Evening star. [volume] (Washington, D.C.) 1854-1972, 1899-12-12

| in 1879. at time when the production OF
| gold was lower than it had been for twenty
| years. There was no expectation at that
| time Of an increase In the production OF
gold; on the contrary. the general opinion
| was that the output of gold was steadily
| diminishing. and yet. when more metallic
| money was constantly required to meet the
| increasing wants of business, 1t was pro-
| posed to demonetize the money which was
| Increasing in volume and to give monetary
| efficiency only to the metal which was d.
minishing in product. The gradual fall of
prices from 1873 to 1897 accompanied the
gradual and progressive reduction in the
| use Of silver, until the whole world. suf-
fering from the appreciation of gold and
! the depreciation of property and products,
started out IN a search for gold. The re-
suit has been a tremendous increase in the
product of gold, the annual product today
being nearly treble the annual product
VIXEN the process of silver demonstration
commenced
The Claim of the BimetaIiists.
The increased production of metallic
money had relieved the situation and proved
the contention of bimetallists as to the
cumulative theory. All that intelligent BIZ
metallis.s claimed was that the world need
ed more money: that all the gold and all the
silver thus far produced had not been suff1-
cent to meet the worlds demand for money:
that the world was more likely to get a
sufficient supply from two sources than
from one; that the vital question was a
sufficient supply: that the rise in prices and
the increase of prosperity consequent upon
the larger production of gold during the
last two years and the increased prosper
tty in this country consequent upon the adj
dition to Its money volume of nearly three
hundred millions, obtained by a favorable
balance of trade, have proved the conten-
ticn of the bimetallists and INDICATED their
theory.
Basic Money Contracted.
no VII, ,f
Newlands claimed. that the republican
the increasing production of gold for the
elimination OF the existing stock of silver
in this country from use The metallic
stock of the country consists of about nine
hundred millions of gold and six hundred
millions of silver, fifteen hundred millions
in all. This Is the only basic money. the
only money of final redemption.
1t Is true there are greenbacks and ma
tional bank notes in existence. but these
are merely promissory notes payable in
metallic money. issued either by the govern
ment or the banks. While they aid in the ex-
changes they form no part Of the money
of the country; on the contrary, they them
selves are redeemable in money. The me-
tailic money needed no redemption; gold
reeded no redemption; silver needed no
redemption, but the purpose Of the domi
nant party was to make the six hundred
millions of silver redeemable in gold by
the treasury. 1t was true that they used
the term exchange" that Is to saw the
treasury was to exchange gold for silver
but If gold was to be given for silver. clear
~ silver would turn into debt redeemable
in gold and thus become a liability of the
treasury. BY this process the basic money
of the country was to be contracted from
fifteen hundred millions to nine hundred
millions. and unless relief was given in
some other way the contraction would be
disastrous.
Function of Checks.
To justify this great wrong, the dominant
party claimed that the great bulk Of the
business of the country was conducted
upon a credit basis, and that credit involv-
ed absolute security as to the standard.
1t was claimed that checks and bills of
exchange had largely taken the place of
money. No greater fallacy existed than
this. Checks and bills of exchange had
not taken the place of money. Their use
was merely supplementary to that of
money; their general use involved the ne
cessity for more money instead of less
money.
Practice of hanks.
Of the money of the country. about two
thirds was now in the pockets of the peo-
pie, used in the current exchanges; the rest
was in the banks, and furnished the basis
of credit. 1t was the custom of banks to
loan to their customers, on the average,
about five times much money as they
had. the loans being turned into deposits
against which the depositors We're accus-
toned TO check. The amount of the depos-
itors' accounts, therefore, depended upon
the amount of loans made by the bank and
the amount Of loans depended upon the
money that the bank had. Country banks
Were required to keep a reserve of Is per
cent of their deposits in cash: banks in re-
serve cities We're compelled to keep % per
cent. Assuming, therefore, that the banks
of the country had today loaned out al
much money they could upon their pres
ent reserves of cash, it is impossible to I'M
derstand how they could loan out more
money as business and porua ton increa sed
without an increase In cash An increase
of cash In the banks would enable them to
loan more money; diminution of cash in
the banks would cause them to loan less
money. contraction of bank loans meant
a contraction in bank deposits, and a con-
traction of bank deposits meant a contrac-
ton of bank checks. so there was an init
mate n1athe Eatical relation between the
cash on the one hand and the bank loans,
bank deposits and aggregate of bank
checks on the other.
Because the ma ture of the use of money
had changed it did not follow that there
was need of less money 1t is true that the
proportion of cash transactions to check
transactions is not so great it was for
merly in this country, ard is not SO great
as in other countries where the cash sys-
tenn prevails. but the credit system means
a multiplicity of exchanges, and increased
bank credits must involve increased cash
reserves.
Trusting to Chance.
What folly IT was, then, when more basic
money was being constantly required, to in
argurate a system hich might gradually
retire six hundred millions of silver dollars
now part of the money of the country.
The answer was made that the increased
production of gold would rapidly furnish
the money necessary to take the place of
the silver eliminated.
Thus chance was substituted for GER
tainty. What certainty was there that the
world would produce three hundred millions
of dollars in gold annually? What Ger
teinty was there that this country could
secure any large proportion of that product.
The war in the Transvaal might, at any
time, cut off one-third of the production.
The great squirt in the production of gold
might be followed. as heretofore, by de-
cline. In addition to this. the movement of
the countries of the world toward the gold
standard was not half completed, and yet
this country has suffered during the past
six years by the immense Accommodations Of
gold in Austria and Russia, Accommodations
not yet completed.
India is about to hoard gold for the pur-
pose of establishing the gold standard, and