New-York tribune., 1906-12-18
CONGRESS- AND CURRENCY.

There will be little surprise if Congress makes
no attempt TO reform the currency during the
present short session, but we think regret will
be felt among students OF financial conditions
in this country if Congress takes positive stand
against the principle of a credit currency. In
deed, we doubt if the subject may be dismissed
thus easily by the simple statement that the
sense of Congress is against unsecured bank
notes. 1t is likely TO remain one of those pitt
less unsettled questions. The need Of max
ing our currency adaptable TO the requirements
of trade has been pressing necessarily upon the
nations attention for many years, and the
adoption of such makeshifts as might get
through the legislative processes with little OPP
position would give small promise of per-
manent solution. 1t is perhaps as well, however,
that every method of aleviation be experimental
with. so that the ineyitability of a scientific
solution of the question may be made mani
fest.
Other nations have found credit banknote
currency necessary TO give life TO the circulat-
ing medium and adapt it TO the expansion and
contraction of trade. The bankers of this coun-
try have been for the principle of elasticity in
the currency at least since the sOcalled BAL
timore plan was presented TO the Bankers
Association in 1894 Secretaries of the Treas
ury have generally favored the idea in some
form Mr. Shaw having in his various reports
supporter IL. ne last ItioIL VI lut NoI-
troIler of the Currency advocated a banknote cur
rency differing from the bankers plan merely in
having graduated tax on the notes instead of
only two rates of taxation, as in the bankers
plan. But Congress SHES from the idea, as.
indeed, everybody expected it would. Congress
sional caution is more famous than Congress
sional wisdom in financial matters. If the
bankers currency plan were rejected on spe-
cial grounds of practical difficulties in that in
dividual plan. or If consideration Of it were put
over to a more convenient season, there could
be no criticism, but for Congress TO turn pale
at the very mention of a credit currency is
characteristic, though a tribe disheartening. We
say it is characteristic because the record Of
American legislation on financial matters is
timid, vacillating and discreditable 10 a great
commercial nation Our national experience
with a credit currency issued by ante bellum
state banks gave lis scare from which Con-
gress, at any rate has never recovered. But
those were the days Of real wildcat note
making with practically restriction in many
of the Western States and no supervision TO de-
termine whether there was any real credit back
of the credit" notes. A printing press and
optimism were all that was necessary TO make
a note issuing bank. and sometimes, we fear
a printing press and dishonesty served the pur
pose Just as well No one proposes return
to any such loose methods, or, indeed TO try
anything which has not been tried on larger
scale by other nations. and with good results
SO much we may say of the general principle
of a credit currency.
The American situation offers some peculiar
difficulties because Of the large bulk of secured
banknOtes-the present national bank notes
which would co-exst with the credit notes. 1t
will. perhaps, be found practically difficult to
take a large bulk Of inelastic currency which
f,,lf ha ordi af trade and imOa rt
elasticity 10 it by providing for an additional
credit currency. The lump is too large to be
easily leavened. This Is what Mr.. Shaw had
| I'm mind when he said to the House Committee
on Banking and Currency that if the bankers
| plan resulted in the issuance of $200O00000
| in notes he doubted if more than $2OOO0OOO
| would he redeemed with the frequency neces-
sary to an elastic currency. The rest would
merely settle down into the general circulation,
as inert the present secured notes An effort,
| in Mr.. Shaw's opinion, should be made to render
ali our currency more elastic, rather than to
PIT an elastic fringe on it,
But here there is n great practical obstacle.
If means were found to impart elasticity 10 the
present United States banknotes. the bonds Sc
curing them would become subject to specula-
tive manipulation in the market, with a resulting
disturbance. Unless that great body OF notes is
made less inert we see no way of leavening up
the mass OF our, currency. Mr.. ShaW criticism
of the bankers plan of credit notes taxed ut
OF, per cent to be reasonable, but the
practical difficulties are many, and nobody has
suggested better solution. The alternative
suggestion of a highly taxed currency per
! cent is the rate usually named-abandons the
| idea of an elastic currency responsive TO the
slight and usual expansion and contraction OF
trade Five per cent taxed notes would, Of
! course only come cut when money rates were
very high. The currency would expand not
/ elasticalIy but with jerk, responding only TO
great trade movements and relieving periods of
extreme stringency.