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THE JEFFERSONIAN Vol. IL No. 46. The Money Clouds Habe Vanished. New York, December 8. —The events of the past week in the financial world have been such as usually mark the gradual return of confidence and the restoration of normal con ditions in the banks. The decision -of the secretary of the treasury to issue only about $40,000,000 of the $150,000,000 in new securities, which he expressed a willingness to issue if conditions required, the disclosure of unusually strong reserves by country banks reporting to the comptroller of the currency, the de cline in the currency premium, and the improvement in the New York bank statement, have been important events of the week which have tended towards stability and reassurance. Plethora of Money in the Spring. The action of the secretary of the treasury, in limiting the issues of se curities, was a part of the original plan recommended to him to meet the situation by a resolute and adequate measure, but to carry the execution of the measure no farther than cir cumstances required. The result of limiting the issue of the Panama 2 per cent bonds to $25,000,000, and the one year treasury certificates to about $15,000,000, will be to con siderably simplify the problem of treasury management and money mar ket conditions during the spring. It is anticipated by far-sighted bankers here that there will be a plethora of money soon instead of a dearth, and it will be necessary to reduce in some way the large volume of currency which has been brought into use during the crisis. Increase of Money in Circulation. .The increase in money in circula tion outside the treasury, as shown by the monthly statement of the treasury department for November, was $131,872,887. Os this amount the increase in gold in the country is computed at about $72,000,000, in cluding domestic production as well as importation from abroad The other principal form of increase is in bank emulation, in which an in crease of $7,533,521 was obtained by the disbursement of bank notes held in the treasury cash, and $46,237,730 was obtained by actual increase in the notes issued by the comptroller and outstanding. There have been fears in some quar ters that if anything approximating $100,000,000 in new bank notes were issued upon the security of the new one-year certificates the resulting inflation would expel gold in large amounts after the credits established by the crop movement were exhausted. This danger will be reduced to a minimum by the relatively small issues made by the treasury, and if small amounts in gold should be exported, it is felt that they could be spared, in view of the large gold re sources in the country, to which President Roosevelt called attention in announcing the new loans. The A Weekly Paper Edited by THOS. E. WATSON and J. D. WATSON. total gold in the country reported by the last treasury statement is $1,561,- 714,719, which is equal to more than 50 per cent of the total fftfney in circulation. Further Increase in Bank Notes.® Some further increase. in bank circulation is expected here upon the Panama bonds and the treasury certificates, but it is believed that the bonds will be deposited’ in many cases as security for the public money w which has been left with the banks, and will not be employed as a basis for circulation until the one-year certificates are canceled in the spring, when money withdrawn from banks by the treasury for the redemption of the certificates will release the bonds and the latter can then be for the certificates as security for circulation. If this proves to be the case, the increase in bank circulation will not be very great during the next few months, and may even turn downward as soon as it becomes apparent that the banks have a large accumulation of cash for which there is little demand. The reports of the condition of the national banks on December 3, which are being published i n various ’ x-alities and are gradually;, reaching the comptroller of the currency, are verifying the anticipations of leading bankers that large reserves would be disclosed in the interior banks, that the disclosures would tend to restore confidence, and that the banks would be willing to release such excess re serves after making their statements. A rough calculation of the reports of the Chicago banks, including some state banks, indicates reserves of nearly 35 per cent. About the same proportion is reported from New Orleans, and still higher reserves at smaller places, where the law only requires 15 per cent, including de posits in reserve cities. The fact that two failures of national banks of a certain degree of importance have occurred during the week with out apparently causing any shock to confidence, even in their own localities, and still less in the financial centers, is regarded here as another favorable indication of the state of the financial markets. The New York Situation. The increase of $4,671,000 in actual cash in New York clearing house banks is regarded here as one of tljp symptoms that the currency crisis, as such, is practically over. The re duction of loans by about $11,600,000 is also considered a favorable in dication of diminished pressure. The increase in the required reserve of $6,779,000 reduces the deficit in New York reserves to $46,210,000, and part of this will be covered by gold yet to arrive. Not much is expected among New York bankers