The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1901-12-05
THE CURRENCY.
Defects Pointed Out and Suggestions
Made for Improvement.

pects,' the secretary continues, Il venture
to speak of that important medium of
exchange designated the currency, mean
ing by that word paper money, whether
issued by the government or by the banks
under the powers conferred upon them by
the law. Excluding treasury notes of 1890,
now in course of extinction, silver certifi-
Gates and gold certificates, which represent
actual coin held for their redemption, there
are now eXtant in the public service 1916. 000-
600 of government notes (greeubacks) and
little more than $3.50 600 900 of national bank
notes. Neither of these can with economic
proprfety be called money-real money.
They are alike promises to pay, and their
value rests upon the ability of the maker
of the promise to perform the obligation
set forth in the promise Under the pro-
visions and conditions of the law as it now
stands, the limit in volume of these obliga-
tons is substantially reached. AS to the
greenbacks, their amount is fixed by stat
ute, while in the case of bank notes their
volume is practically limited and controlled
by the market price of United States
bonds This is so because bankers will not,
any more than other men, assume respon-
sibility or risk without material motive,
and the present as we'll as the prospective
price of United States bonds robs banks
of any motive for the issue of bank notes.
To speak exactly on this point, the care
fully prepared tables of the government
actuary show to national bank doing
business in locality where the rate of in
terest is per cent. an advantage equal to
seventy hundredthS of | per cent per an
mum on note issuing, while in per cent.
locality the profit is y-one-hundredths,
and in m nv &c irtx
one-hundredths.
These figures conclusively show the alb
sence of inspiring motive in the direction
of any material increase in bank-note cir
culation. 1t is, therefore, apparent that
unless conditions change or legal restric-
tons be modified, the country's supply of
paper money cannot be responsive TO any
material increase in demand. At this point
it is also wise to keep in mind that our
population, now aSgregatlng about IS,OOO,-
000 will in the next fifty years increase to
a probable 100 100000. If the present volume
of paper money is no more than adequate
to the present population and to current
domestic trade, it is evident that timely
provision must be made Tor a possible in
crease to meet the charging requirements
of larger population and increasing trade.
The question is not remote; it is immedi-
ate If, then, il be conceded that our pres
ent system is faulty in that it is infieXible,
not responsive in possible supply to future
requirements, in what way can the ele-
ment of supply be made adaptable to de-
mand?
CREDITS SUPPLIED BY BANKS.
"In what has been already said under
the head of banking it has been truth
fully shown, 1 think. that in its broader
sense the currency which our larger in
ternal commerce uses consists of transfer
orders or checks drawn against credits
supplied by banks. In furnishing these
credits the bank finds it's profitable occupa-
IT, I,ai- -lon
trade or prosecute industry and enterprise
find their needs on the whole we'll served.
Now there is no difference whatever in
principle between the banks obligation to
pay. expressed by a credit on their books.
and an obligation expressed in the form
OF note payable to bearer, which may
be transferred from hand to hand. If it
be of public advantage that bank credit
be made available through the machinery
Of checks or transfer orders to those who
can make the more convenient USE of the
credit in that form. there can be no pri-
mary reason why to those who find their
credit in the form of bank notes they
should not be issued.
There is, however, a secondary reason
why the quality and character of notes
so issued should possess higher elements
OF stability and safety than are exacted
in open credits on the books of the bank.
This reason is apparent to every one. 1t
is found in the fact that the relation be-
tween the bank and its borrowers is vol
untary on both sides, and may be termin-
ated at the choice OF either. The bank
rote, however, passes from one TO another
by principle OF quasi pressure. Operat-
ing in the smaller transactions, circulat-
ing often far from its place of issue. the
test OF redemption or payment can not
always and everywhere be promptly ap-
piled. 1t would appear right and reason
able then. that the governing power should
surround the bank credit. utilized in the
form of bank notes, with such necessary
guards and guarantees as may be required
10 make them safe, free from risk Of loss,
in the hands of those who have little choice
as to whether or not they will receive them
in exchange for their wares or the pay
ment of wages. Having done this. the
Governments responsibility may rightfully
be said TO terminate.
THE requirement now made by the law
for the deposit or United States bonds with
the Treasurer Of the United States as a
condition precedent to the issue of cir
culatins notes by the bank furnishes the
desired element OF security. But If ii be
true that diminishing volume OF Gov
eminent bonds will operate TO make it
impossible 10 supply these needful instru-
ments of exchange in proper volume, then
Is hoC mooIncauon OF present requlre-
ments the course Of wisdom? The an
swer TO this question must be in the af-
firmative. There are notifications, con-
sentative in character. which, if adopted.
can be demonstrated TO afford all the nee
essary requirements of safety. give the
desired condition of supply to increasing
demand, and at the same time make the
bank note a more economical and useful
factor in business affairs. | shall indulge
in some practical suggestions on these
points little later.
THE GREENBACKS.
preliminary thereto, / want to refer TO
the greenbacks and the desirabilty of re-
lieving the treasury from the responsibility
which attaches to their redemption. This
responsibility at the present time rests
very lightly. 1t has been, however, heavy
burden in the past, and may become in the
future a source Of public anxiety and finan-
cial embarrassment to the government.
Thoughtful men OF affairs and fnanciers
have long argued for the rsfunding Of
these notes into time obligations, but such
arguments have failed to convince the
people of the propriety of canceling a
debt bearing interest to create in its
stead one equally large charged with the
burden of interest. IT, however in a mod
ification OF the law relating 10 bank cur
rency the burden OF redemption can equita-
bly, be transferred from the treasury TO
the banks, without interest cost 10 the gov
eminent. then the objection TO their retire
ment can no longer be urged. That this
result can be attained there is substantial
ground for believing IL is, of course. quite
I possible that any scheme involving several
related questions. however well thought out
in any single mind. may. when the light
of fair criticism from many minds he
thrown upon IT, appear defective in parts
or unavoidable as a whole. Subject TO that
result the following modificati tons of the
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