' A NATIONAL CURRENCY SUPPLEMENTAL TO THE USE OF GOLD AND SILVER, BASED ON A CONSTITUTIONAL AMENDMENT. No Inflation, No Contraction. REDEMPTION WHEN REQUIRED R. M. WIDNEY, Of Los Angeles, Cal. FOUETH ISSUE. ACCOMPANIED BY FULL TEXT OF PROPOSED LAW AND CONSTITUTIONAL AMENDMENT. Hither our circulating medium must be increased sufficiently to meet the wants of our growing country, or the business of the country must be killed off until it is within the compass of our present circulation. January 15, 1891. ss s~s(3 INDEX. PAGE Danger! 5 Efforts to Believe the Stringency 5 Relation of Money to Business 6 International Money Supply 7 Financial Wreckage 8 More Circulating Medium 8 United States System and Supply Outgrown '. 9 The Expansion of Business 9 The Banking Nation of the World 9 The Volume Required 10 Not Enough Gold and Silver 10 Financial Substitutes 11 Currency 11 A Constitutional Amendment Necessary 12 Proposed Constitutional Amendment t 13 Preserve the National Bank System 14 Farmers' Alliance Scheme 15 Present Four Per Cent. Bond System 15 A National Bond 15 Fifty Years Two Per Cent. Bonds 16 Free Coinage of Silver 16 Foreign Silver 17 Killing our Prosperity 17 Proposed Legislation 17 Finances versus Politics 18 Storm Signals 18 Danger Ahead 19 Copy of Proposed Bill 21 PREFACE. The following pages are designed to furnish facts and sugges- tions to aid in the solution of the present financial emergency. A NATIONAL CURRENCY BANCROFT UBftAKt BASED ON A CONSTITUTIONAL AMENDMENT, No Inflation, no Contraction Redemption when Required. By B. M. Widnet, of Los Angeles, Cal. DANGER ! The total amount owing by (8,055) all the banking institutions of the United States to depositors in July. 1890, was $4,603,844,157. The total cash in all of these banks at the same date, was: Gold coin $99,811,011 Silver, nickels, foreign coin, etc 28,811,478 Paper money 349,694,405 Total $478,316,694 Ten cents on the dollar on hand to pay depositors on demand ! If gold were the only legal tender, there would be on hand only about 2 cents on the dollar for depositors ! Or if gold and silver were combined, it would give less than .03 cents on the dollar ! By using gold, silver and coin certificates on the United States Treasury, there would be only about 5 cents on the dollar in cash for depositors. At the same date these banks had loaned out to the people, $3,893,951,799. There were then about $957,746,248 scattered in the hands of 62,000,000 people. This represents only about 25 cents on the dollar for the people to pay on their loans to the banks. But most of the outstanding money is in the hands of parties not debtors to banks. It may be safely estimated that the people could not pay the banks 10 cents on the dollar in cash ; neither could the banks pay over 10 cents on the dollar to depositors. EFFOKTS TO RELIEVE THE STRINGENCY. The efforts of financial institutions in this respect were very much the same as the general of an army too few in numbers to fight a battle. By rapidly moving a part of his forces from one point to another he tries to maintain strength at one point by weakening some other. Last September, New York received $5,993,000 from the interior, and the in- terior took $20,936,000 from New York. August showed also a large loss for that city, while November and December drew millions more to the interior as against vastly smaller sums drawn to New York, so that their reserve ran some $3,000,000 below the limit. Financial reports constantly contain such statements as these: "Vast sums of 6 money are moving from Eastern cities to the South and West." " Over $1,000,000 was shipped to the West to-day." "Some $500,000 was transferred to New Orleans to-day." "Over $10,000,000 were used to start new banks in the South this year. " ' The cotton crop of the South is over $400,000,000 per year. " ' ' Dur- ing the last five years over 17,000 new enterprises have been started in the South, embracing every variety of manufactures." Some 32,800 miles of railroad were built in the United States during the past four years, at a cost of not less than $3,000,000,000, including rolling stock, etc The money spent in building towns, cities, farms, and in developing the resources of this nation last year is counted only by billions. New York City used some $300,000,000 for building in 1890. Some financiers complain of this, and would destroy the greater portion of all this work, thereby throwing out of employment hundreds of thousands of laborers. It is a strange comment on a financial scheme that, to prevent an increase in volume of money, we must destroy the prosperity of a nation and reduce to star- vation or crime the laboring classes. BUMMAEY. Banking Institutions. Due depositors $4,603,844,159 Cash with which to pay ten cents on the dollar 478,316,694 Loans 3,893,951 799 Cash in hands of the 62,000,000 people out of which to pay the loans 957,746,248 or about 25 cents on the dollar. A partial collection of statistics shows that the volume of business of the United States for the last year was over 45,000,000,000 The money in circulation outside of United States Treasury was for the same year 1,436,062,942 of which over $400,000,000 was held out of circulation as bank reserves, leaving say $1,000,000,000, or 2 cents on the dollar with which to make exchanges. And it may be safely estimated that the business of the United States did not have a circulat- ing medium of 1 cent on the dollar for actual business. Gold and silver combined would not give cent per dollar for business. A past, present and continuing stringency under such conditions is a necessity. And unless the circulating medium is increased to a sufficient volume to meet the demands of business, business must be killed off until it is within the compass of the volume of money. How strange that the opponents of more money should say: " The cause of the recent stringency in money is the fact that there was too much money. The stringency is now over unless Congress should issue more money." RELATION OF MONEY TO BUSINESS. Money is used as a means to carry on business, and varies in