The San Francisco call., 1898-07-05
WHY A NATION IS NOT A BANK.

why the United States Treasury cannot serve the pur poses of bank of issue.
 All paper currency IS credit money, not primary money of intrinsic value equal to its nominal value Nominal value means the value named, or printed or stamped on its face.
 All currency to have its nominal and actual value the must have intrinsic value equal to its nominal value, must be redeemable at its nominal value in something of the intrinsic value Now, when the Government issues paper currency, unless it is redeemable at its nominal value in something of equal intrinsic value 1t is subject to just the vicssitudes as like currency issued by individual or by corporation of individuals Papers, notes, bank checks drafts bills of exchange and letters of credit all of the character. They not money. They merely titles to money and pass commercial paper currency at their nominal value only long the taker IS of the ability of their maker to redeem them at their nominal value. We hear it said often that behind the greenbacks is the credit of the United States. That is true, but the credit of the United States is subject the fluctuations and vcisstudes the credit of indi vidual. The United States has means of get ting money except by taxation of the people. The United States has only this power of taxation means of keeping its credit good When taxation does not yield money enough to pay its current penses and redeem its outstanding promises pay in
 
 credit is in danger and can be maintained only by borrowing money on bonds, or bonded obligations. These bear stated rate of interest and due at fixed time in the future. As their maturity ap breaches the United States provides for their pay ment by laying taxes the people to meet them when due.
 Here, now, we have the difference between the United States promise to pay greenback on de- mand and its promise to pay bond at maturity The greenback IS due at any time. The bond Is due at one time only. Under the law the green back when redeemed has to be immediately reissued Under the law the bond when redeemed is destroyed Therefore, whenever a greenback is redeemed the credit of the United States is weakened. When ever bond is redeemed the credit of the United States is strengthened Now, the value of paper currency depends upon its redemption at its nominal value in intrinsic value, if the United States engage in business as a bank of issue of such paper currency must have hand all the time sufficient money of intrinsic value to redeem on demand its paper at its nominal value
 It is entirely possible that the whole of $346,- 100000 outstanding greenbacks, due on demand, may be presented in day to the treasury for redemp ton. The treasury is just in unusually good condition, having hand gold reserve of $I66,- 100000, for such redemption purpose. But it might pay that all out and fail for $I8oooo,ooo
 What then? Some of political leaders would say Redeem in silver dollars" The moment that was done the silver dollar would appear at its in trnsc value 50 per cent below its nominal value and gold or money of equal nominal and intrinsic value, would disappear.
 Suppose, now, that there greenbacks or demand obligations the United States outstand- ing. Ii its obligations are all time obligations due at different fixed periods so that the taxing power be operated to provide for their redemption they will not only be always at par but usually at prem ium. This will be because of the certainty of pro- vision for their redemption maturity by taxation and because of their safety and convenience for use collateral in raising ready money, and the ever present ability to sell them for actual money at their face value and usually at premium.
 Now if the law authorize corporation to buy $Iooooo worth of such time bonds, deposit them in the treasury and receive in return $ooooo in bank notes to enter into circulation by being loaned as bank capital 1t will be that 90 per cent of the national bonds may be represented in circulation by paper currency and that if such corporation fail the bonds deposited by in the treasury simply ceed and the $oo,ooo in notes redeemed by the treasury their face presentation and the treasury has wiped $Iooooo of its bonded debt has $Ioooo left on hand to pay its expenses in the transaction and the notehoders of the broken bank have not lost penny. The notes worth their face before the bank failed. They were worth the same after
 
 and the only losers would be the stockholders of the banking corporation who lose their original invest ment of $1ooooo in United States bonds which se- cured their circulation and made their notehoders safe.
 The difference between basing bank of issue on national time bonds, of payment at maturity and using the treasury bank of issue will be seen to lie in the necessity of all sound issue banking that 1t shall be founded form of security that is imme-
  and nominal and actual value
 When such money has to be raised by taxation the slow process and uncertainty of the amount that may be demanded by the noteholders make 1t impos- sble to keep exact amount hand for such purpose. It ties up money in the treasury that ought to be in circulation and keeps the public credit in continual jeopardy.
 The other process ties up money, withhods none from circulation but secondarily converts the national bonds into currency. It would seem that perfected system, expanded to the credit and cur