The difference between the notes of a bank and credits granted by it to take the form of deposits is one of form only. The notes, which are promises to pay to the holder an equal amount of coin, are what may be termed subsidiary paper money-pocket money, for transactions inconsiderable in amount; or where it is not known that the person offering cheques is entitled to draw them; or where a person having occasion to make payments has not his cheque-book by him. The tendency everywhere in commercial countries is to cheques in preference to notes, from the greater safety and convenience of their use; cheques, in addition to their use as money, serving as valuable records of the transactions to which they relate. The proportion in amount, or value, of cheques to notes in the United States, were the issue of each alike free, is of course a matter of conjecture; but it is probable that the use of the former as money would be tenfold greater than that of the latter, the proportion of cheques constantly increasing from the establishment of banks in every considerable place of trade, with which every one in affairs opens accounts for the safe keeping, as well as the convenient use, of his money. As it is, while the deposits in the national banks equalled $1,775,251,128, the notes of the same in circulation October 31, 1892, equalled only $143,423,298. At the same time, however, the notes of the United States - greenbacks, equalled $346,681,016; silver certificates and notes circulating as money, $487,744,654; the two equalling $834,425,670. Should the United States ever return to a normal and healthy monetary system, its notes, except such as might be used as instruments, never legal tender, for the collection of the revenues, evidences of debt, not of capital, would be wholly retired. So great has been the progress in the instrument, symbolic money, by which the exchanges of all commercial countries are now carried on, that metallic money, except in the form of subsidiary coins, is almost wholly discharged from use. When it interposes, and then only in inconsiderable amounts, it is in the discharge of balances arising between nations and widely separated districts of the same country, and between banks and bankers, issuers of symbolic money, for distribution from hand to hand. Its chief use is in the discharge of balances arising between the latter. If all bills discounted represented merchandise certain to be taken for consumption within the period in which they were to mature, and if all had the same time to run, balances arising between issuers of symbolic, or bank 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. 52,883,700 6,906,213,328 64,420,200 8,333,226,718 67,146,018 4,756,664,386 67,921,714 6,448,005,956 69,907,435 7,321,143,057 68,900,605 5,915,742,758 68,375,820 6,871,443,591 68,972,508 14,868,597,849 Total 5,728,889 4.7 5,195,526 4.6 6,083,335 5.1 168,515,265 +986,597,212,585 $43,410,277,328 †82,470,719 †3,701,883 14.4 Yearly average for 39 years. Totals for 39 years. 68,586,763 24,097,196,926 4.0 677,626,483 48,428,657 2,207,252 4.6 885,719,205 77,984,455 2,866,405 3.7 1,035,765,108 84,796,040 3,373,828 4.0 1,066,135,106 93,541,195 3,472,753 3.7 1,144,963,451 93,101,167 3,717,414 1,125,455,237 92,182,164 3,645,250 4.0 1,120,318,308 121,451,303 3,637,397 3.0 1,036,484,822 90,274,479 3,365,210 3.7 1,209,721,029 95,133,074 3,827,666 4.1 1,428,582,707 109,884,317 4,636,632 4.2 1,474,508,025 115,885,764 4,818,654 4.I 1,286,758,176 74,692,574 4,205,076 1,408,608,777 81,899,470 4,693,297 5.6 1,895,042,029 79,349,428 4,218,378 5.9 1,373,996,302 76,358,176 4,504,906 5.9 1,307,843,857 73,555,988 4,274,000 1,400,111,063 82,015,540 1,516,538,631 121,510,224 1,776,018,162 159,232,191 1,595,000,245 151,637,935 1,568,983,166 132,543,307 1,524,930,994 111,048,982 4,967,202 4.5 1,295,355,252 82,789,480 4,247,069 5.1 1,519,565,385 109,067,589 4,965,000 4.5 1,569,627,325 114,337,209 5,142,316 4.5 1,570,198,528 101,192,415 5,148,195 5.1 1,757,637,473 114,839,820 5,800,784 1,753,040,145 123,074,139 1,584,635,500 111,051,471 1,861,500,575 118,561,782 4,560,622 4,956,009 4.I 5,823,010 3.5 5,195,440 3.4 5,161,129 3.9 5.8 5.6 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: The balances, $206,579,547.74, were paid to the Clearing House as follows: 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 £23,000,000,1 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 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 |