New-York tribune., 1900-01-15
ELASTIC CURRENCY.
s1rccEsr1ox FOR ISSUES BY INCORPo-
RATED CLEARING HOUSES
, tbe Editor Of The. Tribune.

To the Editor of The. Tribune
Sir: Your correspondent G. II. Y in his Iettsr
published by you on the 18th inst goes rishI 10
the point Of the whole currency question When ne
says: Currency can expand or contract only u-D7E
somebody's will power "If 50, who IS 10 DO the
tbinking?" Elasticity has TO meaning unless II
means that in somebody's judgment the volume OK
paper money in existence may be increased II
there is 10 be limit TO the elasticity "IO - %
determine and regulate that Hmit?' His conclu-
sion which he announces in advance Of his argu-
ment is: IF the definition (of elasticity be not
full of danger, I have studied the subject fruit
Iessy."
Certainly there would be no difficulty in agreeins
with this conclusion il the issues OF currency were
to be made under the will power OF the directors
of three thousand OF four thousand banks. big and
little scattered all over the country; and Il these
banks were hold in their own possession Withous
supervision the security TO the banknOtes they
issued. G. H. Y. says truly that such "an elastic
currency would soon rival John Laws monumental
disaster
But who advocates an elastic currency --=1ed ia
that way2 What successful banking system among
the nations of the earth can be cited which q 50
operated? What statesman in our country Isks
his reputation for good judgment BY espas'siEs
that method of bank note issues? Marriott B1dslus
chairman of the Committee on Banking aLd
Currency of the House Of Representatives, said IN
a statement made by him before the committee OF
the LIVth Congress: I unalterably opposed TO
the Federal Government cOnferring upon any body
of men, under free banking law. the power 10
issue circulating notes their property under
their own control There is little doubt that
a majority OF the present committee agree with
their chairman on this fundamental point. The
question then remains, How elastic cur
rency be provided which does not possess these
Objectionable features2
The answer is simple: incorporate our clearing
houses under a Federal law and give to one IN
each State the power issue circulating notes 70
their bank members to the par OF their capital,
pledge OF banking at 70 per cent Of their aP
praised value, the notes to be receivable by al
provide a safe and elastic bank currency,
based on gold values. with a margin Of 80 Is per
country II would expand when occasion demands
and contract when the service required has been
practice of the New-Yor< Clearing House in the
issue OF clearing house certificates, which are
currency between banks
The will power is then that OF a loan commit
tee. acting for all the banks associated IN any
clearing house, who have contingent liability for
any loss which may arise. This has always
conservative action Such currency would ex-
pand when needed. and the will power OF the
tingent Iabiiity would enforce contrac1on when
the currency had done its work Professor Joseph
a recognized authority finance. has said that
''such a system would tend render irnpossibIs
through in 1873 and 1893
II G. H. Y. will examine the banking systems OF
France and Germany, countries where monetary
panics do not occur. he will find that the principle
which they are founded is similar TO that fol-
lowed by our clearing houses A clearing house.
being democratic in character, should take the
pace pace IN a repuonc occupied by governmental
1t would be dismal prospect for our country Il
curing panics which have become almost the
yearly experience of our commercial life We
have living neglected close at hand means FOR
in many panics to be safe and efficient. Are our
business men so welded to antiquated ideas that
one or two more panics are needed as some think
to convert them to modern metR9dS? r-,.
New-York, jan T. 1900