demand as busi- ness increases or decreases. There is a fixed relation between the two which, if disturbed, must cause trouble. As the business, population and area of our country increase the volume of money must increase. Enterprises cannot be conducted by paying laborers $2 worth of real estate or produce per day. There must be some accepted representative of value to use for exchange, and there must be enough of it. So long as each locality is doing its best to fill its own shortage by pulling money from some other place that needs it, and so long as banks are drawing it from- customers, thereby crushing them, to save the bank, so long as each nation is borrowing and importing money from some other nation, it is useless to say either there is too much or an abundance of money. INTERNATIONAL MONEY SUPPLY AND DEMAND. In August last the principal gold and silver coin and bullion was as follows : Bank of England $184,600,000 Bank of France .' 514,500,000 Deutsche Reichsbank 119,000,000 Austro-Hungarian , 106,500,000 Amsterdam 51,500,000 Bank of Belgium 83,500,000 Bank of Spain 53,500,000 Total $1,113,100,000 Total in United States, September 1,153,191,404 $2,266,591,404 Each of the above nations is short of coin to-day. In October last Austro- Hungary wanted a loan of 20,000,000. Of this the London Economist, in October, said: "Where could any country, however good its credit, obtain 20,000,000 at the present time? On Friday last the entire stock of gold in the Bank of England was only 19,609,997. Everybody knows England is trying hard to get gold. The Bank of Germany had on October 17th 25,298,000, and wants more. The Bank of France had 51,725,000 francs, but is unwilling to part with it. The attempt to raise this sum to loan would give rise to the most serious monetary disturbance the world over." As the newer nations rise to higher civilization they draw gold from the supply of older nations; that is, money from the older* nations goes into the new ones to develop them. Vast sums have recently gone to Egypt, Portugal, South America, and the South and West of the United States. These demands and outstanding ones aggregate over $4,400,000,000, more than double the volume of coin in all the leading nations. So closely pressed is each nation, that recently when Russia withdrew 17,- 000,000 from Baring Bros., it created a money panic that required the combined money of the Banks of England and Scotland to tide over, and this was only done by the Bank of England borrowing from the. Bank of France some $15,000,000, which is not yet repaid. And now France is putting a 36,000,000 loan on the market, which will draw nearly all the French gold out of London. Russia temporarily returned to England, at her request, the 17,000,000 previously withdrawn from Baring Bros. New York recently drew some $5,000,000 from England, and then the pinch cut further exportations short. Last month San Francisco tranf erred $2,500,000 to help New York, and in less than three days the stringency was so severely felt in the former place that the retransfer of money began. The United States Treas- ury turned out over $200,000,000 to fill the void in the fall months. In addition to the above, the banks of New York City, Boston and Philadelphia 8 issued over $30,000,000 of panic certificates to supply the want, the scarcity of money, and to prevent solvent banks from failing. In the light of the foregoing, what shall we say of those financiers who have repeatedly and substantially asserted that "the cause of the recent stringency in money icas the fact that there was too much money. The stringency is now over un- less Congress should issue more money"? FINANCIAL WKEOKAGE. The financial result of the stringency in wreck and ruin is approximately as follows : Financial failures in the United States, 1890 $190,000,000 Shrinkage in stocks and bonds in New York 300,000,000 In other values it is estimated at not less than 10,000,000,000 Over 100,000 people have been thrown out of employment, and are to-day silently, patiently waiting for labor and bread. It is the ominous silence before the storm. Men will not starve in the midst of plenty. Self-preservation is the first law of nature, as well as of the Constitution of the United States. Here is fuel enough to make the funereal pyre of the nation, if the torch of Socialism is once fairly applied. True, this wealth is not destroyed. It has only changed hands. That is, "the poor are poorer, and the rich are richer." It would seem that the Government is run on the theory that its great work was to protect the money and not the people, as if man was made for the benefit of money, and not money for the benefit of man. The following demands for large loans are now on the market of the world: Austro-Hungary $100,000,000 France 182,000,000 Mexico. 40,000,000 Argentine Eepublic 500,000,000 Other South American States 725,000,000 African Mines, Trust Companies, etc 350,000,000 $1,897,000,000 Other nations want fully as much more, to say nothing of local demands in each nation. MOKE CIRCULATING MEDIUM. The world has outgrown its financial systems and money supply. The demand from every place is voiced in one sentence: "We are short of money." Each nation is calling in its supply and bidding for more. In the last decade the whole world has waked up to growth, development, civilization, business and commerce as never before known in the history of the race. The total supply of gold and silver in the world, coined and uncoined, is about $8,497,011,244, or $5.70 per inhabitant. The average annual product is less than 15 cents per inhabitant per year. The circulating medium of our prosperous civilized nations is: for France, $42 per capita; England and Ireland, $19.49; 9 United States, $24. The circulating medium of England alone is about $30 per capita. France is safely and prosperously using $42 per capita, which sum can be taken as a not unsafe amount. UNITED STATES SYSTEM AND SUPPLY OUTGROWN. The United States has outgrown both its system and supply. Its present laws constitute only a patch- work. From August 4, 1790, to