Year: 1873




instead of compound interest notes or sew.
en-thirties, congress absurdly permitted
Mr.. McCulloch to retire four millions oil
greenbacks for eleven consecutive months,
making reduction of eleven per cent oil
the entire amount. What was the result
Money became scarce and dear, and the
rate of interest went up so high that it was
no longer matter OF profit or conven-
ience to enterprising Americans to hold
our bonds. They had to sell them in order
to escape ruinous rates of interest, and
the only market for them was abroad.
But deluded by the fact that we were pay
ing our debt at the of one hundred mill
lions year, and the belief that we must
therefore be approaching specie pay
ments, another measure of contraction
to the extent of seventy millions
was consummated at the cost of doubling
the rate of interest on that amount Of the
debt. The three-per-cents. were in the
nature Of call loan, but they never would
have been called, because our banks held
and used them as part of their reserve, and
We're thus receiving three per cent. on that
part OF their reserve which was composed
of these certificates. AS the banks would
have to supply the vacuum created by
retiring part of their greenbacks which
were not interest-bearing, but by loaning
which they were receiving six per cent,
they never would have called for their
payment. If the seventy millions of
were redeemed had been applied to the
redemption of six -per-cents., our interest
account would have been one million five
hundred thousand gold annually less than
it now is, and the interest would have been
paid to Americans instead of the increased
amount being paid to foreigners. Thus it
has come to pass that all our bonds,
except those held by the national banks
and savings banks, are now held by
foreigners, and our payments of interest in
gold to foreigners, from the government
and on gold-bearing bonds of corporations,
is more than one hundred millions of
dollars annually, OF forty millions more
than the annual product of our mines.


THE ADsURDITY OF A PROPOSITION


DEMONSTRATED.


Nobody now complains that the treasury
keeps hundred millions useless gold, but
everybody Is glad to know that it probably
holds fifty millions. The absurdity of the
proposition that "the way to resumption
is to resume'' is demonstrated by the fact
that if the treasury were to announce that
it would pay specie for greenbacks, the
national banks, preferring to hold their
reserve in gold rather than greenbacks,
would present bills for one hundred and
twenty-eight millions. or one hundred and
fifty per cent. more than the gold held by
the treasury. And having exhausted the
treasury no man could call upon them for
a dollar, inasmuch as their notes are re-
deemable in greenbacks and not in gold.
The attempt to resume would result SIM
ply and solely in transfer of the coin
from the vaults Of the treasury to those of
the banks. Its range of circulation would
have no greater extent than this.


TWO PATHS TO RESUMPTION.


But you ask, Are we never to come TO
two paths to it. One, and the longer one,
is to struggle on until, by the progress of
a long series of years, our exports shall
come to steadily exceed our imports, and
foreigners, in payment of balances, shall
send US back our gold bearing bonds, and
then settle balances in gold. But he who
looks for specie payments by this process
looks through very long vista. The
other process is to secure the transfer of our
bonds to our own people by making money
cheap, or, in other words, by expanding our
currency and issuing bonds payable prin-
cpal and interest in lawful money, and
thus reducing the rate of interest to
point as low or lower than it was before
we insaLely entered into forcing our bonds
on foreign markets by contraction. To
accomplish this, think the banking law
should be so modified as to make the pay
ment or receipt of interest by national
bank cause of forfeiture of charter, and
to prohibit, under serious penalties, the
certifying by national banks of any check
which did not represent an actual deposit
in the vaults of the bank. This in itself
would be measure of contraction.
would therefore relieve the banks from
maintaining reserve to secure either their
circulation or their deposits. Here let me
pause to say why | would abolish the re-
serves Primarily to increase the volume
of currency to counteract the contraction |;
secondly, to remove restraint from banks
that are concientiously managed, but
which are disorganized by those managed
NY Dub dSdlll.
| would do it because such reserve as Sc
curity for the notes Is not needed. The
bonds deposited with the government se-
cure them, and secure them adequately,
for the notes are only 80 per cent. of the
face value of the gold-bearlng 6 per cents,
which, even in this crisis, are at q consid-
erable premium. For the government to
compel the banks to maintain reserve to
protect depositors is absurd. 1t is at
best when fully maintained de-
lusion, for it amounts to but
twenty-five per cent. of the deposits, and
yet it leads people to believe that there is a
reserve which makes their deposits secure
In connection with these modification o.
the banking law. and to avert the effects o
| the contraction of credits they woulc
produce, / would provide for the issue o
bonds payable, principal and interest, il
lawful money, at the rate of 8 G5 100 inter
est per annum, or cent. day, and maxi
those bonds interchangeable with green
backs. How largely such bonds would b.
taken by our people few are now pre-
pared to believe. There are two period
in each year when there is but small us
for money and bank credits, during whicl
merchants of good standing have larg


balances of unemployed capital, and whel