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THE APOTHEOSIS OF CREDIT.
Macleod's favorite theory is that "credit is as good as money." He says: "If a bank can maintain in circulation a quantity of credit in excess of the cash it holds, that is, for all practical purposes, an augmentation of the capital of the country." And he expresses great admiration for a system of banking based on the use of only five per cent, of specie.
His credit theory has just found a happy illustration in Newfoundland, where there is to-day general bankruptcy, because they have little specie although they have much fish and plenty of notes based on general assets, etc., a kind of security highly appreciated by those who favor the Administration - Baltimore - Canadian system of currency (which may be called, for short, the A. B. C. system), and who will not admit that what is needed is more specie money and less credit money.
The holier of a Newfoundland banknote wCI be lucky if he can ~et fish for it, and then if he wants to buy a newspaper, he can take a codfish out of his pocket and put back three mackerels and two herrir.^s received as change.
Some persons, hearing that rich people get their living by cutting coupons off Government bonds, come to think that a people can live upon the interest of what they owe, and that if the Apostle Paul were living now he would write, "Owe all men everything," instead of "Owe no man anvthinsr." But it will not be easy to convince thoughtful people that A. and B., by exchanging their promises to pay, can augment the capital of the country.
Gold and silver are suitable for money; fish and other kinds of merchandise are not. Paper currency based on gold and silver at their relative market values, is good currency. If based on fish or other kinds of merchandise, or on credits, it is generally bad currency. Credits based on sales of wheat, cotton, fish, etc., to reCanadian Batiks. i8g
sponsible merchants, are more safe than credits based on sales of wild lands and mining stocks to speculators; and the great New York banks will never agree to guarantee the notes of small Western banks, based largely on general assets.
In Canada there are few banks. They know each other well and have numerous branches. But to try to introduce their currency system here, where we have 3756 National Banks,1 is unwise.
If it were certainly known in what our Government bonds were to be paid, there would be no difficulty in disposing of them abroad.
It is unreasonable to give a creditor the right to choose whether he will be paid in gold or in silver, at a ratio different from the market ratio. It is unreasonable to give a debtor the right to choose whether he will pay in gold or in silver, at a ratio different from the market ratio. But to say that all payments for contracts made after a certain fixed future date shall be payable half in one precious metal and half in the other precious metal, at the
1 And as many other banks.
market ratio, is just, and this is jointmetallism.
I have shown elsewhere1 how jointmetallism presents a convenient, honest, safe, and permanent basis for currency. If it were established here, the exchanges of the world would come to be drawn in dollars, and the final banking reserves of the world held in New York.
Mr. Carlisle's monstrously ingenious currency plan combines the objectionable features of a National Banking Trust and an Assessment Insurance Company.
The terrible danger is that it may be forced through Congress by political methods and the plea of Treasury necessities, and without sufficient intelligent and thorough discussion.
If, as in the English Parliament, our head of the Treasury Department had a seat in the National Legislature, and were obliged, rising in his place and in fair and real debate, to answer the attacks of educated economists upon his plan, he would soon be out of office.
If, in a time of peace, we establish a
1See page 121 ; also page 5.
Secretary Carlisle's Flan.
permanent system of Government credit money, such as that proposed by the Secretary of the Treasury, it may temporarily benefit some banks and speculators, and facilitate some reorganization schemes, and enable promoters to dispose of their holdings, but it will make it impossible for this country to attain the paramount position which our population and developed resources entitle us to assume in the near future.
It is perhaps, too much to expect that all who take part in the legislation upon our currency should be great economists or learned historians. But it may reasonably be expected that they should know the difference between Bullion and Billon, and at least be acquainted with past American monetary experiments.
I see that the debate on the new Currency Bill in the House of Representatives is to be adjourned over Thursday1 of this week, for the reception of the statue of Daniel Webster, etc.
At that grand function it would be most
•Originally printed in the World of December 18, and the Tribune of December 20, 1894.