date all laws on this subject have been to meet special demands, such as the Revolutionary wants, special purchases of territory, current expenses, private banks and bank notes, the emergencies of the War of the Rebellion, redemption of the currency, and pay- ment of the public debt. Only the amended fragments of these laws now exist, and operate out of harmony with the wants of the people. The London Times says: ** The whole monetary system of the United States is in a muddle. This condition is due to piecemeal legislation. " THE EXPANSION OF BUSINESS. The business area of the United States in less than a century has grown from a small area east of the Alleghanies to an area from the Atlantic to the Pacific; from some 3,000,000 people to over 62, 000, 000; from a few square miles of populated territory to over 3,400,000 square miles; from ox-carts and stage lines to railroads, steamships and telegraphs; from hand-power and tread-mills to all the compli- cated implements and machinery of the nineteenth century; from business con- fines to a few cities and towns not distant from each other to thousands of cities, towns and villages scattered over a continent. Deducting from the total volume the amount in the United States Treasury and in bank reserves, there is not over $15 per capita in circulation. Scattered as this is over such vast area, it cannot be rushed together at any one point to meet an emergency. "When drawn to strengthen one point or enterprise, some other one is proportionally weakened. THE BANKING NATION OF THE WORLD. As other nations are insufficiently supplied with money for their home use we can expect no help from them. And why should we? Why should we be a money dependency on any nation? We have vast resources in gold, silver and other wealth. No nation is now able to furnish its own money for its people and largely for other nations. There is to-day an opening for the United States to become the banker of the world, as well as for its own people. Why should we let slip this wonderful power among men and among nations? Our national wealth is estimated at $71,000,000,000, and we are still in our infancy. An issue 2 cents on the dollar in currency, secured for redemption by a constitutional amendment pledging the faith and resources of the nation, would give us an issue of about $1,400,000, or $22 per capita in addition to gold and silver, which would give us a total circulation of about $2,500,000,000. Our people are paying over $50,000,000 yearly as interest and profits on foreign capital. Why should we pay this sum to foreigners, when we can furnish our entire volume of money and pay interest to ourselves? Why are we to consider it a privilege to have foreign capital come in and occupy the place of our own money? Or if we have enough of our own (as some assert), why does nearly $1,500,000,000 of foreign money come in at our solicitation to buy up our best enterprises and 10 ' drain our profits abroad? The present invested foreign capital will in about fifteen years draw from us in interest about $1,500,000,000, still leaving us in debt the principal, $1,500,000,000. THE VOLUME KEQUIKED. Any system adopted by Congress should be ample. Neither inflation nor contraction should remain as elements of disturbance. As our Supreme Court decisions now stand, there is no limit to the power of any Congress to inflate the currency or contract to any extent. From this power has come the dangers that have wrecked national paper money schemes of the past, and sooner or later will wreck those of the future. A consti- tutional amendment fixing the volume, per capita, and providing for an increase at each census, leaving vested in Congress by a two-third vote of each House the power to omit or decrease additional issue at each census, and pledging our national wealth and honor for redemption when required, would give us a stable currency as well as an elastic currency. Such an amendment is hereinafter suggested. The volume should be of such a character that our National Treasury could hold 25 per cent, of it as a reserve, that a similar reserve of 25 per cent, of the total bank deposits of the United States, as shown by statistics, should be provided for. After making a reasonable allowance for destruction and hoarding, there should be an ample allowance for the current business of the people. The aggregate bank deposits, not counting savings banks, as shown by official report, is about $2,516,179,807. A United States Treasury reserve of 25 per cent, of this would be $629,043,951, using a similar reserve for the National Banks, $629,043,951. These figures would fix the total volume at the aggregate of the deposits. This would be about $40 per capita, in gold, silver and currency. The French nation has a volume of $42 to $44 per capita, and are prosperous and safe in finances. The figures used by them should not be considered too great for us. Our present gold and silver coin is $1,100,712,432. Deducting this amount from the above suggested volume leaves $1,415,463,375 as the amount to be provided for in cur- rency and new coinage of gold and silver. The reported yield of our mines last year was: gold, $32,800,000 ; silver, $46,- 750,000 ; total, $79,550,000. Out of this there were used for industrial purposes, of gold, $16,697,000 ; silver, $8,767,000 ; total, $25,464,000 ; balance left for coinage would be $54,086,000 per year. This volume, if coined each year, would give about $20 per capita for the increase of population. This would leave about $1,400,000,- 000 to be provided for in currency, or say $22 per capita. NOT ENOUGH GOLD AND SILVER. The total amount of gold in the United States in coin is $631,801,689; uncoined is $63,063,981; total, $694,865,680, or $11 per capita. The annual product is $32,800,000, or about 50 cents per capita. The annual consumption of gold for the arts in the United States alone is about $16,697,000, balance for coining, 25 cents per capita. It is therefore the maximum of financial stupidity to assert that gold alone can do the financial work. Silver. The total amount of silver in the