The record-union., 1893-01-20
GOLD AND SILVER.
The Most Serious Menace to Our FL
nancial Sy stem.

1t will be remen bered that the Act of
1880 which increased the monthly pur-
chases of silver by the Government also
made change IN the character of the
notes issued against such purchases. [ n
der the Act of l51S certificates were issued
which stated on their ;ace that u certain
number of silver dollars mad been depos-
tied in the treasury which would be paid
over to the holders of the certificates upon
presentation. The Act of 1890, however,
directs the issue of treasury notes which
are redeemable III gold and silver, and
the Secretary of the Treasury is required
to maintain gold and silver at a parity
This requirement practically makes the
new silver notes redeemable in gold
whenever the holders of the notes request
gold in exchange. The refusal to pay
gold for them would at once excite dis
trust and put gold at a premium. 1t is
this very feature of the new law which
carries the most serious menace to our
financial system, and the fact has been
taken due notice of in Europe.
This very point is seriously and intel
Igently discussed by the London Econo-
mist in a recent issue as follows:
"Of the dangers in prospect the gravesG
is due to the fact that while the United
States Treasury is issuing notes repre-
senting its purchases of silver it holds
itself bound to redeem those notes in gold
If required. And the condition of things
to which that is leading may be gathered
from the statement. which shows the
amount of gold owned by the treasury at
recent dates, and the proportion which
that has borne to the Government cur
rency, for which it is bound to pay gold
on demand. Since 1890 the stock of gold
owned by the treasury has been dimin-
ished by nearly &14 600, 600, while the out
standing volume of Government paper
for which gold can be demanded is in
creased by 4lS,000,000, with the result
tnat Whlle on June 30, 1890, the proper
tlon OF gold to notes was 56.S per cent, it
had fallen at the end of February last to
$50 per cent And both the reduction in
the stock of gold and the increase in the
volume OF Government paper currency
were the result of the Act Of 1890. The
forcing out each month of 1900, 900 of
new notes by the purchase of silver not
only swells the gold liabilities of the
Government, but tends to drive gold out
of the country, because the gold is the
only part OF the currency that has as high
value abroad as at home, and when the
channels OF circulation become gorged by
the continuous addition of fresh paper
money, irrespective altogether of current
requirements, the natural result is the
displacement and export of gold. The
process, too, is not unlikely to 90 on still
L
seen that the changes that have taken
place In the composition of the active cir
culatlon, that between 1880 and 1891 there
was very rapid reduction in the circu-
latlon OF national bank notes, the issue of
which had to be curtailed, as the Govern
ment bonds upon which they were based
were paid off. Thus a void was created
which the paper issued against the treas
ury purchases went to fill. Now, how
ever, the contraction of national bank
issues has ceased, and as the treasury
notes have to make room for themselves
their tendency to expel gold may be ex-
pected to become more decided. And in
these circumstances, if the treasury is to
go on adding at the rate of Ell .OOO. 900 a
year to the volume of its notes, payable
in gold, the question comes to be, how
long will it be able to maintain gold pay
ments. If once any serious doubt arose
as to its ability to pay gold if aud when
required, its gold stock would be very
speedily drained away, as there would be
scramble among the holders of the
notes to get paid before the gold WAS ex-
hausted.
"For our part, we do not believe mat
ters will be suffered to go so far as that
The good sense of the American people
will lead them to recognize the danger
and to take measures to avert it before it
is too late. But the fact remains that it is
as dangerous for the United States Treas
ury to go on pouring out million of notes
which, although representing purchases
of silver, it construes as promises to pay
gold not only without increasing its stock
of gold, but with the inevitable result of
diminishing its stock of the metal as it
would for, say, the Bank of England to
act in that way. The policy which in
less than two years has reduced the pro-
portion of gold to notes from 56.S per
cent. to 2S.6 per cent. must, if persisted in,
land the treasury in serious embarrass-
ments, and the sooner it is abandoned the
better" r."-Dickerson Guide.