The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1898-01-03

held. 1t is necessary, therefore that tbs
government should keep large reserve fund
III soIu. Such fund in the hands of the
government Is defenseless against attack In
countries where the government has no de-
mana dept outstanding, and the gold reserve
is heId by banks the nations stock of gold
is capable Of some degree of protection
through the rate of interest charged for
loans loans. But our government has no such re-
source: lts great gold reserve is an open
mine free to all who bring its notes. And
as the entire monetary system of the country
nanss nt upon mat one reserve, the situation is
one OF uncertainty and hazard against which
no insurance Is possible.
AS against these serious disadvantages there
Is no advantage which possibly be
claimed for paper money in the form of gov
ernInent notes over any other form of paper
money money equally good, except the saving of
represented by the notes. But this supposed
economy Is more apparent than real In
deed. when we consider all the facts, such
notes are an extremely costly form of money
In order to create the gold reserve re-
CURED for resumption In 1879, bonds were sold
to the amount OF $95 000 0OO During 1S94-95-
20, S262, 315, AGO more were sold to protect the
same reserve. The situation was then COM
pilcated by a deficit in the revenue and II
may be said that the necessity for the later
sales arose partly from that cause. Not to
enter upon that question closely. 1t is clear
mat M with interest to pay on 1857 GOO OF in
debtedness incurred chiefly If not wholly in
consequence of the existence Of the govern
ment notes. and $1G0000, 900 of reserve lying
Idle In the treasury, the saving in interest
compared with the unendng burden of pro-
viding for their redemption. We have al
ready redeemed them in gold nearly twice
over-$o4S. .6S1, Ole since 1S79-and they are all
outstanding yet
Worse than this, however. is the injury
which results from the element of uncer-
tatnty which is inseparable from such cur
rency. Such injury is none the less real be-
cause 1t may be unperceived. 1t may go
long unnoticed, like friction in machinery or
malaria in the air. but 1t has its effect
| nevertheless; and when 1t reaches an acute
manifestation, such as we have experienced
within the last five years, the loss occa-
stoned Is beyond computation.
THE SILVER CURRENCY.
We have 1854 355, ,o31 of notes of s. and un-
! der. and $50, 1861 of silver dollars in ac-
tual circulation. making total of S414 SOL S19
of current money in use, exclusive of gold,
in denominations of 81, 81 and S.. Our total
stock of silver dollars is $452 ,713, 792. This is
an excessive quantity to have at the exist
ing discrepancy between their legal and ac-
tual value. But with further coinage of them
discontinued and their parity assured by the
exchange of gold for them on demand 1t is
better better to retain % them as they are than to
attempt final solution at this time of the
problem which they represent. By withdraw
ing all silver certificates over $5 and all other
notes under $40 a place will be made for
nearly all the silver dollars in a way which
will give the country the full benefit of them
for current use without imposing upon the
treasury any serious burden in their main
tenance.
| DEaNhlNG
| She chief difference of the proposed from
! the existing system of bank notes is that IL
gradually does away With the requirement
that there shall be a deposit Of bonds with
the government a condition for the issu-
| ance thereof. AS now, the notes are to be
first lien upon all resources of the banks,
including the stockholders Liabilities. This
change Is necessary because of the scarcity
of United States bonds, and the attempt to
substitute other bonds would lead to many
evils. The change is wise because it permits
the issuance of notes in the way and at the
time when: and for the purpose for which,
they would be issued under natural condi-
tions, II no law prevented. Such a system
would more perfectly than any other give the
| country circulating medium; 1t would read
lily and quickly adjust itself from season to
season to meet the wants of the business Of
the country requiring bank notes for It's con-
venient transaction. Under the present sys-
tenn the problem presented to a bank when
Its customers call for currency is not the
amount or It's own assets, but its ability to
make an investment in something quite apart
from its usual business as a bank in order
that 1t may be in a position to provide a
man who wishes to move property or en-
ploy labor with the tools most convenient
at the time for his purpose. Notes secured
as herein provided cannot fail to be SAFE be-
cause, being based upon all the resources
of ell the banks issuing them, they are
| based upon the whole business of the
country, and that business is the thing
which gives life and value to all securities
! government, municipal, railway and individ-
/ ual obligations. Should all the resources of
| tne DankS ever so shrink IN value as not to be
ample security for the amount of notes that
/ could be issued under this plan then all
! other securities, even government bonds
would become vaueless. The banks are
bound together for the security of these
notes to accomplish the same purpose that
| the denosit of bonds is intended to accom-
plish, namely, to guard against loss through
the misfortune or bad management of single
banks. and thus save the holder of a bank
note the need of ascertaining the standing
of any bank. The objection that Is sometimes
made that the larger banks in the great cities
would not issue notes because of an appre-
hended liability for other banks. is shown
| by statistics to be groundless. Eighteen hun
dred and ninety-three the year of largest
bank failures. but had all the banks OF the
country then issued notes UP to so per cent
OF their capital the amount of their assess
ment to make good the ascertained deffcien-
cies Of that year up to the time of the
comptroller's report Of 1885, would have been
only small fraction of l per cent Had so
per cent of the capital of all national banks
| been issued in notes upon the proposed plan
since the beginning Of the national banking
system, in 1853, the assessment upon the
| banks annually would have been an amount
so Insignificant that is need not be taken
into account Taking the country banks as a
whole. it is found that on the 5th of October
last they had s401, 900 900 Of the s631 900 900
of national bank capital should they issue
notes up TO so per cent of that capital they
would have 1921 COO 900 of notes. and there
would be 81, ,956 coo, 900 of resources against
these notes, not counting stockholders liza
! bility.
! If these resources of the country banks ara
insufficient security for this amount of notes
they will be insufficient only because there
would then be such a condition Of business
paralysis that government municipal and
! railway bonds would be yalueless and also
| few II any banks in the reserve cities would
/ remain solvent The occurrence OF this dis
aster is improbable that its consideration
may be dismissed. In some quarters fear is
expressed that here would be an undue ex-
| pansion under this plan There is no danger
of this. The system of redemption not only
at the banks but at the treasury in Wash
! ington and at the sub-treasuries would
strongly guard against that. The expansion
over that which could be effected were TO
notes issued at all will be found upon in
vestigation, to be small. Dangerous expal-
sion does not take the form of the issue OF
bank notes, but OF the extension of credits.
| The bank note is only form in which he
! to whom credit is given will use that credit
! he can use it equally well for most purposes
! IL the loan is placed to the credit OF his ac-
count by the bank making the loan TO him,
Continuad nr, SauonAb IBn