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The Commoner.
AJPRILj 24; 1903.
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MORE MONEY IS NEEDED
The Now York Sun of March 9 contains an ar
ticle on tho financial situation written by Daniel
P. Kellogg, admitting all that The Commoner has
said in regard to the scarcity of money. He points
out that the financial situation is anything but
satisfactory. The following quotations present
the salient points:
"But it would be idle to deny that In a
broader sense the money situation is caus
ing some serious reflection. Apart from rou
tine business matters it is the chief topic of
discussion in all the great banking and com
mission houses down-town, the query taking
this general form: 'Have we, as a matter of
fact, enough money with which to conduct the
financial operations of the country at their '
present rate and volume?' Those raising the
question admit and lay great stress upon the
sound and substantial nature of all legitimate
business conditions the vast development of
the iron and steel business, the tremendous
railway traffic, the huge purchase of commodi
ties of all sorts by the once poverty-stricken
dwellers on the western prairies, and the
fact, attested in every way, that, despite all
Its great strides, production in our country
has still not kept pace with consumption. But
what is troubling these observers Is what
they declare to be the continual indications
that the mere mechanical operation of financ
ing all this prosperity is becoming difficult,
that the money supply of the country is, in
plain words, inadequate to the demands made
upon it They say that no sooner Is one
period of financial stress, owing to tight mon
ey, at an end, and money rates once more
approximate their customary ease, than one
corporation after another so swoops down
upon the money market with requirements for
cash for extensive improvements, new con- .
struction and acquirements of various prop
erties at high prices that the supply of lend
able funds in bankers' hands becomes ex
hausted. "It has been said in answer to all this"
that there would be money enough, in the
country for all legitimate, business if specula-
tion could be kept quiet But this objection
is without force. Speculation cannot bo kept
quiet. It is the natural complement of busi
ness prosperity, and so-called legitimate busi
ness itself is largely speculative in its na
ture. A circulating medium which did not al
low and provide for the needs of speculators
would be worthless; by which is meant, of
course, that reasonable and not unreasonable
provision of the kind is necessary; undoubted
ly, present circumstances will strengthen the
demand that has recently arisen for an 'as
set' currency system; but if it is said that the
flood of money or of the paper promises of
banks to pay money that the establishment
of such a system will bring, is necessary to
afford proper elasticity to the conduct of busi
ness affairs in our country, one must recall
tfie Increase in the circulating medium that
has already occurred under existing laws and
wonder at the voracity of 'the demands, which,
it appears, this increase has stimulated and
is no longer able to satisfy. The circulation
has increased in the last six years almost as
much per capita as in the famous war time
period between 1862 and 1868; and the volume
of the circulation now is twice as great as It
was then. A change in the currency system
cannot, however, be effected for a twelve
month at least, and there are those who hold
that recent developments, instead of empha
sizing the wisdom of placing the currency on
a bank, asset basis, militate against it"
It 'will be noticed that 'the Sun's financial au
thority raises the question whether we have
money enough, and his argument is qlearly in sup
port of the negative side of the question. It will
also be noticed that he regards the circumstances
as strengthening the demand for an asset cur
rency, and yet it is apparent that he Is not so
sure that It will meet tho requirements of, trade.
In fact, he closes his article with a suggestion
that the circumstances which, he has described
iray militate against an asset currency rather
than emphasize the wisdom of it
Now what does all this mean? It simply meana
that' the business world is fast coming to realize
that our supply of money is so inadequate thai
oven the loaning of bank reserves over and over
again will not suffice to furnish tho money re
quired to meet the needs of the country. The bank
reserves ought not to bo loaned at all. Tho law
requiring banks to keep a reserve against their
deposits ought to be so amended as to require tho
reserve to bo kept in the bank vaults. To allow
this reserve to be loaned when all Is sunshine
only to be suddenly contracted at the approach of
a storm Is utterly without defense. It means that
when money is easy it is too easy, and that it
cannot get a little tight 'without necessarily be
coming very tight
The scarcity of money can be understood
wheh one inquires what the result would be if
the government required banking to bo done on a
safe basis and tfie reserve to be kept in the vaults.
Such a result would .produce a stringency that
might bring on a panic, and yet instead of pro
viding more money with which to do business,
the financiers insist upon the gold standard with
all the danger that it involves. '
. The asset currency is urged for four reasons:
First, because the banks fear that in the course
of timo tho national debt will be paid off, and
they know that with the payment of tho bonds
the present basis of bank-note circulation will
disappear. Second, the banks also know that as
tho national debt is reduced tho struggle to get
bonds will raise the premium and lessen tho
profits of national banking. Third, the bankers
know that there is more profit In tho issue of
bank notes on their assets than in the issue of
notes on government bonds, both because it is
necessary to Invest money In the bonds and also
because the money invested in the premium can
not be off-set by bank notes. Tho fourth reason
why the bankers favor tho asset currency is that
it enables them to issue a larger amount of money
and they everywhere feel the need of more money.
