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laws provisions for the suspension of silver purchases and the suspension of the issue of paper money, whenever gold was being exported. If it be the duty of Congress to provide a suitable volume of


it is no less a duty to provide as good money as possible; but, on the contrary, it would seem that the majority had conceived their duties to be : first, take care of our silvermining industry ; secondly, provide plenty of paper money; thirdly, supply American gold to the rest of the world.

The author has no space here for showing the desirability of elasticity in the vol. ume of money; and, he has not wished to belittle the importance of the country's having a properly large volume of money. . He has tried to show the importance of the proportion of our kinds of money, and to bring out the truth, that demands for new issues of money are generally ill-founded; and, certainly, ought to go unheeded whenever compliance with such demands must result, not in augmenting the volume of money, but in displacing the best money by inferior money.




The original concluding chapter of this work was written in 1892, and was directed particularly against the Silver Purchase Law. The objectionable clause of that law was repealed November 1, 1893, after a great crisis had brought home to the masses of our people the vital financial question, and had taught them that all other national questions were comparatively unimportant. Given a proper revenue for the Government, the question, for instance, whether duties should be raised or should be lowered, concerns few persons directly and materially; but financial revulsion may shake the great industrial structure of our land to its very foundations.

How far the business of the country has retrograded in activity since the panic of 1893 may be


shown by a comparison of the totals of bank clearings for the United States, commencing with the period of three months just before the panic, and ending with the first quarter of 1896:


1st quarter, 1893.


- $15,647,000,000

10,377,000,000 11,165,000,000 12,117,000,000

In the period, 1893-1896, the general financial question has been closely connected with the Government rerenue question. Of course, no such decline in trade as that indicated by the decline in volume of bank clearings could take place without seriously reducing the revenue of the Government, for when people economize they do not discriminate in favor of dutiable goods. Quite naturally the income of the Government fell below the expenditure, and in spite of a reduction in the expenditure itself. For the fiscal year, ending June 30, 1893, the income of the Government was $2,341,000 in excess of the expenditure; but ever since the income has been deficient, say, by $69,803,000 for the year ending June 30, 1894; by $42,805,000 for the year ending June 30, 1895; and by about $20,000,000 for the year ending June 30, 1896. In order to avoid a consideration here of the effect on the revenue of tariff changes, I will add that the McKinley Law was superseded by the Wilson Law on August 28, 1894, and I shall gladly permit the reader to charge the deficiency to legislative action, to the decline in trade, or to both, my necessity being simply to call attention to the deficiency and its bearing upon governmental finance.

In connection with these figures we may note that for two years they seem to have been very surprising to the Secretary of the Treasury. In his annual report, dated December 19, 1893, he forecast a deficiency for the fiscal year, then current, of $28,000,000, which proved to be $41,800,000 below the actual deficiency. On December 3, 1894, he made a better guess by estimating the then current year's deficiency at only $22,800,000 below the figure which proved to be the real deficiency. On December 10, 1895, however, it is fair to add, he more closely estimated the probable deficiency for the current fiscal year ending June 30, 1896. I suppose that the Secretary's miscalculations are somewhat responsible for the financial floundering of the Administration in 1894 and 1895, the first two sales of bonds not being commensurate with the needs of the Government to cover revenue deficiency and to provide for the growing demand for gold in exchange for greenbacks, this demand increasing with the growth of sentiment, just or unjust, that the Administration had not mastered the situation.

The period of trade depression commenced with what was called a Currency Famine,” the summer of 1893 being distinguished for the peculiar


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state of financial affairs, in which money itself was bought and sold, payment for it being made by checks drawn on banks, which checks were not cashable, but were “ good through the Clearing House." If you had a balance to your credit in a bank, that bank would certify your check, and with it you could buy, say, 96 per cent. to 99 per cent. as much money. It was a time of almost universal bank suspension, considered technical rather than reala period when necessity overrode law and custom. With equal disregard of law and custom, there came into existence, in the summer of 1893, many substitutes for money, mainly issued by employers of labor to pay off their hands, these substitutes being good at local stores and redeemable by the issuers with checks, good in turn through the Clearing House or aggregations of local banks.

I trust that no reader of this work will be astonished to learn that such a currency famine could possibly occur just when the volume of circulation had reached its highest point, for it should be clear that no volume of circulation, however large, can satisfy the wants of trade when general distrust causes traders to ask for money instead of checks, or causes even a small portion of the community to hoard money rather than to put it into banks. The Treasury Report for April 1, 1893, gives the following figures of circulation, which may be compared with those of earlier dates on page 186:

1 See Hon. John De Witt Warner in Sound Currency for Feb. 15, 1895, published by New York Reform Club.

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