Year: 1872

III does not Hollow from tleSe views, nor
would it follow from those of similar
character which might be presented,
that the system is perfect, nor does it
follow that the issue of notes directly
by the Government should be surren-
dered and the business of furnishing a
currency yielded to the National bank.
The circulation of each bank is fixed
arbitrarily bya rule of law. The agre-
gate circulation is therefore a fixed
sum, and consequently there is practi-
cally no reserve to meet the increased
demand for money. Occasionally ex-
traordinary events at home or abroad,
arising periodically with the incoming
of the harvest, the old State bank sys-
tenn is sometimes commended in a
quality termed elasticity" but that
quality, as found in that system, was
the principle source offinancial disaster.


Under that system of allegiance and the
present demand for coin, there was
positively no limit to an issue of paper
currency. An increase of circulation


was attended and followed by an adj
vance in prices, excessive importation,
and consequent demand for coin
drawn from the banks TO meet the bal
ances abroad, simultaneous reduction
of paper currency, and the consequent
distress OF merchants and bankers. AS,
the circulation of bank is a. source Of
profit, and as the managers are usually
disposed to oblige their patrons by
loans and communications, it will new
er be wise to allow banks and parties
who have pecuniary interests at stake
to increase or diminish the volume of
tho in. tho krxr af fb al
pleasure; nor do / find in the condition
of things a law or rule on which. we can
safely rely. eljea zGsG ieao
. Upon these views I form the conclu-,
sion that the circulation of banks should


be fixed aHd limited, and that the pow
er to change the volume ofnpaper in
circulation within the limits established
by law should remain in the Treasury
Department. A degree in the volume
of currency Is essential for two reasons
first, the business of the department
cannot be transacted properly if limit
is fixed, and the power to raise the cir
culation above or reduce it below that
limit is denied. a rule of this nature


would compel the Secretary TO accum-
ulate alarge currency balance, and to


hold it, as otherwise the credit of the
Government in meeting the ordinary
claims on It would be at the mercy of
every serious business and political
revolution in the United States, or


Earope. Especially would this be true
now that our ordinary currency expen-
ditureS are greatly in excess ofour cur
rency revenue, Secondly, there is a
necessity every autumn for removing
the crops without delay from the south
and west to the seaboards, that they
may be in port for export and consump7
tion as wanted. This work should be
done in the main before the lakes, riv::
ers and canals are closed, and yet it
cannot be done without the use oflarga
amounts of currency. i-s-l4 r..s -,
; In the summer months funds accum-


dlite at centres, but the renewal of.
business in August and September


gives employment Tor large sums, and


leaves little or nothing for forwarding


the crops in October and November
Nor would this difficulty be observed
by q permanent increase or, q sPeEma-.
rnent reduction of the volume Of cur
rency. The difficulty is due to the


natural order of things, and increases


with the prosperity of the country, as
shown in the abundance of its harvests.


The crops cannot be moved generally


by the aid of bank balances, checks


and letters of credit, but only by bank.
notes and United States notes paid at


once to the producers. This money


finds its way speedily into the channels
of trade and to the commercial centres;


but ifit be allowed to remain for gem
eral use, after the reason for its issue


has ceased, the value of currency would


be increased permanently, and the year
following the same process would be
repeated with the same results, and
thus would the country depart more
and more widely from the policy of
resumption. The problem is to find


way of increasing the currency for
moving the crops and diminishing it
at once when that work is done. This
is necessary work, and inaspueh as it
cannot be confined to the hanks, where.
but in the Treasury Department can the
power be repesed. While tbe currency
revenue was in excess of the. currency
expenses, twas practical to ,,accumu7
late large balances in the Treasury dur
ing the Summer, to fbe used if neeesss-
~ in, the purchase of bonds in the
Autumn, thereby meeting the usual
demand for currency at that season of
the year, hereafter, such. accumulation


must be made by the sales of gold in
large quantities during the Summer,
when business is least active, may. yet
always be consistent with the best in
terest of the country. Reliance cannot
therefore be, placed upon the ability of
the Treasury to accumulate currency
balance each year for the purpose indi-.
Gated 81 Bnf. s..5 81 .,,rT5i9, ss,Y