THE OBJECTS AND METHODS OF CURRENCY

REFORM IN THE UNITED STATES.

AGITATION for currency reform is by no means of recent origin. Indeed, in a certain sense, this agitation can be said to date from the close of the Civil War. Of course, it has not been altogether continuous either in intensity or as respects the precise objects sought. Up to 1880 the particular questions which now most agitate the public mind received comparatively little attention, though considerable stress was laid on the importance of elasticity—especially emergency elasticity—to meet the needs of a panic. But since 1880 the stream of articles, papers, and reports, setting forth projects of reform which in large measure anticipate those now before the country, has been almost continuous. The force of the agitation diminished at the close of the decade 1880-90, and in the early years of the next decade, when the renewal of the struggle over silver made it necessary to confine attention. to the all-important matter of the standard of value. But, after the panic of 1893 and the repeal of the silver purchase act, the movement for currency reform assumed great proportions. It was felt, as never before, that something must be done to give increased security to the standard of value and to furnish a more satisfactory paper currency. This feeling, especially as respects the paper currency, found its first important expression in the so-called Baltimore Plan, put forth by the Bankers' Association in the fall of 1894. This was quickly followed by Secretary Carlisle's scheme, which got so far as to be favorably reported by the House Committee on Banking and Currency. The next Congress took up the matter with earnestness; and a number of bills were brought for

ward, some of which deserve very careful consideration. In the early weeks of 1897 the movement received a new impulse from the Indianapolis Business Men's Convention. This convention resulted in the appointment of a Monetary Commission, which prepared and submitted a long and elaborate report in the first days of 1898. This, again, had been preceded a few weeks by the plan of Secretary Gage. It is perhaps unnecessary to add that alongside of these projects having a public or semi-public origin, there have appeared innumerable plans of reform from editors, bankers, and other persons who represent only themselves.

But, in spite of the very considerable dimensions of the agitation, whether judged by the number or by the standing of the participants,—it is apparent that we are still a good way short of attaining an adequate measure of currency reform. Much has yet to be done, if the movement is to succeed. One thing needed, as probably all would agree, is the securing of greater unanimity among those who materially influence legislation, both as to what is wanted and how it is to be accomplished. But, again, a necessary preliminary to this unanimity is the securing of clear and definite ideas. The subject of currency reform is, at best, a difficult one, and the great multiplicity and apparent complexity of reform projects add much to the confusion of mind in which men generally find themselves with respect to these matters. As in so many similar cases, a clear understanding of the objects aimed at and of the means which must be employed for accomplishing these objects makes the comprehension of reform plans much easier than would generally be supposed. Doubtless there is much room for difference of opinion as to which of several methods of accomplishing a given object is, on the whole, best. But a necessary preliminary to agreement along these lines is plainly better comprehension, and that can be much facilitated.

To bring about this better comprehension of objects and methods, nothing seems more promising than a comparative study of projects now before the country. For it is surely safe to say that few, if any, possible expedients for accomplishing the ends of currency reform have been overlooked in the long agitation, and that the plan ultimately agreed upon will be some combination of the methods and devices already put forth in the numerous projects now before the public. This, then, is my purpose,― to undertake a comparative study of projects for currency reform, with the design of making clear the objects of such reform, and the various methods and devices which have been or may be proposed for accomplishing these several objects.

Taking up, then, the objects of currency reform, the first and most important is the securing of greater stability for the standard of value. At present it is doubtless true that the meaning of the word "dollar" is determined by 25.8 grains of gold; and, in a general way, this has been the fact ever since January 1, 1879. Yet it is a commonplace that whether or not this should continue to be the fact has been in the highest degree uncertain for several years. To borrow a figure from mechanics, the standard has been, and is, in a state of unstable equilibrium. At almost any moment it has been liable to be overthrown. Again and again, during the last five years, we have been on the eve of a state of things wherein the value of one dollar should come to be determined by something other and cheaper than 25.8 grains of gold. It is not improbable that the danger of such overthrow of the standard has been somewhat exaggerated, and that the gold standard has been more secure than is commonly imagined. Nevertheless, there has undoubtedly been some considerable danger of this overthrow; and the fear of it has been almost as disastrous as the real thing could be. While the results of a sudden

drop to a silver basis or even to a greenback basis would be appalling, few things can be more disastrous in the industrial world than continued uncertainty. The blight which this state of things puts on all industrial enterprise almost inclines one to say, "Better give us the change at once even the change to silver - than leave us in perpetual dread of it." Surely, any adequate scheme of currency reform must undertake to remove just as far as possible this state of uncertainty, to make the gold standard really stable and sure.

A second requisite which any satisfactory monetary system must provide is the safety or security of its bank-note circulation. At first glance, it might seem as if this were included under the preceding requisite, that is, the stability of the standard,- since, of course, the stability of the standard depends, in a large measure, upon the convertibility of the credit media of exchange. Yet, in fact, these two requisites of a sound currency may be quite distinct. To provide for the stability of the gold standard is to provide an order of things wherein the value of the dollar is continuously and unquestionably determined by a certain amount of gold. To provide a secure bank circulation, on the other hand, is to insure a state of things wherein all bank-notes under all circumstances are convertible into some form of legal tender. Now it is possible to have one of these two conditions without the other in either of two cases. First, when, as in this country to-day, there are several legal tenders, the security of bank-notes would be attained, provided there were no doubt of their convertibility into any one of these legal tenders, although at the same time gold might have disappeared and the greenback have become the standard. Thus we had from 1866 to 1879 a secure bank-note system. We did not have a gold standard. Secondly, even were there no legal tender other than gold, the gold standard might be maintained, while the notes of minor banks or of failed banks were at

a discount or quite worthless. It is, therefore, necessary to distinguish the providing for a secure, a safe, a convertible bank currency from the providing for a stable standard. The currency project which succeeds in furnishing the former requisite must insure such a state of things that the holder of the circulating note of any bank shall be certain of being able to get its face value at all times, and without any reference to the solvency of the particular bank which issues it.

A third object which the currency reformer must set before himself is the securing of greater elasticity in the monetary system, taken as a whole. Objection is occasionally made to the use of the term "elasticity" in this connection, but it seems to me very expressive and sufficiently accurate. Briefly defined, it means that property is a circulating medium by virtue of which it increases in quantity to correspond with increase in need and diminishes in quantity to correspond with diminution in need. For our purposes, it is convenient to distinguish ordinary and emergency elasticity. By the former is meant the capacity of any circulating medium to respond to those changes in monetary need which take place in the course of a single year, as between winter and spring or summer and fall. By emergency elasticity, on the other hand, I mean the capacity to respond to those changes in need which connect themselves with a panic. Doubtless these two sorts of changes in need differ, on the surface, at least, only in degree. Still, the causes are very different; and it is not unlikely that remedies also should be different.

Now it is probably unnecessary to occupy much time arguing as to the desirableness of an elastic currency. Over and over again, during the last few years, different writers have, on the basis of theory and statistics alike, called attention to the importance of this property. The variations in the need for money from year to year, from season to season, must be admitted; and, if the variations