Butler citizen. [volume] (Butler, Pa.) 1877-1922, 1893-07-14
A Gold Premium.

What would happen if the Treasury gold
gave QUIT The suspension of gold pay
ments by the government in the near
future is a possibility, even though not 8
probability The Treasury gold reserve is
small, and is subject to possible heavy
drafts; the government may be compelled
to resort TO the payment of some of its
hgstions-perhaps the Treasury notes
of 1s90-in silver. What would the con-
sequences be
The first simple consequence would be
premium upon gold. Gold would not be
supplied by the Treasury in exchange for
other money, as it is now, and as it has
been ever since the resumption of specie
payments in 1879 The banks and other
holders of gold would prefer to hold it for
possible or actual need, and would pay to
their creditors and would use in ordinary
transactions legal-tender notes and other
familiar forms of currency. Those who
must have gold, such as importers, dealers
in foreign exchange, persons and corpora
tions having to make payments spec flied
in gold, would have to bid for it at pre-
MUM
But the extent of that premium would
be matter of uncertainty and of specula-
ton. Not infrequently we are told tn.
the suspention of gold payments by the
Treasury would bring Us at once to silver
basis, and to premium upon gold cor
responding to the difference between the
intrinsic value of the silver dollar and the
gold dollar. The silver dollar is now
worth, roughly, two-thirds of the gold dol
lar; that is, the premium would be 90 per
cent, and the gold would be worth $50.
But it is certain that no change of this sort
would occur. The gold premium would
begin by being small-one or two per cent
and its range at the beginning would be
moderate. If it were expected that the
Treasury would soon resume gold pay
ments by getting possession, in one way or
another, of fresh reserve stock, the pre-
MUM would be insignificant. If it were
feared that the suspension would last, and
if it should happen st the same time that
there was a heavy export demand for
specie or heavy need of gold for other
payments, the premium might rise higher.
Its extent would be matter of specula-
ton, and 10 some exte Mt would be affected
by gambling operations, such as those
which affected the price of silver in 1890,
or now affect the current prices of stocks
and grain. If the suspension proved defin-
tive, we may be sure that the gold ex
change would again be opened. Gold
| would be bought and sold for future de-
livery and on margin, and its price would
be affected by rumors and corners and
deals
For a long time however, it is certain
that paper currency-whether greenbacks,
Treasury notes, bank notes, or even silver
dollars and certificates-would be worth
as money more than the silver dollar is
worth intrinsically. The currency would
| be at a discount as compared with the gold
coin, but it would be worth more than the
| silver coin. This anomalous monetary
situation existed in Austria for long
series of years There, too, the paper cur
| rency in circulation was nominally based
on gold, but was irredeemable, and gold
was at premium. The paper was also
rated in terms of silver coin having an
| intrinsic value much less than gold. Not
redeemable in gold. it was yet worth more
than the silver, and this curious state of
things is but now being put an end to in
Austria by the resumption of specie pay
ments On gold basis. If the Treasury of
| ba OF 10
payments, we should be in precisely the
| same situation. Even if the suspension
proved defnitive and the gold premium
became considerable, we should remain in
| that condition for long series of years,
until eventually the currency should so de-
preciate that the premium on gold cores
ponded to the difference between the in
trinsic value of the silver and the gold
dollar.
So far as the immediate effects of the sus-
pension go, general industsy would feel it
little. Some of the opponents of the silver
mania are perhaps disposed to exaggerate
the direct consequences of the financial
collapse. In the business world things
would go on in the main very much as
they have gone on. The Stock Exchange
doubtless would experience shock, and
the professional buyers and sellers of stock
would be embarrassed. But the every day
business world at the outset would notice
the change but little. All those who had
to do with international trade, would, in
deed, he concerned at once. Importers
would have to pay premium on foreign
exchange corresponding to the premium
on gold, and exporters would get that pre-
MUM. The disturbance here would he
real and perhaps serious. But the great
bulk Of our exchanges is purely domestic,
and to them the change would be of no i'm
mediate concern. What the permanent
effects on the general business community
would be is another question. If the gold
suspension proved definite, if the issue of
Treasury notes or other currency contin-
ued in undiminished volume, we should
doubtless have i'll the end a tendency to a
lise in prices, and very likely new per-
iod of initiation and speculation, culmina-
ting in the inevitable crisis. But conse-
quences OF this sort work themselves out
only after years
The financial depression of the last few
months has largely discounted the direct
and immediate effects which the suspen-
sion might cause. Coming suddenly, or
unexpectedly, a Treasury collapse would
shatter credit, and might easily precipitate
a crisis The fear of a collapse has been a
leading factor in bringing about the present
situation; it has already produced those di-
rect effects on general industry which the
shock to confidence might cause. Predic-
ton in matters of this sort is always haz-
ardous; but crises are not likely to come
when they have been expected and are so
prepared for
The real and serious evil of this first
downward step would be moral rather than
material. Public confidence would be
shocked; the repute aud prestige would be
rudely shaken. The failure of the govern
went to maintain its standard would de-
moralze the public conscience. and set be-