The great West. [volume] (St. Paul, Minn.) 1889-18??, 1893-11-03
MONEsY /, CREDIT.
A CLEAR AND CONCISE STATEMENT
bu BY, "A. J. WARNER.

The Actual Value Of Lawful Money and
Bank Credits Upon Which Business Il
Done-The RsmaaSdy Proposed by the HI
metallic League.
~oA comprehensive view of the present
situation must embrace in one whole
the entire volume of money and credit.
Before the panic set in the total vol
ume of money in circulation and in
banks, consisting of gold, silver and I'M
covered paper, fell somewhat short of
81 500, 100000. Of this little over ST.
600, 000, 900 was in the hands of the peo-
pie and something less than $500, 0O0, 900
in the banks as reserves. Upon or out of
the $500, OO0. 900 in the banks as reserves
purely credit currency, in the form of
bond credits or deposits, had been built
up, amounting, including the reserves,
to 81, SOC, 000, 900, making total volume
Of money and credit of $4,000. 900. 900.
But from this should be deducted $780,
600, 900 of reserves on which the $4,000
O00, 900 of pure credit rests, this being
already included in the 81 SOC, 900, 900 of
lawful money.
The total volume of money and credit
then stood as follows:
Lawful money. ..................$ 81, 500 600. O0O
Bank credits. ACKNOWLEDGEMENTS. 4MO 600
This volume embraces everything by
means of which cash transactions of
every kind are settled and business obi
cations of every description, involving
money, are liquidated. The claim
therefore that 95 per cent of the entire
business of the country is done by
means of credit has no foundation in
fact. The volume of both money and
credit, by means Of which all business
is transacted, is before us, and there is
nothing outside. If the efficiency of
money and credit, dollar for dollar, were
equal and they performed equal work,
then the proportion of work done by
money and credit would be as 81 $780,
100000 to 100000 100, or as 81 to g.
But the relative efficiency of the cur
rency part of this volume of money and
credit combined is always relatively
greater than the credit part and in
times like these is vastly more efficient.
At all times the efficiency of money, dol
lar for dollar, is probably at least two
to one Of credit
The money remains from year to year
and passes many times from hand 70
hand, while the credit part comes and
goes, rises and falls, as expectation and
confidence rise and fall. This volume of
credit is therefore quite properly desig-
mated confidence money" It is made
with pen and ink by writing credits in
the books of depositors in banks, on which
they are allowed to draw checks. It is
chiefly from loaning this form of credit
that banks derive their profits. It is an
agency of vast Importance in CONNER
cial transactions and safe enough if kept
within proper limits. But the recent
creation of this form of currency in the
United States through the multiplica-
ton of banks has gone far beyond safe
limits. The country has been literally
banked to death. In other words, bank
credits have been created beyond all
bounds of safety. and hence the collapse.
Instead, therefore, of an effective vol
ume of $500, 900, 900 of money and credit
now the credit part has been largely ex-
tinguished by the destruction of conf
dence, while at the same time much of
the 81, 500, 5000 of money has been
boarded.
What is needed at such time to sus-
tain legitimate business and restore con-
fidence is a quick enlargement of the
volume of actual money. Nothing else
will do it. It will be long time before
confidence will again rise to height
that will permit the banks to float 81 ,OOO,-
100000 of credit or make it approximate
in efficiency to like volume of currency.
Moreover, to the extent that this vol
ume of credit takes the place of or sup
plements actual money it is as potent to
raise prices and expel gold as it's equiva-
lent in money.
In good times, when credit is at its
best. the total volume of money and
credit, as above shown, may rise to
$500, 100000 At such times debts are
freely created, but confidence breaks,
credit collapses, and the whole volume is
reduced, as now, to not one-half what it
was six months ago.
AS the $4,000, OOO, 900 of bank credits
arise out of the $500, OOO,O 900 of reserves,
the withdrawal of 800, OOO, 900 of the re-
serves necessitates the contraction of the
volume of credits by $500, 900, 900. Such
contraction can never take place with
out a collapse such as we now see. This
is the condition when debts created with
q volume of currency are often required
to be paid. In England the proportion
of bank credits to actual money is much
greater than in the United States, and
their system could not be maintained a
twelvemonth were it not for the continual
stream of money flowing into England
from her investments outside. That is
quite different from our condition.
What is wanted now, and it should be
done quickly, is a substantial increase in
the currency part of this volume of
money and credit. It is only at an enor-
NOUS sacrifice that any gold can be OBJ
tanned to supply the deficiency, and
enough to meet the present emergency
is out of the question with any sacrifice
possible.
Let congress therefore at once, besides
coming all the silver in the treasury
available, authorize the immediate issue
of at least 800, 0O0, 900 of treasury notes,
redeemable in coin, as provided by Sen
stor Stewards bill, and take up matured