Sound Currency

by Silver Purchase Law in the U.S.--Decline partly due to Latin Union in closing its mints to
silver and Austria's adoption of the gold standard-The Latin Union 1865-Silver token coins
legal tender-Latin Union closes its mints to silver on private account 1876-Action of other
countries-U.S. tries to rehabilitate silver-Europe adopts à gold standard.

IN THE UNITED STATES BEFORE 1873..

Experience for first 80 years somewhat like that of France-Theoretical double standard-

Practically monometallic-Like England in 17th century-Worn coin in the United States - First

Coinage Act 1792-Hamilton and Jefferson-Combination of English ratio and French system.

1792-1834. Silver Monometallism Under Double Standard...

Coinage of gold and silver 1794, 1795-Gold undervalued-New coins did not circulate-Worn coin

accepted in payment for customs duties and allowed to go in circulation-Gold exported--Legal

and market ratios 1793--Ratio 1794-Coinage of silver dollars suspended 1804--Coinage of 1000,

1834-Up to 1869 less than 400,000 silver dollars coined in any year-Gold coinage--Gold disap-

pears 1817-No coinage until 1849--Business carried on by means of paper currency-Specie

payments suspended 1814-U. S. Bank re-chartered 1816-Attempts to check exportation of
American coins-Foreign gold coins not legal tender 1816-1819-Foreign gold coins receivable
for public lands-Dollars of Mexico, Peru, Chili and Central America and five-franc piece of
France legal tender at nominal value.

1834-1893. Gold Monometallism Under Double Standard.

1834, foreign gold not legal tender--Basis of circulation foreign silver-Gold movement--Dis-

coveries in South-Protective movement--Gold and silver dollar reduced-Effect upon gold and

silver--Coinage of half-eagles--Eagles 1 04 resumed 1838-Double-eagle 18. 0-Gold dollar increased

to 25.8 grs.--Silver underrated--Exportation--Presence of Spanish-American coins-Fractional

silver 1853 made subsidiary and token money--Made legal tender-Gold_monometallism until

1873--Silver dollar too valuable to circulate--Act of 1881 drove silver out--Did not affect price of

silver- Quotations from London market 1-33-1842-Increase in price of silver due to gold dis-

coveries--Si.ver beg.ns to fall--Demonetization 1873.

IN THE UNITED STATES SINCE 1973.

The Act of 1873 Movements affecting currency-Silver not demonetized by Act of 1873-Done

by Act of 1834 Change of ratio at that time-Token money aided gold monometallism-Silver over-

valued-No effort to restore the market ratio-No complaint that the silver dollar was dropped,

1873-The trade dollar authorized-Made legal tender, a mistake-Rectified-Contention that

silver was surreptitiously demonetized - Facts do not sustain it-No bearing on the merits of

bimetallism or monometallism-History of the Act of 1873-Mr. Knox's explanation accompanying

the bill-Gold basis by law 1873-1878-Fall in the price of silver, 1876-Increase in the production

of gold and silver output, 181-1875 Silver driven into the melting pot-Gold in Europe-France,

18 2-1844, absorbed $6 0,000,000-Gold in United States-Increase of annual product, 1847-1818-

Silver product, 1838-873-Silver increased-Gold held its own-Incrasee in supply of silver and

decrease in demand-Highest prices. 1860-1873 price falls-The effect of demand on the price--The

new German Coinage Act and sales of silver-German demand for gold about $414,000,000-Effect

on the price of silver- Decrease in demand for silver-Belgium, Holland and India-Exports of

silver-Reason for fall in price, 1876-Gold and silver alternate national metals-Increase of silver

advocates in Congress Senator Henry M. Teller-Colorado admitted--1873 gold and silver product

equal-Increase in product of silver, 1898-A cause of fall in prices-Free coinage movement 1876

-Activity in the House-Bland Act-History of bill's passage-The bill in the Senate-Mr. Allison

-Conditions of Act-Silver certificates-Monetary conference-Free coinage defeated--President

Hayes vetoes the bill-Passed over the veto February 8, 1878-The Mathews resolution-Its effect

on U. S. bonds Return of bonds from Europe-Only $2,000,000 coined per month-Bullion owners

demand more than market rates-Sec. Sherman's interpretation-Difficult to circulate silver dollars

-New York Clearing House declined to receive the certificates-Compelled to do so by Congress-

Government pays for transporting the dollars-One, two and five dollar certificates issued-Sur-
render greater part of bank currency makes a place for the new silver currency-Neutralizes the
effect-Amount purchased under Act 1875-Amount paid-Amount issued in coins-Silver still
continued to fall-Prices 1878-1889-Senate Free Coinage Bill 1890-House did not concur-Com-
promise measure known as Sherman Act-Its conditions-Established policy of the United States
to maintain a parity-Purchases under the Sherman Act-Loss to the Government-Effect of the
law-Alarm of American security holders - Hoarding of gold-Export of gold 1888-1893-Loss of
gold to United States-Percentage of customs duties in gold -Shows departure of gold-The busi-
ness distress.

