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ble by the United States for all dues to itself.

They are

legal tender for all debts both public and private. By the act of 1890, commonly called the Sherman bill, it was declared "to be the established policy of the United States to maintain the two metals, gold and silver, on a parity with each other upon the present legal ratio, or such ratio as may be prescribed by law." If the government should. persist in the refusal to redeem silver dollars in gold, it would be guilty of debasing its silver coinage fifty per cent and of thereby cheating innocent holders of these coins out of more than $200,000,000. Should it do that, it would at one blow destroy the public credit and we should have all the evils, without any of the advantages, of free coinage of silver. The treasury has, in fact, declared that, should the redemption of the silver dollars in gold be demanded, it would not hesitate to grant the demand in obedience to the law requiring gold and silver coin to be kept at a parity.

It follows, therefore, that the whole amount of $1,150,741,785 is representative money, for the redemption of which in gold ultimately, the United States is both legally and morally bound. The value of the silver ounces it may count among its assets, as it might count the market value of the copper and nickel alloy and of the paper pulp made of cancelled notes, but it must not compel holders of its representative money to take anything else than gold in redemption of its obligations.

To redeem this $1,150,741,785 of representative money the United States treasury held October 1, 1897, in gold coin and bullion, $184,561,664. This showing is a great improvement over that of January 13, 1896, when there was only $56,162,059 of free gold in the treasury. But all admit that our present financial system is not at all satisfactory. All depends upon the willingness and the ability of the treasury to redeem on demand eight different sorts

of currency, to the total amount of $1,150,741,785, in gold. A maximum reserve of sixteen per cent is not at all adequate.

Business depends upon the currency. The currency depends upon the amount of gold in the treasury. The amount of gold in the treasury depends upon many fortuitous circumstances. A syndicate of a dozen American or foreign bankers could make a run upon the treasury that would drain its gold in a very few days. Should the United States ever become involved in a war with a first or second class power, European countries could easily return government bonds and other securities and so reduce the gold in the treasury as to force the suspension of gold payments, and thus bring all our financial transactions to a silver or paper basis, to our great loss. Success in war under such circumstances would be greatly delayed, if not rendered impossible.

Something must be done: what shall it be?

It is proposed to retire the greenbacks and the notes of 1890. But this of itself would be no remedy. There would still remain some $809,130,178 to redeem in gold. To contract the currency by the withdrawal of $341,611,607 notes would precipitate a panic. If the national banks should increase their circulation by that amount, then, unless the whole system of banking were changed, the government would still be obligated to redeem them in gold. The banks would redeem them in silver, and the government must change the silver into gold. If the government issue any representative money, then does it become necessary for it to redeem all sorts of money that may be redeemed in its representative money. Four hundred millions of silver dollars are more than enough to form an endless chain which the banks may use to withdraw gold from the treasury faster than it can there be accumulated. All notes then issued by banks must be paid really by the gov

ernment on demand. The only alternative would be for the government to repudiate its silver dollars. Thus the banks would get all the profit of the issue, and the government all the expense and risk of redemption. All the arguments which go to show that the government should issue no paper money, prove that the government should not issue representative money stamped on silver instead of paper. Silver representative money is both costly and burdensome.

In seeking a remedy for our present financial straits, we can take a few things for granted:

1. The nation has decided against a single standard consisting of silver.

2. The nation has decided against bimetallism under existing circumstances.

3. There is no immediate prospect of the adoption of international bimetallism.

4. There remains, therefore, the necessity of adopting for some years to come the single gold standard.

5. It is best that the nation should adapt its financial system at once in the most perfect manner possible to the single gold standard.

6. The use of gold coin as a common medium of exchange in wholesale and retail trade is impossible; its actual use must be confined to settling balances between nations and different parts of the country. The amount of money in circulation is sixteen hundred and seventy-eight millions. Were the United States to attempt to secure eleven hundred millions of gold, it would drain Europe of the precious metal, and raise its price so high as to throw the whole business of the world into confusion. Moreover, the abrasion on eagles and half eagles would soon consume profits. Gold bullion commands a premium over coin for export, since coin, packed ever so carefully and handled with discretion, loses in weight. Gold coin in the pockets

VOL. LV. No. 218. 8

of the people and in the tills of shops would soon wear out. The debasement of English gold coin is one of the threatening evils perplexing the financiers. To remedy it, the proposal has been made to make half sovereigns token coins, and so secure gold enough to recoin sovereigns and restore them to full weight.

7. The people are satisfied with our subsidiary silver and minor coins. The necessity for the use of these is so great that, in ordinary times, they pass from hand to hand and are seldom presented at the treasury for redemption; so that the government has the constant use of some $80,000,000 of these without interest. So long as there is no great scarcity of other kinds of money, small change circulates; but let specie payment be suspended as to paper money, while the redemption of minor and subsidiary coins is continued in gold, then these coins will disappear in a few days, as was the case during the civil war.

Several things are to be noted in regard to subsidiary money. It is representative money. It is now made of silver, nickel, and copper. Formerly it was made of paper and called fractional currency. Both token coins and fractional paper have been issued by private individuals, by banks, and by other corporations. But experience has shown that such money cannot be safely issued by any such parties, and that the government should alone issue it. It is agreed, then, that the government may be trusted to issue eighty to a hundred millions of this representative money, of little intrinsic value, which passes readily from hand to hand because the people believe that the government will not issue more than the business requires, and will redeem it, dollar for dollar, in gold, or its equivalent, on demand.

8. Experience has shown that the people cannot be compelled to use subsidiary silver in place of paper money to any great extent. After coining hundreds of millions of

silver dollars, containing silver of the present value of about fifty cents each, and having tried every possible method of putting them into circulation, the treasury reports only $57,145,770 in the hands of the people and in the banks, while three hundred and seventy-four millions. are locked up in the vaults of the treasury. If the people must use representative money whose intrinsic value is less than its nominal value, the difference being made up of government promises, implicit or explicit, they much prefer paper to metal for all sums above one dollar. Silver dollars have been used in the South and West, because paper money could not be procured to take their place.

9. If the use of gold as a common medium of exchange is impossible; and if subsidiary silver and minor coins cannot be made to do all the money work of wholesale and retail trade and the exchange of services; and if the people cannot be forced to use a metal dollar, composed of fifty-three cents' worth of silver and forty-seven cents worth of faith that the government will, though it has not promised to do so, make good the value of its coin, grounding their refusal upon its inconvenient size and weight, then nothing remains but to confess that the people must and will have paper money.

In addition to the gold, there is in circulation over $1,100,000,000, besides $134,000,000 in the treasury which might be put into circulation. From these figures it is evident that the business of the country demands more than $1,000,000,000 of paper money, probably in good times. $1,200,000,000.

Such are the conditions which confront us. Our problem now assumes definite form: Of what shall this $1,000,000,000 of paper money consist, and by whom shall it be issued?

The American people are not fools. Two hundred years of experience with paper money has taught them some

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