United States in coin is about $458,134,067; uncoined, is $27,236,440; total, $485,370,497, or about $8 per capita. The annual product is $46,750,000, or 74 cents per capita. The annual consump- 11 tion of silver in the arts is $8,767,000; balance for coining, per capita, 60 cents. It is apparent, therefore, that silver cannot even approximately meet the demand. Gold and silver combined conld only give about $19 per capita for a circulat- ing medium, with an annual increase of 85 cents per capita for both. With France using $44 per capita, and England $30, and the United States $24, and each demanding more, it is apparent that the two combined would only yield about three-fourths the volume now in use in the United States, and less than one-half of the amount now used in France with safety. Upon the issue of this money the Treasury could retire all outstanding paper money, except gold and silver certificates. There would be left a net increase of volume of about $800,000,000. Under Sections 7, 12 and 34 of the accompanying Bill, this volume would soon find its way into the business of the country. FINANCIAL SUBSTITUTES. The December report of the the Comptroller of Currency shows that the financial world has been forced for years past to transact about 92 per cent, of the volume of business in checks, Clearing House certificates and other evidences of value for want of money. Every promissory note, mortgage and credit is a method or instrument to help increase the volume of money. What is a United States legal tender note? It is, in money effect, the Clearing House certificate of the nation, backed by the wealth of the nation, good in any clearing house in the United States, instead of a certificate backed by a few banks and only good where they wish to accept it by courtesy. It is the check, signed by the people of the United States, backed by over $71,000,000,000 of the people's wealth, good at any counter of any bank, instead of a private individual's check only good at his own bank and in his own locality. It is the promissory note of the nation, secured by a constitutional mortgage on over 3,400,000,000 acres of land, with the improvements and personal property thereon, valued at $71,000,- 000,000, payable to bearer, and good to any creditor from any debtor, instead of the private note of a citizen secured by mortgage on a few acres and only good at a discount, or exchangeable for gold or silver, or present coin certificates, to any one who needs coin. It is a representative of value for exchange purposes, mutu- ally agreed upon by 62,000,000 people for their joint benefit. CURRENCY. Statistics show, therefore, that the use of gold and silver must be supplemented by paper. This has been done in all historic ages in the form of individual paper obligations, bank obligations and national obligations. The whole class of prom- issory notes, checks, bills of exchange, drafts, Clearing House certificates, bank notes, national bonds and currency notes are supplemental currency, representative of value for purposes of exchange. In times of prosperity and confidence business runs far beyond all hitherto furnished national supply of circulating mediums. What is the result ? Individuals try to supplement the demand and issue promissory notes, checks and other private obligations. The banks allow credits, notes, overdrafts, and, as a last resort, "panic certificates" all to supplement and augment the volume of circulating medium. As they are curtailed, the crash comes, and failures reduce to poverty and ruin those who are first called on to turn their personal circulating medium into the national medium. And this pro- 12 cess must continue until the business of the people is killed off and brought within the volume of the national legal tender. The great question before each nation, and especially our own, is to furnish a volume of legal tender backed up by the wealth of the nation, to replace a large amount of the dangerous substitutes of personal and bank notes, checks, drafts, " panic " certificates, etc. Statistics show that over 92 per cent, of the volume of business the past year was forced to be transacted in these lowest and most dangerous forms of a circulat- ing medium. It is in them the wreck has occurred, and not in the currency. How could we have clearer proof of the insufficiency of the volume of money than by showing that the whole financial crash, every dollar of it, has occurred in those personal and bank substitutes for money ? How can we better demonstrate what cure should be than to substitute a national volume of circulating medium backed by the wealth of the nation, a legal tender, in place of the irresponsible individual and bank substitutes, with only the fleeting wealth of the bank or individual back of it ? Pkivate Bank notes have failed along these lines for want of national back- ing. The present National Bank system is the best yet devised. But why should our nation issue to these banks a private note secured by bonds deposited with the Government as collateral security for redemption ? What is the use of the National Bank note fifth wheel ? Why should not the nation issue its own legal tender, backed by the resources of the nation for redemp- tion, and loan it direct to National Banks on the same bond or other equally safe collateral ? The circulating medium would then be uniform and of known value, the Gov- ernment always holding a reserve volume sufficient to meet the fluctuating volume demanded by trade in different localities at different seasons of the year. Secti6ns 8, 9, 10, 11, 12 and 22 of the accompanying proposed law show in italics a complete and safe system to meet the actual wants of our nation. A CONSTITUTIONAL AMENDMENT NECESSARY. No system of national finance can successfully meet the wants of business unless it is protected, from all dangerous contingencies. The United States Supreme Court first decided, by five Justices to three, that Congress had no constitutional power to make money a legal tender. One of the five resigned, and Congress added one more to the number of the Court, and