New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1899-01-11

in 1929 1885 s232 12o. ~
These failures and liabilities represent the
financial troubles and losses that came 70 the
surface. The losses that were borne without
publicity would increase the amount largely.
q What Is the inference? 1t is that present
system affords our business community less
than one-tenth OF the protection from panic
which It needs. In other words. under tre-
mendous money pressure the currency has one
tenth Of the elasticity It should have. There
an unused currency privilege on Govern
ment bonds at the same time Of S427 100000,
but the banks did not own and could not
quire the bonds necessary to avail themselves
Of It. There was a similar state Of affairs in
1873 and In all the minor pancs Does not this
prove that our present system is inelastic2
II a man-of-war is requested to pass a speed
test of twenty miles hour. and under forced
draught can only go two miles would It not be
condemned as having no speed? II projectile
"a required 10 pierce ten inches Of armor-plate
and pierces IL only inch and then skaters,
would not that he called lack Of piercing
power? II all the departments of the Army and
Navy were only at one-tenth of required eff
cheney In what shape would the country be TO
resist the attack OF a foreign Power? That is the
position Of our banking system to-day. 1t has
less than one-tenth Of the elasticity necessary
10 ward off a panic.
The principle of elasticity may be formulated
as follows: II the mode Of supplying bank cur
rency is by notes issued on special classes Of
assets. then the elasticity Of the currency Will
he just in the proportion which those special
assets bear To the total liabilities Of the banks.
Or It might be limited somewhat as follows;
That the elasticity of a currency 50 issued would
be in the proportion which those special assets
hQpr 10 fna ofr T.-1 tn inc1I
solvency under any and all circumstances.
Your article closes as follows; IF this (the
present currency IS not the most elastic cur
rency conceivable. pray. what banker can sug
gest any form Of circulation which Will be
as elastic as responsive TO the needs OF business
and in the light OF experience equally safe?'
What has lust been said is intended to prove
that our present currency mas only one-tenth Of
required elasticity and ! viii therefore only
answer the last part Of the question
The banks Of the city Of NewYork associated
IN the New-York Clearing House for the last
forty years, and other banks in other clearing
houses. for a lesser time. have suggested IN
their clearing house certificates form or cur
rency 10 give relief TO the business community
IN time OF panic. The basis OF this currency -
any OF the acceptable assets OF the banks. anu
consequently it has all the elasticity to be Cd
tained from absence of limitation TO speclai
class Of assets No money has ever been lost
on clearing house certificates. and in the lGht
OF experience" they are equally safe with Ma
tora bank notes. They are also responsive to
the demands Of business
Clearing house methods need only TO be legal
lied by the incorporation Of clearing houses
under Federal law so that they can do legally
that which for forty years they have success
fuly done extra-legally In order TO carry TINS
suggestion into practical effect one clearing
house OF issue might safely be established IN
each State, 50 that the business OF all the coun-
Try could receive equal protection. The issues
should be in the form Of currency TO be CIR
culated as money and then our banks would
be IN position 10 meet demands for currency
without forcing liquidatons on the commercial
community.
Not only has this suggestion the recommended
ton Of a favorable business experience for forty
years but 1t is approved by some Of the ablest
OF the scientific monetary experts In this coun-
try.
The need Of elasticity and the way 10 get IL
may be taken the theme OF "The Theory OF
credit" work by Mcleod. the foremost Eng
ilsh authority on banking and currency ITO