The Saint Paul globe., 1896-08-01
LET US GO TO THE BOTTOM.


LET Us GO TO THE BOTTOM.
letter which we publish elsewhere
this morning from Mr. w J. Mcleod,
of Redwood Falls, is so carefully
thought out and so well expressed, that
we can hardly conceive that there
would be any difference between our
correspondent and the Globe when
they had reasoned the matter over to-
gether. Mr.. Mcleod essays to answer
our question why, if the government
can create values by putting a stamp
on bits Of metal or paper, or of any
thing else, 1t should not give each of
us million dollars. That question
was put to those who assert that it is
the stamp which makes the money and
gives it value. 1t is one which they
cannot answer. Mr.. Mcleod does not
believe anything of the kind, and,
therefore, the question is not pertinent
to his view of the subject He seems
to us to hold, with appreciative clear
ness, principles most of which are fun
damentally correct. His money Of
Representatives value is, as he says
himself, money partially fiat The sill
yer dollar is a fat coin to the
extent in which its nominal exceeds it's
bullion value. 1t is true that any ma
ton whose credit is good can keep in
circulation, without depreciation, a GER
tain amount of such currency.
Mr. Mol cod nnfaG o1c0 fIo,.o
is a limit beyond which a money can
not retain "even its representative val
ue," although backed by all the power
of the government. This is just the
point that we have made. There is a
limit to the credit Of the nation, as to
that of the individual. Fiat money, or
money partly fat, circulates, not be-
cause the fat confers value upon it,
nor because Of anything in the fiat at
all; but because there is an expressed
or implied obligation on the part Of
the state to make good the debt which
such currency really represents. In it's
representative character it does not
represent value, or anything but
promise to pay. Now, the issue Of
promises to pay is a very delicate and
dangerous matter, as every one knows
who has had experience with them.
The point at which it seems to US
that Mr.. Mcleod leaves the beaten
path and fails to get at the bottom of
him, that the volume Of actual money
that is, money of full value-is made
quate; and that, since We cannot in
crease it at pleasure, we must eke
out the insudficiency by creating "rep-
resentative" money. We think that If
he will investigate this one point as to
the adequacy Of money volume, his
conclusion will be different. All the
facts within our knowledge go to show
that money volume has increased at a
rate greater, rather than less, than the
requirements of the world would seem
to indicate. Not only do the tables of
money in circulation in the United
States, from 1860 down to the present
time, show this, but it is proved in a
much more conclusive way. as we have
already stated, by the fall in the price
of money. The price Of money is the
interest rate. If there Is not enough
of it that rate will go up, just as surely
as wages or any other commodity
rises in price when the supply is
too small. The decline of interest rates
all over the world, notably in the
United States, is measure Of the in
creasing volume Of money supply, as
compared with money demand This
is partly due, Of course, to the great
| multiplication of instruments Of credit.
to which we imagine Mr.. Mcleod does
| not give weight enough.
The paper that gees through bank
clearing houses represents mercantile
transactions Commodities have been
| exchanged just as truly and their ex-
change has entered into the volume Of
business, if they have been paid for by
a check or a draft for $1,000, as If $1,000
in cash had passed from hand to hand
Now, since the volume of these instru-
ments of exchange that pass through
the clearing houses is from $50, ,O00, ,0o0,-
900 to $6o,eOe, 100000 per annum it is
obvious that they are vastly more i'm
portant than the volume Of money it
self What is little expansion or con-
traction in say s1,6ee, ,eoe, 900, actually
circulating among the people, as COM
! pared with contraction of $le, ,000, ,eo0,-
| 600 in credits, which we have seen hap
en- as the only result of panic about
| the stability of our price of values.
! Finally, If Mr.. Mcleod still fingers
over the idea that there ought to be
"a specific volume" Of money, bearing
a certain definite relative ratio to the
population and business or a country.
/ does he really suppose that congress ls
the proper party to decide when that
/ ideal Volume has been reached? Would