The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1902-04-28
FINANCIAL LEGISLATION

The report from Washington that there
Is steady decline of circulation through
the withdrawal of bonds securing it. sug-
gests somewhat foreibly the necessity
for such financial legislation as will give
the country continual supply of cur
rency adapted to the demands of business.
The applications for withdrawal Of
bonds securing. circulation during May
are now exhausted. as the legal limit is
100000 a month, and the applications
for June are reported very large. Nat
urally, If there is a great pressure for
currency, the ability Of the banks to in
crease the amount outstanding by the
issue of notes will be impaired accord
ing to the measure of the reduction of
the bonded debt by the purchase of bonds
by the secretary OF the treasury Every
withdrawal Of bonds securing circulation
means, of course, the retirement of the
currency ISSUED against them when it is
needed by the business of the country.
The point of interest hina this process is
that while the secretary Of the treasury
intends by the purchase of bonds not only
to reduce the national bonded debt, but to
increase the circulation, the banks are
withdrawing the circulation secured by
the bonds, and contracting the currency
to that extent. The anticipation of the
public debt is thus rather costly opera
ton and congress wouldfcdo we'll to ad-
dress itself to the work of reform.
At present, in case of a panic, the banks
can only afford relief by issuing clearing
house certificates, as was done with good
results in 1898, when business machinery
and the crop movement requirements were
met. This method OF tiding over strin
gency is a violation of the law taxing
state bank circulation 10 per cent, but 1t
was tolerated because of it's agency in re-
storing confidence. What is really needed
Is actual money. In the Fowler bill this
demand is proposed to be met by pro-
vision to the effect that, in graduated
amounts covering period of five years,
the banks which assume currency redemp-
ton of United States notes, may take out
asset circulation equal to 60 per cent of
their paid up, unimpaired capital, with
provision for emergency circulation sub
that when the pressure for which it may
be issued Is removed, the notes issued will
be at once retired. The proposed currency
will respond to the dema nds of business,
the redundancy through emergency Issues
being prevented by the tax from assum-
i,,o- ~ iod
present our bond secured currency is con
trolled by the profit or loss on the bonds.
The asset currency clause of the Fowler
bill does not meet the views of many per-
sons who fear undue initiation. There is,
possibly, better way to secure an elastic
currency. The discussion of the bill may
evolve such method. The law permits the
secretary of the treasury to accept other
than United States bonds as security for
circulation, If in his estimat ion there are
2 others sufficiently secure for that purpose
as railway or municipal gold bonds of high
character, which have not fallen below
par for several years preceding their ac-
ceptance as security, and are secured by
3 mortgage On roadbed and track, if They
are railway bonds, and, If municipal bonds
are issued by a city whose tax levy does
not exceed 2 per cent per annum.
The proposed credit currency issued t,
take the place of the $3.50, 900 900 green
backs retired (the government concur
rently to retire $4,000, 900 of them, leav
h ing $1,000 900 backed by the $751;, 900, 90
gold redemption fund in the treasury i
to be further secured by fund consist
ing of United States bonds or gold col
& equal to per cent of the notes outstand
ing, this fund to be used only for the pay
ment of the notes Of failed banks, th
taxes and interest on bank deposits bein
added to it. while the notes 50 issued ar