The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1902-12-21
:. M. CAMPBELL &c CO
BONDS
SHAW ON THE CURRENCY
POSSIBLE FINANCIAL LEGISLATION
DISCUSSED BY THE SECRETARY.
How a More Elastic Currency system
Might He Established with In
surance Against Loss.

CHICAGO, Dec. 20.-Two hundred Of Chi
Cages most prominent business men were
at the banquet of the Chicago Bankers
Club at Kingley's tonight. The chief speak
OF the evening was Secretary OF the
Treasury Shaw, who addressed the club
on Possible Financial Legislation" His
remarks were well received by his hearers.
IN addition to Secretary Shaw a number
of local financiers delivered short addresses
upon timely financial topics. Secretary
Shaws remarks were in line with his re-
port to Congress. He said in part:
81 do not like the term credit currency,
but / prefer IL TO asset currency or
emergency currency. though they all mean
about the same thing. No one objects to
the inconvenience and laborious methods
of exchanging credits by means of checks
and bank drafts payable to order and sub
Ject TO Endorsement, and annually FEWER
people object TO exchange of credits in the
more convenient and natural, and may 1
not say universal Except when prohibited
by law, form OF bank notes, payable to
bearer.
.'The most common objection to any addi-
tional currency legislation Is that the notes
would be unsafe. This objection might be
good IL there were no other security pro-
posed than the ordinary liability OF the
bank of issue. Fortunately. however, no
with this. Every friend of elastic currency,
whether Ii Is called credit currency, asset
currency, emergency currency, or gold re-
serve currency. proposes that the bank or
issue shall pay into a redemption fund a
certain tax upon the amount OF circulation
maintained. The lowest rate of tax sug-
sested py any on ns n Is VASTLY more
IT want TO emphasize the necessity for
an element of elasticity in our currency
system 1t has been said that our present
sense In which the term Is employed, but
in another sense 1t Is a mistake. I'm
fortunately, however, the volume contracts
just when IL should expand, and expands
when 1T should contract. This is not cap
tious criticism 1t is the naked truth. There
is just as much need for contraction when
money is not legitmately needed as there
is for expansion when more money is re-
quired. And unless contraction can be in
duced. expansion Is impossible.
What the essentials OF elastic
currency? First, its prompt retirement
when not needed: second, its equally prompt
reinsurance when needed. And unless you
have the one you cannot have the other.
The one Is an essential protection against
imitation. The other is the best safeguard
against stringency: Currency sufficient to
do the business OF the country is not in
fated. A redundant currency. be that much
or little. is always dangerous.
some have suggested the issuance of
currency based upon deposits OF State and
municipal bonds, instead of government
bonds. but this would leave the system
as inelastic as at present. What is needed
Is the right TO issue limited amount of
currency without encroaching upon the
available funds or the assets already in the
bank but with such safeguards as will in
sure its absolute safety and its prompt re-
tirement when the demand ceases.
This cannot be accomplished under the
present system on national bank circula-
ton. Bonds are too scarce and the price
too high. and there is no way either to
induce additional circulation when the de-
mand increases. or its retirement when in
terest rates are low. The gradual liquida-
ton OF the government debt is reducing the
amount of bonds available for circulation.
IL therefore follows: Either the idea OF
having an elastic currency must be aban-
doned, and In order to maintain that which
we have the government debt must be per-
petuated, and more bonds issued "a needed
or some new scheme must be evolved. IL
the banks are to issue any circulation what
ever IL must be secured either by specific
assets. like government bonds. deposited
with the treasury, or by general assets I'm
the vaults OF the banks, with an ever-in-
creasing fund derived from tax on circu-
lation sufficient 10 cover all possible loss"