Kansas City journal. [volume] (Kansas City, Mo.) 1897-1928, 1897-12-07

years have demonstrated that it is not
only an expensive charge upon the govern
ment. but a dangerous menace to the ma
tional credit.
Protection Against Bond Issues.
1t is manifest that we must devise some
plan TO protect the government against
bond issues for repeated redemptions. We
must either curtaiI the opportunity for
speculation, made easy by the multiplied
redemptions of our demand obligations, or
increase the gold reserve for their redemp-
tion. We have 500. 100000 Of currency which
the government by solemn enactment has
undertaken 10 keep at par with gold. No
body is obliged TO redeem in gold but the
government. The banks are not required
to redeem in gold. The government is
obliged TO keep equal with gold all its out
standing currency and coin obligations,
while its receipts are not required to be
paid in gold. They are paid in every kind
of money, but gold. and the only means by
which the government can with certainty
get gold is by borrowing. 1t can get i: in
no other way when it most needs it.
4De NIlNOul l--eA SoAN
revenue is pledged TO maintain goldredcinp-
tion. which it has steadily and faithfully
done, and which, under the authority now
given it will continue to do. Thelaw which
requires the government after having re-
deemed its notes to pay them out again
current funds demands a constant re-
plenishment OF the gold reserve. This is
especially SC in times of business panic
and when the revenues are insufficient to
meet the expenses of-the government. At
such times the government has no other
way to supply its deficit and maintain re-
demption but through the increase of its
bonded debt, under the administration
of my predecessor, when s262. .3i5, 400 of Az
per cent bonds were issued and sold and
the proceeds used to pay the expenses of
the government in excess of the revenues
and sustain the gold reserve.
How to Protect the Gold Reserve.
While it is true that the greater part
of the proceeds of these bonds was used
to supply deficient revenues. Il considerable
portion was required TO maintain the gold
reserve. With our revenues equal to our
expenses. there would be no deficit requir-
ing the issuance of bonds. But IL the gold
reserve falls below 5000 900. how will it
be replenished except by selling more
under existing law? The serious question
then is, shall We continue the policy that
has been pursued in the past: that is, when
the gold reserve reaches the point of dam
ger, issue more bonds and supply other
means to prevent these recurring drains
upon the gold reserve?
If no further legislation is had, and the
policy of selling bonds is to be continued.
then congress should give the secretary of
the treasury authority to sell bonds at
long or short periods, bearing a less rate
of interest than is now authorized by law.
I earnestly recommend as soon as the
receipts of the government are quite suf-
flcient to pay all the expenses of the gov
ernment that when any of the United
States notes are presented for redemption
in gold and are redeemed in gold, such
notes shall be kept and set apart and only
paid out in exchange for gold.
This is an obvious duty. If the holder of
the United States note prefers the gold
and gets 1t from the government he should
not receive hack from the government a
United States note without paying gold
in exchange for it.
The "EndIess Chain"
The reason for this is made all the more
apparent when the government issues an
interest bearing debt to provide gold for
non-interest bearing debt. Surely it should
not pay them out again except on demand
and for gold. If they are put out in any
other way they may return again to be
followed by another bond issue to redeem
them-another interest bearing debt to re-
deem non-interest bearing debt.
In my view II is of the utmost importance
that the government should be relieved
from the business of providing all the gold
required for exchange and export. This
responsibility is alone borne by the gov
ernment without any of the usual and nec-
essary banking powers to help itself. The
banks do not feel the strain of the gold
redemption. The whole strain rests upon
the government and the size of the gold
reserve in the treasury has come TO be,
with or without reason. the signal of dam
ger or of security. This ought to be
stepped.
If We are to have an era of prosperity In
the country. with sufficient receipts for the
expenses of the government. we may feel
nc immediate embarrassment from cur
present currency: but the danger still ex-
lists and will be ever present, menacing us.
SO long the existing system continues.
And besides, it is in time of adequate rev.
enues and business tranquility that the
government should prepare for the worst
We cannot avoid without serious conse
quences the wise consideration and prompt
solution of this question.
Secretary Cages Plan Indorscd.
The secretary of the treasury has out
lined plan in great detail for the purpose
of removing the threatened recurrence of
a depleted gold reserve and save us from
future embarrassment on that account.
To this plan j invite your careful consid-
Grafton.
4 ;s u, I,.Se
LILY in his recommendation that national
banks be allowed TO issue notes to the
face value of the bonds which they have
deposited for circulation, and that the tax
on circulating notes secured by deposit of
such bonds be reduced to one-half of / per
cent per annum.
i also join him in recommending that au-
thcrity he given for the establishment of
national banks with n minimum capital of
$4,000. This will enable the smaller vii
lagos and agricultural regions of the cotin-
try to be supplied with currency TO meet
their needs.
! recommend that the issue of national
bank notes be restricted to the denomina-
tion of $40 and upwards
If tho suggestion I have herein made
shall have the approval of congress then
would recommend that national banks be
required to redeem their notes in gold
THE CUBAN QUESTION.
weyIer's Policy Denounced and n