The Stark County Democrat. [volume] (Canton, Ohio) 1833-1912, 1883-12-08
THE CURRENCY.
Comptroller Knox the Contraction OF
National Bank Circulation.

lHE NOHHENSIs
Comptroller Knox on the Contraction OF
National Bank Circulation.
WASHINGTON, Nov 26.-The portion of
Comptroller Knox's report relating to the
contraction of National bank circulation ia
the most interesting and important part of
the document The Comptroller refers to
the probability that all the threes will be
called for redemption within the next three
years, and says this will reduce the bonds
held by banks from 1888. 900, 900 to SI51,-
100000, and cause a contraction of the
National bank circulation of about 500 OOO,-
900 per annum. 1t is evident unless there
is additional legislation the bonds held
as security for circulation will rapidly
diminish. New legislation may, how
ever, postpone payment of the public
debt, or cause the profit on circulation to in
crease sufficiently to induce National banks
to invest in long four per cents, which are not
to mature for twenty-four years. COntrac-
ton OF bank circulation may be avoided by
the reduction of the redundant revenue, and
there is no doubt this is the true policy.
Contraction of bank circulation may also be
avoided by the conversion of long bonds into
three per cents, by offering an inducement to
holders of bonds to exchange them for three
per cents to mature in 9O7, the Government
paying the holders thereof a reasonable
amount for the difference in value. The pre-
MUM 10 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 National
banks as security therefor, snail not be
subject to the present tax of one per cent
per annum, or pOstpOning the time of their
payment Contraction would also be
avoided by providing for the removal of the
tax on circulation, and the increase of the
amount of circulation to be issued to the
banks upon bonds deposited by them.
The Comptroller considers that so long as
there is a sufficien, amount of United States
bonds outstanding, legislation should be so
shaped as to continue them in use as basis
for the National bank circulation. With a
decrease of interest and decrease of profit
upon circulation, the amount of issue upon
the value of bonds would be also decreased.
There is no propriety or justice in authOriz-
ing the issue OF ninety dollars upon every
one hundred dollars of the three per cent.
bonds worth par, and refusing to issue like
proportion upon the four per cent. bond
worth one hundred and twenty-One dollars.
Holders of a Government bond can
readily borrow money upon it as a pledge
from bank to the amount of ninety-tiYo
per cent. of its market value, and it is not
surprising that banks prefer to relinquish
their circulation rather than to deposit as
security bonds having a margin of more
than One-third of the circulation issued.
A law authorizing the increase of issue to
ninety or ninety-tive per cent. upon the low
est market price during the calendar or fis-
cal year previous to deposit, together with
the repeal of the tax upon circulation,
would result in the deposit of a sufficient
amount of four and four and a half per
cents. TO maintain the circulation at about
the present aggregate
The amount of gain to the Government
from the accidental loss or destruction of
circulating notes, the Comptroller says, does
not properly belong to the United States or
the banks issuing the notes, but to the own
crs of the notes at the time of the loss, and
the gain thus aCcTuing should be carried to
the credit of the ''insOlvent bank redemp-
ton" account in the Office of the TTea-urer.
The Comptroller believes that the PROPOSE
| ton TO convert long bonds into three's is
| more desirable than the proposition to in
crease the rate of circulation, and that
large contraction of the currency, now I'M
minent, should not be allowed to take place
too rapidly, or the deficiency caused by such
contraction will be replaced by a substitute
less desirable than the bank notes now in
circulation.
Knox calls attention to the statement that
The contraction of currency may be supplied
by imported gold, by the annual product OF
mines, or by the coinage of the silver dol
lar, upon which silver certificates are now
issued, and shows that the excess of the
gold import is growing smaller, and the
probability that the gold now held by us
will not long hence be greatly diminished.
The substitution of standard silver dollars
FOR the retired circulation would be simply
the introduction of inferior currency In
answer to the proposition that treasury
notes as well as silver certificates may ba
issued in place of the bank notes to bo
retired, the Comptroller says that
the treasury is embarrassed with a reve-
nue. greater than it needs, and greater
fnIf fahr
under such circumstances the authority
from Congress to print additional treasury
notes would lead to still greater cmbarrass-
mcnt and place treasury circulating notes at
time when the most important subject
before Congress is the reduction of the re-
dundant revenue and the employment Of
the surplus oYertlOwing treasury. If it
were possible to issue additional treasury
notes when the revenues of the Govern
ment are so much greater than its eXpendi-
lures, and simultaneously with the yearly
additional of silver dollars now authorized
by law, it is evident that such steps would
lead plainly from a gold to a silver stand
ard. The issue of additional treasury notes
will weaken the treasury and be likely to
create doubts of the ability of the
Government to pay gold on demand, and
the Government by declining to pay in gold,
thus taking from the holder the option of
payment, may at any time bring the Nation
upon silver standard, advancing the price
of products and demonetizing the entire
gold coin of the country. In such a crisis
the reserve geld in the treasury would be
continually diminished on the one hand by
the presentation of its notes for payment
while its revenue on the other hand would
not be increased by the customs duties paid
in gold as at present but by the return of
silver dollars and silver certificates, which
will, under existing laws, sooner or later
drive every dollar of gold coin out of circII-
latiOn, bringing upon the country much
greater contraction than that which it is now
proposed to prevent