under the new arrangement, five Justices held, as a war power, it was constitutional, while the original four still held it unconstitutional. Three of those four Justices have died, and now eight out of the nine hold that Congress can, in peace or war, make anything, in any quantity, a legal tender. If the Administration changes, new Justices can hold as did the original, that Congress has no power to make paper money a legal tender. Until that time, Con- gress can cause inflation or contraction to a dangerous extent. Or, as France did, issue volumes of paper money on a gold basis, and then bisect or quarter the gold dollar so that one dollar in gold would redeem from two to four dollars of the paper issue. To make the paper money permanently useful, it must have from the first a fixed and permanent value with gold; its volume must be circumscribed with impas- sable limits; it must be secured by an irrevocable pledge of national faith and 13 wealth; it must be exchangeable at par for gold or silver, and a legal tender for all debts. No date need be fixed for redemption; for redemption would only require anew issue to take its place. Provisions for redemption, when required by a two-thirds vote of each House, would be ample. All of these points would be secured by an amendment about as follows : CONSTITUTIONAL. AMENDMENT. Article XVI. Section 1. A national currency circulating medium shall be issued to the amount of twenty dollars per capita, as shown by the census of 1890, and by each succeed- ing census, for the proper redemption of which when required, the resources, the property and the faith of the nation are pledged ; for which redemption, Congress, by a two-thirds vote of each House, may provide for the collection of Government revenues and taxes in gold or silver coin. / Section 2. Said currency, with gold and silver coin of the United States of / present weight and finenessy ^pr su ch notes as may be issued in lieu of gold or silver ' coin, held exclusively for theTetlemption thereof, shall constitute the only legal money of these United States, and shall be received at par in satisfaction of all obligations for the payment of money within the jurisdiction of the United States. Said gold and silver coin and currency shall be exchangeable at par value. Section 3. Congresss shall have power to enforce this Article by appropriate legislation, but shall have no power to increase or decrease said issue; provided, that after the issue of 1890, Congress may, by a two-thirds vote of each House, reduce the rate of any further issue per capita from time to time. Underlying a national system of finance, this would give us the best foundation ever yet adopted by any nation. The weight and fineness of our coin ^dollar could not be varied. The constitutionality of the medium never could be questioned. The volume is protected against inflation, contraction or repudiation, and provides for a fixed increase at each census to meet increased population, if required. It pledges the resources, " the property and the faith of the nation " for redemp- tion when required. This represents an issue of 2 cents on the dollar of our national wealth of some 3,400,000,000 acres, and personal property valued at $71,000,000,000. This is a national first mortgage to secure redemption. With such security the national notes would be considered gilt edged paper in any market in the world. They would be received in any nation more readily than Bank of England notes are to-day. No special call will exist for gold to pay national taxes or revenues. As gold, silver and currency are exchangeable at par as required, the situation would be about as at present. No one would call for gold or silver, but would take paper money or certificates for the coin, except in a few special cases. For this reason large sums of gold and silver would always lie in the United States Treasury, as at present, ready for any exchange required by business. \ This allows the Government to buy gold and silver at market rates for coinage. The profit between purchase price and coinage value would be the profit of the whole people. * 14 PRESERVE THE NATIONAL BANK SYSTEM. A bank system in the United States is a commercial necessity. Every indi- vidual cannot erect burglar and fire-proof vaults to protect his money. Neither could he employ a set of clerks to keep his accounts and financial exchanges. The banks to-day use the smallest floor space on -which the business could be transacted, and also have their working force reduced to the lowest number. The work could not be done by the Government with any less floor space or with any less number of persons. Nothing could be gained by destroying the present system, with all of its organized and trained forces, and replacing it with any Government scheme for commercial banking or loaning. The scope and flexibility of the present system could be vastly improved by some such arrangement as the following: Allow States, counties and cities of say 5,000 population or over, where they need money for public improvements, to issue 2 per cent, bonds for twenty to thirty years to the amount of 5 percent, of the assessed value of the real estate. Allow the United States to buy these bonds, prohibiting any contest as to their validity after receipt of the money therefor. Let the Treasurer sell these bonds to any National Bank wishing to purchase them, and allow them or any United States bonds to be used as a deposit security with the United States Treasury on which to draw money when additional sums are required by any bank. The large reserve always held by the United States Treasury would be the fund from which this would be drawn, and to which this would be returned when not needed. This would give a perfect elastic currency to meet all expansions or contractions of season trade. Real estate could also be safely used as a reserve, as shown under the head of Farmers' Alliance Scheme hereafter. The economic of this plan are that States, counties and cities wanting to bor- row money and pay interest could borrow of the people who have the national