Delaware gazette and state journal., 1895-09-26
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The United States is tho only civil
ICED country that attempts To manage
its gold reserve by governmental ma
chinery In all others the reserve is
provided for by commerce itself, through
the operation Of banks, It is 50 in Eng
land, France, Germany and all the
countries OF Europe which me on
specie basis. II was SO in this country
before the waR; for our treasury was
not then in the banking business. Our
present false monetary system grew out
Of our dire necessities ia tho, war
period and We have not been wise
enough in The past twenty years TO rid
ourselves of it.
When we were struggling back from
inflated paper money to q coin basis,
our statesmen had to face the clamor-
Gus greenback movement The green
hackers, Of course, were not allowed to
have their way, but their demand for
paper money had an influence on what
was done. Instead Of providing for the
retirement upon redemption of the
greenbacks then outstanding, our gov
ernment continued to reissue the old
greenbacks replacing those too worn
for use by new notes, Hence, our treas
ury department continues to this day
a great bank Of issue, and must keep
its gold reserve TO protect outstanding
paper. While this system continues.
we shall have recurring troubles in
keeping gold on hand.
Under sound and sensible monetary
system, our treasury would not be a
bank. The government would not at
tempt to interfere and dictate as to the
money with which business is trans
acted. 1t would put its stamp on GER
tain pieces OF coin to certify that they
are of certain weight and fineness,
and it would declare the coins thus
struck legal tender for the discharge
OF obligations. There it would stop.
How the debtor shall obtain these
pieces of coin is no concern Of the gov
ernment, nor is it any concern Of the
government how many ounces of gold
shall ho brought to the mint or how
many shall be melted or exported. II
need not guarantee that banks shall
always have gold enough TO redeem
their notes or pay their checks with, in
case the noteholders and depositors for
any reason want gold The utmost that
il need do in such case is to enforce
penalties for any breach of the banks
contract Just as in other cases of breach
of contract.
When the government gets out of the
banking business the gold reserve will
be controlled by automatic action. A
lucid statement of how this automatic
action works in England was recently
made by the Evening Post:''
If it is an unusual demand (for goldl
the bank raises the rate of discount.
III it has been lending at 3 per cent
previously it will now raise the rate
to per cent. This has two fold con
sequence. 1t causes n certain proper
tion OF the banks borrowers to nav up.
All those to whom money is not worth
4 per cont will pay their maturing
bllls and not borrow again. These paw
ments are the equivalent Of gold to the
bank, as they must be resolyable into
gold at the mint price. The rise in
tho rate of discount is also an induce
ment to foreigners TO send money to
London for investment, and this checks
tho export movement If the export
continues nevertheless, the bank raises
the late Of discount another peg, saw
to . per cent This causes another lot
of borrowers to pay up, and attracts
more money from abroad and has still
further effect, which is really the
most important of all. As it forces
borrowers to pay per cent who were
formerly paying only 3, IL compcls
some of them to sell their goods at
lower prices, and this leads to an in
creased expectation Of goods which thus
take the place of gold IN the country's
foreign trade. As there is no assign.
able limit to these three operations, ali
proceeding from the rise in the rate of
discount, it is plain that il is adenuate
to check the expectation Of gold in every
case and that il is automatic in Tia
sense that the government has nothing
whatever to do with il.
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