St. Paul daily globe. [volume] (Saint Paul, Minn.) 1884-1896, 1886-02-24
a DANGER sIGNAL.
The Breakers Seen Ahead OF mOrri-
sons Surplus Bill.


port Oh Mir. Morrison's bill directing the
payment Of the surplus in the treasury, eX-
ceedmg $1,000, 900, 000. in liquidation Of the
public debt
'''Ihe effect of the resolution" says the re-
port, eff enacted into law, will be 10 reduce
the balance in the treasury available for the
payment Of the current Indebtedness and the
redemption of legal tender notes 10 $780,
100000 1t makes no provision for replcn-
ishing the treasury when the available bal
ahce shall fall below SlU0, 100000. The qucs-
ton thus presented is whether, in view Of the
obligations and functions Of the treasury. as
now defined by law, the proposed Limitation
on the balance now held Tor meeting the liza
bilities payable OH demand is prudent and
safe, in view Of the pledge Of the United
States to redeem all its Indebtedness in
coin or its equivalent. The under
signed believe that such Limitation
would be unwise, dangerous and at variance
Il ke with the experience Of solvent nations
and of sound financial institutions. The or
dinary disbursements Of the treasury may be
roughly stated 10 amount TO Sl,O0O.0OO day.
To meet this disbursement it is necessary
that reasonable working balance should be
kept on hand, because at times the current
expenditures largely exceed the daily re-
ceipts. Careful business firms usually carry
IA balance equal 10 one months disburse-
mnets. Measured by this standard-and a
lower one could not safely be adopted, be-
cause the secretary of the treasury has no
power to make temporary lOans-the working
balance in the treasury should be about
$4,000, coo. That the amount is not too large
will be apparent from the fact that in the
pension bureau drafts for Sl0,0G0.UO0 Will be
made on the lst OF Marcn u that the amount
Of the probable payment under arrears act 10
be fixed for any specified date. But beside
the current expenses provided for by law the
United States has
A DISTINCT OBLIGATION.
to provide for debt payable on demand in
i'm the shape of S3fG.65I0lG of legal tender
notes. These notes form about one-half of the
paper currency. They constitute final
means of payment between individuals, and
OF settlement in all transactions of business.
IL is absolutely necessary, therefore, that
the ability 10 redeem these notes ia coin
should at all times be assured. The only
question is rs 10 the amount OF coin which
viii constitute reasonable and adequate re-
serve. TO determine this point we nave no
other rule than usage and experience. In the
case of gold ana silver certificates, the treas
ury has dollar for dollar, but in the case OF
the legal tender notes, il has not been usual
TO have at any time in the treasury a reserve
i'm coin exceeding one-haf of the whole issue
in coin. When specie payments We're resumed
bonds of the United States We're sold so a 10
provide fund amounting TO $50, 500 Q00 iu
gold for the purpose of assuring tie rcdemD-
ton OF the notes which, as the law then pro-
$500. 000, 600. Ii was certainly not considered
safe TO begin resumption with less than one
third reserve and rs "A matter Of fact the
available balance in the treasury amounted
to over 40 per cent. At tine present time un-
der the practice OF the treasury, claimed TO
be in accordance with the bank act OF 1882,
Sl00,000,000
IN GOLD COIN
is set apart for the redemption of the legal
tender notes, being rather less than % per
cent. This reserve would Ice regarded 10y
prudent bankers as the minimum amount in
an easy money market, but If the financial
prospects should be threatened pru-
dence would require that il should
be enlarged and strengthened. The practice
of the treasury under Secretary Sherman,
who put the resumption act in operation. was
not TO allow the reserve to fall below 40 per
cent, and, all things considered, this is prob
ably the smallest amount consistent with alb
solute safety. If this ratio should be adopted
the amount of the reserve in coin would De
Sl33, 600, Adding this amount to the
amount heretofore stated as a reasonable
working balance, we have the sum of Sl68,-
900 rs the minimum balance which the
treasury should carry in order TO be in a con-
dtiOn of safety. Any other conclusion is at
variance with the lessons of experience and
the well-established rules for the safe conduct
of business. The main argument urged for
infringing on this balance must be the saving
of interest on the 4S,OOO000 which, ater al
lowing for the tax on bank circulation, is 90
per cent. per aunum. amounting TO Sl,lT0O00
annually, but it is to be remembered that the
demand debt of the United States
represented by the legal tender notes
bears no interest, and that the gain
in interest between the total amount and Il
proper reserve is over $4,0O0,00O per annum,
so that the government could well afford the
outlay required to keep its finances in the
strongest possible condition and should GER
tainly never approach the point where under
that law ii may become necessary TO sell
United States bonds in order TO preserve
specie payments. Such q contingency would
not be an edifying spectacle 10 II people whose
proud boast it is that within twenty years
IRON the close of the war, it has paid Of
MORE THAN oNE-HALF
of the public debt and reduced the burden Of
interest to one-third of its original amount.
Certainly policy so humiliating would be
condemned 10y the people when its effects
should become apparent. The greatest care
must be taken not to interfere with the fiex-
ibility of the currency, and the only flexible
agency rests in the treasurer. in the power
now exercised 10y the secretary to make calls
for the redemption Of the public debt. 1t is
a great question whether such power should
ever have been trusted 70 the government or
TO the discretion of an official. In other con-
ServatiVe commercial countries il has been
conferred on intermediate agencies in direct
the people. We have no such system and
hence the treasury has been forced 10 become
q member of the New York clearing house.
which is the financial center of the exchanges
of the country. The treasurer is thus prac-
tically engaged in the banking business. not
only in the issue of currency, but in adapt
ing its operations TO the general require
ments of trade. Dangerous aS this system is,
il was the outgrowth of necessity, and until
some other security beside the bonded debt
of the United States is devised for the issue
of bank currency, the power to come to the
relief of the money market in times or strin-
gency must rest with the treasurer. One
other consideration may be presented as q
fatal argument against the reduction of the
treasury balance to Sl00,000,0O0 i'm coin,
necessary at all times TO be kept for redemp-
ton of the legal tender notes. The ability OF
spectators TO reduce this balance below
500, 100000 by presenting demand notes for
payment is obvious, and unless the eXpedient
of replacing the amount by the sale of bonds
be resorted TO- the money market can be SC
manipulated as 10 impair confidence and
bring about 4 general disaster by which the
operators for a fall would reap abundant
profit at the expense of the legitimate busi-
ness of the country.
washing ton waits.
The house committee on Indian affairs has
decided to make reports TO the house on all
bills granting TO particular railroad companies
right of way through the Indian territory,
Notwithstanding that general bill on the
subject has been favoraby reported to the
house. This action was taken because meul-
bers of the committee were OF the opinion
that some Of the special bills might be acted
upon by the house when general bin would
not secure a hearing, The first of these bIlS,
granting right of way to these Denison *
Wichita Railroad Company, was yesterday
ordered to be favorably reported.
The cabinet meeting Yesterday WAS mainly
devoted to the consideration OF the general
question of promotions in the army and navy,
particularly as to the wisdom of giving prefer
ence in such matters to officers soon to be re-