The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1900-11-22

such certificates, in the discretion of the
secretary of the treasury, may be issued in
denominations of $50, $50 and $780, and sill
yer certificates of higher denomination
whenever received at the treasury shall be
retired and certificates of $40 or less sub
stituted. IL is further provided that after
such substitution a like volume OF United
States notes of less denomination than SO
shall be retired and notes OF denominations
OF SO and upward shall be reissued. The
purpose of this section Is to meet the de-
mand for one, two and five~dOllar notes in
silver certificates and il is thought that
such demand Will keep them in circulation,
and. being SO widely distributed, they will
not so easily find their way to the treasury
for redemption in legal tender silver. The
mass OF silver certificates will be in these
denominations. and they will circulate 1ree-
~ until there is no apprehension that their
fat value Of about one-half will not or
cannot be made good by the government In
gold. They would then depreciate to the
purchasing power Of silver. The silver dol
lar, being legal tender, would not fall 20
| 80 cents in name in such an event. 1t would
be dollar with about one-half Of the pur-
chasing power of gold. The deprecated
currency would drive out money of higher
value and the gold reserve would be
drawn upon to redeem the United States
and treasury notes. Silver is not ex-
| changeable for gold As the bill for the
act passed the House IL was redeemable in
| gold. but the silver element in the Senate
defeated that proposition. Whenever the
gold reserve is drawn down TO $lOO,OOOOW
| then the secretary of the treasury, by the
terms OF the law, sells bonds puts the pro-
ceeds into the general treasury and ex-
changes gold for notes redeemed and does
not pay out those notes except as provided
by law and pays out gold whenever it is
demanded and keeps all the silver that
comes to the treasury. So constituting the
| law any lessened confidence in silver can
| be restored. Another construction would
render the government unable to hold up
the value of the mass of silver currency
| and it would sink to its intrinsic value and
1 there would be an injurious contraction OF
the currency. 1t is true that silver, and
| especially the silver certificates. as broken
| up by this law into small denominations,
| are scattered among 16,OO0OO people In
| pocket trade for the small transactions.
| To withdraw il from circulation in any
| substantial amount would not be possible
except in the event OF widespread dlStrust
of the ability of the government to main
| tain its purchasing power with that of
| gold. While this phase of the subject is
not thoroughly satisfactory, yet 1t was the
| best obtainable in Congress.
| THE RESERVE.
| "By Section the reserve is separated
/ from the current balance in the treasury
| A special fund for redemption is created
| in the sum of $50, 900. IT may be in part
| in redeemed notes which may be exchanged
| for gold in the general treasury, or for
| deposits by individuals. This substitution
| may continue until the redemption fund
amounts to 500. 100000. then bonds must be
| issued. Gold in the general balance must
| be gone before the minimum in the treas
+! ury is reached. Under the old law the gold
| reserve might decline without a single re-
| deemed note in the treasury but under the
present law there would be at least $50.00O 600
/ of redeemed notes before any bonds need
some check in this the endless chain
/ as is also the provision that notes ex-
| changed for gold resulting from bond is
/ sues shall not be paid out to meet deficits
| in current revenues.
"In substance the provisions of Section
u are that upon the deposit with the treas
urer of the United Staes by any bank of
/ government bonds it is entitled to issue
| circulation UP to par of the bonds and any
| bank having bonds now on deposit may
issue an additional amount of circulation
| to par, provided however, that such circu-
| lation shall not exceed the capital stock of
| the bank actually paid in, and provided.
further. any national bank may substitute
| the 2 per cent. bonds of 1900 to secure circu-
| lation; and in order to stimulate a sub
| stitution the tax on circulation is reduced
by Section Is TO one-half of l per cent. per
| annum.
when the act went into effect there
| were in excess of S39, 900, 900 of exchange
| able issues. On Sept g. 1900. the amount
| of twOS issued in exchange for the old
issues was in excess of 335, 000. 00o The ma
| tional bank circulation increased from
1928, go on March IA, 1900, to $296, 755 80
| Of the amount of bonds held by the treas
| urer security on Oct. 1, $3.50. 900 were
| new twos 1t will be seen that since the
| act went into force there has been a sub
| stantial increase in national bank crcula-
| ton and that the great part of it is based
| Oh the new bonds
1.-The national bank issue may economize
| the use of gold and certainly the govern
| ment could not have placed the 1900 issue
| o. bonds at premium except through the
| banks 1t was a very favorable transac-
| point of the bank, Ii would seem the sub
| stantial increase in circulation would indi-
| cate that the banks decree was in favor
| OF its issue. There are several considera-
| tions in the mind of a good banker in issu-
ing circulation. He does not want to issue
on bonds at too high a premium, or that
| are likely to decline in the market The
| controllers reports during the recent years
show rarely profit of one-half of / per
| cent. on national bank circulation. the
| chief reason being the high premium on
| bonds
LOW INTEREST BOND.
1.-The new act furnishes a low-interest
bond that will, it is thought, stimulate cir
| culation. A national bank note possesses
| certain legal tender quality, being re-
| ceivable at par by all national banks and
| by the government, and must be accepted
| by all creditors of the government except
| bondholders. While not possessing full
| legal tender capacity, it crculates widely
| in all sorts OF financial channels, and its
basis being the governments own credit
| il is accepted without question in the ordi-
| nary course of trade. Congress has made
| due provision against sudden contraction
| of this form of currency. The national
bank act prohibited bank from increasing
its issue within six months after il has
retired any portion of its circulation. The
| present act repeats that clause, but leaves
in effect a provision restricting the total
| retirement of bank notes to 5000 600 a
| month. III contraction is required beyond
| the legal amount il cannot be had and
if the currency in circulation is not alb
| sorbed then bank notes would displace
| gold or legal tenders. When there is ex-
port of gold Ii may mean undue expansion
| of currency, and that condition certainly
indicates that bank notes should not then
be issued. However, recurring to the
| statute, il makes the most liberal provis-
| ions yet had for the issue of ma
| issue to par value of bonds, reduction of
| tax and low interest bond, so that the
| bank will not have SO much money tied up
| in premiums. 1t will be kept in mind that
| that form of money is so inelastic it is far
from ideal as it is at present constituted
In 1899 the controller, in his report recon-
| additional 10 per cent. circulation of banks
| so that only at seasons of the year when
| profitable would banks issue the notes. thus
| giving their notes an elasticity which they
| do not now possess. This suggestion, how
| ever, has not been followed in legislation
| The permission of the statute for the Or
! ganiZation of banks with less capital in
| small places obviously intended to