Year: 1878

A Convertible Currency.


OUR readers will remember the dis
cussions of few years ago upon the
question how to furnish the country
with currency always equal to the
wants of trade, and the same time to
make it redeemable, in case the amount
in circulation should become excessive.
The issue of an interconvertible bond
was urged by the Greenback party;
that is, that bond bearing 3.65 per
cent. interest should be issued by the
Treasury to any person depositing
greenbacks; and that upon the presen-
tation of the bond the Treasury should
redeem it by return of an equal
amount of greenbacks. The theory of
this scheme was that it would furnish
perfect system by which greenbacks
when in excess of public needs would
retire in the form of bonds, and, when
necessity existed for them, they would
be called out again. At the time, the
Tribune pointed out the fatal defect
that the bonds, being always equal in
value to the currency, with 3.65 per
cent additional for interest, the green
backs would all be rushed into bonds,
producing general contraction of the
currency. 1t took the infationists
long time to clearly comprehend that,
to issue greenbacks and give the holder
the privilege of exchanging them at
par for a national interest-bearing bond,
it would be simply to so fill the country
with bonds that they and not the notes
would become the currency, thus pro-
ducing that very contraction which they
dreaded so much. Finally, the inter-
convertible-bo scheme was aban-
doned and that of fiat money was adopt
ed in its place.


Time, with its healthful operations,
has worked revolution. We now
have cheap bond without any con-
traction of the currency. We have
currency convertible into bonds at par
without reducing the amount of cur
rency in circulation. The beneficial
purpose of the interconvertible-b
scheme is accomplished without the
consequent contraction. At present the
holder of $50, 800 or $1,000 in cur
rency can take them to the Sub-Treas-
ury and receive therefor per cent.
bond at par. The currency and coin
being at par, the Treasury applies the
money received for the per cent. to
the payment of per cent. bond;
| anu, WHCLl OuC pei COhGs DOhdo
all have been taken up, then the re-
ceipts from the 4 per cents will be ap-
piled to the payment of the per cents,
and in this way the work of converti-
bility of currency into bonds is always
going on, and yet the currency flows
out of the Treasury into general circu-
lation as fast as it is paid in. In the
meantime, each conversion reduces the
annual burden of the public debt to the
extent of the conversion-one-third.
Instead of paying $50 year interest on
$1,000, the annual charge for interest
is reduced on the new bonds to $40.
ANY person having more currency than
he needs, or for which he has no pres
ent use, and still would like to have it
earn something, has only to exchange
it at par for per cent. bond, and
hold it in that form until he has direct
use for the money. Under any other sys-
TEN this process would lock up that much
currency and withdraw it from use; but
under the process of funding the debt
it is Immediately paid out and enters
again into the general circulation. No


such admirable, safe, and economic
system for furnishing immediate in
vestment for idle money, whether in
large OF SIldll SulllS, has CAlStOO' AhOiO
is moreover no danger that this means
of investment will be withdrawn, or
that the bonds will ever advance be-


yond par. So long as the Government
has 6, or 5, or a AZ per cent. bond
outstanding, the supply of per cent.
. bonds at par must continue. When
money shall advance, and become
worth more than per cent. then the
demand for the bonds will cease, but
the accretions of money-of surpluses
in the hands of individuals beyond the
needs of present use--will always con-


tinue, and in this way the sale of per
cent. bonds will probably continue so
long as there is bond bearing higher
rate of interest outstanding. While
this process is going on, the country re-


mains in possession of its whole volume
r of currency, and that currency consists
of gold, silver, and paper of equivalent
and interchangeable value. Never was
} the currency in more convenient and
serviceable condition than at present.
Any man having more than he needs
has an investment always open to him
at par, and yet no contraction of the
volume of the currency takes place.
Here is the end which the Greenback-
ers so many years sought to accomplish
8 actually in operation and successfully
: progressing, and yet they are not
: happy. Chicago Tribune.