El Paso herald. (El Paso, Tex.) 1901-1931, 1910-04-23
RELATION BETWEEN PUBLIC DEBT AND
THE CIRCULATION Of NATIONAL BANKS

the circulation between 1898 and 1903
and narrowed the difference between
circulation and capital TO about $780,
100000
Outstanding Public Debt.
The relation between the outstand
ing public debt and the circulation has
to be traced in connection with changes
in the character of the debt, as well
as in the amount AS late as 1875,
when the resumption act was passed,
the bank note circulation was not a
fifth part of the debt. The decrease
Of the debt down TO 1888 by nearly
$500. 00O,O 900 did not at once cause con-
traction of the circulation; but the in
1uence of the decrease in the debt was
shown after that date by a decline in
the circulation from about $3.50, 200, 600
in 1888 TO s17O.000.00O in 1891. After
the latter date circulation showed some
disposition TO follow the increase Of the
debt due to the panic of 1898 and the
war with Spain This increase in cir
culation was slow and gradual, but il
was not obviously checked by the re-
duction of the debt after 1899. The
reason for this must be sought in the
special advantages to the banks af-
forded by the percent bonds issued
under the refunding law Of 1900, which.
according TO the charts. left to the
banks by 1907 the custody OF more than
two-thirds of the bonded debt, where,
as recently as 1899, they had held less
than one-quarter.
Deposits of Public Money.
This chart bears a close relation TO
that Of the deposits of public money in
the banks, which were also secured by
United States bonds down TO the year
1902, when different classes of securi-
@f1r-
The diagram showing the net balance
in the treasury and the proportion in
the custody of the banks is a series Of
mountain peaks and depressions, in
which the sky line of the deposits fol-
lows roughly, though at a considerable
distance, the line of the highest alti-
tude Of the treasury balance. Deposits
with the banks. except during the re-
funding operations Of 1879, were not an
important factor until 1855. and de-
clined during the treasury penury of
1898, only TO assume much higher ele-
vations with the accumulation of a sur
plus and the pressure of a tight money
market in 1898 and the following years
Significant Fact.
One of the significant facts brought
out in the chart showing the principal
items of resources and liabilities of
the national banks is the manner in
which total deposits have gained over
individual deposits. The difference
consists in deposits by banks in other
representing in some re-
spects z duplication of credit. The diff
ference between the two items-total
deposits and individual deposits-which
was less than $500, 100000 in 1878, still
stood at only about $3.50, 1000, 900 after
the panic of 1893. The difference was
greater during periods of expansion in
1883 and 1892 but ii was not until after
1896 that the lines of. separation be-
gan to draw wide apart. In the sum-
mer of 1899 total deposits, which stood
above $4,000, O00, 600, showed an excess
above individual deposits of a round
billion of dollars. and with the increase
of total deposits by another bill
lion in 1903, their excess over
individual deposits had risen to 1880
0OO. OOo The eve of the panic, in the
summer of 1907, found total deposits at
sc. 200, 600 600, which was nearly $4,000
600 600 above the total of individual de-
posits It is the sharp downward dip
of nearly $500 600, 900 in total deposits
within few months, while Individual
deposits fell by only S200,O00,0OO, !
which indicates the character of the
pressure Of the interior banks upon