money, would be only nominal. The amount daily arising between issuers of such money in the United States is well shown in the operations of Clearing Houses1 now established in every considerable

1 Statement showing the number of Banks, members of the New York Clearing House established in 1853; their aggregate capital; clearings; balances; average daily clearings; daily balances, and percentage of balances to clearings at the same, for thirty-nine years, 1854 to 1892, inclusive.

$47,044,900

1855

48

1856

50

1857

1858

1859

47

1860

1861

50

90,274,479

$988,078

940,565 1,079,724

1,182,246 4.4 1,016,954 6.6 1,777,944

5.6 1,232,018 5.3 1,151,088 6.0 1,344,758 6.0

4.0

$5,759,455,987 $297,411,494 $19,104,505 48,884,180 5,362,912,098 289,694,137 17,412,052 52,883,700 6,906,213,328 384,714,489 22,278,108 64,420,200 S,333,226,718 365,313,902 26,968,371 67,146,018 4,756,664,386 314,238,911 15,393,736 67,921,714 6,448,005,956 363,984,693 20,867,333 69,907,435 7,321,143,057 380,603,438 23,401,757 68,900,605 5,915,742,758 353,383,944 19,260,520 68,375,820 6,871,443,591 415,530,331 22,237,682 68,972,508 14,868,597,849 677,626,483 48,428,657 2,207,252 4.6 68,586,763 24,097,196,926 885,719,205 77,984,455 2,866,405 3.7 So,363,013 26,932,384,342 1,035,765,108 84,796,040 3,373,828 4.0 82,370,200 28,717,146,914 1,066,135,106 93,541,195 3,472,753 3.7 81,770,200 28,675,129,472 1,144,963,451 93,101,167 3,717,414 81,270,200 28,484,288,637 1,125,455,237 92,182,164 3,645,250 4.0 82,720,200 37,407,028,987 1,120,318,308 121,451,303 3,637,397 3.0 83,620,206 27,804,539,406 1,036,484,822 3,365,210 3.7 84,420,200 29,300,986,682 1,209,721,029 95,133,074 3,827,666 4.I 84,420,200 33,844,369,568 1,428,582,707 109,884,317 4,636,632 4.2 83,370,200 35,461,052,826 1,474,508,025 115,885,764 4,818,654 81,635,200 22,855,927,636 1,286,758,176 74,692,574 4,205,076 80,455,200 25,061,237,902 1,408,608,777 81,899,470 S1,731,200 21,397,274,247 1,895,042,029 79,349,428 71,085,200 23,289,243,701 1,373,996,302 76,358,176 4,504,906 63,611,500 22,508,438,442 1,307,843,857 73,555,988 4,274,000 60,800,200 25,178,770,691 1,400,111,063 82,015,540 4,560,622 5.6 60,475,200 37,182,128,621 1,516,538,631 121,510,224 61,162,700 48,565,818,212 1,776,018,162 159,232,191 60,902,700 46,552,846,161 1,595,000,245 151,637,935 61,162,700 40,293,165,258 1,568,983,166 132,543,307 60,412,700 34,092,037,338 1,524,930,994 111,048,982 4,967,202 4.5 58,612,700 25,250,791,440 1,295,355,252 82,789,480 4,247,069 5.1 59,312,700 33,374,682,216 1,519,565,385 109,067,589 4,965,000 4.5 60,362,700 34,872,848,786 1,569,627,325 114,337,209 5,142,316 4.5 60,762,700 30,863,686,609 1,570,198,528 101,192,415 5,148,195 5.1 60,762,700 34,796,465,529 1,757,637,473 114,839,820 5,800,784 5.0 60,812,700 37,660,686,572 1,753,040,145 123,074,139 5,728,889 4.7 60,772,700 34,053,698,770 1,584,635,500 111,651,471 5,195,526 4.6 68,233,500 36,279,905,236 1,861,500,575 118,561,782 6,083,335 5.1

Yearly average for 39 years.