Why not satisfy this need by the coinage of
silver rather than by the issue of paper promises to
pay, resting upon the shifting banking assets of
a banking institution? Every well-informed stu
dent of finance knows that the coinage of silver
under the Bland-Allison act and under the Sher
man law conferred a great benefit upon the world
by increasing the amount of real money. The
government will soon finish the work of coining
tho silver in the treasury, and there is then no
law for the further coinage of silver. Not satis
fled with this, the financiers are attempting to
make the silver dollar redeemable In gold, thus
lessening the volume of real money and, increas
ing the volume of credit money. While It is pos
sible to issue a certain amount of credit money
upon a given amount of real money, it has never
been possible to establish with mathematical cer
tainty just what that safe relation is, and it
varies with financial conditions. When every
thing is running along smoothly a given amount
of real money will carry a larger amount of credit
money than it will In time of panic or industrial
depression. Then, too, the government can carry
a larger amount of credit mono on a given
amount of real money than an, individual- or pri
vate corporation can, because tho government,
with its taxing power, stands back of its paper.
(This is assuming that the government paper,
like the banking paper, is redeemable in stand
ard money.)
It is merely a statement of a self-evident
truth to say that a financial system becomes
weaker and less secure In proportion as the ra
tio of credit money to standard money is in
creased. It Is easy to understand why the great
financiers insist upon a gold standard, bank paper
and an asset currency. But why should anybody,
3
else advocato these things? The f armor, tho la
borer, the business man (tho business man who
thinks for hlmsolf and Is not under tho thumb
of some financial magnate) aro all Interested In
having a volume of monoy that Is not only safe,
but sufficient In quantity. If the government
.should open tho mints to tho coinage of sllvor to
day, and xioin all that was presontcd, it could not
furnish monoy moro rapidly than it Is now neod
ed. With a sufficient volumo of real money wo
could require tho banks to keep their reserves on
hand and thus save tho country from spasmodic
inflation and contraction of tho loanablo monoy
of tho country; wo coutd replace tho bank cur
rency with silver or silver certificates, and then,
if there was need for moro money than tho gold
and silver furnished, wo could issue United States
notes, liko our presont greenbacks, that are a
legal tender and about whoso value there can bo
no question. These advantages would come to
us at once, not to speak of tho advantage that
would come from an increase in tho price of sil
ver. That would increase the export value of tho
silvor wo send out and improve our trade with
tho silver-using nations of tho world, and raise
the -value of those exports which have suffered
because of their competition with the exports of
silver-using countries.
Becauso, during tho last six years, tho coun
try has been benefited by tho Increased produc
tion of gold and by the enlargement of tho volumo
jjf our currency many people have thoughtlessly
declared the monoy question settled, but no one
who reads tho news from othor countries and
knows of the struggle that is going on every
where to get money enough to carry on tho
world's business can bolieve that tho money ques
tion is settled or cati be settled by any system
that curtails the volumo of real monoy or sub
stitutes the unsubstantial fabric of an asset cur
rency, for a legal tender standard money.
The fall in the price of European consols Is
only' an indication, but taken In connection .with
tho Sun's article, it shows how unsupported Is the
confidence of those who expect the financiers to
take caro of the people and solve their financial
difficulties for them.
J J J
Concerning Advertising:.
One of the readers of The Commoner has
discontinued his subscription because Tho Com
moner declined to publish an advertisement of
tho stock of a corporation in which the sub-4
scriber was interested. While one always dis
likes to lose a subscriber, it is impossible to so
conduct a paper as to please every one, and The
Commoner prefers to lose a few subscribers rather
than risk the injury of the readers by the ad
vertisement of stock in corporations. As a rule,
the corporations that advertise stock for sale are
purely speculative, such as mining, oil and de
veloping companies, and while many of these
companies aro entirely legitimate, the value of
stock depends partly on chance and partly on the
management of the companies, and aa the man
agement may change any day The Commoner haa
thought it best not to take such advertisements
Of course, in refusing such patronage The Com
moner virtually loses the money that might b
obtained from these advertisements, but the pro
prietor prefers to suffer this loss, rather than
make himself responsible for a far greater losa
that might come to his readers if through such
advertisements they were led into unsafe invest
ments. Mr. Cleveland said recently that he did not
know that any one was thinking of silver. Well,
he cherished tho same delusion about 1896, but
so many were thinking of it that even his office
holders, aided by all the banks, railroads and
other corporations, could not secure an indorse
ment of his administration by a democratic convention.
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