Vermont watchman and State journal. [volume] (Montpelier, Vt.) 1836-1883, 1880-08-04
Economical Questions.

A correspondent wishes us to tell our read.
ers why the rates of interest have SO greatly
declined since the close of the war. lie also
asks why, though specie payment has been
so long resumed, so little specie is in crcu-
lation. We doubt very much whether any
one can answer both these questions in a
perfectly satisfactory manner. We see but
little agreement among even the most emf
nent writers upon financial questions, while
self-interest is so much mixed up in the dis
cussion Of them that the real truth, even
were it ascertained, must be more or less
covered up under mass of plausible argu-
mentation.
One point we think all will agree upon,
namely, that the scarcer any useful thing
becomes the higher (within certain limits)
will be its price. During the war all sorts
of useful things were being destroyed in the
most wholesale manner. In fact, for two or
three years some two million of men were
wholly engaged ia the destruction of life
aud property. Not only was the ruin which
they wrought immense, but they had to be
fed, clothed, transported, and supplied with
implements of destruction. Besides this
they had to be paid, their families aided,
themselves taken care of when sick or
wounded, aud finally they had to be pen
stoned, many of them having become per-
manently disabled to greater or less extent
from contributing to the industrial progress
of the country. This is war,-a very costly
way of settling disputes, to say the best
of it.
Destruction wrought by war made all
kinds of useful property scarce. Money is
property, butt is more than that. BY COM
mon agreement it is also the universal meas
ure Of the value of other property, and con-
sequently the accepted instrument of all ex-
changes made between the owners of other
property. During the war the demand for
all sorts of property increased the value of
each sort proportionally to that demand.
Money, real money of gold and silver, had
become very scarce, and the price of it was
correspondingly high. Even paper money,
though apparently abundant, had so depre-
ciated in purchasing power as to be really
scarce. Consequently the price Of all money,
reckoned in things exchangeable for it, was
high. Rents, that is, the prices of the use
of property, were also high, for the same
reason of scarcity. Interest is the rent
charged for the use of money, and it was
high like everything else.
After the war was over the nation was re-
lieved from the great destruction and the
cost of it, and most of those engaged in the
war went to work, producing instead of de-
stroying. Seventeen years of such product
i've industry has filled the country with all
sorts of valuable things wanted at home and
abroad, and exchangeable for money. We
have mined and coined large amounts of
the precious metals, and we have exchanged
vast quantities of the products of our in
dustry for the money of other nations. This
money, to the amount of several hundreds
of millions, is the property of the nation,
and is stored in the vaults Of the national
treasury, where it forms the substantial
basis of our currency, and keeps it equiva-
lent to gold and silver as medium of ex-
change. Large sums of gold and silver
money are also in private hands. The paper
money based on the national treasure, and
the metallic money in private hands, bring
no profit to the holders except when it is in
use-that is, when it is employed in meas
uring values and exchanging property.
There has not been enough OF that going on
to employ all of it, and the rent of it (the
INTEREST," has declined, just as the rent of
houses and farms declines when there are
more of them for hire than there are of per-
sons wishing to hire them. A part of this
stagnation of business was due to the settling
up process which took place after the
"panic of 1878. Since business has re-
vived there is more use for money, but not
enough to greatly raise the rates of interest.
Should the production of the precious metals
keep pace with the increasing demand for
their use as measure of value, the rate of
interest will not increase. But national ex-
travagance or waste, or anything that tends
to scarcity of valuable things, whether
money or goods, will put up the rates of iu-
terest. Especially will the extravagant use
of foreign productions have that effect. The
waste of labor upon harmful, useless or un-
necessary things, such as intoxicating drinks,
tobacco, palatial private and public build
ings, unnecessary railroads, as well as the
refusal of the government to coin bullion
freely, ETC., impoverishes a country and ad-
vances the rates of interest. A similar eff
feet is produced by the purchase of goods
and lands upon credit by persons incapable
of making their payments promptly All
sorts of waste, extravaganza and financial
The more nearly the business Of country
is conducted upon a cash basis the lower the
rate Of interest will be, other things being
equal.
In regard to the second question, why we
do not see coin in general circulation since
the lawful resumption of specie payment, il
is easily and, we believe, correctly answered
by saying that when its purchasing power is
NIhoi1 anu ieo ASN'Shh"ciAey 40 ~
cure, the people will always prefer paper
money to coin. This is true even in regard
TO a fractional currency. The entire com
munity has regretted the withdrawal of this
convenient little money, and is by no mean'
as well pleased with its silver substitute
As basis for the currency suficiency Of
coined precious metals in the hands of tn,
government is essential. In transactions
with foreign nations these metals are equally
essential for the settlement of balances
But for the ordinary home transactions Of
every day business it is plain that the peo
pie prefer a national currency that il
promptly redeemable in coin, and is renewe,
frequently enough TO be whole, clean am
legible. We feel confident that it will b
found impossible TO induce the people to &C
cept of coin money unless its paper substi
tute is withheld by arbitrary legislation
and as all interests unite in favoring papel
either bank paper or national, we shall prof.