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About The Conservative (Nebraska City, Neb.) 1898-1902 | View Entire Issue (Dec. 21, 1899)
8 'Cbe Conservative * quantity of money actually circulating and upon which they are based. But it may well bo doubted whether any increased activity in trade can so increase the demand for money as of itself to seriously affect even the inter est rate saying nothing of the effect it is supposed to have upon the prices of commodities. When More Money Is Needed. But let there be a disturbance in the security or credit market and there will at once set in an increased demand for money which will immediately act upon the interest rate and this action will extend all along the line ? of credit to a degree limited only by the magnitude of the disturbance. This increased demand added to that of the legitimate exchanges may produce a condition of stringency which at times will be attended by panicky symptoms-a condition which , like the sword of , Damocles , constantly hangs over the credit world. The quantity of the money supply which was ample before is now in adequate. Money Value Not Increased. It is not that the value of money as a commodity has been increased. The money is not needed for itself. It is needed only for the useful service it performs in facilitating the exchanges of credits and commodities the number of which transactions has been increased as a consequence of the causes noted acting upon the money market. In ( hit ion No Benefit. It is a condition in which more money is truly demanded than can be supplied from the current circulation but this fact does not justify the ridiculous idea some people hold and maintain vocifer ously that it evidences the need of a large volume of the circulating medium which increased volume they would supply by an act of legislation , increas ing the volume of paper currency. I'aper Money Is Not Elastic. To call any such increased issue of paper money "an elastic currency" is a perversion of the meaning of words , for in no sense can it be elastic. After the increased issue has been absorbed the same non-elastic conditions will again be in evidence and should the process be continued it would lead inevitably to general bankruptcy and financial ruin. Ell'ect of the Foreign Exchanges. But neither should the sole relief for the situation be loft to the slow , although sure , movement of the foreign ex changes. An increased money supply would be eventually obtained from this source but it would not be beneficial under the circumstances. It would only prove , al its best , a temporary addition and at the same time it would serve to extend the perturbation to other countries. Utility of mi Emergency Currency. All that is required to offset the dis turbances described is a supply of some thing in which people will have confidence and will pass from hand to land ( for they do not desire to keep it ) as a medium of exchange. The credit market will eventually settle to its usual tranquil condition and the extra money supply being no longer required can be withdrawn without injury to any interest. Its full purpose and utility will have been demonstrated } y the manner in which it has influenced the settling process with the least excite ment and attendant losses. HIMV Obtained ? There are two means available with us for supplying this currency. 1st. Treasury notes issued by the government and upon its credit and fiat. 2d. National bank notes issued upon ; he credit of the issuing bank and secured by its assets. In either case the notes must be taxed or interest charged to a degree which will prohibit their continued circulation after the necessity for their use has ceased. L/e al Tender Notes. The writer of this paper suggested during the panic of 1893 an issue of emergency legal tender notes to be loaned by the government to the banks in clearing-house centers upon the security of clearing-house certificates , guaranteed by all the banks in the re spective associations. This plan was covered in a bill introduced in the senate by Senator Maudersou ( S. F. 484 , 53d Con. , 1st Session ) . The serious objection to the plan exists in the fact that it would be a continuation of the "lawful money" habit the extension of the policy of governmental interference in business affairs. The government should not engage in any species of banking or perform any banking function. It sustains this re lation when it circulates "promises to pay" on demand and maintains a reserve fund for the redemption of these promises. No one can more clearly recognize this objection than the writer or depre cate more strongly this governmental interference. At the time the suggestion was made it was the only practicable scheme. It may still be defended as the best , if there is to be no change in this respecl if there is to be no abatement of this governmental policy. If we must have this interference it should be utilized and directed in a manner to produce the best results. liunk Notes. The bonk note suggestion , while free 'roni the objections which apply to legal ; euder notes , has the advantage of ex- ieuding the benefits of the privilege to all parts of the country. The notes could not be made so absolutely safe as ; he legal tender plan suggested in the senate bill referred to , but considering ; he fact of their temporary character and the possibility of ample restrictions and safeguards , there can be no doubt but what they can be authorized with entire safety. This feature of a taxed currency the tax being increased in proportion to the quantity of notes ssned is embraced in the elaborate "Currency Bill" recommended by the [ ndiauapolis monetary conference. This special feature ought to be considered separate and apart from the proposition in the bill for the creation of a perma nent bank-note circulation , secured only by the assets and credit of the issuing banks. The Comptroller's Plan. Mr. Dawes , in his report , recommends ihat the national banks be authorized to issue notes to the additional amount of 10 per cent upon the bonds deposited by them to secure circulation , thus raising the amount that can be issued to the par value of the bonds. This addi tional 10 per cent is to be taxed at the rate of from 8 per cent to 4 per cent per annum , and this charge he thinks will be sufficient to retire the notes when the emergency issue is no longer required. The trouble with the comptroller's plan is that it would bo an inadequate relief , if it was available , and it is not available , to accomplish the purpose contemplated. Inadequate. The increased amount of notes per mitted is only to the extent of 10 per cent of the bonds deposited. The comptroller argues that this supply would be ample and cites in support of his argument the fact that this 10 per cent will aggregate as much as the total average rediscounts shown by the bank reports. If , instead of figuring this 10 per cent upon the total of all bonds deposited , he would take it only upon the bonds deposited by the banks reporting the re discounts , he would find the result an insignificant sum. This is certainly the only proper way of ascertaining the benefit to accrue to the banks who need the assistance. The large majority of the banks both large and small , but especially the large banks have on deposit no greater amount of bonds for circulation than the minimum required by law. This minimum is $50,000. Of what value would this proposition be to a bank , say of $1,000,000 capital ; $0,000,000 deposits ; bonds deposited $50,000 ; in creased circulation $5,000 ? It IB for