money to loan, and banks could buy such bonds to use in their system. Our system of national finances should be so arranged that renewed supplies of money seeking loans in the hands of one class of people could be obtained by that other class requiring the use of money. This can best be done by our Government, which is over 62,000,000 people, issuing a full volume of gold, silver and currency, which is the property of all the people, to be used by them as a representative basis of values for exchange. A large reserve held idle in its vaults by the Government is for the benefit of the people, to be sent at one time (like a reserve force of an army) to the support of this place and then to other places. This reserve system will meet all demands for an elastic currency. The people, through the Government issuing and holding this medium of ex- change for their own use and benefit, share its profits and losses for the community as a whole. The only remaining point is to provide a proper means by which the people may obtain the use of this money as needed. This must be done by banking principles, either applied by the Government or by banks. If the Government attempts this work, it will require as much floor space as the banks now use, and as many and as able employees as are now engaged by all the banks. 15 That a profit may arise, the banks are now run on the most economical basis possible. FARMERS' ALLIANCE SCHEME. This scheme has some sound points in it. Land can be safely used as a secur- ity in the National Bank system as well as bonds. Allowing the title to land at a valuation of, say, its average assessed value for the preceding five years and not to exceed one-half of its cash value to be pledged to the Government under the form of a National Bank incorporation, would give relief to the farming communities. It would substitute a National Bank for a Sub-Treasury ; a set of bank officers to manage the loans for a set of Sub-Treasury agents; a responsibility to the Gov- ernment for large aggregate sums under the bank laws instead of the inspection of thousands of small changing loans. The supervision of the Bank Examiners under present laws as to the solvency of the bank would be all that was required, while the bank officers would supervise all detail business and loans to individuals. Section 8 of the proposed Bill covers the foregoing points. Section 22 provides that for the first $100,000 drawn as above, the interest to the nation shall be 1 per cent. The rate increases on larger sums as follows: 2 per cent., 3 per cent., 4 per cent., 5 per cent., 6 per cent., 7 per cent., 8 per cent., 10 per cent. The object of this is to prevent reckless drawing and using at low rates. The lower rates will develop the legitimate industries of the country. The higher rates will check the wild, rash enterprises of speculation, and furnish means to carry on business with less profit or loss until adjustments occasion regular business routine. This is the same principle applied the world over in finances. The Bank of England raised its rate of discount. So did other European financial institutions. The same thing was done in New York recently. It is the natural law on the sub- ject for checking speculation without killing off legitimate business, and is here used. This plan is adopted in the recent German law establishing a system of more liberal and modern financiering. PRESENT FOUR PER CENT. BOND SYSTEM. The present bond system, as applied to the use of banks, is a financial ab- surdity. For a bank to secure circulating notes of, say, $90,000, its stockholders must take $125,000 cash now in circulation and buy $100,000 in United States bonds, and then depositing them, borrow of the United States $90,000 to use in its busi- ness. If the bond element is dropped out, the bank could have used $90,000 of its $125,000 for the same purpose and have $35,000 to start a respectable country bank with. As an original war scheme, selling bonds by the United States to get money was a necessity. Then allowing them to be used as a basis, in the hands of the owners, to increase the circulating medium was wisdom. But for non-holders to use cash on hand to buy them up at a premium to get back less circulating me- dium than they cost, for the avowed purpose of increasing the circulation, is, to say the least, passing strange. A NATIONAL BOND. If at any time, by reason of war, or national purchase of territory, or vast pub- lic improvement, the nation needed money, it could issue its bonds as in times 16 past, and sell them for money to meet the demand. Such bonds would work in under the proposed plan with perfect adjustability. These bonds again could become, in case of emergency, a basis for a national bank issue, as at present, of bank notes not a legal tender. FIFTY-YEAR TWO PER CENT. BONDS. How would this practically work out ? The owner of 4 or 4 per cent, bonds would not exchange them for 2 per cent, bonds at par. To sell the 2 per cent, bonds and leave the money idle in the Treasury until the 4 per cent, bonds matured, would be to pay double interest. To buy up the 4 per cent, bonds at their premium or interest until due, is just as great a loss. If sold to banks as a basis of note issue, the results are even worse. To illustrate: the United States issues, say, $100,000 in fifty-year 2 per cent, bonds. You wishing to open a National Bank, must take $100,000 cash circulating medium and buy the $100,000 bonds. Next you deposit these bonds with the United States and get back your $100,000 cash for a bank capital, and for fifty years the people, through the Gov- ernme?it, pay you 2 per cent, per year on the bonds for doing a banking business on your own original $100,000. That is, at the end of fifty years the United States has paid you $100,000 interest for what? Or if you annually use the interest paid you on your bonds to buy new bonds, so as to make it compound, you will own your original capital, $100,000 -f $100,000 interest + about $70,895 bonds bought with interest on interest. Total, $170,895 profit presented to you for doing business on your