The Wichita daily eagle. [volume] (Wichita, Kan.) 1890-1906, 1898-05-07
Paper Money in Spain.


Spain claims to be on a specie-paying
basis. and asserts that her paper money
is redeenlable on demand This was GER
tainly the intention of those who consu-
tuted the Bank of Spain in 1874, giving IT
the exclusive right to issue circulating
notes. 1t was kept in view when. in 1881.
the limit to the issue of notes was raised
from $50 900 600 to $500, 0Oo, 90 in return Tor
substantial assistance to the government
from the bank A metallic reserve OF one
third the circulation was TO be held oy
the bank, and one-half OF this reserve
must be in gold. 1t was noteworthy that
with the completion of this new arrange
ment, the rate Of exchange fell Cold nao
been at small premium in 1880 when the
outstanding circuIa ton OF bank notes was
only S46, 500, 900, giving evidence OF an issue
already greater than was required. IN
1892 the circulation was increased TO va
200 600. and the premium on gold rose from
per cent to 2 per cent and Is now ABOUT
30 per cent. The currency was greatly
Inflated in 1892. and yet every conoltlon
pointed TO further issues. without the pos
sibility of redeeming and cancelling any
part of that already in circulation.
Yet the bank steadily gained gold for
its reserve. says the New York Evening
Post In 1891, when the note limit was
raised. the Bank held $50. 000 600 in gold ana
Sc, SOC, 600 in silver. In December, 1884, the
gold had increased to $40.000,o0O and the
silver to s55, 10000, or a reserve OF $50, 2OO,-
900, against a note of circulation of $685.
co., 600. This would have been astrong po-
sition, but for the depreciation OF the notes
and the refusal of the Bank to make any
scheme of redemption that would redeem
Under ordinary conditions, the gold would
have been swept out of the Bank IN ex-
change for notes; and it was only by ten
dering silver that the yellow metal was
retained But this contriyance prevented
the public from deposting gold In the
Bank. The gold reserve of the Bank is
therefore a mere hoard kept in the in
terest of the shareholders. Spanish silver
coin will not leave the country. as spain
is not a member of the Latin Union and
does not enjoy any of those privileges or
international circulation of silver when
the regulations of that combination give.
The Bank has always been willing 10 re-
deem its notes in silver; out as the notes
have been with more in the market than
the silver coin at its metallic value, the
notes were not presented for redemption
Absolutely refusing to pay out gold. the
Bank is really in a state of suspension,
Without the natural and automatic
check furnished by redemption. its is
sues Of notes have steadily increased with
each new demand of the government for
advances. In 1874 the average circulation
outstanding was 513 1S0, 600; in 1891. 1t had
risen to $3.50. 600. 900. and in 1894. the year
before the Cuban trouble began, to SlS6,-
600 900. Naturally. the pressure OF war has
added greatly to the necessities OF the
government and only from the Bank could
advances be had. On April g. 1898. the notes
in circulation amounted to $685.. 400, O00 leav-
ing only $44, 900 to be issued before the
charter limit is reached. Between April
1897, and April, 1898, the issues were at the
rate Of So, 300 900 a month; but in the single
week from March 20 to April 2, 1898, the
circulation increased by 100000. and
nearly IS, 900 more was issued between
April and April g. At this rate the
limit will soon be reached, and must be
extended.
AS 1t is, the rise in circulation by 49,
400 900 in a single year would be sufficient
to awaken anxiety, unless the assets OF
the Bank on which this issue is made
were of the first quality. Gold would be
the best security, and under ordinary con-
ditions, government stock would be almost
as good, because readily realiZable. In
Spain the government has issued so ma
ny obligationse and on so little promise
of certain payment. that the market value
is seriously impaired, and every new is
sue only makes that value less. The
Bank has largely taken the bonds, ana
treasury notes (pagares) because the gov
eminent must have money. and there was
no large market for the state securities.
To what extent this practice has been
carried is evident from the returns of
the Bank In January, 1895. it held only
SIS, 0O0, COO in treasury bills and stocks,
apart from the $50, 300, 900 of the per cent
bonds which were almost fixture in the
assets. In April of the current year the
treasury bills and stocks amounted to
S42, 500, 900. and the item Of loans and dis
counts had sweled from s47. 900, 900 at the
beginning of 1885 to s14s, 800 600 in April,
1898, and il is understood that good part
of this increase is due to advances made
on government bonds. Such methods by
an institution not redeeming its notes on
demand can be pursued almost indefinite
ly: for 1t is only the refusal Of the public
to accept the notes that can check 1t.
The notes are now worth only one-half
of their face value; but the experience
of the United States in the Revolution, and
Of the Confederate states in the civil war,
shows that paper may be issued until
all its value disappears. and 1t ceases TO
circulate at any rate Of exchange.
Spain is still far from such desperate
straits. and the fervor Of her people will
lead them to make heavy sacrifices be-
fore yielding. The Bank has been, and
now is, the main instrument OF national
finance: and as all foreign markets for
loans appear to be closed to the govern
ment the future loans must be raised at
home and on the paper Of the Bank. As
an experience in finance the Spanish
treasury operations since 1895 are not
without interest. They are certainly more
honorable than the suggestions now made
by the Democrats at Washington for new
issues Of greenbacks. Spain was on an ir-
acknowledgment basis before 1895, and all
her loans and bargains have been made
upon that basis. The Democrats would
involve the United States in an operation
that at one blow would bring a depreci-
alton of the currency for which no ex-
cuse Of necessity could be offered.
--
Diamonds as Charms
II has been discovered that the native
African chiefs in the diamond regions