The herald., 1893-12-24
SOME FINANCIAL QUESTIONS,
How About Currency Issued
by the Government?
How Would Such Money Be Put
Into Circulation
And How Would 1t Be Determined
when There Was Enough of 1t
Issued for the Country's
Requirements?

Gov. Lionel A. Sheldon was recently
the recipient OF letter from friend, to
which the following is q reply. 1t pre-
sents some interesting features OF view
of financial matters:
I have your letter in which you ask !:
"Are you in favor of an issue OF cur
rency exclusively by the governments Z
If 80. how would you get it into circula-
tion? How would you determine when
there was enoush?"
For more than 81 years the govern
ment has supplied the country with
paper money. known as greenhacks or
treasury notes. For more than IA years
they have not been at discount, and
never would have been had they been
receivable for all public dues. Ii 1t did
not involve confederation OF another
species OF paper money in circulation,
should answer yes to your frat ques-
tion. We have considerable volume
of national bank notes in circulation
whose sudden retirement would pro-
duce no little disturbance. These latter
notes are good enough anywhere, simply
because the government is surety on
them. If fcurrency is good when the gov
eminent is indoreer, that which Is is-
sued by it as principal should be good.
To supply money to the people is the
prerogative of government-a power
that should never be delegated to corpo-
rations or individuals, on account of the
liability to abuse. The national banks,
from 1882 to 1891. retired their circula-
ton to the extent of $3.50, ,000, 900. pro-
ducing contraction when there should
have been expansion. If the national
banks are to be continued would forbid
retirement of their circulation, except in
caseH where they wished to 60 into
liquidation and OUT of business. prefer
that the government should issue cur
rency directly.
To your second question answer that
at present there is no way in which the
government can put money into circula-
tion except by paying debt, paying for
services, and as fast as it pays out it re-
ceives back in taxes. imports and ex-
cises. The German government has
what are called Reich banks, which loan
the government funds at times at low
rates of interest on collateral or per-
sonal securities, which effectively re-
lieves in times of great financial pres
sure, and has the further effect OF check
ing the exorbitance of other banks in
thsir' interest rates. In this way
larger volume is kept in circulation than
there would be by merely relying en-
what the government has to pay out.
Our government might issue treasury
notes and loan them in similar way
and thereby increase the circulating
volume.
How to determine when there is
enough is more difficult to answer. The
demand for money is variable, which re-
aui-es that there should be elasticity to
the circulation. do not think it can
be best determined on a per capita ba-
sis. The true theory is to base the
amount upon the volume of business.
Our domestic trade aggregates about
$22, ,000, 900, 900 annually, and / do not
think 10 per cent of that amount would
be too great volume of money OF all
kinds. This at present would give us
So, 200, 900 900 instead of between 81 ,600,-
O00, 600 and 81, 1000. 900, 900 now asserted
to be the volume of our money. think
we are deficient in circulation to the
extent of $500, 100000, or that sum
should be added to enable US to do busi-
ness easily. We are now doing business
on 314 per cent cash, as think ia demon
strstable, for though we have a nomi-
nal volume of money much greater than
that, it must BIZ remembers that much
more than one half of it is compelled
by law to lie idle in the banks as re-
serves and in the public treasures.
The volume of greenbackH and national
bank notes is very much less than ap-
pears from the books of the treasury,
for thoaa daatrovad and lost ara mt Do
Quoted from what appears to be out
standing.
1t is inevitable that we shall have
metal money OF one or more kinds, as
we'll as paper money. In order to in
crease the volume of money, would
recoin all gold coin under 500 into 500
pieces, and retire all small notes under
500, and fill their places with twenties,
and open the mints to the holders Of
silver bullion, permitting them to 90
there, get it coined, take their money
and do what they pleaged with it, MAX
ing silver coin legal tender for all sums
under $40. This would open space for
silver large enough for the use OF
four or FIVE hundred million dollars.
Holders would get their silver coined as
long as they could use the coin to ad-
vantage and no longer. There would
be the element OF elaaticity in this plan
to come extent, and the danger OF re.
dundancy would be avoided. If this
would not assure money enough, the
only other resort would be the issuance
OF treasury notes redeemable in gold or
silver coin. Very respectfully,
w. H. KNIGHT, Los Angeles.