Morning journal and courier., 1882-05-20
Saturday Morning, May 20, 1882.

THE CURRENCY OF THE FUTURE. Senator Allison, of Iowa, contributes to the current number of the NortA Anae7Tcnn Reo1eao an interesting paper on ''The Curren- cy Of the Future" He. believes that our na- t1onal banking system is the safest and best system for the holder of national bank notes | as well as for the general business interests
 of the country, and that if it could continue substantially as it now exists, with power of | expansion and extension according to public needs, the problem of the currency would be l solved and we need give ourselves no further anxiety about paper money. But, he says to continue this system with it's present secur- ity to the note-holder involves an indefinite continuance of the national debt. This debt will not long continue. $55O, GOO, GOO, in round numbers, of this debt, bearing three and half per cent. interest per annum, is now payable at the pleasure of the govern ment and of this the national banks held as security for circulation, on the first of No. vember last $241 ,OOO 900. It is within the limit of conjecture that the whole of the three and a half bonds held by the banks will be paid within five years, or at the rate of $5O,O00, GOO per annum. $25O, 1000, GOO of four and half per cent. bonds are payable after 1890, of which the banks hold only $3O, ,OOO.0O The remainder, S74O, ,OOO, ,OOO, of four per cents, mature in 1907, the banks holding about $93, ,OOO,- 900. These two latter classes of bonds bear high premium, and as those of the three and half denomination are paid of, will bear still higher premium. So that with the high rate of taxation, and low rate of interest of bonds held, national bank circulation will gradually diminish in volume as the three and half bonds are paid off Banks will not pay the large premium necessary to continue their circulation, even if the bank taxes shall be removed. It is equally certain says Mir. Allison, that every business interest in the country will continue to grow and ex- pand rapidly, requiring additional circulation to make exchanges to meet this increased de mand. Demand will be made for some safe convertible substitute during the period of the dininution of national bank notes. For this purpose the Senator recommends na- tional currency based on gold coin, dollar for dollar. This would be seJf-regulating and absolutely safe, and would not lead to any sudden expansion or contraction. To this end he would have the government re- ceive on deposit all the gold coin offered it, issuing therefor gold certificates in conven- tent amounts, the government holding the coin solely for the redemption of the certif- cates.
 Senator Allison also has plan for the contin- uance of the national banking system without the deposit of bonds to secure circulation. He would enlarge the principle of individual lia- bility, so that each stockholder should be held liable for the redemption of the circulation of the bank in which he was shareholder in case the assets of the bank should prove insufficient for the redemption of its notes, the note holder having the first lien on the assets. This is the system which prevails in Scotland. There, except in the case of two banks having special privileges, every bank is partnership, and every stockholder is in- dividually liable for every debt of the bank, the circulating notes having preferred lien upon the assets of the bank. So that the notes of broken bank in Scotland have been taken as freely as those of solvent oank indeed, there have been only four considerable failures among the joint-stock banks in Scotland within one hundred and fifty years, and these failures were attended with little or no loss to the public but only to the shareholders. Some of these have, however, suffered terribly, as in the Glasgow bank failure. If this system should be adopted in this country there would be fewer banks, but most of them would be apt to be sound