The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1893-10-20
OUR MONEY SYSTEM
Finance Discussed by Horace
White at the Bankers Congress.
What an Elastic Currency Means and
How 1t Can Be Secured-Address
by Ex-DirectOr Leech.

with the subject of finance says that we
ought to have an elastic currency. What
is meant by that? Evidently ii means
currency that will expand when there is
active demand for il and contract when
the demand subsidies; This suggests an
other query: What do we mean by de-
mand? We mean the demand for money
to carry on the exchange of the products
or the country, which, moved at certain
periods and years in larger volumes than
at other periods and years, depend upon
the state of the crops and the market for
ought to be elastic in the sense of being
more abundant when the exchanges OF
goods are rapid and extensive. and less
abundant when the contrary conditions
exist. How can we get this kind of cur
rency? We cannot get it from the govern
ment, because the government cannot
diminishing. 1 believe it has never been
proposed TO gauge the issuing of currency
by the collections at the custom house,
but that method will be much more philo-
sophical than the per capita method" :
Mr.. White then gave the history of
money from the early ages to the present
day, and, continuing, said: but the point
/ wish TO illustrate is that a check on a
bank, private individuals acceptance,
company, or any kind of shin plaster will
perform all the functions of a bank note
If the public have the same confidence in
the issuer There is no difference between
the check and the bank note as regards
their intrinsic nature and character.
perfectly elastic currency would be one
pasSu with the quantity of sugar, flour,
cloth and other commodities seeking to
be exchanged for each other. 1t is easy
to see that the check system is automatic
and elastic and that 1t accommodates it
self to the volume of the business at one
time as well at another. 1t is not quite
so easy to see that the bank-note system
may be automatic and elastic in the same
way.
Now our problem is 20 devise a system
where the bank notes shall be elastic like
the check, and in like manner make barter
a science. We can see now, if not before,
why the government has no facilities for
imparting elasticity to the currency. 1t
has neither the requisite knowledge OF the
needs of business nor the means of respond
ing to them. Even If it had an oracle to
keep it informed of the needs of business
il would have means of putting the
money where it is needed unless it should go
into the business of diScounting commercial
paper, in which case it would have to re-
ceive deposits also and perform the other
functions of a bank. Under the George
Smith regime, when the certificate of de-
post was first made prominent, there was
abundance of money for legitimate trade
This means simply that for the purpose of
bartering the consumable products of the
country against each other there was no
lack of instruments of exchange. 1t is not
banking function to furnish capital for
permanent works Of any kind Most of
the misfortunes that have overtaken banks
In this country have resulted from loans
10 spectators, such as advances to rail-
the like. No currency will ever be elastic
enough to satisfy such wants
THE requisites of an elastic currency are
ilrst, that there must be no limit set upon
IL except the demands for instruments
win which TO exchange the consumable
products and materials moving throueh tbe
country, including such as have been i'm
ported from or are going to foreign coun-
tries; second. 1t must be issuable at once
as the demand for it arises without wait
Ing for somebody else to do sometime
else, and without spending more money in
making prepare tons for it than is finally
obtained. The present national hank cur
rency is not now and never was an elastic
currency 1t has great and aboundin .
merits, but elasticity is not one of them
VI idte years IT has been losing such elas-
ITCHY as It had in the beginning. Insfead
OF expanding with the wants of trade il
TSs Deen contracting in the face OF them
ness. "i'ioi VI pusi-
The The great merit of the national bank cur
aSncy Is IT'S security. This is due to the gov
ernInents guaranty, which, in its turn is
justified The government guaranty is also
- ,ieti TOT the note holders. The question
- Whether United States bonds can he dis
i Pensea with as part of the security of the
government" Mr.. White then read the COW
~ communication from the Controller of
,ne United states showing that the taxes
levied on the national banks of the United
Stdtes since the organization of the system
of 'u s1so Iss nod 5he government the round
therefore,, that If there had never been any
pond security for national bank notes The
so9Tneernment would have lost less than q
million dollars by redeeming the notes Of ali
lalled banks. To put it in another way: If
t thSre h Iaaa neen common fund of some
,Ling less tnan million dollars accumu-
lateQ by taxation of bank notes no loss
would have resulted to the government.
Mi. Whlte then went on to say: Bond Sc
curlty for bank notes Is not consistent with
elasticity If you ask me whether I con-
sloer elasticity a more valuable feature than
security, l say decidedly not Our aim
Snoulu De Tor both security and elasticity
Both are attained in the Scotch system bv
unlimited liability Of the shareholders of
, Hahhs ,or their note issues Formerly the
except three. were unlimited as to all claims
wnEatsoever, but since the failure of the City
OF 1t, the unlimited liability clause has been
repealed, except to note issues Thus it
has happened that the notes of failed banks
IN scotland nave always been received by
tne otner banks at par, and have never de-
preciated although they have neither bond
security nor safety fund behind them.
III bank note system is both elastic and
secure we have every requisite of a perfect
system. What we mean by security IS the
Gonvertibility of the bank note into gold on
months that signs have appeared in the
financial armament that the limit Of fiat
millions of gold has been reached. / only
| regret that this additional circulation for
which We see there was real demand was
| OBTAINED at such a costly. rate by the pur-
4
| might have been more easily and accurately
served with bank notes, which cost nothing
but the printing. 1 say bank notes-not gov
eminent notes. Another reason why bank
notes are preferable is that they are con-
tinually balancing each other i'm the trade OF
| the country, just as checks do. In other
words, they redeem themselves without the
| use of gold. Gold is needed as a touchstone
| all the time but its actual transfer is re-
| quired only to settle balances of information
| al trade"
Mr.. White then exampled the imperial
| banks of Germany, France and England
| as another way to dispense with bond Sc
curity for bank notes. He also said:
There is no reason that / can discover
why the national banks should not be al
| lowed to have branches as the Scotch and
| Canadian banks do" Mr.. White then
| went on to show why the national banking
| act must be gotten rid of, If a flexible cur
| rency is secured, in so far as the bond Sc
| curity" clause is concerned, saying: IF
| bond security were dispensed with and
its place taken by either safety fund. un-
limited liability or bank consolidation, an
| elastic currency would be secured In
conclusion Mr.. White read the bill which
was drawn up by him last winter and in
PRODUCED in the House of Representatives
by Mr.. Walker of Massachusetts
LEIGH ON SILVER.
E. o. Leech, ex-Director Of the United
States Mint, a New York banker,
read a paper on THE silver question, as
related to the appreciation OF gold" He
said:
He must be blind, indeed, who fail to
see that the dfstruSt, which was the main
feature OF the recent panic. had its birth
ing short of radical reversal Of this policy
Will restore confidence and attract foreign