The St. Johns herald., 1893-06-01
Sale of Bonds to Maintain Gold
 Payments.

There are now outstanding $346,- 100000 in legal-tender notes and S130,000,000 of Treasury notes of 1890. The notes are redeemable in gold on presentation when gold coin Is demanded for them. When re- deemed they are not. cancelled but reissued. If, therefore, the whole $476,000,000 were redeemed in gold they would still be in circulation to be redeemed again. In addition Treasury notes outstanding are in creasing at the rate of nearly four million per month. If the gold re- serve is constantly maintained by the sale of bonds, and constantly depleted by the redemption of these notes, when is the sale of bonds to cease? The only answer is, it can not cease as long as there is a de- mand for gold. Bonds sold abroad for gold will be paid for in gold procured in this country. In other words, the United States will sim ply fund its notes into bonds in- stead of redeeming them in gold :; and, as 1t continues to issue the notes, there will be no end to the funding. If. on the;contrary, legal tender notes and Treasury notes could be cancelled when once re- deemed, there would be a prospect that maximum bond issues would not exceed the $476,O0O,000 of these notes outstanding.
 It was just Said that while the notes are reissued they will be pre- sented again and again for redemp- tioE as long as the demand for gold lasts. It is therefore of some inter- est to know what causes this de- mand. There is, first, an adverse balance of trade but this itself is the effect of the unequal distribu- ton of the currency and its accum- ulation in the Eastern money mar kets and importing cities. Second, there is the manifest determination of the European nations to unload their silver on the United States in exchange for gold. This process will only cease with the exhaustion of the silver stock of Europe, or the exhaustion of the purchaser. The United States encourages the continuance of it by offering an exorbitant price'in gold, which these nations want, for silver which they desire to get rid of. Until the h. ternational Monetary Conference there was some doubt as to how the nations of Europe stood on bimet- allism. Since, there is none. They are all in favor of the gold stand ard, and intend to have 1t as soon as possible; and they are all now scrambling for the gold of the Uni ted States. They will probably get all they want, for there is absolutely nothing the Administration can do to maintain the gold standard ex- cept to sell bonds as long as the de- mand continues. If there was a law to stop the reissue of notes when once redeemed, or a law to stop the purchase of silver and the issue of Treasury notes the position would be simplifed. But, even if an extra session of Congress be called, it is doubtful if the none tary fanatics in that body will per init useful enactments.
 Strong action upon the part of the Treasury is necessary to main tain the parity of the two metals as required by the act of July 14, 1890. All notes redeemed for gold should be held to await the action of Congress when it meets, not re- issued as at present. If bonds are sold they should be sold to the Ma tianal banks for gold or gold notes, legal-tender and Treasury notes, the banks to issue circulation upon them to take the place of the legal tender notes held. Bonds should 1 not be sold abroad if possible to avoid lt.-Rhodes' Journal of Bank ing for May.