The islander. [volume] (Friday Harbor, Wash.) 1891-1899, 1894-12-13
The Financial Question.

The Financial Question.
During the last month the gold re-
serve in the treasury for the purpose of
redeeming the notes of the government
circulating as money in the hands of the
people became so reduced, and its fur
ther depletion in the near future seemed
so certain that in the exercise of proper
care for the public welfare it became
necessary to replenish the reserve and
thus maintain popular faith in the abil-
ity and determination of the government
to meet as agreed its pecuniary obliga-
lions. 1t would have been we'll if in
this emergency the authority had exist
ed to issue bonds of the government
bearing low rate of interest and ma
turing within short period. The last
session of congress having failed to con-
fer such authority, resort was necessa-
rily had to the resumption act of
1875, and, pursuant to its provisions,
bonds were issued drawing interest at
the rate of 5 per cent per annum and
10 years after their issue, that
being the shortest time authorized by
the act. I am glad to say, however,
that in the sale of the bonds the
premium received operated to reduce
the rate of interest to be paid by the
government to less than per cent.
Nothing could be worse or further re-
moved from sensible finance than the
relations existing between the currency
fho hos fsc,,oH ho rvolI
held for its redemption and the means
which must be resorted to for the pur-
pose of replenishing such redemption
fund when impaired. Even if the
claims upon this fund were con-
fined to the obligations originally
and if the redemption of
these obligations meant their cancella-
ton, the fund would be very
small. But these obligations when re-
ceived and redeemed in gold are not cam
celled, but are reissued and may do duty
many times by way of drawing gold
from the treasury. Thus we have an
endless chain in operation, constantly
depicting the treasury's gold, and never
near final rest. As if this was not bad
enough, we have by statutory declara-
ton that it is the policy OF the govern
ment to maintain the parity between
gold and silver, aided the force and mo-
mentum of this exhausting process and
added largely to the currency obligations
claiming this peculiar gold redemption.
Our small gold reserve is thus subject to
drain from every side.
DEMANDS INCREASING.
The demands that increase our danger
also increase the necessity of protecting
this reserve against depletion, and it is
most unsatisfactory to know that the
protection afforded is only temporary
palliation. 1t is perfectly and palpably
plain that the only way under the
present conditions by which this re-
serve, when dangerously depleted, can
be replenished is through the issue and
sale of bonds of the government for gold,
and yet congress has not only thus far
declined to authorize the issue of bonds
best suited to such a purpose, but there
seems a disposition in some quarters to
deny both the necessity and power for
the issue of bonds at all. I cannot for
a. moment believe that any of our citiz-
ems are deliberately willing that their
should default in its pecuni-
ary obligations, or that its financial
operations should be reduced to silver
basis. At any rate, l should not feel
that my duty was done if l
omitted any effort I could make
to avert such calamity. AS
long, therefore, as no provision
is made for the final redemption or
the putting aside for the currency obll-
cation now used to repeatedly and con-
stantly draw from the government its
gold, and 80 long as no better authority
for bond issues is allowed than at pres
emit exists, such authority will be
utilized whenever and as often as be-
comes necessary to maintain sufficient
gold reserve and abundant to save the
credit of our country and make good the
financial declarations of our government.
Questions relating to our banks and
currency are closely connected with the
subject just referred to, and they also
present some unsatisfactory features.
Prominent among them are the lack OF
elasticity in our currency circulation
and its frequent concentration In imam
,ial centers when it is most needed in
other parts of the country. The abso-
ute enforcement of the government
from the business of banking is the ideal
relationship of the government to the
circulation of the currency OF the
country.
SECRETARY CARLIsLE's PLAN.
This condition cannot be Immediately
reached. but as a step in that direction
and as a means of securing more eias-
tic currency and obviating other obJec-
lions to the present arrangement OF oank
the secretary OF the treasury
presents in his report scheme modify
ing the present banking laws and pro-
viding for the issue OF circulating NOTES
by state banks free from taxation, under
certain limitations. The secretary e1-
plains his plan so plainly, and Its ad-
vantages are developed by him with
such remarkable clearness, that
any effort on my part to present
argument in its support would
be superfuous. shall, therefore, con-
tent myself with an unqualified lndorse-
ment OF the secretary's proposed changes
in the law and brief and an Imperfect
statement of their prominent features.
It is proposed to repeal all laws provld-
ing for the deposit OF United states
bonds as security for circulation; TO per-
NIT national banks to issue circulating
notes not exceeding in amount IS per
cent of their paid-up and unlmpalred
capital. provided they deposit with the
as a guarantee fund In
United States legal tender notes, includ..
inc treasury notes of 1890, a sum OF
eonal amount to 80 per cent OF the notes
thew desire to issue; this deposit to be
maintained at all times, but whenever
anv hank retires any part of its circula-
ton proportionate part OF Its
0rarantee fund shall be returned to
It: to permit the secretary OF
t th treasury to prepare and keep on
h l readv for issue in case an increase
in circulation is decried, blank national