New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1897-01-19
"ELISTIC CT RRENCI."

'EIlS1H - hhFN' J.
Among the currency plans which have dark
ened the air hy their multitude since last sum-
mer. PERHAPS the most interesting TO Il large
class are those which provide United States
notes interchangeable for lowrate Government
bonds The thought is fascinating 10 some
minds that we should then have paper cur
rency elastic and automatically regulated III
volume which would expand whenever active
business requires more and would contract
naturally and without effort whenever bust
ness inac,ion renders part OF :he circulation
superfiuous. Some even 90 SO far as 10 say
that this plan would permanently prevent The
Offering OF United States notes for redemption
In gold and would thus prevent exports OF
gold But il should be remembered that. If
there Is demand for shipment Of gold To other
countries to settle balances or 10 meet needs
there represented by a higher rate OF interest
than prevails here greenbacks would be used
in Just the same way as they are now TO OBJ
tain the metal for shipment. As the plague In
India Is not more contagious than loose think
ing il is worth while 10 consider Just what the
elastic currency means and how il would work.
On the surface Of things 1t may he seen that
the holder Of paper money would he the only
holder Of property on which the Government
would guarantee 10 pay interest at any time
hp did not want to use H. The landowner
cannot get Government 10 rent every house
or acre he NAV have idle. The owners of 2.oOU.-
900 pieces Of print cloths cannot get Govern
men, 10 borrow those AZ their pleasure and
issue for them bonds bearing interest The
wage rarners cannot get the Government 10
borrow their labor when II is unemployed. ana
pay them interest Oh its value. Is there IL
sound reason for giving To the holder of one
kind of property II privilege not granted 10 the
holder Of any other: II there Is one. II must
be- that the presence OF idle currency i'll circu-
lation tends 10 do mischief. 80 that The peO-
ple can afford 10 pay interest in order 10 with
draw this circulation until it becomes needed
again But the presence of idle money. other
things being equal tends 10 produce Il reduc-
ton in the rate of interest. which Is indeed
regrettabe TO those who lend. but not to the
far greater number who borrow or want To
borrow The elastic currency would tend 10
keep the rate of interest mp in times when sur
plus might otherwise be loaned AZ modcra"
rate in aid Of production 10 assist individual
enterprise or 10 enable traders to purchase any
surplus product and carry il in the nope of Il
rise But are these uses of idle money ncces-
sarly harmful?
The safety valve of modern commerce and
industry is the tendency which turns idle
money 10 seek employment in productive indus
try thereby employing more labor. or in the
purchase Of any form of property which seems
unduly depressed. thereby wardng off pros
,Iation Of industry Or trade. Like every other
tendency. II can he abused. The fire which
warns and cooks and works for us may he
come destroying coniagralion when II breaks
all restraint: hut That is not II reason for nav
Ing no heat The precise function OF an "au-
,omati,aly regulated currency apparently ~
10 lessen the employment of money III indus
try or the purchases Of real estate or products.
N n time when superb bundancc of circulation
would tend 10 promote such employment.
At bottom the guarantee of :, per cent inter
cs, on money AT ANY time it may he idle tends
to prevent il from going Ia the relief when
any form Of property or industry or labor Is
threatened with undue depression. Al such
time the interchangeable currency would drift
into Government bonds. the amount remaining
in circulation would l~ indefinitely contracted.
and that contraction al such n time would
have Il tendency 10 push prices lower. There
i, surely some reason 10 doubt whether this
would be an unmiXcd blessing. But in times
Of rrviving activity. when money readily com
mands much more than per cent on the best
security. the low rate bonds would 90 back
10 the Treasury. the currency would flow out.
and swiftly increasing abundance Of supply
would then have Il tendency Ia stimulate specu-
lalon and push up prices just when no such
stimulus * needed There must he limit Of
volume aS all admit and when that limit of
Issue has been reached and no more currency
can be had Ia feed the fire. reaction must come
and bc rendered al the more severe 10y the dis
position of frightened capital 10 get out Of
everything else and into Government bonds
II il moi apparent that such sudden alterations
exposure 10 extreme heat. followed by ex-
posture to severe chs. would be beneficial 10
the financial health