New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1898-12-07

slbie to forecast and exactly detSIinihe '"'So e
factors. Economically considered. the part OF WIS
oon would seem TO be 10 provide sufficient mar
Gin NJ new ADVANTAGES in interest. or otherwise 10
Noat the loan successfully. and then allow the
market by fair competition. TO reduce the i''"'s'
thus provided to the narrowest limit. Inc new
bonds were properly fixed at per cent St''c'
business logic dictated that they should enter INTO
connection with the Older issues. 1t was the ohy
vav nv which their true relative value could ne
determined Instead OF this. the whole Issue WAS
offered 10 the subscribing public at the UNIFORM
price of par. Nevertheless. the experiment may NC
considered a 1ustihable one and II worheu OUT ="
a way to strengthen the National credit froi" IT,
however useful suggestion may be derived
1t is evident that an attempt by Congress 10 IN
the nroper ratio of interes; Justify an oner ior
the Governments obligations at par VIII always
be subject to ono Of two dangers;
First If the rate of interest be hxed TOO low
time and circumstances being considerations loan
may fail with the consequence of serious deraHse-
ments 10 the Treasury; or. 49,
second ~ the rate Of interest be fixed too hlgh'
md the issue offered at par while 1t VIII De easS
taken the result may he a great economic waste 10
the Treasury. A..
The considerations thus presented lead 10 TIC
conclusion that while the features intended TO indhe
the loan a popular one should be preserved io
vision should also be made 10 secure 10 INC ""
eminent the highest value attainable unuei 'o
fair operation OF the popular loan prlhciPi''
business affairs the Government should nave SUN
regard 10 the principles which everywhere anu
elsewhere obtain l. e. in the purchase oil ma'e''"'
and supplies required FOR public use II shou'u- as
81 docs-seek the lowest price FOR the same so'u9
and conversely in the sale Of what X may nave 10
sau whether of material or Of its own interest
hearing obligations it should also seek 10 Io"'~o
Tho highest attainable price. Should eAlse"Cio'
arise-not now observable-under when lu''"e'
,seres under the Act Of June Is should be made
necessary, 1t would seem wise to modliy IN some
way the mandatory provision which would now
,eouire an offer ~ the same to the people at par.
With a market premium of per cent now estap-
Ushed and conditions remaining the same such d
proceeding would involve an inexcusable economic
waste On the other hand, as before noted IL 10
not to be expected that previous market premium"
can be fully realized on large addition 10 ,he
rorke, sunnly believe that with some extension
81 discretionary power 20 the administrative oe-
nar,ment OF the Government IN this connectlon'
the popular features Of the present act can DC
fully preserved, while the risk OF undue sacri"ee
in maintaining that valuable principle may ne GU
Waited
In submitting my report. feel 1t my duty 70 I'M
nress upon Congress as best may, the important
subjec; Of currency and banking reform.
7 shall not be outside Of my duty If venture 10
point out. in AT least one important respect "'e
advantages to the poorer districts OF the couh'!
az n
he done by fairly describing the course or the
financial movement as 1t now goes on. and by pre-
een,ng in contrast the movement as 1t would go on
under the conditions advocated 1t is iamiliar
fact that in the period of harvesting ana crop
moving the currency is strongly drawn from tHe
centres to the country districts. When thls move
ment is over the currency again tends toward
the ccntres The currency flows 10 the centre to
pay loans occasioned by its use and other genera
Indebtedness and also 10 secure the beneht OF n
terest TO the country banker for a portion OF MS
funds which IN a dull period would otherwise lie
unemployed in his hands. At present. the cur
rency so sent consists almost entirely OF legal
tender notes and Treasury noes-that IS TO say,
IN the money which the law recognizes as lawful
reserve Thus received by the banks in the money
centres It becomes reserve for deposits IN the re-
lation Of one 10 four. Now, deposits may ne IN
creased by loans as well by the deposit or cash.
A loan for ten thousand or a hundred thousand
goes to the borrowers credit upon the banks
books and swels the deposit account by SO much'
True the borrower may check against this luhd'
but his check may also be deposited In the same
bank, in which case 1t Is mere transfer 10 an
other account or. II It be deposited In another
bank and paid IN money by the lending bank 1t
is still a transfer. The total deposits OF all the
banks are swelled by this original loan.
Whoever has followed the del!neauon OF our
financial movement and those VINO are familiar
with the facts which thus portrayed. ought
cause of the irregular and deranging effects de-
scribed Is to be found in a fixed volume Of paper
money clothed with full powers Of a legal tender
Upon this money-tself credit obligaton--other
credit obligations. In the form Of bank deposits
through bank loans may be built up IN the pro-
portion OF four 10 one. With the volume OF paper
money thus hxed--with no natural movement
toward its retirement when not needed in legiti-
mate trade--the tendency 10 build the four-story
structure upon It permanent base IS ire
Estible. The withdrawal Of TIE base by those who
really own It causes the structure to vibrate and
threatens It with fall.
Consider now. as briefly as may be. the practical
working Of banknOte currency-non-legal tender
If substituted for the paper money issued by the
Government. Verihcation may be found by those
who will look for it in systems now current In
France. Germany. Scotland and Canada; or. If our
own records be preferred, the New-England system
Of forty years ago those then in vogue in In
diana. Iowa and Louisiana will be equally good
examples Under such a system the financial
movement may thus be described:
Commencing as before with inward movement
OF funds from the exterior TO the centres the
money forwarded would then consist largely OF
banknotes These received az the centres would
not like the legal tenders OF the present, form
base for expansion. The desire TO obtain legal
money in their place would cause the banks re-
ceiving them TO push them home for redemption
IN legal money but the general effort In his orec-
ton would neutralize TO a large degree the erect
desired. Bank a. sending home the notes OF bank
B. would be met. not by A payment in legal
money but as an offset by the presentation OF the
notes OF bank B. There would be mutual retire
ment OF their respective bank note liabilities or
this precision in offsets would not be the
rule, but the illustration shows the general effect
TO be the temporary retirement Of a currency when
II cahnot be circulated IN the service OF the coun
try's trade and exchange. Observe this: The power
10 lend not thus lost; II is temporarily suspend
ed When, with the recurring needs OF the interior
10 handle its products Of the farm the factory and
the mine the power to issue circulating notes may
be summoned into use. then the needs Of industry
will coincide with the proht-moving motives OF the
banker, and the fun value OF this latent power
will bs experienced, not IN the centres where bank
notes are not needed and viii circulate but in