RECENT DEVELOPMENTS.

Repeal of Sherman Act 1893-Closing of the Indian mints 1893-The panic in silver-Lowest

point in the price of silver-Variations in the price-Increase in the production of gold-Expecta-

tion conc rning the increase.

A CENTURY'S STRUGGLE NOW ENDED

The question of bimetallism answered by recent developments-International trade barriers

broken down-Dependence of government upon conditions of finance and commerce-Laws pow-

erless to affect the tides of commerce-In matters of currency, commerce all-powerful-Offices of

legislation two-Must look to commercial development, not to legislation-Supply and demand

for coin currency vitally affected by three factors: (1) The development of communication facil-

ities and commercial expedients; (2) Discoveries of new deposits and cheapening of gol and

silver production; (3) Extent to which silver has been renounced as a basis--Annual products

effect value of gold and silver but slowly-The demand decreased greatly in comparison to rapidly

increased supply-Both cheapened compared with price of labor-Third factor present in last 25

years-World conducting business on gold-standard basis-Result of it-Not easy to decide that

gold has appreciated-More steady in late years and more steady than other products of industry-

There might be a question how far comparative appreciation of gold should be tolerated--Fortu-

nate events assure a solution without intermeddling-Tendency to depress silver and appreciate

gold practically spent-Commercial developments lessening the amount of metal required for ex-

changes-Probable production of gold, 1895-1900-The last quarter century culminated in world-

wide movement to displace silver and to appreciate comparatively the commercial value of gold-.

The operation practically at an end-Compensating forces at work-Value of gold must hence-

forth steadily depreciate.

OUR PAPER CURRENCY.

A CENTURY OF MONETARY FAILURES.

Our monetary history not one to be proud of-Failure of experiments-Inadequacy of State

Banks-Superseded by National Banks-National system failed to supply sufficient currency-

Effect of the War upon banking - Greenbacks-A menace to the credit of the government-The

quality of greenbacks deteriorated by reason of the issue of Treasury notes-Defects of bank and

government paper aggravated by issue of silver money-Silver full legal tender--In case of

failure to meet obligations in gold, silver would be used-Have tried six systems during the

century-Two standards-Legal tender -Ability of the government to honor its notes-Dependent

upon metropolitan banks-Situation of the government.

MEASURES OF REMEDY,

Must retire legal-tender paper to bring about order-Greenbacks popular-The Greenback

has acquired a prestige which has made it a fundamental factor in our money system-Legality

of the Legal Tender Act-A paper currency based upon the mere credit of a central power The

place of the State in issuing money-The recent position of the United States Treasury-The

danger of constituting government legal-tender notes the money of banking-The distrust of

silver-The use of notes to get gold from the Treasury-Necessity of retiring the legal-tender notes.

HOW SHALL THE LEGAL TENDERS BE RETĪRED

Prohibition of re-issues of the notes-Necessary to supply another form of money at the

same time and to have means for redemption-Treasury gold reserve available-Other resources→→
Time of redemption-Necessary to have a substitute-What it should be.

THE NATIONAL BANKS AS A FACTOR IN CIRCULATION

The Failure of their Guaranty System.

PAGE

United States bonds as a guaranty against notes-The ratio of guaranty-Introduced to create

market for United States bonds-Superfluously ample security-An excessive guaranty shown in

the decrease of National Bank circulation-Percentage of circulation to capital-The present

system of bond deposit destructive to note issues and to free use of resources-National banks

become State banks-Bank of England-Danger in too excessive a guaranty-Liable to prohibit

issues-Economy in guaranty, not exorbitance, is the legitimate principle-Inducements for

redemption and elasticity of circulation lessened-Necessity of new form of guaranty conceded.

An Amended Guaranty..

Notes should be limited to 75 per cent. of capital-First lien-Redemption agencies-Federal

authority.

Limitation of Issues.......

Importance of a maximum limit-75 per cent. of capital a safe limit-Percentages of National

Bank circulation-Capital and supplies of National Banks Oct., 1894-Issue power of banks under

a 75 per cent. limit-Probable issue of National Banks-Issues would not entirely effect the retire-

ment of legal-tenders-Necessity of another source of issue.

Is the Proposed Guaranty Sufficient?..

Sufficiency of the guaranty-Guaranty of shareholders-Assets and shareholders-Under the

new methods notes might not be redeemed as promptly-Necessary to guard against any distrust

of the bank currency-Failures of National banks 1893-Amount of capital of banks in hands of

receivers for 30 years-Proportion of capital of failed banks to total capital-Probable yearly fail-

ures banks under the new system-- Protection of note-holders-Reports of the Comptroller of the

Currency for 20 years-Guaranty from assets and shareholders would afford a larger ratio of

protection than the deposits of United States bonds under the National system.