in the way of currency legislation by congress at the present Atlanta, Ga., Thursday, December 12, 1907. session. The fact that the presiden tial ,elevon is approaching and that therk ie diversity of view as to the \ of new legislation, leads \ that the subject will be iered, without final action, du\ ’ esen t session. The necessity important measure of reK o .fyiito generally recognized, but \ kth of senti ment for a strong central bank is checking in some degree the move ment for giving wide powers of note issue to the existing national banks. —Atlanta Constitution. HARD TIMES AND CLEARING HOUSE CERTIFICATES. Political economists, when political economy was just beginning to be recognized as a science, decried the idea that panics and hard times may be caused by a mistaken policy of government. Even Herbert Spencer vehemently declared that acts of pariliament could neither cause nor cure the evils of business depression. Since that time history has testified to the fact that panics may be brought about by errors of legislation in times when crops are .good and when there has been no over-pro duction vs ’’ .’imodities. While it is generally conceded that manipulation of the stock market by certain Wall street interests was the direct cause of the present panic, it must not be forgotten that behind the manipulator is legislation that makes possible. The primary fault lies in the laws govern ing the national banks and the trust companies. The secondary fault lies iii laws created by the influence of the special interests. The fundamental principle of the present banking system, briefly stated, is this theorem: No great number of depositors will withdraw their funds simultaneously. is true during times of confidence and prosperity. But at the least alarm depositors begin to withdraw their money, and the banks are crippled, if not actually ruined. And under our present business system the failure of the banks means the collapse of the entire business structure. The theory that will not work under all conditions is wrong. This country has recently witness ed the singular spectacle of univer sal law-breaking in times of peace, for which action public sentiment and public policy demanded there be no punishment. The banks absolutly refused to pay depositors funds which were legally due them; locked great amounts of money in their vaults; paralyzed the circulation of the busi ness life-blood; depreciated the earn ing capacity of the laborer and caused widespread misery and suffering. To remedy this condition the banks issued certificates guaranteed by the Clearing House Associations. These Price five Cents. certificates, so the banks maintained, were of greater stability than the national bank sote, as instead of the credit of one bank behind them, with its deposit of United States Bonds, they were backed by .the credit of all the associated banks. It can be easi ly'shown that this is a fallacious ar gument. In the first place, the panic was the result of, loss of confidence in the banks and the issuing of clear ing house certificates by the banks in lieu of currency was an admission of the weakness of the banking system. If the depositors lacked confidence in the individual banks their confi dence could not be strengthened by any association of banks. In the second place, clearing house certifi cates are not legal tender and in reality have no more value than an individual check given by one person to another. These certificates are somewhat similar to the currency isued by the Confederate Government when there was no confidence in the stability of the government. It makes no difference how solvent a bank may claim to be, it becomes in solvent when confidence is destroyed and depositors withdraw their mon ey. The banks were in a bad predica ment and the country was in a bad predicament. Doubtless the action of the bunks was the best way they saw to escape a difficult situation. The deplorable fact is that errors in legis lation are responsible for this state of affairs. The recent panic brought into the spot light these costly errors. The people now wonder why the laws regulating trust companies allow them to lend 80 per cent on stocks and bonds as collateral. The stock gambler deposits 10 per cent, his broker puts up 10 per cent more, and the trust companies lend the balance on stocks and bonds as collateral. Os course, when the corne r in copper collapsed and the value of certain stocks dropped below 50, the lending trust companies were hard hit and some of them were forced to the wall. The whole intimately connected banking system received a shock from which it has not yet recovered. Several plans have been suggested for guaranteeing bank deposits and for establishing a national bank of issue as obtains in Germany and France. This should be done by all means. But there is,another thing of more fundamental importance. The time is coming when economists will realize that gold and silver have no intrinsic value. Gold, except the small amount used in the arts, has no commercial value. Nei ther has silver. The stamp of the government on gold and silver gives it its value as money. The stamp of the government on any metal or on paper would have the same effect When it is internationally recognized that the fiat of the government gives the real value to money as a unit or medium of exchange, men will no longer toil in mines for useless met- (Continued on Page Five.)