The Kinsley graphic. [volume] (Kinsley, Kan.) 1890-1940, 1891-12-18
Colossal GEEK.

been Advanced IN All ssriousness-
At the recent annual Convention Of
the American bankers association
held at New Orleans. November 40 and
II, the national bankers through their
mouth-picce. John JAY Knox, formu-
lated the following astonishing and i'm
Pudent proposition, or plan for a fiez-
IDLE circulating medium Mr.. Knox
said:
What we need in a country like this.
il we are 70 have bank circulation,
which hope we are TO have at some
time in the future, IS q circulation
which is both safe and elastic. grant
that the national bank circulation,
while il hlied all Of three require meuts
of safety, couvertib iity and uniformity,
was defective in the principle OF elias
ticity-
THE proposition which had the
honor 20 present 70 congress was in
brief terms tine following: That banks
organized in this country should be al
lowed 20 issue a circulation upon rs per
cent of their capital A bank of $780,
900 capital should have the right to
issue circulation TO the amount of $780,
OOO Half Of that circulation (s15J. OOO)
would be secured by gold OF silver coin
or bullion, or, If you please, by the
public debt 50 long as the IS shall ex-
ist, until l9Oe- bg government bonds
The other portion of the circulation
would be secured by a safety fund OF
course, If circulation was issued on
gold or silver coin or bullion alone
there would be no profit on that circu-
latiOn, but upon the other half of the
circulation there would be a profit as
1t would be secured by safety fund.
/ The principle Of the safety fund rests
upon the well established fact that at
least three-fourths of the banks are
managed with ability, aud under no
circumstances are likely to become in
solvent We have experience 70 guide
us in this matter. During "a quarter OF
a century, during twenty-five years, $50
national banks failed, having an aggrc-
gate circulation of SIS. 600, coo. Under
this system oue-half that amount would
have been secured by a deposit of coin
or bUllion- The other half would have
been secured by a safety fund. This
safety fund would be formed by a con-
tribution of all the banks of the coun-
try of one per cent upon the amount
Of circulation issued, the same amount
that is now contributed 20 the govern
ment of the United States as tax up
on circulation.
1--WE would have then loss of SI5.-
O0O, 600 in twenty-five years, an annual
loss of $500, 600. Oue-half secured by a
safety fund OF $500, 900 and the other
half by coin or bullion. The income,
3
was issued. would be S., 900, 600 a year
The loss would be $500, 600, or a loss OF
only one-tenth of the amount of the in
come, taking the experience of the last
twenty-five years as correct data If
the loss should be 6ve times greater or
] ten times greater than the experience
of the last twenty-five years, there
would be still enough in the safety
fund to cover all possible require
ments- II the safety fund should by
[ any possibility be exhausted, the un-
/ secured solvent notes would be enti-
| tied to preference in pay ment from the
/ assets of the bank and the Individual
/ liabilities of the stOckhOlders- While
the total of insolvent national bank
notes during the last twenty-five years
/ has been SIS 600, 600, the amount de
rived from the assets and Individual
| liabilities of insolveut banks had been
| more than $40, 600, O1O- This is indie
! pendent of the bonds So that such in
| solvent notes, If the banking system is
! conducted as safely in the future as in
/ the past, would be secure without a
/ fund the amount which would be taken
I 70 pay these notes would be taken from
/ the fund which properly belongs TO the
| depositors of the banks.
Grand in its audacity aud revolution
] iziug in its ideas, proposing, as 10 does,
/ TO vest in banking corporations a pre-
/ rouative belonging solely to congress,
/ the foregoing proposition nevertheless
! cmbodies some concessions aud Hdmis-
/ sions IF value aud portent 10 the people
[ at large. Stripped OF all surperd nous
] verbiaye the proposition is as follows.
/ That Tor every E2-66 in ostensible cap
/ ital cluimed by a bank it shall issue
paper hills for two dollars OF this
/ amount one dollar is to have behind it
] in GOLD rrrsfr HrrNHf
/ for its rede mPtion in case of the fGil ure
| of the bank or its retirement from bus
I mess by liquidation The other dollar
| is to have behind IL for its redemption
| in case of the failure Of a bank or its
I retire ment from business the sum of
I two cents in coin or bullion This viF-
/ tually admits:
First-Ihat so far as its use as money
/ or as q circulating medium is concerned.
| money needs no specie basis or metal
! lie reserve for its redemption as Mr.
/ Knox in his proposition makes no pro
/ vision for the redemption Of any OF this
/ bank currency, except in case Of banks
/ becoming insolvent or volunt ariiy re-
/ firing from business. Aud even Tor
this contingency there is no provision
/ for the redemption of more than the
/ one-huudredth part OF the total bank
/ circulation outstanding. In other
/ words, Mr. Knox eoutemplates that the
! average life Of q bank and it's currency
! will be ffty years ranging from one 20
I one hundred years If more than one
! per cent of che total outstanding bank
| currency should need redemption from
| any cause the worth Of One-half OF the
excess would be pro5lematicaL
/ Second-That were It not for the fact
| some banks become insolvent and 9TH
ers wish % retire from business, no
| other money than paper bills would
I ever be required
Now let us give Mr. EnoE's Princi-
piles a broader application The credit
I of the whole people IS better than that
/ Of the banks, while anything the Amer
| lean banlrers' association eau accom-
pIish the whole people, including the
| banksra- 10 their communal govern
l mental capacity, can more easily Eud
/ surely perform The United States
! government will never fail or become
ins 1lvent If a sinking or safety fund
OF two per cent in the hands Of the
banks is a good aud sufficient reserve
Z r., rrrzEz.nfaa a csfreula atinu media then