The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1897-12-02
TEMPERATURES.
IAN ELASTIC CURRENCY"


IAN ELASTIC CURRENCY"
There is no expression in the whole
range of financial discussion that IS
subject to more abuse, or is more fire.
euently used with vague idea, than the
one which stands at the head of this
article. As an illustration, in a recent
article the Minneapolis Tribune dis
cusses the proposition of the New York
Sun that the national banknotes
should be retired and greenbacIs put
In their place. 1t says that, at the
same time, the government should have
power to expand or contract the legal
tender circulation, but must always re-
tain sufficient gold reserve for It's re-
demption. The article concludes with
the sentence: This would give US an
elastic currency"
Aside from all the other objections to
the plan, this is exactly what it would
not do. The issuing of paper money
by the government is not only dan
gerous to the credit ard the business
solvency of the nation. but one great
objection to it is that it is as perfectly
unelastic as any currency can be made.
When the term elastic" is applied to
the circulating medium of a country, if
1t means anything, it means that the
money volume shall expand when bust
ness j. -Gliisll-8nd contract when it is
dull 1t means that there shall not be
q vast amount of currency Of some
sort locked up in treasury vaults or
piled in bank reserves at pertain sea-
sons of the year, while at other times
business interests are actually clamor-
ing for more money with which TO
carry on their transactions.
AT the present time the money vol
ume of the United States is almost en-
tirely without elasticity, because it
consists principally of government is
sues. The national bank currency is
slightly elastic, or only imperfectly 50.
When interest rates advance to a high
point it pays the banks to put out more
circulation, and when interest rates
fall it pays to retire it. So narrow are
the limits, however, within which they
can act, and so small a portion of the
total currency volume is formed of ma
tional banknotes, that this plays an
unimpOrtant part. Usually, monetary
crisis is all over and done with before
the banks can go through the neceS-
sary formalities of taking out addition
al note issues. AS for the grecnbacks,
they are absolutely inelastic currency
because there is no means whatever of
making them respond to the demands
of trade. --.
Our experience and the experience of
every other country, With paper money
whose volume depends upon the will of
a governing body like congress-, or even
Of a political party which has control
Of the national eXchequer, shows that,
while the volume may increase it
never diminishes. The temptation to
make money is frequent and irresis-
tible. The camor against contraction
is sure to make itself heard, however
great may be the actual need for re-
firing a part of the notes outstanding.
So. from the time that the federal gov
eminent began to put out legal tenders,
the amount never decreased, but al
ways advanced until The beginning OF
the resumption period. Then, as soon
as the retirement of the greenbacks
had been ordered, 1t was stopped forth
with by act of congress, ard the $685.
00O,0O0 then outstanding have remain
ed in circulation ever since Let US
look at the process by which these
notes can be Issued and redeemed, to
See how totally incapable they are of
constituting an elastic currency
At certain seasons Of the year, when
crops are to be handled and stocks of
goods laid In, there is an active de-
mand for credit and money This de-
mand comes from farmers, merchants.
elevator men and the managers of bust
nesses Of all descriptions Where does
1t make itself felt? At The nearest
bank. The bank is the concern to which
all these different individuals go TO
obtain credit OF cash. How can the
government help them? Suppose it
were authorized to issue, let us say,
$5O,00O,OOO of greenbacks to assist In
moving the crops. How are they to be
got out of the national treasury? They
cannot be sent to local banks to be
loaned to business mon and others
as the peoples property, and can
be paid out only for interest on the
public debt and to discharge appro-