Morning journal and courier., 1881-01-14
Friday Morning, Jan. IA, 1881.
A PLAN WORTH THINKING OF,

A defect in the best banking system that
 has ever existed is attracting attention. This
 is the non-elasticity of the circulation, which
 does not increase in times of money strin-
 gency as it should, or contract it's volume
 when money is abundant. The privilege of
 free banking, conferred expressly to secure
 the needed expansion, is not regarded as of any value. The privilege of retiring circula- ] ton at pleasure is employed, as the New York Times says, rather to assist the banks in
 bond speculation than to reduce the circula-
 tion when it is in excess. The ISnaes pro-
 poses as remedy the repeal of that part of
 the bank act which permits the sudden with
 drawal of currency on the deposit of green
 backs, and, by implication, the abolition of
 the treasury redemption agency-the banks
 to withdraw their circulation s'by redeeming l it either over their own counters or through | their redemption agent, as banks have done ! under all systems from time immemorial." ] The Boston Adgersiser thinks the remedy proposed by the Tunes both objectionable I and inadequate, and has a plan of it's own, upon which it would like the judgment and | criticism of those acquainted with the work ing of the present system. The outlines of
 the plan are as follows: special issue of the public debt to be created for bank pur- poses only, to consist of credits opened on
 the books of the treasury with each bank. Such credits to be non-transferable. This debt to bear interest at rate to be ascer- tained by experts so as to make bank issues
 barely profitable to the issuers with money at it's average supply and the rate of interest at normal point of say per cent. Banks to be at liberty to withdraw circu- lation and bonds now, but no new cir culation to be taken out except upon the basis of this new form of debt. The credits on the treasury books to be opened on the deposit of gold, greenbacks or bank notes to the amount of the face value of such money; and to be balanced by the payment to the banks of an equal sum; that is this vari- ety of debt would never be in the market, and it would never rise above nor fall below par. Circulation based upon this debt to be re- duced in the following manner: The issuing bank sends to the treasury lawful money or greenbacks equal to the amount of circulation it proposes to withdraw; at the same time i4 gives notice of its intention to demand pay
  the expiration of six months the treasury pays the debt with the interest then due. l The bank having deposited first, the amount | of the debt, and secondly, the amount of | notes circulating, receives back the former | sum, and the treasury becomes liable for the | redemption of the notes. Inasmuch as the | bank is deprived of the use of it's money for | six months, it is no more than fair that it | should be allowed to count that which is de- posted to reduce circulation as part of the funds on which it can draw no interest," that is, part of it's reserve.
 Great advantages are claimed for this sys- tenn if it can be made practicable in detail. In the first place an increase of bank circulation would be profitable when money becomes tight, and, on the other hand, reduction at a time when the market rate of interest is low would be profitable, while also saving the tax on circulation. Secondly, while the in- crease of circulation when needed would be speedy, and the reduction of it when in excess the provision that the debt to the banks shall be paid only after six months has several merits: CD it is a measure of safety to the treasury; CD it gives the banks Glne 6o reverse thelr po1lcy IT the course or l the money market should change; and (3) it avoids the evil which would follow instant payment, namely, that an effort to reduce bank circulation would momentarily, at least, result in an increase of cur rency. Thirdly, by the scheme of an unnegotiable debt as a basis of circulation, the rise and fall of the currency would be wholly disconnected from the bond market and attached to the money market, where it belongs. Fourthly, the banks would lose the pecuniary interest they now have in opposing loan at low rate of interest. Finally, the change from the present system would be gradual, degree of permanence would be given to the issue of bank notes, and the grievance, more fancied than real, against the banks on account of their SUD- posed large profits on circulation, would be redressed.
 The Adcertise7's plan is an ingenious one and merits much attention and discussion. At first sight it seems well calculated to &C., complish the desired objects |