Evening star., 1902-01-01
FINANCIAL PROBLEMS
Some Which Will Confront the New
Secretary Of the Treasury.
bow TO KEEP down THE SURPLUS
Greater Elasticity of Bank Note
Circulation Needed.
THE NEAREST STORM CLOUD

| A series of important problems is likely
to confront the new Secretary of the Treas
ury Immediately upon his entrance into Of
fice Secretary Gage has handled the con-
ditions of the last five years with great
skill, but in dealing with the steadily in
| crcdsing surplus he has exhausted most of
| the resources for reducing the debt without
| imposing undue charges upon the treasury
| or causing confusion in the money market.
| Tne purchase of bonds at premium has
| gone steadily on since the close Of the
| Sranish war until the margin of bonds
which can be purchased at fair rate has
been pretty we'll absorbed. Secretary Gage
pointed out in his annual report that with
In about two years, from November i,
| 1873, to November 49, 1901, the bonded debt
had fallen from 81 O46 O49,O20 to 1854 O27.-
15O. showing reduction of $92. .O21 $50.
Evea this large reduction does not repre-
| sent the amount which has been applied
to reducing the debt and the annual interest
charges upon it, The annual interest
| charge has fallen from $40, ,SS4 to $25,-
Al 22S, and is still in process of reduction.
| Interest has been saved or anticipated
amounting to $54, 54s, 424 within the next
| seven years alone. This remarkable record
of debt reduction has been accompanied by
| measures which have prevented the con-
| gestion of money in the treasury and saved
the money market from stringency. The
| deposit Of public funds in the national
| banks stood on Saturday at S113 9S6, 937,
| representing the liberation of that amount
| OF money for the uses of commerce. Not
withstanding all these measures, the cash
| balance has continued to mount upward,
| until 1t stood on Saturday last at sta, ,S46,-
! 531. The surplus of receipts over ordinary
expenditures thus far this year has reach
| ed 1855, 659, where for the same period
| last year 1t was only S,444, ,4S3. The
record of the last three years has been one
| of financiering to keep down a surplus
! rather than the difficult task of Secretary
! Carlisle from 1893 to 1897 to keep down a
deficit, but the surplus problem has pre-
sented difficulties great In their way as
the problem of the earlier deficit.
Problems of the Future.
Among the important problems which
Secretary Shaw is likely to be called upon
to face in the near future are these:
Can the treasury surplus be kept within
reasonable limits without the payment of
eXtravagant prices for unmatured bonds?
What legislation shall be recommended to
Congress for preventing the accumulation
Of an excessive surplus?
Can the public deposits in the national
| banks be withdrawn without causing finan-
| cial disaster?
| Can the present expanded condition of
| trade and credit be maintained until after
the next presidential election without a
panic in the money market and period of
| business depression?
| Under the first head the problem is be-
| coming constantly more difficult as the
cream Of purchasable bonds is being taken
| from the market. The bond purchases by
| the treasury under the offers of Secretary
| Gage have reached $17, 7,706 $50 since No
vember /. This includes about So 500 900 re-
eeived on Saturday last: The purchases
| during November were S11 1613,37O, SO that
only about $6OOO,0OO has come to the treas
ury during December. The amount pre-
sented hereafter is likely to dwindle to a
trlfling sum unless the government raises
the prices offered for the bonds This will
naturally invite political as well as finan-
cial criticism. 1t will be absolutely neces-
sary, however, to keep down the surplus
by the purchase of bonds or by some SINH
lar process unless the money market is to
be wrecked by the withdrawal of currency
from circulation by it's piling up in the
treasury.
the surplus and the bond purchases is that
Of the bank note circulation. The circula-
tfon in the aggregate has not yet begun a
downward course, but the live circulation
secured by bonds has been falling during
the last two months, and applications are
already on file for the withdrawal of cir
culation to the entire legal limit of So 600 900
for January as well as for December. The
bank note circulation on Saturday last was
$3.50 9O5 900, Of which 1924 800, $50 was Sc
cured by bonds and $35, ,104 ,72O was repre-
sented by lawful money deposited for re-
firing the notes. In case of pressure for
currency, the power of the banks to in
crease the amount outstanding by the issue
Of notes is being greatly impaired by the
reduction of the bonded debt. There is
grave fear in many quarters that If Con-
gress fails to provide some means of giving
elasticity to the bank note currency, there
will be pressure in case Of a financial
1sas pss1'' WHICH Will 0e as severe as that OF
The question what legislation shall be rec
commended for keeping down the surplus
opens up the whole problem of the tariff
and the revenue. Secretary Gage has rec
commended that miscellaneous internal taxes
be abolished to the amount Of about $27,-
100000. 1t Is beginning to be apparent, how
ever, that a reduction of this amount will
be entirely inadequate to keep the surplus
under control. Hence the whole question
of reciprocity treaties, concessions to Cuba
and general tariff revision may be projected
into the political arena and referred to the
Secretary of the Treasury by the President
for a wise solution
Most Serious Storm Cloud.
The most serious storm cloud on the po-
litical horizon is the danger of collapse Of
speculation within the next three years
Such a collapse is very generally feared in
financial circles. Secretary Gage in an in
terview made public on Saturday, expressed
a hopeful view as to the future, but limited
his positive predictions to the present or
future close at hand. The problem Of the
surplus may solve itself if business depres-
sion sets in and receipts for customs and
internal revenue begin to fall off In such
case 1t will probably be necessary to at
tempt the difficult task which President
Jackson essayed, when he undertook to
withdraw public deposits in the face of a
Tightening money market. The banks
would find it difficult to reduce their re-
sources $114yO0O,OO0 in response to govern
ment calls. and the treasury might be shut
up between the desperate horns of the di-
lemma, whether to lose it's own credit by
deficiency of cash or sacrifice business cred
It by crippling the banks. The attitude of