The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1892-08-22
What is decentralization Does
Horner's Banking Act Pro-
vide For 1t?

vide For 1t?
Mr.. EDITOR Mr.. Homer objects
to the term "irredeemable paper
money" as applied to the cur
rency proposed to be issued
under his banking scheme. He
is understood to claim that
there are two provisions in the
bill which provide for its redemp-
ton. Before considering these, let
me ask-what is redemption? In
commercial matters it is defined as
"re-purchase by the issuer of notes,
bills or other evidences Of debt, by
making payment to the holder" or
in the words of another authority,
"by paying the value to the holder"
If Mr.. Horner objects to these def
nitions / have only to say that his
quarrel is not with me, but with the
standard English dictionaries. The
ordinary and popular use of the
word corresponds, as we all know,
almost exactly with the definition
given above.
The very idea of redemption in
wolves, of necessity, the admission
that the note, bill or other paper to
be redeemed is not Of itself real
value, but only its representative,
just as a bank check represents
money in the bank to the
credit of the drawer, or a
plantation draft represents value
in cash or goods in the hands
of the agents to the credit of the
plantation. Such paper, like bank
notes, may as a matter of convent
ence be passed from hand to
hand and used in place of
the real values which it rep
resents, but whatever efficacy
it has in this respect is due en-
tirely to its representative charac-
ter; to the belief that the values it
processes to represent are really
behind it, and that it will be paid,
that is to say, redeemed. Money
made of the precious metals does
not have to be redeemed, nor in
deed can it be. It does not repre-
sent value, it is not a promise to
pay, nor an obligation of any
kind it's value is in and of itself.
It may be exchanged or exchange
able for other things, bills and
notes included, but it cannot posi-
sibly be redeemed in any sense of
the word. Such a claim involves
patent absurdity.
Now, how does Mr.. Horner pro-
pose to redeem the paper issued
under his Banking Act? First, be-
ing legal tender for all public and
private debts, it will be received by
the Government at par for all
taxes, duties, licenses, rents and
other obligations due thereto. Al
though this is not exactly redemp-
ton in the strict sense of the
word, it amounts practically
to the same thing, as far as
it goes. But unfortunately it goes
very little way. If the paper
money paid into the treasury re-
manned there, or still better, if it
was cancelled or destroyed, there
might be some sense in speaking
of this as a redemption. But what
actually does happen is something
quite different. This paper, be il
remembered, is a legal tender fol
debts due by the Government as
we'll as to it, and while the Finance
Department is taking it in with
one hand it will be paying it out
with the other, The only portion
of it that can, by any stretch Of
language, be said to be redeemed
is an amount equal to the balance
that may remain in the treasury
What this balance is likely to be
for the next few years others can
judge as well as myself, but 10 pei
cent. of the total amount in circu'
lation would probably be a very
liberal estimate. Taking currency
in and paying it out again is GER
tainly not redeeming it.
Again it is provided that parties
having more of this currency than
they need can deposit it at the
bank and receive in return bank.
book or certificate of deposit bear.
ing 81 per cent. interest. Very
good; but when the depositor pre-.
sents his claim to the bank for
settlement he will receive the same
kind of currency back again
Where does the redemption come
in under this arrangement? The
only rational answer is, that il
don't come in at all. The fnan.
cial system that Mr.. Horner pro-
poses for the country reminds me
of an old story about man who
had dog which he was very fond
of, but which his wife had great
aversion to, and was constantly
teasing to sell. "Well, my dear, "
said he one evening on his return
from business, 81 have sold the
dog and got fifty dollars for him."
"Oh what a darling" exclaimed
his delighted spouse, "you are
just too sweet for anything
and now that you have got so