New-York tribune., 1918-01-07
Large Issues Of
Currency Notes,
Cause Initiation
English Writer Calls Attention
to Dangers of Expanded
Circulation
By Sir r. H. Inglis Palgrave,
F.. r. S,

(f'rom al article in The Bonkers
Magazine, Of London)
"URRENCY notes have continued
to be issued very largely The
amount issued which was about
100000 in April, 1916, had become
about 3145,O00,000 in April, 1917, and
at the date of writing. November Ia,
1917, the issue is nearly 100000, 900.
Arranged in tabular form the figures
appear thus:
Increase
per cent.
l916=100
April, 1916. ....s1O7 100000 -
April, 1917. 145,O0O,OO0' 81
November. 1917. S9,9Oo,0OO II
This is practically three times as
large as the estimate made by the Mint
of the gold in circulation in 1908, which
was no more than G63,500O0O. The
Mint authorities were led to infer from
the result Of the investigation then
made that the gold circulating in this
country was not rapidly increasing, and
though the amount in August, 1914
when the currency notes began to be
issued, was doubtless larger than in
1908, it probably was not very much
larger.
Currency Expansion Not Favored
The habits of English people do not
naturally favor any large increase in
the circulating medium; the tendency is
in favor of opening small accounts with
their bankers. and the number of small
checks on those accounts also tends to
increase. The increase Of small checks
for few shillings, as compared with
those drawn ten or fifteen years back
is remarkable, and we are informed on
the best authority that the practice of
drawing small checks is general The
use Of checks to a certain extent takes
the place of the circulation Of specie
and of currency notes, but checks can
hardly exercise the same influence in
the "inf1aton' of the circulating medi-
um as notes do. Each check is drawn
for separate and special purpose 1t
is a most unusual thing for check to
be employed by the drawee for the pay
ment of any other debt besides that
obligation to meet which it was issued ,
it is almost always presented immcdi-
ate]y to the banker on whom it is
drawn. and Herewith its circulation
ends. 1t is very different with the note,
and especially with the practically in
convertible note. among which class we
must include the currency note. A
really convertible note when the holder
needs it no longer makes its way back
to the Office whence it was issued is
paid in coin, and remains there till it
is paid out again. But there is no sim
liar pause in tie circulation of the in
convertible note.
There is no sign in our active trade
that there is any real need for the in
crease in the circulating medium we
have chroncled from some SOB 900. 900
to S190,0C0,00 We are clearly suffer
ing from an excessive issue Of paper.
Convertible notes and convertible
money generally may lose the quality
of convertibility or possess it only to
d lIiilIl"u c3tCnl, ana mus become IN
convertible through difficulties being
imposed on the obtaining coin in pay
ment for the notes. The question to be
solved is. how to regulate the quantity
of the paper circulation so as to keep
its value identical with the value of the
metallic currency.
Real convertibility, that is to say the
means Of obtaining specie for notes
whenever required, appears to be the
only means available for obtaining this.
Position of Currency Notes
Now, what is the position Of our
currency notes? 1t is true that the
notes are paid in specie. but this does
not render the great mass of notes con-
vertiblc at the moment, though no one
can doubt that all will be paid in full
eventually. There is always very
great risk in issuing inconvertible
paper money, because there is little or
no check on the amount in circulation