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

| Mr. Theodore Gilman writes on IAN elastic
currency" In a manner which is most refresh
Ing after the deuge Of assumptions that de-
sired elasticity OF currency can be obtained only
by unlimited issues OF banknotes. 1t VIII be
observed that he offers not word In favor
Of ntrustIng to every bank the power to make
currency on the basis Of anything 1t may con-
slider good assets. Plainly. Mr. Gilman knows
that such n plan would be nadmissble. and
the virtue of his proposal Is that It would pro-
vide powerful safeguard respecting cmer-
gency issues OF currency. No space need be
spent in repeating the proof that the cOnceI-
tons Of the panic Of 1893 which were invented
by Mr.. Cleveland and his officials were mis-
leading. That panic came because n reversal
of the National policy for many years was i'm
mnent and the country has swiftly recovered
from 1t and It's effects, not by any change OF
currency, but by n return to the National pol
icy then assailed.
Mr. Gilman considers that the liquidation
forced upon the banks was about Si00O0O000.
which he calls the Required elasticity. and
that the Increase OF banknotes TO meet the
pressure was only $50, 100000. so that the OK
listing system 'has only one-tenth Of the re-
qulred elasticity" How complete an error this
Is will appear when the net imports Of over
$4,000 600 gold In the last four months of 1893
are considered The currency now includes
gold Of which II Will draw from other countries
whenever IL IS needed here. But this Is not
the only elastic feature OF the present currency.
as Mr. Gilman himself shows. He points out
that the clearing houses OF NewYork and other
cities provided an emergency circulation OF
many millions. which he maintains did give
relief to the business community. on which
mo money has ever been lost and which us
also responsive to the demands OF business.
But nothing Ike 500 000OO0 Of such certli-
Gates was ever put into circulation showing
that the actually required elasticity was not
that amount as he has argued. The certlh-
Gates, the imported gold and the new bank
notes all put together did not nearly equal
the supposed required elasticity"
Mr.. Gilman's proposed remedy is to legaze
this form OF relief by incorporating clearing
"houses under Federal law. so that they can
do legally that which for forty years they
"have successfully done extra-legay' The
mode Of relief, however exists, and is actually
a part Of the currency system OF to-day, ana
has been for forty years successfully en-
ployed. II so. why has not the existing sys-
tenn shown the elasticity which Mr.. Gmans
proposal would secure? Though "extra-legal."
such issues were never stopped by the Gov
eminent nor treated as breach Of obligation.
and there has been nothing to prevent them by
the banks of other cities wherever clearing
houses exist or may be established Is It not
because the banks Of most cities have not been
prepared to trust each other In the conduct Of
institutions by which the interest and business
OF all might be affected? Suppose Mr.. Gil
mans plan for zone clearing house of issue in
each State" had been In operation. Is 1t not
obvious that In the boom" times ut the West
the clearing houses Of Kansas and Nebraska
and Alabama and other States would have been
hurled under certificates Issued against assets
representing titles to land enormously over
valued?
II should be said that Mr.. Gllman's plan has
in II merits incomparably beyond those OF
other schemes which have received great atten-
ton. II does provide some safeguard against
the excessive Issues OF notes by any one bank
upon what II may please TO consider good as
sets II puts the faith and business experience
and personal interest Of number of banks be-
hind any Issue permitted. and enlsts them TO
insure It's retirement. That this proposal can
he go modified as to be OF vast service to the
country will not seem improbable to those who
have read Mr. Giman's book on the subject or
his statement last year before the Banking ana
Currency Committee But IT is not TO be for
gotten that this kind Of elasticity exists already,
restricted only by the prudence OF individual
banks. and that no form Of expansion which
~ not restricted with the utmost care can rea-
sonaby be expected to escape exposing the
business world to greater disasters than those
II ternporarly relieves. The one remedy FOR
overtrading overspeculating and excessive ex-
tensions Of credit Is loss. The sooner the loss
comes. as rule, the less severe 1t VIII be-
Efforts TO defeat that natural law have 10
be guarded with the utmost care. or they mere
" multiply disaster and extend II TO FAR
greater number Of people.