The record-union., 1894-12-05
State OF THB FINANCES.
[coNT1NUED FROM FIRST PAeE.l

CONTINUED FROM FIRST PAGE.
ness at home, while their purely COM
merclaI relations with the people of
other countries, upon whom the pro-
ducers of exportable commodities are
compelled TO rely Tor the consumption of
their surplus, cannot be profitably main
tanned unless they are always in condi-
tlon to pay tor what they buy in as good
money as they receive for what they sell.
We cannot, therefore, preserve our trade
relations with the best customers for our
surplus products unless we maintain a
monetary system substantially in accord
with theirs, and until they manifest a
disposition TO cooperate with US in max
ing q change on terms just and fair to
all our interests, we ought to continue
our adhesion to the gold standard OF
value, with as large use of silver as is
consistent with the strict maintenance OF
that policy.
''Since the resumption of specie pay
ment, United States legal tender and
treasury notes have been redeemed in
gold to the amount Of 100000, 900, and all
Ghe notes redeemed have been reissued
and are now outstanding. They are a
constant menace to the gold reserve, and
no scheme of financial reform can he
complete or etiectual which does not pro-
vide at least for their gradual elimination
from our currency system. L am con-
WINGED that the interests of the country
require such change in our organization
as Will discharge the Government en-
tirely from the business Of issuing or re-
issuing these notes, and thus relieve its
financial department of periodical de-
mandS on its resources, which under the
existing system must continue to disturb
the financial and general business affairs
CT the people.
ARBITRARY REGULATION OF VALUE.
Arbitrary regulation of the value OF
circulation TO be kept outstanding is
wholly inconsistent with the maintenance
OF a healthy financial condition, and is
the exercise OF a function which does
not properly belong to the Government
or any other public authority. It's effect
Is to force paper currency on the people
when it is not needed, and to deprive
them OF it when it is needed, thus estab-
fishing and maintaining an improper and
unwarranted connection between the
Government and the private business at
fairs OF It's citizens, and making their sue
cesSful prosecution largely y dependent on
the caprice of a superior authority hav-
Ing no interest in the transaction except
perhaps 4 partisan interest not in har-
mony with sound financial arrange
ments.
Under our present currency system,
80 tar as it consists OF notes issued by the
United States Government, the volume
OF circulation was intended to be, and IS,
IN fact, Interchangeable. 1t is unalterably
liked at u certain amount, and no matter
how great the emergency may be. 1t can
neither be enlarged nor diminished. The
only part Of the currency possessing III
any degree the quality OF elasticity IS that
issued 10y the national banking associa-
tlons, and it is now generally conceded, L
believe, that in that particular, at least, 1t
has failed to meeet the requirements or
the situation at some of the most critical
periods in business affairs of the country.
Its failure is credible, in my opinion, to
the principal cause, first, to the large
volume of United States currency OF
various kinds kept constantly outStand-
ing, making the contraction or eXpan-
sion of the comparatively small national
bank circulation less effective than it
would otherwise have been; second, the
difficulty and delay in producing and to
some extent in retiring circulation;
third and mainly. the provisions of the
law which require the deposit OF
United States bonds to secure circulation
and restrict the issue in notes to 90.per
cent. OF the par value of the bonds.
with S900,G00,000 in United States
Treasury notes, silver certificates and
gold certificates, besides about S625 200, 600
in gold and silver coin constantly out
standing, none of which can be lawfully
retired by the Government without the
substituting Of other currency in its
place. the national bank notes, which
amount to only 500 800, 900, or about Il
per cent. of the whole, cannot exert q
very effective influence on the volume OF
outstanding currency at any time. espe-
cially At times when large contractions
or expansions are most needed. But the
greatest difficulties are encountered, and
the national banking system as now or
ganiZed is least effective, when the busi-
ness of the country demands quick eX-
pansions of the currency to meet sudden
emergencies.
''In addition to existing Instructions to
the prompt increase and decrease of cir
cUlation, the ninth section of the Act Of
July u, 1882, which provides for the eX-
tension Of the corporate existence of ma
tlonal banks, expressly prohibits them
from retiring their notes to a greater
amount than S3,0O0,0 600 In the aggregate
per month, and advocates that no bank
which made deposit OF lawful money in
order to withdraw its circulation shall be
permitted TO make any increase in its
circulation for period of six months
thereafter. These provisions are so man
testly in conflict with the dictates ol
sound policy that they require no COM
ment.
PLAN OF RELIEF.
"In view of the foregoing considera-
tions, and many others that might be
urged in favor of reorganization and
reformation of its paper currency system
/ have prepared the outlines of plan
which, in my opinion, will relieve the
Government to q great extent from the
burdens now imposed upon ii, secure
within reasonable time a safe and elastic
National and State bank currency, anC
result ultimately IN the permanent retire.
Inent of United States legal tender notes
of both classes. 1t is, in brief, as fol.
lows:
"First-Repeal all laws requiring OF
authorizing the deposit of United State:
bonds as security for circulation.
''Second-Permit national banks tC
issue notes to an amount not exceeding
20 per centum of their paid up and i'm.
paired capital; but require each bank be-
fore receiving notes to deposit guarantee
fund, consisting of United States lega