The herald. [microfilm reel] (Los Angeles [Calif.]) 1893-1900, 1894-09-02

with accrued interest payable every
year. This currency became depreci
sted, and finally both the private bank
and the provincial institution appear te
have become failures.
There 10 one other establishment thai
| mention here. because, though it was
instituted in comparatively recent times
and still survives. it's methods ere &c
like those advocated by Mr.. Gator as 10
be worthy of note as comparison.
The bank OF Norway 10 virtually car
ried on and controlled by the etsts and
has the exclusive privilege of issuing
notes in Norway, which are legal ten
der for all debts.
These notes are issued on land recuri-
ties to the amount Of rs Per cent of the
value OF the land pledged. The interest
is per cent per annum, payable semi
annually, and per cent OF the principal
must be paid every year; thus the debt
ia liquidsted in 20 years instead of go, as
proposed by Mr.. Gator. Otherwise the
plans are strikingly ALIKE.
In case OF default the land in pawn lie
sold at public auction and the proceeds
to the amount Of the debt and interest
paid to the bank.
A promise to pay in gold on demand is
upon the face OF these notes. but as a
matter OF TACT the people prefer the
notes to gold.
One more brief reference to what oc-
CURED in England at the close of the
last century:
In 1898, in consequence of the failure
OF 300 out OF $50 banks then existing in
England, and the withdrawal OF large
amount of specie from the vaults OF the
Bank OF England. parliament directed
the bank to suspend specie payment.
The effect in this case 10 worthy OF note,
for instead OF depreciating the value OF
the Bank of England notes. as might
have been anticipated. this action actu.
ally appeared TO advance it. For the
fret three years after suspension the
notes, strange to relate, commanded a
premium over gold. though subsequent
ly, during the 90 years of the continu-
ance OF the suspension. they were at a
discount.
There seems to be need oil come ex-
planatioa of the diverse effects produced
by similar causes in the cases related.
1t seems to me that the cause of all
the failures Of the eforts to supply the
people with q currency whose value de-
pends more or less on ths confidence
which the public may have in it may be
given in two worda-overissue and spec.
ulation.
As long as people are convinced that
currency. is money, it is money.
An issue OF currency, not redeem
able in gold, is usually termed "iat
money" 1t seems to me that O more
appropriate name would be faith money,
since its value depends upon the faith
the people have in it.
All money. not excepting gold, ia fat
money in the most extended eense only
instead OF the fiat having been uttered
by single state. it is the joint utterance
OF tie whole family of nations engaged
in commerce.
No one pretsnds that gold Ia naturally
q medium of exchange, but is 30 because
the whole civilized world has agreed that
1t 10 the most convenient one. Had they
sgreed to select the cowrie shell as such
medium, oowris shells would have had
~ stable value as gold has now.
Even further; should any one nation
select different medium of exchange
from all other nations and their people
have faith enough In its usefulness to
uas 1t to the exclusion of all other, aud
the other nations became convinced that
acquire the same, or nearly the same,
value with them as with the country
that adopted 1t.
This seems evident, for if citizen OF
one OF these nations, engaged in COM
MERGE, could procure the same amount
OF valuable commodities with the cur
renoy used by the inhabitants of the
frst.named nation, when trading with
them, as he could with his own more
universally used currency, it would be
as valuable TO him, for it Is clear that
the ultimate object of the trader is not
the money but the goods that it pur.
chsses.
If thousand cowrie shells are worth
q dollar on the weHt coast OF Africa
that is, they win buy the same amount
of merchandise that dollar would buy
"a Boston merchant. ready to start on
a voyage to that coas., would not refuse
a Thousand CO wrie shells because they
do not pasa current IL Massachusetts.
He knows that where he is going they
do pass current. TIE people there have
faith in them as money. and he has
faith in their faith.
1t 10 true, ii is stated that gold was
selected and retained as a medium of
exchange because 1t has an intrinsic
value OF its own. But that is only max
ing the same statement in another way.
The fact of its scarcity is really what
causes people to have faith in it. Sup
ply that faith in another way and the
Same universal confidence ensues.
II some means could be devised to
keep the finances OF the country out Of
the hands OF the speculation. and to 40.
sure ths public that no more currency
would be issued than could be redeemed
that is, that it would always be &C
cepted in exchange for valuable COM
modities-and that currency, no matter
of what character, would become as
valuable abroad as at home and be truly
faith money.
But unless effective msaaures are
taken to hedge it around with these
safeguards, the same disastrous results
may be expected to follow the Issue of
any kind OF money not redeemable in
gold on demand as has hitherto attended
such attempts.
Santa Ana, Aug. 81, 1894.
rnrvNITv N