Wood River times. [volume] (Hailey, Idaho) 1882-1915, 1892-09-10
some FACTS AS TO NATIONAL
RANKS.

Peoples party, and plank demand.
ing their abolition has always been
prominent in their platforms.
This hostility seems to be predicated
upon the supposition that they can in
vest their capital ia government bonds
at par, and get interest on them, and
issue an equal amount in circulating
notes which they can also lend and
so get double interest. But this is
very far from being a correct states
ment of the case.
The facts are that since the close of
the war government bonds having
some time to run have always been
at considerable premium, except the
late issues of per cent. bonds upon
which the interest amounts to almost
nothing); and this premium dimin.
ishes at tho rate of about l per cent.
per annum, causing that much loss to
the holder For instance, United States
4 per cent. bonds due in 1907 are now
worth about l6 per cent. premium.
They will be redeemed at par in 5
years, hence it is manifest that the
present holders are bound to lose q
little over ! per cent. per annum
on them. This practically reduces the
rate Of interest to less than per cent.
per annum.
The privilege of issuing currency
may be and often is source of loss
instead of profit to the bank; and
where money is worth as much as 8
per cent. interest it is bound to in.
volve a loss if used.
TO illustrate: Suppose bank puts
its whole capital of, say, $4,000 into
bonds to secure circulation. This
would buy, at l6 per cent. premium
$43, 103 in per cent. bonds upon
which it could only issue 80 per cent
Of their face in circulating notes. The
law requires s per cent. OF the circu-
Iation to DO kept At Washington all the
time as a redemption fund, and IL
per cent. OF tho circulation and dc
posts to be held in reserve all the
time.
This reduces tho actual circulation
20 per cent, and will only leave $751;
Yrs for the bank to loan, besides
which the government levies semi>
annual tax of ] Of per cent. upon
the circulation issued.
Assuming money TO be worth 10
per cent. interest the account would
stand thus at the end Of year:
| CIR.
By interest on $31 .725 for one year at per
By interest on $4s.l 03 government bonds at
per cent ..'....'.,..... ................ i''2A
Total interest received by bank $500. 81, GO!
To per cent depreciation on govern
To per cent. tax on ssi .7S5 circula.
| ZION. ............... ...-....... olt- "a
Net am ,uns interest received on $780,
UOo capital ......... .............. 1850
which is a fraction ever s per cent.
Now il, instead Of getting any cir
culation, the bank had loaned out it:
whole capital at 8 per cent, 1t wouli
have this to show:
Interest $50 900. year. at yer cent. "a 80
But by INDUCING in circulation 1t only gets. 1856
And loses the difference go
so that at the end Of the year it would
be 5000 better off without any circu'
la,ion than it would be with all tn,
circulation it could get.
If instead of per cent. bond tn,
circulation was based upon a pc
cent. bond it is manifest that the
per cent. tax and the loss of in,eres
s on the 80 per cent. Of deduction fron
It loauable funds would more than de
l. stroy all of the interest on the bonds
t If this circulation business was q
?? profitable as imagined, all Of the ma
tional banks would have as much of i
as possible; whereas, in fact the bank
e do not average over 25 per cent. o
the circulating notes that they nigh
!. issue, and many of the largest one
such as National Park Bank of New
York, capital 100000, and tn
First National OF Chicago, capita
!. $4,000, 600, have no circulating notes
at all.
Job Printing ut the TINES Office.