The Clearing-House transactions of the Assistant Treasurer (a member of it), of the United States at New York, for the year ending October 1, 1892, were as follows:

Totals for 39 years.

The balances, $206,579,547.74, were paid to the Clearing House as follows:

$83,355,000 00

75,275,000 00 47,949,547 74

place of trade. The exchanges at the fifty-seven Clearing Houses in the United States in 1892 equalled $61,017,839,067; the daily average being about $200,000,000. The balances daily arising averaged about $16,000,000, or about 8 per cent. of the exchanges taking place. In the city of New York the exchanges at the Clearing House for 1892 equalled $36,279,905,236, the daily average being $118,561,782; the daily balances, $6,083,335, a sum equalling 5.1 per cent. of the exchanges. Clearing Houses, enforcing daily settlements between all their members, are now the great correctives to any tendency to over-issues of currency. No greater amount of metallic money (not including subsidiary coin) would be required in the internal commerce of the country, equalling $40,000,000,000 annually, than that now required at the Clearing Houses, as at these the debtors one day are creditors the next, but for extraordinary calls to which issuers are exposed from disturbances arising alike in our domestic and foreign trade. The amount of reserves, gold, held by the Bank of England, ending with 1892, for its own issues, as well as for those of all other issuers in the United Kingdom, the aggregate averaging $3,000,000,000, equalled about £23,000,000, or $115,000,000. London, the Clearing House of the world, is first called upon to supply the lack of capital in every part of it. It has to consider quite as much the political and military as the financial and industrial situation the world over. When peace is menaced the first care of the belligerents is to provide plentiful supplies of gold, the only kind of money to be depended upon as having the same value in all countries and in all emergencies. Were the monetary system of the United States a normal one, a sum not exceeding one-half that maintained by the Bank of England, the greater part to be held in New York, the Clearing House of the country, would be ample as reserves for all the issuers of symbolic money within it, and for the discharge of all balances arising in the domestic and foreign

1

1 Statement showing the amount in pounds of gold held by the Bank of England near the first day of January of each year, for twenty years, ending with 1892.

The average amount at the beginning of each year was £20,659,541, the average amount held being somewhat larger, but not exceeding that given.

trade of a country subject to very few of the disturbing influences to which Great Britain is exposed. The United States is usually, and always, with a proper monetary system, would be, the creditor nation. With a proper monetary system and with Clearing Houses in all the great business centres, it would be impossible that there should be any considerable fluctuations in trade, or that any large balance should be found due abroad, or from one section to another, or between issuers of symbolic money. But assuming that the reserves of the issuers of symbolic money in the United States should be in the same ratio to their liabilities as are those held by the Bank of England, the amount required by them would not exceed $100,000,000, to increase with the increase of the exchanges. We are consequently paying an enormous penalty for our unnatural and fantastic system. According to the report of the director of the mint, the amount of gold in the public treasury, November, 1893, was $162,683,854; in the hands of the public, $498,121,679; in both, $660,805,533. The amount of silver in the public treasury was $488,318,428; in the hands of the public, $58,834,149; in both, $547,152,577; the total of the two being $1,207,958,110. It will thus be seen that we are carrying as dead weight more than $1,000,000,000 in the form of silver and gold, counting silver at its nominal value, which, as capital, might, but for our vicious monetary system, be made the basis of new industries, increasing vastly our production of merchandise and with it the amount of the symbolic money of the country.

