Currency note

“ The fact of their existence renders necessary to every counter who would secure herself against loss an examination of the numbers printed on every five-dollar note of that bank passing through her hands; for the bank, never having issued those stolen, cannot be made to redeem them. Other banks have currency in circulation upon a similar basis, the number of notes varying in different instances from one upward. ”

“ The paper currency of France is issued wholly by the Bank of France, a private corporation, privately owned, but whose chief officers are appointed by the Government, which thereby obtains a general control of policy and administration; the maximum amount of note-issue is fixed by law, arbitrarily, and by occasional increase is kept well ahead of the country's necessities; no fixed legal reserve is required, but the total note-issue must be covered by gold, silver, securities, and commercial paper ”

“ B. placed great reliance upon the restoration of the gold currency for putting down a small note circulation. No man would choose to carry a bundle of small bank notes in his pocket, even new and clean ones, much less old, ragged, and filthy ones, when he could get gold in their place. A limitation upon the receivability of these notes, in payment of federal dues, would complete their suppression. ”

“ That was the first experiment in America in the issue of a currency redeemable at sight—a promissory note payable on demand—which had been the practice of the bank of England for nearly a hundred years. ”

“ It is generally well understood that it is for the advantage24 of the nation that the unrepresented paper issues should be carried as far as is compatible with their perfect convertibility and security. Every note issued in lieu of gold is obviously equivalent to the creation of so much additional capital; for as it withdraws a gold coin from circulation it enables that coin to become capital, while the note itself discharges the functions of a medium of exchange as efficiently as the coin for which it has been substituted. ”

“ In the interests of the currency the issue of bank notes is subject to various statutory restrictions. A bank, other than the Bank of England, may not issue notes in England unless it had a lawful note issue in 1844. On the other hand, Bank of England notes are legal tender except by the bank itself.
In fundamental principles there is general agreement between the laws of all commercial nations regarding negotiable instruments. ”

“ We will have the United States notes, the bank notes, and coin certificates, both gold and silver, together with the gold and silver itself, all in circulation. The actual amount of currency in circulation, I think, will be as large in specie times as now, and its equality and convertibility will rather increase than prevent the circulation of either. The depreciation of paper money is not necessarily caused solely by its excess, but by the uncertainty of its value and confidence in its redemption. ”

“ But even now we realize very imperfectly what a power in the world paper-money is; for we are apt to think of it only as a circulating medium in the form of bank-notes, or treasury-notes, or of somebody's currency which has the merit of making no pretensions to the theoretical idea of a currency which represents gold, the representative of everything else. Bills of exchange and promissory notes are instruments quite as indispensable to modern commerce and civilization ”

“ No paper should circulate in a commercial country, which is not a representativ of ready cash; it must at least command punctual interest, and security of the principal when demanded. Without these requisits, all notes will certainly depreciate. Most of our public securities want all the requisits of a paper currency. [pg 111] But if they did not; if they were equal in value to bank notes or specie, still the sums are much too large for a circulating medium in America. ”

“ There are 80,000,000 natural persons in this country; there are 5,000 corporations called national banks! The 80,000,000 natural persons may sign promissory notes for five dollars each, and these notes are simply commercial paper, having no circulation as money. The 5,000 national banks sign their promissory notes to the same amount—$400,000,000—and these notes constitute, for all practical purposes, a national currency—a national money. ”

“ The first contemplates the gradual withdrawal from circulation of the notes of private corporations and for the issue, in their stead of United States notes, payable in coin on demand, in amounts sufficient for the useful ends of a representative currency. The second contemplates the preparation and delivery, to institutions and associations, of notes prepared for circulation under national direction, and to be secured as to prompt convertibility into coin by the pledge of United States bonds and other needful regulations. ”

“ Can anyone tell why a bank, under such circumstances, should not meet the peculiar demands of its customers, and furnish bank notes at a cost of one-sixth of what it must be, if the bank is compelled, as it is today, to rediscount its promissory notes, and buy gold certificates or United States notes to be used as currency, when its own bank notes would answer every purpose of currency just as well? ”

“ But the proportion of sound notes became at length so great that the new plan was adopted as an evident measure of economy, and now no piece of paper money is withdrawn from circulation until worn out, unless at the desire of the bank. Many financial institutions within easy reach of the capital make a custom of forwarding for redemption all their receipts of currency for the day, getting in return new notes just from the printers. ”

“ In 1864 the notes of the government had been depreciated to such an extent that coin was quoted at a premium ranging from 80 per cent to 150 per cent. The record of a single bank organized and issuing notes under such circumstances is illustrative of the whole system.
Take a bank with one hundred thousand dollars to invest in government bonds as a basis for its issuance of currency. The bonds were bought with the depreciated Treasury notes. Deposited with the Comptroller of the Currency at Washington, the bank received ninety thousand dollars of notes to issue as money. ”

“ It is very well known that under the system of State banks, which furnished almost exclusively the currency in use for a great many years prior to the issue of legal tender notes by the United States, there was a difference between the value of that currency and gold, even while the bank notes were promptly redeemed in gold. ”

“ Most foreign countries issue metallic money only, except those that are on a paper basis. In general the paper currency is issued by banks, many of which are more or less remotely associated with the government. Some of these banks issue notes on the security of the government or other stocks and bonds, while many emit notes based on no special form of security, but upon the general assets of the bank. ”

