The evening times. [volume] (Washington, D.C.) 1895-1902, 1899-10-24
BANKNOTE1 CURRENCY.
The Scheme of Secretary Gage to In
crease the Elasticity of Money.


The recent stringent state Of the money
market in New York and in other large
money centres is Just now being studied
more earnestly than ever by the leading
officials of the Treasury Department with
a view CT securing some permanent means
of relief. With the small assistance rem
dered by the Government in the advance
payment of October and November inter-
est On bonds, it is felt that the worst of
the embarrassment this year has been re-
lieved and that the New York banks will
now get along very well until the next
extraordinary demand arises for money in
the rural districts. The experience of the
last few weeks. however, has led Secretary
Gage to believe more strongly than ever
in the need of sech a reform Of the banking
and currency laws as will produce more
elastic movement Of money. In his forth
coming annual report to Congress he Will
probably use the experience of the New
York bankers this fall as an argument for
modifying legislation. and he Will empha-
size some of the recommendations made In
his report of 1888.
In his recent tour of the Northwest with
~
an opportunity to see close at hand the
great agricultural industries that al this
season of the year are making such great
demands OH the money centres. In dis
cussing the money situation today the Sec
rotary said that the agricultural districts
of the country would undoubtedly be bene-
fitted by an extension of bank-note curren-
cy. The financial movement as it has been
going on during the last few weeks forms
a striking contrast to the movement as 1t
would appear il the conditions which he
advocates should be fulfilled. The Secre-
tary called attention to the familiar fact
that during the period of paying farm
hands, moving crops, and meeting other
expenses of the harvesting season, money
is inevitably attracted from the centres
of money to the farming districts; and sub
sequently returns to those centres. AS is
well known, Secretary Gage said. the
movement of money back TO the centres
is for the purpose OF paying loans result
ing from its use for other forms Of in
debtedness, and to yield interest payments
to the country bankers for a part of the
funds with which, in a dull season. would
remain idle in their banks. This currency
under the present system. consists of
Treasury notes and legal-tender notes
money which is recognized as legal re-
serve.
When the banks in the great centres
like New York. said the Secretary, re-
ceive this money from the crop districts.
il becomes reserve for deposits in the
relation of one to four The possibility
of increasing loans against the inflow Of
reserve funds from the farming districts
after the harvesting season in the proper
tion of one TO four, is regarded by Secre-
tary Gage as temptation TO which the
city banks are likely to yield. In his an
nual report last year the Secretary said:
1T must be remembered that this in
ward movement of currency f-on the
country occurs at the time of year when
commercial activities, are the least and
the general requirements for the use OF
loans IN the interior are the smallest. The
| efforts of the banks at the centres TO in
crease their loans causes interest to fall.
| The fall in the rate of interest causes in
] terest and dividend paying securities to
! rise. The rise in securities induces specu-
lative buying The speculative buyer be-
! comes the banks borrowing customer"
! This results the Secretary said today, in
! the banker putting out his funds. as the
/ banker says. although he really does moth
! ing OF the kind. He keeps his funds but
! swells his deposit liability until the funds
on hand are answerab.e to the rule of one
! of cash TO four of liability.
This condition recurs every year, but
/ Secretary Gage believes that the condition
/ is more strikingly apparent than ever this
! year maximum of loans and deposits
and a minimum in cash reserves Ia always
! the result. he says During the season tn =
! country banker has used his checks and
! drafts on Eastern banks as a medium OF
! exchange, but he requires cash later 10
pay farm wages and meet other expenses
{ 81 ha bar Tho
! dent at the money centre, as Secretary
J Gage describes the process. is obliged then
/ to meet the rural demands for cash by
drawing on what he had regarded as his
legal reserve. and this is disturbing con-
dition. The reserves become depleted and
the country banker is informed that
money is very close.
! In discussing this years situation which,
! he says. is only more emphatic repetition
! of what has occurred in former years. Sec
rotary Gage said that the cause of the trou-
| BILE is the fixed volume of paper money
/ having all the powers of legal tender.
The remedy, he said. is to be found in a
bank-note currency. ~ The inward move
ment of money to the centers would then
consist largely of bank notes-non- legal
tender. These notes; would not form a
basis for expansion because they do not
! become part of the legal reserves of the
! for redemption in legal money, and the
! effort to do this would Mr.. Gage urges,
neutralize largely the effect desired. Bank
| A sending home the notes of Bank would
/ bring forth, not payment in legal tender,
! but as an offset by the presentation of the
notes of Bank B. This would result, the
Secretary thinks, in a mutual retirement
of these bank-note liabilities THE power
| to lend is not thus lost says Secretary
Gage, but it is temporarily suspended"
The Secretary added that the needs of
the interior of the country each autumn on
account of agricultural expenditures will
be conveniently met by the power of the
banks to issue circulating notes, and the
needs of industry will coincide with the
desire of the bankers to make their profits,
and the value of the power to issue notes
will be felt in the interior where the farm
| industries are going on, and not in the
/ usual centres of money activity, where the
bank currency is not needed and will not
| circulate
Secretary Gage will develop this argu-
ment in considerable detail in his forth
coming report, and urge that Congress take
| the action which he advocates.
|
| A Chinese Lodge of Masons.
(From the Detroit Tribune.)
4 Calumet iet - has Chinese lrtIoe of Free