States for the purpose of redeeming their notes. If we increase the deposit of the banks with the United States government to 10 per cent., or, if necessary, to 15 per cent. of their circulation, and provide for the redemption of their notes at every United States Assistant Treasurer's office, our system would correspond in some degree with the redemption of the notes of the Canadian banks. The last named institutions maintain branches in the leading cities of the Dominion, and their notes are daily redeemed at all these points..

Such a system of redemption would produce the elasticity absolutely essential in credit money. It is impossible to have a greater or less volume of checks. and drafts than business requires, and under proper methods of redemption, this would be equally true of bank notes.

The last proposition, that one-third of that part of the lawful reserve required to be held in the vaults of the banks may consist of the notes of other banks, grows out of the necessities of the case. If we fund all the legal tender notes and the notes of 1890, nothing would be available for the reserve of national banks except gold, silver and silver certificates. Hence, as silver would be employed as domestic money, there might be a deficiency in the money available for bank reserves. I can see no serious objection to counting, as a part of the reserve (to the extent of one-third at least), the notes of solvent banks, secured as those notes will be in the plan proposed. This will not interfere with the proper redemption of bank notes, because when the stock of gold and bank notes at a given point is so small that it is only sufficient to supply the

bank reserve, there will be no need of reducing the volume of the currency by redemption. When the stock is in excess of this amount then, of course, the redemption will proceed as usual, and the necessary contraction will result.

In my opinion, this plan would give us a sound currency, well secured, redeemable in coin at all the principal cities, and so elastic as to conform to the necessities of trade. Unless we can provide a paper currency possessing all these qualities, a proper solution of the questions relating to the coinage of gold and silver will not bring us the needed relief, and embar rassment and depression, panic and disaster, will periodically afflict us.

CHAPTER XXV.

SILVER AND THE BANKS BY LYMAN J. GAGE, PRESIDENT OF THE FIRST NATIONAL BANK, CHICAGO.

THE silver question has been long under debate. The issues involved have been affirmed, denied, and declared to be unworthy of debate. Events now indicate that these issues, whether good, bad, or indifferent, must soon be met and forever settled.

My objections to silver do not lie in the fact that the silver standard is peculiarly inimical to the interests of banks. On the contrary, I affirm that aside from the benefit conferred on silver mining interests, bankers and money brokers are the only classes likely to reap advantage therefrom.

How can this be? The answer is not remote. It is now generally admitted that what is called a double standard is not a practical and ending possibility. With gold and silver both current, one must be superior and the other subordinate. At this hour such is the fact with us. Gold is the recognized money of accounts, and silver circulates in a reduced volume by the sufferance of the commercial community, but in a purely incidental and subordinate relation. The continued infiltration of silver coin and silver certificates into the channels of circulation, supported and enforced by the treasury department, threatens to soon reverse the present relation of the two metals in our financial system. When that shall be accomplished, silver will

be the money of account, and our gold coin, possessed, as it is, of a higher commercial value abroad, will either be hoarded at home or seek its higher exchange. ability in other countries.

I have said the banking class would find advantages in this shifting of standards. It will occur in two ways -first, through the profit arising from exchanging with the public the then absolute money, gold, for the new medium, silver; and second, with silver payments made respectable, the banker will find as good protection as he now enjoys against dangerous runs, with much lower average reserves, and the difference he can lend at a profit.

The bulky character of silver, also, will render the banker's service to the public the more indispensable. It is true that the purchasing power of his capital, when counted in silver, will be much reduced, but as he is never a buyer-always a lender-this will not consciously affect him, or, if it does, the conversion of his present gold reserves, with their accompanying premium, into the lower silver standard, will nearly or quite make good such loss.

Why, then, do I oppose a movement which promises these benefits? We oppose it, notwithstanding these temporary and unworthy advantages, because, taught by the nature of our relations to reason on these things, we perceive, or honestly think we perceive, that the adoption of silver as the money of account will be detrimental to our commercial and industrial interests, and in the prosperity of these the nation's highest welfare is closely bound.

How will our industrial and commercial interests be adversely affected? We are a commercial people.