The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1891-05-25
WARNING TO THE FIATISTS
A Gold Reserve Fund Is the First Lesson
in the National Banking Primer.
Facts About the Assets of the Treasury Which
Go to Show Why 81 in Gold in Reserve Is
Equal to SIS Of Circulating Medium.

the available assets of the Treasury seems
to imply as uncertain ideas about the mean
ing of the English language as about the
conduct of financial operations. Neither in
fighting nor in financiering Is q reserve any,
thing but q reserve. 1t is not an active
force. 1t is q contingent fund, of men or
money, held outside of and sacred from
active engagement, in order that it may be
available for some special purpose in time
of need. This Is true of reserve" in the
general sense of the term. Much more is it
true Of the 500, 600. 900 held against the
greenback circulation; for it is not only re-
served from ordinary uses. but 1t Is appor-
toned and set apart for q particular object,
known and specified ever since the resump-
tion act went into effect. One might as
we'll inquire whether the money approprl-
ated to improve the harbor of Galveston
could be used to pay the salaries of pension
employees. and counted as a part of the PEN
sion appropriation, as to ask whether the
legal-tender reserve can be included among
available assets.
People forget simple facts very speedily.
Probably there are not q few to whom the
name OF this gold reserve conveys little
definite notion of it's origin OF purpose.
When this government proceeded to make
good the promise to pay which it had
stamped upon it's paper money by offering
W cACuduBc ROlu IOT I'll SUCH pdptT uOttS
as might be presented at its treasury-the
process known as assumptions serious
practical question arose. 1t was not pro-
posed, unfortunately. to call in the green
backs as fast as gold could be obtained and
paid out for them. This, the obviously fair
and proper proceeding, which would have
saved us q world of misfortune in the
future, was prevented by the urgent plea of
the advocates of an inflated volume OF
money. 1t was decided simply to let the
lace n -....f. .AAa
of redeeming them outright. Congress
provided for their continual reissue and
forbade that the aggregate volume of them
ehOuld be diminished at all. This being
determined upon. the practical question
was what proportion OF their total amount
would it be necessary to keep in the treas
ury in gold in order that they should cir
culate at par with gold and the pledge of
the Nation be redeemed. This is the be-
ginning of the gold reserve.
RESULTS OF PRACTICAL EXPERIENCE.
Secretary Sherman In deciding this ques-
ton followed sim ply the experience of the
ordinary banker. Every bank has out
standing obligations immensely in excess
of it's Immediately available assets. 1t
makes loans on time, using for that purpose
q portion of the deposits left with it sub
ject to demand. The people who have
money at q bank never draw it out all
together except in time of panic. Prac-
tical experience In the business showed
that an available cash fund of about
80 per cent. is sufficient. That ia to say,
about one-thlrd of the amount actually de-
posted with a banker will serve to supply
all calls upon him from day to day, leaving
the other twO-thirds free for other employ
ment. If he keeps less than that on hand
he Is liable to suspension some day when
deposits are light and drafts are heavy.
The percentage to be held is rather less
now than it used to be, and business has
been done safely on a narrower margin.
But this was the calculation when resump-
tion went into effect, and III has been the
judgment of our best financiers that @ gold
reserve of 500. O00. 900 held in readiness to
redeem legal tenders when presented in any
amounts. would be neither too great nor
too small to float the entire bulk of our
dent to the simplest mind thar this is a fund
which is. less han any other, available"
for any purpose but that indicated.
1t has bothered and angered the initiation
lists and the fiatists a great many times to
see tins sum of money lying apparently idle
in the treasury. And many ave been the
schemes for setting it into circulation.
These people live in an era so far removed
from the paper-mOney regime that they for
get altogether that every dollar of this gold
reserve, doing nothing but staying in the
treasury vaults. is actually enabling more
than three paper dollars to remain in circu-
iation and to perform all the Offices of
money. The1egal tenders amount to $780,
OO0.O 600. They circulate among the people
as readily as any other form of money.
They do this simply and solely because the
man who receives them knows that he can
get an equivalent amount of gold for them
at the treasury on demand. And he
can get it simply because this reserve
of $780, 600. 900 is kept there FOR that
specific purpose. Once let that range
ment be broken. and the S346, OO0. 900 of legal
<ooAnro urnpf6 otnE A. Tho xynr ~ l No.,
Abolish the gold reserve. or even SO much
as establish the proposition that il might
or could be turned to some other purpose,
and you destroy at once the found alton of
certainty and security which great finan-
ciers have built below that uncertain and
insecure quantity, the ~greenback, and ex-
pose its inherent weakness. The preseEva-
tion of the reserve intact is the guarantee
OF specie payments.
A SUGGESTION.
OF course no one thinks for a moment
that any body connected with the treasury
or the mint at the present time would
dream of infringing upon the gold reserve.
All that has been done is to make a sug-
gestion of bookkeeping. 1t has occurred
to somebody hat a good showing might
be made, at q time when the
resources of the treasury have been
drawn down by liberal %appropria-
tions. by entering this 500. 900, 600
among funds Immediately available. The
actual reserve would not be touched at all.
But there is danger even in the suggestion.
just as the public may forget, in a few
years. the 1inperious necessity of such q
fund and the circumstances out of which it
grew. so might the same public become
familiarlZed with the idea that this reserve
is availabl Die cash. until it should insist up
on its nse as such. Indeed, We should not
expect the gold reserve to be entered on the
books as an available resource for many
years before some act of Congress would
appropriate the whole OF part of it to some
other purpose, It is q sacred fund. 1t must
be let alone. At the came time this Incl
dent emphasizes once more the folly and
the danger of retaining the greenbacks as
a part of our motley currency. The last
excuse for their existence has vanished. We
know them to be the most dangerous form of
currency In existence. We have provided
for such q liberal use of silver, and such
an extension of the paper currency by the
Issue OF silver certificates, that the widest
advocate of inflated money volume cannot
even a silver dollar behind them. All of
their total which Is not covered by the
gold reserve Is q debt, and nothing else but
Q debt. lt Is a debt. moreover, which the
Nation, by providing for their continued
reissue, promises that it will never pay. 1t
would be a great currency reform if we
were to get rid of the gold reserve in the
one right. safe and honorable way of dis
posing of IL permanently. That way is to
circulation requires it's maintenance.
When we get a Congress both intelligent
n courageous, bold enough and wise
enough to see that the right thing il the