The Providence news. (Providence [R.I.]) 1891-1906, 1898-01-03
FRASER BROS. CO.. DISTRIBUTORS

ROtldDle property ~ tlhtl VI SitdAtl
value. The bank note comes forth as
a sequel OF a business transaction, and
Is based on he active property of the
country VII / Is passing between pro-
ducers and consumers. This property
Is always negotiable and always equal
TO the duty 81 meeting the noe liability.
Bank notes are as sound as the business
transactions of the country, The cur
rency of the country. moreover. should
increase as the transactions of the coun-
try increase; hence the rigid unchanging
Issues Of the government make them an
inelastic part Of the circulation, while
by the very process of their issue bank
notes alone can he automatically ad-
justed TO the changing transactions OF
the business community.
For these and other reasons the COM
mission strongly urges the government
to withdraw its demand obligations now
used as money. decline 10 provide gold
for exporters and put the burden and
expense Of maintaining rcdeemab,c
pdrer circulation upon the banks. In
order TO meet the demand obligations
the present reserves of gold In the treas
ury furnish beginning to be set aside
In the division of issue and redemption
and to meet possible contingencies the
secretary OF the treasury is authorized
TO sell bonds whenever the reserve needs
replenishment. In this way. or from
surplus revenue, the demand obligations
tthat is. United states notes and treas
ury notes OF lS90) can be gradually re-
moved, and the cost 10 the country can
be reduced; while this process will also
give the inestimab'e advantage OF ceas-
ing 10 use demand debts as money, of
simplifying our currency. and of adding
TO confidence in the certainty OF our
standard BY the plan OF the commits
sion. government paper is Withdrawn in
the nrst five years Only 50 fast as the
banking currency expands so that con-
traction cannot take pace; if United
states notes are cancelled their place
VIII be taken by the gold paid out for
them. or by the expansion Of bank notes
tunder tn" new fy~tem propcsed: and
IN the fo'lo"ing five years all the re-
maining United States notes are to be
etred.
In view Of the scarcity OF United States
bonds they cannot long be regarded az
u
bond security Of a higher character
yields rw rate OF interest; and IN a
time OF stringency. when borrowers need
loans and the market rate Of interest
rs high, there is no lrducement TO buy
these bonds 10 increase circulation.
Hence, under the present system. when
notes would be most needed. il Is least
profitable TO issue them. While pro-
xsiI inn fav tt
curing notes t25 percent OF the capltaD
the commission proposed that notes be-
yond this should be Issued on all. in
stead OF part Of the resources of n
bank; and after 10 years that no special
security should he required. Banks may
issue notes Up To GO percent Of their cap
ital without restraint; for issues beyond
90 percent and up to so percent they pay
tax ot percent; for those beyond so
percent and up 10 100 percent they pay
tax OF percent Th-se notes would
oe prior lien upon all the resources
OF the bank. and, in addition. upon the
stockholders liability. Moreover all
banks issuing hotes contribute 3 percent
or their circulation as "a permanent
guaranty fund. For daily redemptions
banks should Keep percent redemp-
ton fund in the hands of the comptroller
or the currency. Banks OF $4,000 cam
ital may be established i'm places OF 1000
inhabitants; and branches OF banks are
also permitted.
1t is apparent that the scarcity Of note.
holders under the proposed plan is
greater than usually supposed. Ifnotss
should he issued by all national banks
to the amount of so percent % their
present capital, the security in the form
OF total assets (omitting consideration
or stockholders liability or a guaranty
fund.- is more than s. 10 81. In tile 1876
banks outside the reserve cities. the pro-
lection would be sGl0 TO 81 " notes
The greatest number Of failures Of banks
occurred In 1888 and vet the notes OF
those failed banks which did not realize
at least 50 percent OF their capital out
OF their resources formed only is Of I
percent OF the proposed circulation.
Had 80 percent Of the capital ~ all ma
ti0nal banks been issued Ga notes up0n
the proposed pan. since the heglnRng
or the ns'iOnal banking system In 1865
sn assessment upon the banks annually
Of only 40 Of percent would have been
necessary Moreover instead ~ tax
ON Circu,atirT "a tax e. Is ~ percent
on capital and surplus - proposed 10
cover the expenses of the system. such
a plan in general would furnish a safe
elastic. uniform and expanding cur
rency based on a hXe6 and certain stan
dard