Daily globe. [volume] (St. Paul, Minn.) 1878-1884, 1883-11-26
CURRENCY.
COMPTROLLER KNOWS REPORT ON
THE CONTRACTION AND CIR
CULATION.
The Withdrawal of Three Per Cents VIII
Cause Great Decrease In the Circulation
of the Banks.

WARRINGTON, D. O., Nov. 25.-The por-
ton of Comptroller Knox's report relating
to the contraction of national bank circu-
lation is most interesting and important.
Part of the document by the comptroller
refers to the probability that all three per
cents will be called for redemption within
the next three years, and says this will re-
duce the bonds held by the banks from
$685., 100000 to $151 100000, and cause a
contraction of the national bank circula-
ton of about $60,O00,0OO per ennum. II
is evident, unless there is additional legis- |
lation, that bonds held as security for cir |
culation will rapidly diminish. New legis- |
lation may, however, postpone the pay
ment of the public debt, or cause |
the profit on the circulation to increase |
sufficiently as to induce national |
banks to invest in long four per cents
which are not to mature for twentyfour |
years. The contraction of bank circula- |
ton may be avoided by reduction of |
revenue and there Is no doubt this is the |
true policy. The contraction of bank cir
culation may also be avoided by the con-
version of long bonds into three per cents |
by Offering an inducement to holders of
the bonds to exchange them for three per
cents to mature in 1907, the government
paying the holders thereof a reasonable
amount for the difference in value. The
premium to be paid holders of these long
bonds may be considerably reduced by
providing that the circulation to be issued
upon the proposed bonds when deposited
by the national banks as security therefore
shall not be subjest to the present tag of
one per cent. per annum, or by postpon-
ing the time of their payment. Contrao-
ton would also be avoided by providing
for the removal of the tax on circulation
and an increase on the amount of circula-
ton to be issued by banks upon bonds de-
posted by them. The comptroller con-
siders, 30 long as there is sufficient
amount of United States bonds outstand-
ing, legislation should be so shaped as to
continue them in use as the basis for the
national bank circulation. With the de-
crease of interest and the decrease of
profit upon circulation, the amount of
issue upon the value of the bonds will also
be decreased. There is no proprie-
ty or justice in authorizing
the issue of $50 upon every 500 per
cent bond worth par, and refusing to issue
like proposition upon per cent. bonds
worth 1921. The holder of a government
bond can readily borrow money upon it as
a pledge from the bank to the amount of
So per cent. of its market value and it is
not surprising that tho banks prefer to re-
linquish the circulation rather than deposit
| as security bonds having q margin of more
| than one-third of the circulation issued.
A law authorizing the Increase of the issue
| to 80 or So per cent. upon the lowest mar
| ket price during the calendar or fiscal year
previous to the deposit, together with the
| repeal of the tax upon circulation
would result in the deposit of sufficient
amount of four and four and half per
cents to maintain the circulation at about
the present aggregate. The amount of
| gain to the government from accidental
| loss or destruction of circulating nutes,
the comptroller says, does not properly
belong to the United States, or the banks
issuing the notes, but to the owners of the
notes ut the time of the loss, and the gain
| thus accruing should be carried TO the
credit of the 'insolvent bank redemption"
| account, in the Office of the treasurer. The
comptroller believes that the proposition
to convert long bonds into three per cents
| sition to increase tine rate OF
traction of currency now imminent
should not be allowed to take place too
rapidly, or the deficiency vouldbe replaced
by a substitute leas desirable than the
bank notes now in circulation Knox
calls attention to the statement that the
contraction Of tue currency may be sup
piled by imported gold, by the annual
product Of mines, or by the coinage of
the silver dollar upon which silver certii-
Gates are now issued, and shows an excess
of gold imports growing smaller and the
probability that the gold now held by the
United States will not long hence be great
Iy diminished. The Substitution of stand
ard silver dollars for the retired circula-
ton would be simply the introduction of
an inferior currency. In answer
to the proposition that treasury
notes as we'll SO silver certificates may be
issued in the place of bank notes to be re-
tired. The CONF troller says, the treasury is
embarrassed with a revenue greater than
the needs, and greater care ia necessary TO
iudiciously disburse. Under such circum-
stances the authority or congress to print
additional treasury notes leads to still
greater endorsements, and in place of
the treasury circulating notes at the time
when this most important subject is be-
fore congress is the reduction Of the re-
dundant revenue, and the employment OF
| the surplus in the overlooking treasury. II
it were possible to issue additional treas
. ury notes, when the revenues of the gov
eminent are 30 much greater than its ex-
penditures, and simultaneously with
the yearly addition of the silver dollar!
. now authorized by law, it is evident that
such steps would lead plainly from a gold
to silver standard. Anissue of addition
! al treasury notes will weaken the treasury
and be likely to create doubts as to the
ability of the government to pay gold or
| demand, and the government by declining
) to pay in gold, thus taking from the holde
the option of payment, may at any tim
bring the nation upon the silver standard
) advancing the price of product
and demoralizing the entir
gold coin in the country. In such crisi
the reserved gold in the treasury will b
, continually diminished on one hand by tn
presentation Of its notes for Epaymeni
while its revenue, on the other hand, vii
not be increased by the customs dutie
paid in gold, as at present, but by the re
turn of silver dollars and silver certificates
which will, under the existing law, soone
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