The morning news. [volume] (Savannah, Ga.) 1887-1900, 1900-04-20
MONEY TO BURN.
The Effect of the New Currency Law
Volume of CircuIatson.

on Volume of Circulation
Secretary Gage in Golfers Weekly
In considering the effects of the new
currency law, point that is of decidedly
the greatest immediate public interest is
in regard to it's influence on the volume of
circulation. 1t can be generally answered
that the law will lead to an increase in
the supply of money in circulation. but
it is extremely difficult to hazard any
thing like an intelligent estimate AS to
how great that volume of increase will
be.
Should the entire $40, O0O,0 600 of bonds to
which the refunding provision applies be
offered for redemption, there will be paid
QUE of the treasury $50, 600, 900 in premiums
The payment of the premiums win be in
cash. and there will he,>that addition TO
the circulation. 1t is not to be anticipat-
ed, however, that all of the bonds will be
offered for exchange into the new per
cents. Probably a large part, at least
of the holdings of banks, will be offered
National banks hold an aggregate of $780,
100000 of registered bonds of the refund
able issues By the way offers are already
coming in there is an indication that a
fair amount of the holdings of individuals
will be offered for exchange. While we
cannot probably look for the paying out
or this entire SS6, 600, 900 in premiums there
may be paid out within the next sixty or
ninety days S20000,000 or $780, 900 600 in that
way. Perhaps $40, 600 600 of that will come
direct from the treasury but there will
eventually be Withdrawals of deposits now
with the national banks to replenish the
general fund in the treasury if drafts on
he nay NJ Of
miums are sufficient to make that seem
advisable.
The largest increase might come from
the additional incentive which the law
offers 10 banks to take out circulation
There is discrimination in favor of The
new per cent. bonds to the extent that
the tax which national banks must pay
on their circulation will be only one-half
as much when the banks deposit the new
bonds to secure their circulating notes as
it will be if they keep on depositing their
old issues This offers an incentive to the
banks TO make the sacrifice that they are
asked to make in exchanging the higher
rate interest bonds for the new 2 per cent.
bonds If the market price of the new
bonds had not gone above par there would
have been fair amount of profit in a
bank buying the new bonds on the market
and taking out additional circulation 1t
has been calculated by the government
IL.
bonds al par, and taking out circulation.
would, We're 1t able to Keep loaned all of
Its circulation, make profit of about / 2-5
per cent. more by taking out circula ton
than it would by leaning the moaey IL
must originally invest In the bonds Sure
by, that is not exorbitant profit but
1t would undoubtedly be sufficient to lead
to a very large increase in the circulation
As the law permits banks to take out cir
cuiatton up to the amount of their capi-
tai, there is room, with the present aggre-
gate capital of national banks, for an in
crease of substantially 1850 900 600 cjroula
ton.
The high premium that has been imne-
diately realized in the market for the new
per cent. bonds, however will certainly
check, to a large degree any movement
in the direction of additional circulation.
and it IS quite impossible. with any data
at hand, to estimate how great the in
crease will be.
That the volume of circulation hinges on
the market price of a per cent govern
ment bond is one of the best illustrations
of the fact that our currency system has
not been put on an entirely scientific ba-
sis by this new legislation. The bank-note
circulation ought to have a direct relation
TO the commercial needs OF the country
rather than to the market price of United
States bonds and ii is in the direction Of
a scientific law governing by proper eco
nomic principles the volume of bank-nOte
circulation that financiers and legislators
must next turn their attention
As the situation now stands there will
be an increase in the national bank circl-
laton; that increase may be considerable
but as the country develops, our needs viii
soon grow up 10 that increased supply We
will discover that the volume of crculat-
ing paper money is not regulated by an
entirely different principle. the principle
of the profit on circula ton that is secur-
ed by bond deposits, that profit depending
on the market price of the bonds. There is
entire dislocation between cause and eff
feet. Scientific principles do not govern
the volume of money 50 issued. This new
legislation has postponed the time when
these facts will be brought 10 the attention
OF the commercial world in an unpleasant
way; but whoever thinks that the curren-
cy problem has been wholly settled by this
recent legislation will be undeceived as the
years go on The legislation that we have
go far secured Is wholly admiral BILE. | am
plea ed with every feature OF the new law
but ! believe II Is well enough 20 sound
this word OF warning. People should not
conclude that we have reached the cnd
of currency discussion; we are Gin out
OF Joint with the spirit OF the commercial
world In our treatment OF national bank
note issues, and We must have education
along that line as we have mad such
splendid education and such entirely sat
isfactory results Ia the discussion Of the
- ahdard IT valDa