The Indianapolis journal., 1897-01-07
OUR CURRENCY SYSTEM
DEFECTS OF THE PLAN UNDER
WHICH BANKS NOW DO BUSINESS.
And suggestions Looking Toward
Unity of Action and Centralized
Government Supervision.

To the Editor of the indianapolis Journal:
The late report of the secretary of the
tleasury falls short of any adequate grasp
of the difficulties involved in the currency
reforms which he so persistently urges. He
puts to the front a strong demand for the
retirement of the United States notes and
the treasury notes. These forms of cur
rency amount to over $476.0 ,OOO They are
now part of what are denominated law
ful money" and part of the redemption
resource of the national bank issues. With
a retirement and cancellation of these, we
should have left only gold and silver as
lawful money" for purposes of redeeming
national bank notes. In order to prevent
the contrac ion of the currency the secre-
tary proposes that national banks and their
bills be increased to the amount of the re-
tired national paper. That would give the
country about s75o.OOO.OOo of national bank
paper for redemption on demand.
based on gold and silver as the remaining
lawful money" The law now provides
two ways in which to demand redemption.
viz: at the respective bank counters and
by the treasury of the United States. For
the latter purpose the banks required
to keep ) per cent. on deposit with the
treasurer. Suppose the views of the secre-
tary be carried into law. and the $476,0oooO0
of lawful money" be Cancelled. and the
same amount be added TO the circulation
i'm national bank notes. With the United
States notes and the treasury notes can
celed and with the periodic foreign de-
mand for gold. per cent. deposits by ma
tional banks of lawful money with the
treasurer would not meet the demand for
banks elect to keep this per cent. deposit
and additional calls in silver-that is, law
full money" Then how would the treasurer
obtain gold for redemption of the bills any
easier than now for greenbacks? Congress
would not and could not require the re-
demption deposit kept in gold That would
in effect demonetize silver. impair the OBJ
legation of a contract. for silver dollars are
now a full legal tender.
But suppose, as the President in his late
message. and the secretary suggest, the law
be so amended as to require 'the national
banks to redeem their own notes. and
when periodically the demand be made, and
for self-protection. they offer silver dollars.
which are full legal tender and lawful
money" that would. at a single step. pre-
cipitate the country to the silver basis ana
its consequences. few national banks
would be glad to do that. So it is seen that
the proposal TO cancel the national notes
and treasury notes Is mercy ERE q seheme EN- TO 10
cessity of redeeming them in gold when
demanded and transferring the work to the
banks but increasing very greatly the peril
to the entire business interests OF the coun-
try In a word. 1t would be merely shift
ing the responsibility, but greatly increas-
ing the peril.
ONE OF THE ESSENTIALS.
Any movement looking toward greater
difficulties in redemption of circulating pa
per would necessarily tend to discredit it.
We cannot afford to initiate the methods
of the old wildcat banking system of 1854
1857. which made staging necessary into the
interior to find the place of redemption.
,T,> ha
redemption, as now. should be at the most
convenient point. Not obstruction. but alb
solute ability to redeem is what will secure
the widest confidence and the minimum of
demand for Ii. That maintained at the most
convenient point to meet the demand from
abroad, practically the only demand there
will be, is one of the chief things to con-
slider For domestic purposes and trade
there can be no motive for the redemption
of circulating paper which is all at parity
with gold. for it is easier and cheaper to
handle the paper than the coin.
But circulating paper is not all the prob
ness interests About slOOO.oO 900 of Amer
lean securities, including government
bonds. railway bonds and other industrial
obligations are held abroad. In times of
credit disturbance at home. as in the past
three or four years. and foreign failures
and disturbances, as i'm the Barring Broth
ers failure in 1891. this vast volume of OBJ
legations held abroad, in effect upon our
money market would he but call loans and
when part OF IL should be thrown upon
the market it would have to be taken care
of in gold exports, or disaster would
suit and be felt throughout every avenue
of business. If not taken of, then
depression in government securities would
ensue. which would awaken new fears. and
additional bonds would be thrown on the
market. If ii should be railway bonds, re-
ceivershps would enSue and from the
stockholders and their dependencies down
to all connected with the operating forces
to the last switchman all would feel the
disaster. If other industrial obligations.
suspension of factories an,. their thousands
of operatives would be touched with disas-
ter in loss of employment and reduction OF
wages, and in turn the effect of all these
would reach the producers of food and raj
ment and seriously hurt them also The
Nation and the people under bond
to make and keep all this credit good, and
in default all would feel the resulting dis
aster.
Thus it is plain that the prime thing is
that the coin Of the world should be held
here in quantity to meet the demands of
lean obligation when presented or thrown
upon the market for sale. How is this 10
be done? Aside from occasional trouble.
as in the case of the Barring failure. there
must be a condition of trade which makes
ii profitable to export gold before anyone
will pay the charges to do it When ster-
ling exchange in commercial bills is quoted
at S4.SS and above ii pays to export gold.
and that is why gold goes abroad. and not
because there is a convenient chain TO draw
ii out. How long, indeed. has this endless
chain of government paper so much depre-
Gated by the secretary, been drawing the
gold out of the treasury. and in what
amount? Here is the very remarkable
answer to this question by the secretary
himself. in his late report. viz: From
March l. 1893. to Dec. l. 1896. this endless
chain of national paper drew from the
treasury i'm redemption Si57. .039. $50 i'm gold.
while from Jan. l. 1879, TO Dec l. 1893. only
500 $50, ,024 was drawn out for redemption of
these notes Thus in one period the note
redemption in gold annuaEy was little
over 1000. 900, while during the other it
was over $3.50. .000 600 per year. Perhaps the
trouble was not so much the government
notes as that had such a period as 1893
to 1896.
MOVEMENTS OF GOLD.
Now let Us see what have been the ccndi-
tions of the past which have made it profit
able to export gold. Here are some facts
from the abstract of the reports of the
treasurer of the United States. From 1873
to 1887 the value of our excess of exports
of merchandise and products over imports
was 81, ISL, Sol $50. During the same ten
years our excess of gold imports over
ports of gold was sl9S 634. 76i. Here we have
a fair illustration of the reason why we
do not lose gold; that when the balance of
trade is in our favor we need no gold TO
settle balances abroad; that when we are
selling more than we are buying other
tiOnS have TO settle their balances with us