As the issues of a bank made in the discount of bills of exchange are ordinarily returned to it through the purchase for consumption of the merchandise they represent, its share capital which constitutes its reserves may be wholly paid in in bills, a portion of them to mature in season to provide the coin necessary to take in such of their issues as are not returned to it in the manner described. If pressed for gold this can ordinarily be had by a pledge of bills the constituents of which have ordinarily the value of an equal nominal amount of gold. No small portion of treatises upon money is taken up with the discussion of the proportion of reserves in coin to liabilities, such proportion, in the books, to be all the way from a quarter to one-half of liabilities, plenty of illustrations being offered. The proportion depends upon the constituents of the bills discounted. If it be merchandise, the liabilities of the

issuer are returned without any intervention on his part. If not merchandise, the borrower ordinarily will be unable to meet his loans. No empyrical rule, consequently, can be laid down. Little or no coin may be necessary to the entire solvency of a bank. In case of a suspension on a large scale provision for resumption is not necessarily that of coin, but that the bills of a bank should represent merchandise, the ordinary subjects of consumption. In such case no greater amount of gold may be required when banks resume than when they suspended specie payment. Resumption is not the taking in in coin of the liabilities of a bank, but that its issues should represent merchandise having a value in gold equal to their nominal amount. The process of resumption on an extended scale may not involve the use or movement of a dollar of coin. The capital of new banks is ordinarily paid in in the form of cheques upon other banks against deposits which grow out of the discount of merchants' bills. Every one possessed of merchandise is capable of issuing instruments for its distribution entitled to circulate at the par of gold. Such methods have been frequently resorted to, but are no longer necessary, banks standing ready to discount all bills given for merchandise, supplying a higher form of currency than that issued by a single producer whose credit, no matter his means, is limited to a narrow circle.

As already shown, the only difference between bills discounted and the notes and credits issued in their discount, both being alike at the option of the holder payable in coin, is in the time in which they are respectively to mature; the bills being payable on such time as is assumed to be necessary for the distribution for consumption of their constituent; the notes and credits presently, it being assumed that provision therefor has been made in the merchandise put upon the market which the bills, and notes and credits, issued in their discount, alike represent. If no such provision is made the issuer has to supply the merchandise in the form of the universal equivalent. Credit, as expressed by bills, is the necessary condition of the issue of symbolic money. But for it metallic money, as an equivalent, would be required alike for the movement of merchandise in gross as for its distribution, piece by piece, to consumers. It is the essential quality of symbolic money that previous to its issue provision be made for its return to the issuer in the merchandise which such money represents. If the public are

solvent the banks must be, although unable to meet upon the instant any considerable demand for specie. If called upon they may have no alternative but to suspend payment. Their bills paid, no new loans being made, they would again have all their capital in hand in its original form. Under such conditions, suspension of specie payments may be a matter of a few days only. The consumption of merchandise would go on as before, the liabilities on either side being discharged by mutual offset until they are wholly retired. A suspension of specie payments may have hardly any other injurious effect than to arrest for a time the operations of production and trade. It is a common thing to speak of the issues of banks as paper money based upon specie." The exact reverse is the fact. Paper money is based, not upon specie, but upon merchandise, and is retired thereby, specie interposing, as a rule, not between producer and consumer, but only between issuers of symbolic money.

The proceeds of bills discounted are ordinarily taken in the form of credits to remain on deposit with the issuers, to be drawn according to the wants of those in whose favor they are granted. Notes, subsidiary paper money, find their way into circulation chiefly by means of cheques against deposits for the payment of wages, current expenses, and the like. As they are drawn for specific purposes they presently return in greater part to the issuers, a small amount as pocket money remaining in the hands of the public.

As the capital of banks when first established may be largely paid in in bills, these supplying in their payment, which may be demanded in coin, the reserves proper to be held, to the extent that the proceeds of loans made by them are undrawn, these may be treated, in part, as reserves for new loans. Issues so made do not inflate the currency, as they have behind them the proper constituent for their redemption. The owners of undrawn proceeds of loans well understand the use that is to be made of them and do not object, the banks being strengthened instead of weakened thereby. When demanded in large sums, all that the banks have to do is to call in their loans, or negotiate new ones for themselves, payable in coin, for gold is always to be had at prices not ordinarily much above those demanded for other kinds of merchandise. It is to be remembered that nearly all the issues of symbolic money, though nominally payable in gold, are resolved by merchandise, the ordinary subjects