own money. On the present banking capital of about $700,000,000 now in the United States, the banks would hold at the end of fifty years $700,000,000 capital + $1,196,- 265,000 paid to the banks for doing business on their own capital. As the voters are the payors and the banks the payees in the above scheme, there would probably be objections raised. The bonds do not increase money, but are used to buy money already issued from the people, and in fact first contract the circulating medium, and then, as paid out by the United States, only restore it to its former volume, which was too small, and which was futilely attempted to be increased by a bond issue. If deposited with the United States Treasurer and notes issued to 90 per cent., or even par, there is only restored the amount paid for them. Or if a new issue is made as at present of National Bank notes, not a legal tender, backed for redemption by the United States, why not abandon the inter- mediate subterfuge and let the United States issue its legal tender on its own backing at once in place of the bonds ? The other system has a strong appearance of an intention to adopt a method whereby the United States shall under a cloak of disguise pay unearned money to a class of persons. FREE COINAGE OF SILVER is open to much the same criticism. Last year the silver product of the United States was worth in commerce $46,000,000, but if coined it was worth $64,000,000, a profit of $18,000,000. The free coinage of silver would seem to make a present of $18,000,000 per year to the owners of mines. If the whole output of silver were bought by the people (the United States) at its commercial value and stored, and certificates issued for its purchase, the profit or loss would be for the benefit of the whole people. 17 FOBEIGN SILVER. The purchase of foreign silver cannot increase our circulating medium. The money or certificates we issue are changed into coin and sent abroad to pay for the silver. This is really increasing foreign circulating medium at the cost of the United States, KILLING OUR PROSPERITY. Why do not those who have for years declaimed against too much money sug- gest a relief measure for the situation as' shown by the past twenty years. Every time our country becomes prosperous, and laborers are employed all over the nation, and our industries are active, and men contentedly at work, we reach an advance prosperity beyond our circulating medium. Then commences a finan- cial rigor, resulting in the death of thousands of prosperous industries, and throw- ing out of employment tens of thousands of laborers. Then arises a cry from would-be financiers that the business of the country is overdone. It cannot be overdone so long as our laboring classes are employed, and clothed and fed thereby. Extensive articles are published to show the building of railroads, city business blocks, etc., etc., is overdoing the business of the country. What would such writers want ? Did not all that work furnish labor, food, clothing to hundreds of thousands ? What would such persons have done without that employment ? The remedy is not to kill off the business but to sustain and increase it. The point at which business begins to break down is when the employers cannot collect payment for material and produce ; when the owners of property cannot get money simply because the money is too scarce to be had, not enough to go around. The remedy is for the nation to periodically increase the circulation to keep pace with the prosperity of the country, and not kill the prosperity to await some slow process of growth of circulating medium. The owners of property cannot pay day labor in portions of property. But if the owner of property can borrow money on it he can daily pay. The insufficiency of currency to represent small values prevents the employ- ment of laborers. What there is of the money accumulates most in cities. Hence, to the cities go vast crowds of laborers to find jobs of work. When there is money in the rural districts, the laborers willingly go there. A large volume of circulat- ing medium would therefore supply rural districts with money, and call back again to country life from overcrowded cities. A PROPOSED BILL. The accompanying bill is suggested as a comprehensive system to cover our whole finances permanently. The wisdom of Congress will, of course, add improve- ments. The Bill is drawn so as to utilize the elements found by long usage to have been best in the systems of the United States, England, Scotland, France and Germany, at the same time providing against the dangers that damaged the finances of past schemes. There are also new elements introduced to meet peculiar demands and con- ditions existing in this country. The words in italic show wherein the Bill differs from the present law of the United States, taking the Act of June 3, 1861, as sub- stantially embracing the present system. 18 FINANCES versus POLITICS. The matter is now before Congress, and has the attention of the country. Will Congress content itself with some more legislative patchwork, to temporarily tide over the present, soon to be followed by another financial rigor ? If a complete, full, comprehensive system, based on safe constitutional restrictions, executed by a statesmanlike law, is proposed in Congress by either political party, will the other dare oppose it ? If neither party is competent to handle the matter, or will not, then the people will receive no campaign pledges on the subject from them. In that case wnat will be the vantage to the Farmers' Alliance, or a third party ? The people believe that Government, and politics and parties are means to benefit the people and their property. Do not the people now need ample legislation to put the money system in order so as to stop the present widespread ruin, and to give employment to the idle multitudes asking for work, and to build up and develop the vast industries and resources of the nation ? This financial question is the great question of the hour. All past attempts at solution have been on the theory of gold alone, or an effort to keep