The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1897-07-21

N "OiO liz StdJe DduK
systems, with branches and without branches
There was no common regulation, no com
mon control or visitation of any kind. and
no harmony or concert among them.
Some of them were purely speculative and
practically fraudulent creations, organized for
the sole purpose of issuing paper money. os-
bonds of doubtful value; in other states nv
real estate, and In other states by a miyture
of all the securities which have been named
1t was impossible for the government to
borrow from such banks, for the evident rea-
son that they had neither money nor loan
able credit. az
But during the quarter of a century which
had elapsed since tne destruction of the
commercial centers of New York. Boston and
Philadelphia, there had grown up substantial
banks. of means and local reputation, which
undoubtedly had the liability to provide ali
the medium of exchange which would have
been required for the conduct of the war. If
the subtreasury act of 1916 had not existed.
or If congress had repealed that act and
availed itself of the facilities which these
reputable banks. were able and willing to
afford. But congress made the fatal mistake
of refusing to repeal the subtreasury act,
silver coinage of the United: States should he
received or paid out ny the treasury of the
United States.
THE SUBTREASURY ACT.
I desire to call your attention to the fact
that this law prohibited the government from
using any kind of bank credits as a medium
of exchange. And as this prohibition was a
most important factor in the financial dim
culties OF 1861, and as, even in it's present
modified form, the act is. in my Judgment
one of the most important factors in the diff,
culties of the present financial conditions. 7
will ask you to give me special attention upon
this branch of my subject.
l have already shown that the only medium
Of exchange which in any commercial country
is available for a government loan is held by
the banks. The medium of exchange held by
hanks consists Of actual mOnay o,d -,
credits. The proportion between these two
mediums depends, to a considerable extent
upon the organization of the banking system.
Under our present national banking system
the proportion differs in different lo~caIities
but considering it in the aggregate, the pro,
portion is about one dollar of actual money
to ten dollars of loanable credits
In England and Scotland, where there is q
more perfect organization, the proportion is
about 81 of actual money to about SIS of
loanable credits. That is to say, the national
banks of the United States of TODAY in the
ordinary course of commercial transactions,
where the borrower does not demand the act,
ual cash, but accepts a credit to be trans
ferred by check, as required, in the ordinary
course Of business, can loan $40 to every 81
it could loan the government under the sub
treasury law, which compels the actual money
to be carted way and locked I'D in it's
vaults. The banks of England and Scottand
could loan about fifteen to one.
Practically the same relative conditions ex-
listed in 1861. The first issue of the govern
ment war bonds, amounting to $15O, 600, 900,
was made in 1861, and they were loyalty BUR,
chased by the banks of New York. Boston
and Philadelphia, and paid for in strict &C
cordance with the subtreasury act. in coin
which was carted away and locked UP in the
treasury vaults, to lie idle and useless until
again put in circulation by the disbursements
OF the government at the rate of less than
5000 900 per day; Having done this, the
ments, for the reason that they had no
specie left. Let us apply the same test to
the rational banks of today.
FATHER OF THE GREENBACK.
In concluding my resume of the war his
tory of the subtreasury laws I will suggest
that Andrew Jackson may Veil contest the
dubious honor of the paternity of the green
back.
The destruction of the Bank of the United
States rendered possible the subtreasuries
and together they made possible the green
States notes of 1890, the different fiat theories
and isms which have entered into the notifies
and disturbed business affairs during the
years which have elapsed since 1861.
Having traced some of the disastrous eff
fects of the substitution of the subtreasuries
for the bank in the emergencies of war I
will next note some of the mischievous work.
peace.
The fathers of our country regarded taxa
ton, IN any and every form, as a burden
which should only be imposed to the extent
wv SNShoC " llSSI
the expenses of government.
Upon this theory of taxation the annual
budget would be made up by making a care
full estimate Of the necessary expenses and an
equally careful estimate of the taxes to be
levied, which should, as nearly as possible,
meet the expenditures, leaving at the end Of
the year neither surplus nor deficit.
If the annual appropriations and the annual
tax levy were still made on such old-fashioned
principles the necessary expenditures have
become so large that o with the indirect
Methods Of taxation lInnn which tho uanuo
are based 1t would be impossible to estimate
in advance, with sufficient accuracy, to make
the flow of revenue into the treasury run
even and parallel, day by day, with the flow
of disbursement in payment of expenses,
hence the result would always be "a surplus
or a deficit.
Since the advent of the new theories of
producing prosperity by taxation, and that
duties should be levied upon each schedule
on the basis of the amount of prosperity,
instead Of revenue it will produce. the DIFF
f1culty Of avoiding a deficit or a surplus is
increased.
When the prosperity system of taxation
and appropriation results in SURPRISES such
surpluses are withdrawn from the circulating
system OF the country and locked up in the
treasury. For several years after the war
the surpluses which the treasury accumu-
to as much as $40, 900, 900 per month for
months il succession. 1t has been the with
drawal of these large amounts from the
circuA ing system Of the country which has
raised havoc with business affairs and at
different periods led men to believe that
the quantity of money in the country was
deficient, which, in turn. has been the in
ducement Of so many frantic efforts on the
part of congress to create money.
Certain phases of the money question were
discussed in the last election and the verdict
ieemS to indicate that a majority of the
voters are, at least, beginning to understand
something, at least, of the essential quail
ties of money and the natural avs which
govern. The verdict would seem to indi-
cate That tha npOnll orp convinced of tho
futli1ty of all attempts to create money by
an act OF congress, and that a reformation
OF the finances of the country by the re-
tirement of all kinds Of fiat money is i'm
portant. But no specific plan has yet been
formulated and accepted by the public mind.
| predict that any plan for the reformation
subtreasury laws and a better developed
banking system viii fail. In my opinion
they are the chief factors in the problem.
1t is my contention, and it seems self
evident, that If money cannot be created by
legislation, the only way that the money
needs, beyond the current production of gold.
or a constantly increasing can be
supplied is by economizing the use of such
money as there is.
If we seek the most conspicuous example
OF the economical use of money, it will be
found in connection with the commercial
transactions of the general government. The
government buys supplies of numerous kinds
and IN enormous quantities, employs vast
numbers of people, to whom it pays wages
and salaries, and it borrows and pays in
terest. These transactions are commercial
transactions, differing in no essential par
ticulars from the ordinary commercial trans
actions of individuals. Perhaps, the most
important principle in a successful CONNER
clal career is the practice of economy. The
most important economy, both for his own
sake and for the rights of others, which a
merchant can practice, is the economy in
the use of money. No private merchant.
and much less the government, in its ca
pacity as a merchant, has the economic or
moral right to wantonly withdraw from cir
CulatiOn and lock nn money to such an eY-