“ The opposers of a solvent paper currency either ignorantly overlook, or craftily and dishonestly attempt to keep out of sight, the vital fact that, in all safe, legitimate, solvent, and prudent banking, all the notes issued for circulation will be wanted to pay the notes discounted, and will come back to the banks in payment of notes discounted; and that it is only rarely that any other redemption-redemption in coin-will be demanded or desired. ”

“ For large payments, therefore, it is important to encourage the use of notes to the utmost extent possible,-from the point of view of economy, because by these means the Government may obtain a large part of the reserves necessary for the support of a Gold-Exchange Standard, and also because only thus will it be possible to introduce a proper degree of elasticity in the seasonal supply of currency. ”

“ They abound in countries where no other currency is allowed. In our own States, where small notes are excluded, gold and silver supply their place. When driven to their hiding places by bank suspensions, a little firmness in the community soon restores them in a sufficient quantity for ordinary purposes. Postage and other public dues have been collected in coin without serious inconvenience even in States where a depreciated paper currency has existed for years, and this, with the aid of Treasury notes for a part of the time, was done without interruption during the suspension of 1837. ”

“ Looking at the amount of notes current in Scotland, below the value of five pounds, and comparing it with the total amount of the paper currency of that country, it is very difficult to foresee the consequences of a law which should prohibit the future issue of notes constituting so large a proportion of the whole circulation. ”

“ Instead of using actual coins of gold, silver, or bronze, it is common to make use of paper notes containing promises to pay money. When the sum of money to be paid is large, a bank note is much more convenient, being of far less weight than the coins, and less likely to be stolen. A five-pound bank note is a promise to pay five pounds to any person who has the note in his possession, and who asks for five pounds in exchange for the note at the office of the bank issuing the note. ”

“ Trade is very brisk with the photographers. All persons between the ages of twenty-one and sixty-five years, that is to say, all those who are not inmates of State establishments, have received instructions to have their likenesses taken. This step is an essential part of the Government plan for the introduction of the new currency. The old system of bank-notes [35] and coins is to be abolished, and so-called money certificates issued instead. ”

“ If they prefer to have gold spoons, or gold candlesticks, or gold watches, or gold anything else; or if, as traders, they require to make purchases in any parts of the world where their notes would not pass current, or where those from whom they buy do not require any commodity manufactured in this country, then they can have their gold at the Bank any day by presenting their notes. As, moreover, the holder of every bank-note has an equal claim, pro tanto, on the bullion in the Bank coffers, the more gold there is in them, the more will his note represent. ”

“ Although we have avoided the details of banking as much as possible, it cannot be overlooked, that the liability of the stock only, the unlimited power to issue notes, and the capacity of those notes to transfer property, constitute temptations, which human nature has never been a match for. The nation possessed a national currency ”

“ An issue of notes is a manifest gain to the issuers, who, until the notes are returned for payment, obtain the use of them as if they were a real capital: and so long as the notes are no permanent addition to the currency, but merely supersede gold or silver to the same amount, the gain of the issuer is a loss to no one; it is obtained by saving to the community the expense of the more costly material. ”

“ Specie payments having been resumed by the Government and banks, all notes or bills of paper issued by either of a less denomination than $20 should by law be excluded from circulation, so that the people may have the benefit and convenience of a gold and silver currency which in all their business transactions will be uniform in value at home and abroad. ”

“ Part of the Union notes were redeemed, part replaced by 10 lire and 5 lire state notes, payable at sight in metallic legal tender by certain state banks. Nevertheless the law of 1881 did not succeed in maintaining the value of the state notes at a par with the metallic currency, and from 1885 onwards there reappeared a gold premium, which during 1899 and 1900 remained at about 7%, but subsequently fell to about 3% and has since 1902 practically disappeared. ”

“ On the other hand, the objections to a policy, which divided the country up for the purposes of paper currency, are also plain. The limitation of the areas of legal tender and of the offices where the notes were encashable on demand greatly restricted the popularity of the notes. It might well have seemed worth while to popularise them, even at the expense of temporary loss. As soon as the public had become satisfied that the notes could be turned into coin readily and without question, their desire to cash them would probably have been greatly diminished. ”

“ Outside of the straggling ranks of the greenbackers the national-bank notes are regarded with favor. It can not be gainsaid that the period during which they have been in existence has been a very comfortable one, so far as a good currency for the people could make it so. Whatever theoretical objections there may be to the system, it has worked singularly well, is justly popular, and it is easy to understand why its probable restriction and ultimate discontinuance should be looked forward to with concern. ”

“ The treasury notes for currency are distinguished by features and qualities the reverse of those which have been mentioned. They bear little or no interest. They are payable to bearer—transferable by delivery—re-issuable—of low denominations—and frequently reimbursable at the pleasure of the government. They are, in fact, paper money, and possess all the qualities which forbid investment, and invite to circulation. The treasury notes of 1815 were of that character, except for the optional clause to enable the holder to fund them at the interest which commanded loans—at seven per cent. ”

“ The chief duty of the National Government in connection with the currency of the country is to coin money and declare its value. Grave doubts have been entertained whether Congress is authorized by the Constitution to make any form of paper money legal tender. The present issue of United States notes has been sustained by the necessities of war ”