The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1895-02-08
WHAT A SILVER BASIS MEANS.
A Premium ON Gold and Uncertainty
in All transactions.

New York Tribune
There are persons who consider it alb
silver basis. Others, who realize that
the thing is possible, do not see now, and
very result they fear. The thing in ques-
ton is not at all one of theory about which
men may dispute indefinitely. 1t is simply
absolutely by the the opinion and action of
men in business on both sides of the ocean.
The first step, of course, would be the
establishn ent of a premium on gold.
Whenever gold becomes so scarce, either
ing as has taken out of the treasury $751;
co., coo in January which has not gone
abroad nor into the banks. somebody who
wants gold may pay SOL in paper for SlO
in gold. This is not yet a change of basis.
but only a loss of basis; instead of being
worth the gold it promises the paper be-
come worth somewhat less. But the mo,
ment a miu appears all holders of gold
will try to get 1t, and anticipate that it
may increase, and will therefore hold their
gold in the hope of realizing an increase.
This necessarily tends to a sudden with
drawal of all gold from active circulation.
and it is obvious enough that the treasury
would be quickly compelled to pay out the
last dollar and ounce of gold it has, or else
silver. The exhaustion of the gold reserve
might come almost in a day, because the
treasury noios IN excess OF g Son oo cer ba.h
coin and bullion, and the New York banks
alone hold nearly double that amount of
legal tenders redeemable in gold.
Should the treasury decline to redeem
notes except in silver, the premium on gold
would naturally rise with r%apidity: 1t is
impossible to say how far it might rise
within any given time That would depend
upon the extent of foreign Withdrawals of
capital from this country, and upon the
speculative disposition of the people to
realize profits by an advance in the prem
the g%reenbacks did not depreciate much for
a year after they were first issued. SO the
currency now in use would not. But the
amount, and only SOC, CO.,, 900 by the LIST of
July, 1862. and besides they gave the people
for the first time a legal-tender paper,
which many did not at once expect to de-
preciate at all. The notes, moreover, were
~redeemable in gold, and were expected to be
Thousand millions. and the people have
it is liable to depreciate greatly If not kept
r~edeemable. 1t is legally redeemable in
silver coin now worth about 90 cents on the
dollar, so that, If payment in gold should
stop, there would be no assurance that this
paper would ever be redeemable except in
silver. And if redeemed only in silver. it
would be worth no more than silver coin.
Such a currency might quickly depreciate
50 far hat men would give 81 in paper for
81 in gold. Between l per cent. and 100 per
cent, there would be no rational stopping
point for the premium, no point at which
difference in market value between gold
and silver bullion. When the time comes
that redemption in gold has entirely ceased,
and the premium on gold mounts toward
the difference between gold and silver bull
lion, then the currency will have no other
than a silver basis. No man can tell how
quickly that change might come after gold
redemption had onced ceased. 1t is not a
question of theory, but one of actual pay
ments in the market by those who have
paper and need gold to those who are hold
ing the gold for the highest premium they
can get, and who know that the premium
has no reasonable stopping point short of
the difference between the two metals.
Under such circumstances it is not in the
least improbable that the paper currency
of the United States, within a single month
after redemption in gold had ceased. might
come to have no greater value than the sill
yer bullion which alone could be obtained
for it at the treasury.