Mexico weekly ledger., 1895-04-04
Money, Currency and Banking.

uais. The safety OF the noluer oi the
bank bill is best secured, of course, by
the guarantee of the government
This guarantee OF the government may
be furnished in various ways. The
national bank note i'll this country Is
safe because there are in the Ii OF
the government bonds of the United
States, belonging to the banks, amply
sufficient for the redemption OF every
note. The difficulty with this national
bank note circulation is that its
amount depends upon the amount OF
the public debt. The debt OF this gov
eminent has been paid off with a
rapidity that is marvellous, so tina
while the population and exchanges
of the country have been increasing,
the amount of bank note circulation
has been diminishing.
The national bank notes have been
replaced by government paper repre-
senting gold and silver, but principally
silver. o greatly people prefer
paper to silver is illustrated by the
history of the silver certificates and
the efforts of the government to force
silver dollars into circulation. In
1886, when there had been coined i'll
silver s244, AS, 1856, the amount of sill
yer dollars actually in circulation was
s6l, 500, 155. In 1894 the -aoinage OF
| silver had srfcreased to S421, 776,4Oo,
aifu rne amount of silver in circulation
had fallen to SIT, 4l3, $50. At the same
time the certificates representing sill
yer dollars had so increased that the
amount of silver held in the Treasury
for their redemption had increased
from 800, 3O6, 500 to 1881, las, 301.
But we are now inquiring what
money really is, what it means, and
what laws govern it, and determine its
amount and its distribution. Paper
currency issued by banks, its origin
and operation, may be best illustrated
very simply. A man goes into a rural
community, let us say, where there Is
a general store. He knows the store
keeper, who has confidence in his in
tegrity, or he has gold or other valu-
able security, which he deposits with
the storekeeper. 1t matters not why
the storekeeper trusts him. Conti-
dence and trust are at the base of the
great structure of commerce. When
| that departs men will be obliged tC
| carry coin about with them, and wher
that time comes large transactions,
| such as are now of daily, perhaps
| hourly occurrence, must cease. But
no one who realizes the deep signifi'
| canoe of the advance of civilization
| believes that commerce will ceas
through the failure of mems conf
| dence and trust in one another. The
man whom l imagine a. going to the
simple rural community desires tt
| purchase the product of the farmer:
| of the neighborhood. He says to the
| storekeeper: .'These farmers do no
know me, and I have nothing witt
which to buy their products. But they
know you. They have confidence il
you. They will accept your promises
in payment for their produce. Give
me orders on you, and we will share
the profits of the transaction"
Upon this the stranger obtains tbs
orders. For the community in which
he is carrying on his transaction these
orders constitute a currency. The
stranger goes out among the farmers
and finds, as he anticipated, that the.
are perfectly willing to exchange thei
products for the orders on the store
keeper. He ships his purchases totht
market, and from the proceeds of tht
sale he pays the storekeeper TIT
amount of the orders issued by him 70.
the purchase of the farmers products
Besides the amount of the orders, III
pays the storekeeper something &c
the risk he has run and the accommo
dalton. The amount that he pays i
proportIoned to the risk if he is tn
only applicant, and is limited by tn
amount Of profit which the speculate
will probably make in the market Il
which he will send his purchases II
this transaction We have the opera
tons Of a bank of discount and of
bank Of circulation. The storekeepe1
takes a receipt from the s~pecuiatdr 70,
the orders which he mas given him
and this receipt is IN the nature Of {
promissory note, which may be pay.
able on demand or at the end Of 4
Special tirae.
The speculator may pay the ; Bore,
keeper IN coin. IF he does ne mus.
pay the cost Of shipping il to him, +
he can secure paper currency, bow
| ever, he q that. As q ruIe, he vii
have money in bank in the .pIact
where he lives, and a check on fhj.
bank especially if the bank eeftiGe,
that she money 10 meet it is actually
in It's possession, will be satisfactory
to she ssorekeeper. As TO tBe order:
issued by the s~torekeeper, they vii
come 70 rim in dae time, bat BIB vii
not have TO pay sill of them IN money
| The farmers tfade with him, and some
81 them are indebted to him. iWher
he receives one Of mis- orders from 4
debtor, he accepts il as q fan or par
! payment OF bis aceogat, according II
she amount Of each. No money ha'
passed that is, no coin has been tset
in q transaction in which an order il
finally concealed by 81 debt due to hin
uho isstte8 IT, The bit Of paper osll.
ing for lst US say, styD, eas accepted
by she farmer IN return for his grain
He may have Hsed ~ to buy 4 iiorss
from % neigfbof, vino also bad conf
depos in tbs stotekeegef That nsieh.
bor may have paid q debt IL another
This ethtT may have paid interest Will
it on a mortgages owned by tbs store.
keeper. let ms suppose that tbs store.
keeper has issueI orders for st0,Ggg
IL 5000 of this gees 10 persons il
debt To tbs stofskseper, or who yam
goods that he has ,6niy 5000 VIII hsvs
TO be redeemed in actual money. II
the meti, time, in the Instance ~ tins
500 order which have imagined, siDt
worth Of grain has purchased n hhfse
the horss has paid a debt owed by the
seller, and the fourth holder has paid
800 Of interest on his mortgage, and
10 a -.