The Vermont watchman. [volume] (Montpelier, Vt.) 1883-1911, 1895-01-02

in one form or another, all redeem
able in gold and being used over
and over again to draw gold out of the
treasury" The Carlisle plan would re-
tire, at the outside limit, some $780,
900 900 of the legal tenders, as fund to
protect the circulating notes of the
banks organized under his system, but
there is no prohibition upon the gov
ernments paying them out again If its
necessities compel it to do so. The
secretary's scheme expressly permits
safety fund for the redemption of the
circulating notes of failed banks in
outstanding bonds of the United States,
and the guarantee fund of thirty per cent
might be Invested in similar manner.
1t is by no means clear that the new
banking scheme would retire the legal
tenders or materially reduce the bulk of
national notes. Nor is it clear that the
$500 900 900 in notes is "being used
over and over again to draw gold out
of the treasury" There has been no
period when the use of small fraction
of this vast sum once would not have
exhausted the treasury's stock of gold,
but that stock has never suffered ma
terially from any domestic demand.
The drain on the national treasury
arises from the liquidation of American
securities held by foreigners. This de-
mand not only exhausts large balance
of trade in favor of the United States,
bu. demands in addition the export of
large amount of gold American
securities are not as profitable as they
were before a change in the national
economic policy was foreshadowed and
accomplished, or before the recent
foreshadowing of radical and danger
Gus change in the national financial
policy. Industrial depression, the re-
suit of an injurious change in the
nations economic policy, is respon sible,
in controlling measure, for the fnan-
cial embarrassment of the government.
American railway securities have been
made Improbable by the decline in
traffic; similar causes have affected the
value of other securities. The national
administration has shaken foreign con-
fidence in American investments in
general, hence foreigners are with
drawing their investments here, and
hence the steady flow of gold to Europe.
The second difficulty the Reformer
finds with the national system is its
lack of L" elasticity" under it money
is scarcest when most needed, as last
year, and most plentiful when it is least
wanted, as now" This objection is
not peculiar to the Reformer, but
neither our contemporary, nor any of
his associates, has made it clear in what
way the proposed new system will be
more responsive to the public demand
for money than under the existing sys-
tenn. The trouble last year did not be-
gin with, and was not caused by, a lack
of currency. Collapse of credits began
the difficulty. Stringency in the cur
rency supply began some time after
the panic broke. There was as much
money in 1898 as in 1894. Banks, I'M
der any system, shut up like an an oys-
ter when trouble comes. What the ma
tional banks did in 1893 the state
banks did in 1857. The proposed Car
Isle banks would do precisely the same
thing under similar circumstances, and
no amount of security would tempt
money from their vaults. This ideal
quality of elasticity in banking cur
rency, sort of automatic action, ex-
banding in response to demand and
contracting when the demand is salts
fed, exists only in the mind of the
orists. The present system is as re-
sponsive to business demands as any
that can be devised, and is infinitely
safer than some that have been pro-
posed.
The Carlisle plan, the Retormer says,
would throw on to the banks the duty
of gold redemption. No requirement
is made, even of the national banks,
for redemption in gold of a single dol
lar of the S75O,0OO, 900 that might be is
sued under this plan. The scheme is
an initiation measure, Willingly or I'M
Willingly, and would add to, rather
than relieve, the embarrassment of
the existing condition of financial af-
fairs. 1t is fortunate for the country
that there is not the slightest probable
ity that the bill embodying the Carlisle
plan will become law.