the supply of money as short as possible. This scheme has worked disastrously, fearfully so, and has to be supplemented by the use of personal notes, checks, drafts, "panic certificates," etc., all non-legal tender, and dangerous substitutes for a national legal tender note backed by the wealth of 62,000,000 people, having over $71,000,000,000 of wealth. Legislative financial relief puts money indirectly in the hands of every voter, and revives the dying industries and development of the nation. Will any financial legislation that benefits a class of citizens or a part'cular section of the nation be accepted by the masses as satisfactory V STOEM SIGNALS. A history of the financial storm would occupy too much space. For those who care to trace its growth we herewith attach a current daily list of "newspaper head-lines" from August to December last. They give a most concise idea of the situation : " Wall Street wants more money." " The bottom fell out." " Still no bot- tom." " Another day of surprises on Wall Street." " No cause for a n arm, says a prominent N. Y. banker." "The Treasury not inclined to help." "Banks in difficulty." " Jay Gould says the worst is over." " Some of the strongest banks unable to settle." "Saved from ruin; the Eothschilds and Bank of England come to the rescue." "The Secretary pours out nearly $70,000,000 to relieve the situa- tion." "N. Y. Banks issue Clearing House Certificates to relieve the financial strain." "Boston Clearing House issues Certificates; amount not limited." "Phila- delphia Clearing House issues Certificates to relieve the stringency; amount not limited." " The Treasury turns loose $163,000,000 in October to relieve the strain." " Prominent N. Y. Bankers say the strain is over and plenty of money." "To- day the streets were full of rumors that more Clearing House Certificates would be issued." "$900,000 more Clearing House Certificates were issued." "The usual announcement was made that the banks had no immediate use for the certifi- cates; that the banks simply Jtook them out to help the moral sentiment." "N. Y. Banks lose money, and prices go to the bad." "N. Y. Banks take out $250,000 19 more Clearing House Certificates." "The Banks are $2,429,650 below the reserve limit." " The West and the South are calling for more funds." " Money loaned on Wall Street at 200 per cent, over legal rates." " Secretary Windom talks on the situation." " Boston Clearing House issues more Certificates." " Gold ordered from London." "N. Y. Bankers say the worst is over, and that after to-morrow the man who will not be satisfied with the situation is very unreasonable." " The Secretary buys $5,000,000 4 percent." "Three N. Y. Banks to-day took out #1,000,000 Clearing House Certificates." "Total issue, $15,000,000." "The financial stringency." "The cure to be found in wise legislation." "Bonded periods for imports may be extended. " "Coal mines shut down, and thousands of men out of employment." " The financial pinch." "Paris, Berlin and Amsterdam should come to the rescue and send gold to New York." " Good New York authority says the panic is over." "More Clearing House Certificates taken out for the relief of the market." "Congress to come to the relief of the money market." "President Harrison will send a message to Congress on Monday urging the issue of more money." "Uneasiness in New York circles." " Up the spout. Steady increase of business failures." "More hopeful." "No doubt a steady improvement in finances." "The financial cyclone continues to interrupt business." " Windom's conference with New York bankers." "Public confidence restored by the prompt action of the Administration." "Bankers recover from their fright." "No cause for uneasiness." "Wide stock fluctuations." " Firms forced to suspend. " "Several more bank failures." "The financial strain keeps up." "Germany calls more gold from London." "The Bank of England loses more gold." "Over $200,- 000,000 have been recently paid out by the Treasury to relieve the market, and the strangest fact is, scarcely a trace of its effect is left." " Secretary Windom says the strange feature is that the stringency is not confined to New York, but exists all over the country." "The shrinkage in stocks and bonds in N. Y. Stock Exchange since last June is over $300,000,000. " December 24, 1890. London, Stat. " The French funding loan for about 36,000,000 is to come out next month. Their balances will be called in from Lon- don by the French banks." "Holland will call also for a large amount of gold." "Germany and Russia will probably call home large sums of gold." "Portugal and Austro -Hungary are seeking a large supply of gold for Government use." "South America, Egypt and Africa are using unusually large quantities of gold." DANGER AHEAD ! The Czar orders that the killing of Jews in Russia shall cease for three years for financial reasons. London, January 14. The Times' correspondent says: " The Russian Minister of Finance, representing that it was inexpedient to quarrel with the Jews because such a course would offend Jewish bankers, the Czar ordered the application of the anti- semitic laws to be suspended for three years." In the Baring Bros, trouble, Lord Salisbury refused to allow the Bank of England to furnish aid. Thereupon the President of the Bank said to him: "My Lord, lam instructed to tell you, in case you refuse, that unless the Government comes to the rescue, there is hardly a bank in the United Kingdom thai can be relied upon to meet the demand of its creditors twenty-four hours after the disaster 20 we appbehend. " Lord Salisbury jumped from his chair as if shot, aud ordered the relief. The Bank of England is indebted over $100,000,000 to-day borrowed money for the panic. The above are only a few of many samples. If our legislators neglect the signs of the times and neglect action, a fearful financial penalty will be paid for it. In the next panic and financial crash the nations will not be able to extend aid to each other. The elements of national panic are too widespread, and each one will reserve its funds for self-preservation.