THE STATE BANKS A NECESSARY FACTOR.............

Their Present Status.

Question as to right of State banks to issue notes-Tax on State bank issues-Banking insti-

tutions invidiously divided-Encourages abuse of Federal power--Excuse in the unsoundness of

ante-bellum currency-National bank notes entirely stable-Wildcat currency no longer a

possibility

Rights and Duties of Government.

Government has certain rights and duties-Paper money should not be exposed to deprecia-

tion-The National Government should concern itself in the solvency of the issuers-This prin-

ciple fully recognized in the powers conferred by the Constitution-No question raised as to

the exercise of these powers-Not warranted in applying them by means of a prohibitory tax-

Duty to see that notes are of proper quality the office of Congress-Guaranties required-Issue of

State banks identical with issues of National banks-State banks and National bank issues to

supply deficiency caused by redemption of legal-tender notes--Present capital of State banks-

Probable issue of notes by them--Retirement of legal tender notes impossible without co-ope-

ration of State banks-Prejudic s must be surrendered.

Current Redemption of Ñotes

Necessary to provide a new system of redemption--Possibility of inflation--Manner of redeem-

ing notes-Object of banks to keep circulation in the field--Competition regulates circulation-

Note clearing a necessity-Redemption agency of the National banking system a failure--Suffolk

bank redemptions 1857 more than those of the present--The present system ineffective-Difference

in cost of redemptions of Suffolk and National systems-Country should be divided into districts

each having an agency of its own-Each agency to forward to issuing banks for payment all notes

presented.

THE VOLUME OF CURRENCY.

What changes would occur in the volume of currency--Gold reserve would circulate--Summary

of circulation under the new system-In the event of too great expansion, Secretary of Treasury

might order a temporary suspension of issues.

The further issue of silver currency permitted-New issues of bank notes to be payable in gold

--Present silver currency may be kept at par by large gold reserve-A question of expediency.

SUMMARY OF FOREGOING PROPOSALS

Authorize redemption and cancellation of all outstanding United States notes and Treasury

notes of July 14, 1890-Not to re-issue legal-tender notes--Banks having $25,000 capital, or over, to
issue notes to 75 per cent. of paid-up capital-Establishment of six redemption agencies.

202

NATIONAL AND STATE BANKS.

OBJECT OF NATIONAL BANKING SYSTEM.

A matter of currency reform and replenishing treasury-Amount of fiscal aid to government

at close of war.

THE TAX ON STATE BANKS' NOTES.

Adverse report of Committee of Ways and Means on National Banking System-History of

Bill to its passage in House and Senate -Tax on State Banks--Question as to Constitutionality-

Object of Tax--Blame of a bad currency on last generation.

STATE BANK SYSTEMS..

Good and bad systems.

State Bank of Indiana,

When incorporated, 1834--Capital Stock--Subscribed by State and individuals-Organization

--Officers--Branches-Earnings and dividends belonging to shareholders exclusively--Each branch

liable for debts of other branches--Assets and liabilities--Business, kind of, defined by law--

Discounts--Voting power limited--Directors individually liable for infractions of the law when

not voting against--Absence of directors--History of the bank crisis of 1837--Re-charter, 1855--

Dividends--State prevented from becoming a shareholder in any bank or other corporation-Note

Amount of surplus turned over to the State--General Banking law.

State Bank of Ohio

Origin of bank-Banking law of 1845- Branches limited to seven--Commissioners--Dominant

idea of bank security of noteholders--Amount of notes-Safety fund, 10 per cent. for protection

of noteholders-Liability of branches--Assessments in case of failure to redeem notes.

Louisiana Bank Act of 1842..

Bank calamities of 1842-New banking law: Specie reserve; Two-thirds commercial paper;

Banks examined by board; Bank directors liable; Shareholders at least fifty; Bank to pay out
only its own notes; Balance to be paid every Saturday; Mortgage loans made; Bank act of 1812
scientific; Requirement of specie against liabilities-Effect of this law on banking in the State.

Massachusetts and the Suffolk Bank System...

Bank law before war two parts-Limited amount of stock held by one person to one-half of

total amount in bank -Directors' stock not to be pledged for debt-Debits and credits limited-

Directors liable for violation of this-Payment of notes-Noteholder paid in case of failure-Specie

reserve 1858-Free banking-Redemption of notes at Boston-Resistance by country banks-Suf-

folk system subjected notes to daily test-Governing principle in three systems examined.

Free Banking Law of New York.

The free banking system a step backward-Origin of it-Specie system and bank charters in

New York-The free banking law 1838 a reaction-Principle of-State bonds ruled out, except those

of New York-Mortgages kept up to a high pitch-Law of 1892-Free banking system in Ohio and

Massachusetts.

Free Banking in the West.