New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1899-01-11
AN ELASTIC CURRENCY.
THEODORE GILMAN THINKS 1T COULD DE
SECURED BY EMERGENCY ISSUES
EY CLEARING HOUSES.

BY CLEARING HOUSES.
tn the Editor of The Tribune.
Ctr. your editorial in this mornings Tribune
.,,,ed "An Elastic Currency" states we'll the
.ro,,ment in favor OF our present system and
,,.,es a reply by asking: What do people
r,.an by an elastic currency?" The advocates
:, such a currency should be prepared to an
.u,er a question put fairly and clearly.
Tho subject can best be explained by an cx-
.r,n,e and. as the facts Of the financial situa-
,,on In 1893 are well known through the
-enorts OF the Controller Of the Currency and
from other sources, we may accept them
substantially correct. and use them for illustra-
tion
The financial bridge broke down in 1893 as It
h.s broken down before and since The
n,anation OF the breakdown Is that the bridge
WAS not able 10 bear the strain. There are two
rays Of obvating these accidents. One is the
old fashioned way. not TO allow the teams to
60 faster than n walk. and the other is to make
the bridge so strong that loaded express train
can 90 at full speed over 1t without causing
any detection. Modern business requires solid
construction and that Is the end aimed at in
this discussion
The facts OF the breakdown in 1898 are as
follows: The deposits Of all National banks In
2 1893 were as follows:
december 1902 .........-..-.-........N f64 Fel7I
October D. 1914. ~
TIE shrtnkase between these two da,ss was
other commercial banks. State and private,
probably suffered a similar shrinkage. and AS
their deposits about one-haf those OF Ma
tional banks. the total shrinkage in banking de-
posts throughout the country during the period
named was about S4OOOO0O0O This represents
the money pressure on the banks caused by
Withdrawals boarding etc. The only resource
the banks have fer meeting demands upon them
without diminishing their reserves below legal
requirements or calling loans and refusing dis
counts and thus causing forced hquldations' IS
by expanding their National bank currency
Let us see how much relief was obtained by
this means During the period which we are
examining the National bank notes were IN
creased as follows;
Amount outstanding october l. .s2os 500 ~
Amount Outstanding December |. 1898 .. 1880 s2s
under s4co0Nco money pressure there 60, Nc, "a.
<o"0S4''''
Or slightly less than 10 per cent OF the amount
needed to prevent the panic.
Consequently the banks were obliged TO issue
clearing house certificates and have recourse on
their assets to raise the balance Of the money
The liquidation which was thus forced on the
business community by the National banks. is
shown by the following figures. Their loans
and discounts were on the following dates;
December ts'I' So Gsi ISL
The amount Of liquidation which was thus
forced on the business community during the
time named by the National banks was s322,-
QS1, 55s
A corresponding liquidation was made by
other commercial banks. bringing the total
s,oppage OF business up 10 about 800 100000
The disastrous consequences Of this liquidation
have been felt for years The total failures
for the years 1892 and 1898, given in Dun's
Review, were as follows:
No. Of Amount q