they are constantly reiterated, and
must be as constantly corrected,
The reasoning of Ch1Se's Chronicle in re