mint. A laboratory is maintained at the mint for making tests of weight and fineness. This work is continuous. A special committee is appointed as a further safeWork of the guard. Coins are standard at .900; .003 is the limit of tolerance. In no case was a newly coined piece found to be outside the limit in 1899, while only one was discovered in 1898. But few coins depart more than .001 from the standard. These figures show the exactness with which the unit for judgment of value is preserved in the standard money of the United States, while the redeemable coins are watched quite as closely. to. When a reserve of gold is not kept, equal in amount to the credit money outstanding, a revenue department of the Treasury is essential. The present reserve fund Relation of the Revenue serves only to give confidence in the ability of Department the Government to meet present demands. With $150,000,000 of gold in the Treasury, this is deemed sufficient to guarantee, for the time being, that the Government will be able to meet its money obligations. But it is quite as necessary to give assurance of ultimate ability to meet all outside obligations. Under ordinary conditions a few millions of dollars in gold will suffice to keep the whole $1,369,000,000 of credit money valued at par. There are times, however, when for business reasons, those holding this credit money may wish to have a large portion of it redeemed in gold. Demands for gold for private use, demands for export, or some shock to public confidence in the credit system may cause an extraordinary strain on the Treasury. The possibility of such unusual demands dictates that some means of maintaining the reserve intact should be provided. In 1893 the Government found itself in a position where the reserve was not only impaired, but its very existence threatened. The result was the impairment of all the credit relations of the nation. All private as well as public credit depends on confidence that the Government will be able to redeem its promises, and pay gold in exchange for credit money outstanding. It is this that links the monetary promises of the Government to its fiscal transactions--that makes necessary a revenue power as part of its credit money system. Possible de The Report of 1901 shows that on June 29, 1901, the Government had in hand $385,642,560.46 of gold coin, and $109,205,736.96 worth of gold bullion—$494,mands on the 848,297.42 in all. As against this, the GovTreasury for ernment held a special 5 per cent National gold. Bank-note reserve fund of $13,267,236.27, a special fund of $289,017,689 for the redemption of gold certificates, and various other special deposit and redemption accounts outstanding to the amount of $8,545,644.24. Add to these amounts the $150,000,000 reserved by law for the redemption of the credit money of the United States, and we have a total special reserve of $460,830,569.51 which must be subtracted from the gold in the Treasury to determine available funds. This leaves a net balance over and above the redemption funds mentioned of only $34,017,727.91, which at that time might have been devoted to the maintenance of the Government and to meeting its fiscal obligations. The receipts for the year from various sources were $3,011,031,891; the disbursements, $2,993,795,160. The moneys received and disbursed were as follows: From all sources, including redemptions, clearing-house balance and transfers, and expense of Government, during the year 1901, $11,735,461 more of gold was received than was disbursed. As before shown, the actual demand for redemption was only Sources of revenue to meet gold demands. about of one per cent, while the net demand for gold for this purpose was only about 10% of one per cent. 1000 Suppose, however, that under our system of interchangeable credit money the net demand for gold had risen to 5 per cent a very usual demand in times of business adversity and financial strain: this would have made a difference of over $140,000,000 in the amount of gold in the Treasury. Not only would the surplus be wiped out, but two-thirds of the gold reserve also. To meet such an emergency the Government must rely on its revenue powers. Of these it has three (1) Taxation, (2) sale of available assets, and (3) sale of its bonds. That it may not always rely on taxation is evident from the nature of the money in which taxes are payable. For example, in the year 1901, $622,606,298 of gold were received through customs and customs deposits. Yet, with these receipts, only $11,735,461 more of gold was received than disbursed. When the demand for gold is 1. Taxation inadequate. strong the gold receipts from customs and taxes become small. Through its taxing power, the Government is unable to secure gold with which to protect its reserve. When the taxing power is inadequate, disbursements in payment of officers, etc., may be made in forms of credit money, but this can not do more than temporarily protect the Treasury. The credit money disbursed soon finds its way through the redemption agency. The excess of credit money paid out during times of strain sets in motion the "endless chain" of redemptions that draws away the surplus. A decrease in the expenses of government may somewhat lessen the demand, but if the demand for gold through outstanding credit currency be strong, the reserve may fall to a low point, and in such an event neither present economy nor power to obtain future revenue through taxation can avail to maintain it. In the Treasury at the time mentioned there were $453,702,931 silver dollars, $10,587,556.93 in fractional silver, and $49,396,841.98 silver bullion-$513,687,2. Sales of assets of 329.91 of silver coin and bullion as an asset. Government. Had this been sold for gold, and relief found by conversion of quick assets, the silver owned would have produced something like $250,000,000 in gold coin, and would have reduced the credit liabilities of the Government to the same extent. But the Treasurer had no legal power to dispose of the silver in his possession. He might have turned to his bank assets, of which at the time he had $100,010,493.95 on deposit in the National Banks. This might have been turned into cash, but it would have given no relief, for the banks would then have converted the United States notes and the other credit money reserves held by them into gold by presenting them at the redemption agency. The gold reserves of the Government would have been reduced in like amount. The third revenue power-loans-must now be invoked. From this alone can relief come when the other powers fail to meet monetary credit demands. Without this power our whole credit currency system would have failed in 1893. In time of stress, with $1,369,000,000 of credit money outstanding against the $150,000,000 reserve, the loan power may be as essential to the maintenance of the United States Treasury as is the power to contract loans necessary to the maintenance of the credit accounts of a commercial bank. Service of the The service performed by the United States Treasury is at once apparent. On it depends the integrity of our whole money system, and out of the integrity of the money system grows our system of private credit. From the United States Treasury we now turn to the private institutions and agents used in funding operations. Government. CHAPTER X THE SAVINGS-BANK UNDER a system of exchange, based on consent of parties, any kind of business may be profitable to that extent, and to that only, that it renders a service to One who can not offer to others Every busi- service rendered. something which will give them greater enjoyment or greater business advantage than can be had elsewhere at the same price, must either keep the thing offered or reduce the price until, in the judgment of some member of the community, an advantage is to be found in exchange. But one can not sell at a price which will not yield him a profit and remain long in business. A business man must get a return that will pay him for his effort, as well as offer some advantage to others from dealing with him. The formula of successful business is: Price must equal cost, plus a profit. Again, one who offers to sell goods at a price which will yield him a profit must compete with all others in the market. The fact that there are buyers is proof that, in the judgment of those buying, a service is rendered to them by the one offering goods; the fact that the one who offers goods at a price which brings customers-i. e., remains in a business --is proof that he produces and sells at a price which yields a profit. In other words, the business man is able to continue the particular business in which he is engaged under these circumstances only: that he can both serve the community and at the same time serve himself. 14 209 |