The World. [volume] (Martinsburg, W. Va.) 1891-1896, 1893-09-08
rHg CURRENCY FAMINE.

In some respects the present panic
is unlike any other in THE history Of a.
nancia. disturbances. The panic Of
1887, of 1877 and other bank panics,
were caused by overissncs Of bank
notes and the undue expansion Of cred
II in other forms, resulting in the ex-
pulsion Of coin from the country. tho
suspension Of specie payments by the
banks and tle3collapse Of credit. The
notes u many Of the suspended banks,
however, continued TO circulate after
specie payments hadbeen suspended, so
that the people were not entirely with
out currency, at least, for home use.
There was, therefore, no currency
famine then as is now witnessed
The reason for this exists in the diff
ference between former bank issues
and modern bank credits. Notes Of
suspended banks might circulate and
form a currency, but bank credits in the
form Of deposits can exist only as long
as bank reserves last; as the reserves 90
this form Of credit currency necessarily
vanishes. That isexaetly tile case now3
tile bank reserves have been largely
drawn upon and bank credits have
vanished and there il nothing to cireu-
late; hence, the existing currency fam
inc.
This fact is clearly exhibited by the
followingagures
Before the panic began there were in
the United States nearly $1,000, 900,
600 Of money gold, silver and uncov-
cred paper of This little over ST.
600, 000,000 were in tho hands 81 the
people, in the tills Of merchants, etc,
performing the legitimate function Of
ready money a little less than $500,
900, 900 were in the banks as reserves.
On this $500, 000,0 900 Of reserves rs q
basis the banks created something over
4 ~, 900, 000,0 900 Of purely credit cur
rency, by writing sums subject TO
check in the books Of depositors. This
has been fifty called " confidence mon.
ey.n Passing by the question Of til,
relative efficiency Of actual money and
bank credits, the total effective eur
rency before the panic began, there
fore, was 81 900, 900, 900 in the hands
Of the people, and 81, 500, 900 900 as re-
serves and rs bank credits, making a
total Of 81, 500, 900, 900 Of money and
bank credits.
What il the condition nowP The
$1,000, 100000 remains in the hands Of
the people mt the $500 ,O00, 900 Of the
reserves have been largely drawn up
on, and Ms the reserves are drawn
down bank credits are absolutely OK
tinguished. Exactly to what extent
this confidence money has been ex,
j tinguished may be difficult to tell. but
at one time, at any rate, it was nearly
all nonresident for practical purposes.
The currency shrinkage is altogeth-
er in this form Of bank credits, the re.
suit being that instead Of a volume Of
$1,000, 100000 Of actual money and
Z $1,000, 100000 Of bank credits to dc
business with, We are left, for the time
n being, with little more than tile money
part Of this entire volume hence 4
currency famine. In fact, here, in this
relation Of bank credits 10 reserves
this dispropoltion between actual mon
o. and credit devices, lies the storm
center whence all modern panics arise.
There is no remedy but. to increase the
proportion Of actual money and re.
strict the proportion of credit Ii ou
volume Of money had been increased
to $1,000, 100000 and credit restricted
to not over S3, 0O0, 0O0, 900 Oh 4 reserv,
OF say 40 per cent there would GER,
tainly have been no panic, and if tht
credit part Of the entire currency vol
ume We're restricted 10 40 per cents 81
the whole, panic such as we are nov
experiencing, and such as 80 often af
fiicts this country, wouldl be impossi
BILE. Panies are not without Il caus,
and are not remediless. But what vii
be the condition. if silver is taken away
and foundation money reduced u golt
only 7 Is il expected that credit vii
be Immediately expanded 70 iii III,
vacuum?
The stability of our money system
depends upon the relation of aetna
Y money to bank credits.
The root Of the whole money qucs
ton lies here.
Eyidentlyswhat is wanted inst now
isan immediate expansion of actua
currency to take the place Of VANISHED
credit. And, generally, We must hay,
broader basis Of standard monei
relatively to the superstructure 81 cred
n; and until this Is done panics, MI
continue to occur and will increase il
81 severity as credit devices exceed SAT-
relations 70 actual money In othe
words, more money and less credit i
required 70 give stability TO our mon
ey system