The broad ax., 1899-12-16

the cause OF sound money tnaI cldInoE
for more government paper should ind
no excuse in existing conditions. The
friction has been due to casting a bur-
den on the treasury which does not be-
long there. The natural avenue OF
relief is through the national banks"
The friction to which the treasurer re-
fers is that which gives rise 20 clamor
for more paper currency whenever
there is a scarcity of means for the
handling OF crops after harvest or for
the handling OF greater crops of specu-
lative paper on Wall street. Mr.. Rob-
erts means that whenever such clamor
arises the duty of dealing with 1t
should rest on the banks and not on
the government. II the demand is
legitimate the banks should issue
notes: IL it is not legitimate neither
the banks nor the government should
meet II.
Is this the end of wisdom on this
subject? Why do not the banks meet
the demand under existing law when
it is supposed to be legitimate? Why
is II supposed to be necessary every
now and then for the secretary OF the
treasury or the president to stop and
decide whether the demand is one that
should be met and meet it IL in their
superior wisdom they decide that it is
legitimate? Mr.. Roberts proceeds i'm
mediately to say that the existing
banks of the United States have the
right under their charters to add $685.
| 020, i13 to their circulation" This Is
more than twelve times as much as
Mr.. Gage offered to pour out of the
treasury for the relief of the market"
Why could or would not the banks
supply per cent of the amount they
are already fully authorized to emit?
II they had bonds to sell to the gov
eminent why could they not have de-
posted the same bonds as security for
additional circulation? Why could
they not have afforded the relief which
Il is their natural duty to afford?
The reason is. says the treasurer,
because bonds are high and the banks
can get only $50 in notes for every
500. face value, of the bonds they de-
posit as security. though they cost in
the market, say. SIP. Therefore he
joins other officials Of the government
in recommending that notes be issued
to the banks to the face value OF the
bonds and that the tax on circulation
be reduced from l per cent to one
fourth or one-eighth Of / per cent per
annum.
But by what natural or supernatural
process do Mr.. Roberts and the other
officials arrive at the knowledge that
these measures would give the banks
just the right profit to induce them to
issue the notes necessary for the relief
Of the market? May it not be neces-
sary to issue notes up to the market
value instead Of the face value of the
bonds and to abolish the tax on circu-
lation altogether? Why is 1t not nee
essary to offer different inducements to
the issue Of notes for different locali-
ties? The relative profit on circula-
ton varies in different localities, ac-
cording to the prevailing rate of inter
est. II is greatest, other things being
equal, where the rate is lowest and
least where the rate is highest Then
why not limit issues to 80 per cent OF
the securities in one locality, to 100
per cent in another, and to the mar
ket value in another? Whoever will
ponder these questions will perceive
that there is no natural relation be-
tween the arbitrary prescriptions OF
law which affect profit on circulation
and the issue of the latter to meet
either local or general stringency We
know that under the existing prescrip-
tions the banks do not take out more
than about two-fifths of the circulation
to which they are entitled at any time,
and that hey rarely, IL ever. take out
circulation to meet conditions Of
stringency.
Suppose congress should take the
measures recommended by Mr. Roberts
and other officials; how does or can
anyone know that the banks would
not issue clear up to the authorized
limit even IL there should be no strin-
gency. leaving themselves no margin
for further issues in case of real and
severe stringency? They would issue
notes. as they do other business, for
profit Therefore they would be more
likely than not to issue clear to the
limit when things were booming, min
istering to the speculative excitement
which needs to be checked by the nat
ural difficulty of getting money to add
the inflated speculative dealings to the
ordinary volume Of business. They
would be likely to stimulate the I'M
healthy excitement. as the old state
banks did. and contribute to make the
final crash more disastrous.