The Worcester spy. [volume] (Worcester, Mass.) 1898-1904, 1898-12-30
NEED OF REFORM.

NEED Or REF ORM.
Despite the fact that much improve
ment has taken place within two or
three years, there still exists real need
for monetary and banking reform in
the United States. The standard of
value upon which the whole system
rests is by no means as secure as it
should be. The circulating note sys-
TEN is still greatly lacking in elias
ITCHY Adequate banking facilities for
newer, or more backward. districts are
still wanting. In the system as a
whole, there is a notable lack Of unity
and organization.
In citing the first particular, that is,
the insecurity of the monetary stand
ard, as a proof that currency reform is
needed, your committee do not mean
to imply that the existing standard is
the only possible one, or even the most
desirable one. 1t is merely assumed
that. SO long as that standard is re-
Gained, it should have the utmost pos
sible security; since the unquestioned
security of the monetary standard is
Indispensable to a high degree OF in
dustrial prosperity.
1t is possible, however, to argue that
the defect in question no longer exists,
that the stability of the gold standard is
IL
unquestionably much force in this CON
tention. Besides a number of tempo
raIy circumstances, such as q full
treasury, a large gold reserve, and a
favorable trade balance of exceptional
amount, several changes of more per
manent character have contributed to
the improvement of the situation.
In fact, under the laws now in force,
a secretary who desires to maintain the
.ttDT Il ri ~
in doing so. But in the absence of an
explicit legislative mandate with re-
spect to the duties Of the secretary in
this matter, it is possible for an ex-
ecutive so disposed to overthrow the
gold standard, even though no change
be made in the law.
AS respects the need for elasticity in
the note system, next to nothing has
been gained. In the first place we
still retain for our bank circulation the
system of bond security, and under that
system it is in the nature of the case
extremely difficult, if not impossible, to
secure in the currency that prompt and
easy adjustment of volume to need
which constitutes genuine elasticity.
In defense of this statement
much might be said, but it
may suffice to call attention to
single consideration. If bank circu-
are required as a security for that cir
culation must be such as a bank Or
dinarily has in its possession; since in
a stringency when expansion is needed,
the bank already has its resources
locked up, and consequently cannot
without great difficulty get hold of new
assets. But government bonds are not
a kind of assets which banks will, or
usually ought to, have on hand in con-
eli q &c bo al e
banks is to provide funds for the ev-
eryday business of the country, that is,
to invest their resources, not in a sup
ply of bonds to furnish the basis of a
possible issue of notes, but in CONNER
cial paper, grain bills, and the like.
In the second place. we have not at
| tanned in our circulation even that de-
gree of elasticity of which bond Sc
cured system is capable. AT the out
set, we disregard the fundamental
principle that, in order to be elastic,
a circulation should he profitable. That
this is a fundamental lrinciple, needs
| little proof. The necessity of profita-
bleness to secure expansion, is self
evident. In securing contraction on
the other hand, profitableness, if less
necessary, is not lass effective: for, in
| making each banker anxious to expand
his own circulation, 1T leads him prompt
| ly to send home the issues of his neigh
bors in order to make room for his
| own.
Thus. from the single fact that the
| circulation is fairly profitable, are de-
| rived two opposing forces which work
respectively for the expansion and for
| the contraction of the currency as a
whole. Further. the relative strength
! Of these opposing forces is largely de-
| ternined, as it should be. by the needs
Of business. If more notes are wanted
| in the ordinary circulation. they will
| be swifter in going out, and, since they
will not naturally get into the hands
of bankers, slower in being sent home
! to the issuer. IF, on the other hand,
| fewer notes are needed, they viii be
slower in going out and more prompt
| in coming back: since. when idle. they
will naturally accumulate in tie banks,
and by them will be sent home.
IT is thus evident that q reasonable
| degree of profitableness is a most i'm
portant requisite Of an elastic curren-
cy Now it is a commonplace that our
bank circulation is not a profitable
one Most banks deposit bonds to the
least amount permitted by law. and do
not always issue even the quantity Of
circulation corresponding thereto.
But again, even an increase in prof
itableness can not avail unless the
machinery of issue and redemption is eff
ficient The forces which work re-
spectively for expansion and contrac-
ton must have easy and unimpeded
action. At this point our present law
is not only inadequate it is positively
evil 1t limits the amount of circula-
ton which may be retired during any
one month, and prohibits reissue for
six months after retirement, thus ac-
tually putting a premium on irelastic-
| ity Further, the machinery Of issue
and redemption is unnecessarily SLOW
! and clumsy. Even if a bank decides to
expand its circulation, the process can
scarcely be completed till the special
need has passed.
The foregoing describes the exper-
jenee Of ordinary times; for the case
of the monetary panic. when there
arises a demand for an immediate and