VOL. VIII.

No. 3

As this number of the REVIEW OF REOur American Monetary VIEWS goes to press, Congress is engaged Crisis. in a contest the outcome of which is fraught with grave consequences for the whole world. Perhaps the chief difficulty in the way of a lucid discussion of the pending monetary questions lies in the fact that two very different things, needing distinct treatment, have by many speakers and writers been kept almost inextricably blended. There has for several weeks existed in this country a currency famine that has almost wholly paralyzed a large part of our normal business activity. Nothing like it has been known to our generation. A year ago there was an abundance of money in circulation. Suddenly it has disappeared. Hundreds upon hundreds of millions of dollars of the circulating medium have gone as completely out of the channels of trade as if they were sunk in mid-ocean. This in the very nature of things is a temporary condition. As these paragraphs were written late in August the imperious law of supply and demand had already begun to create a reaction, and the worst of the monetary stringency was, seemingly, passed. But it had been the duty of the Executive and of Congress to prevent, or immediately to relieve, that temporary distress. There is prompt treatment due to a man in convulsions. Then there is the fundamental and deliberate treatment that his case needs to prevent recurrence and to make him sound and well. At the critical moment of the convulsion it is usually very bad judgment to pause for protracted consideration of the means by which to re-establish the patient's general health, with a view to the prevention of future attacks. The analogy is not perfect, but it will answer the purposes of illustration. President Cleveland called Congress together to take prompt action to relieve an immediate convulsion. A considerable part of Congress thereupon formed itself for a sturdy resistance, declaring that the panic should not be relieved, but that the frightfully exhausting and demoralizing convulsion should continue its ravages, unless the application of remedies were accompanied by an agreement upon a permanent course of constitutional treatment. And so the historic contest is raging. The President's supporters say: Let us first bring our distressed patient out of this desperate spasm. Then

let us proceed in due time, and in an orderly way, to take measures to establish him in a normal condition. But the other side declares: We have the one sound theory for permanent treatment, and we will not take any chances of losing the adoption of our plans. Inasmuch as this second party is strong and determined, it tends to grow somewhat obvious that the patient must trust to nature and to his own inherent power of recuperation, and come out of his fearfully depleting spasm all by himself, while his physicians wrangle with each other.

At the President's call the new ConWhat the Administration gress assembled on August 7 in exMight Have Done. traordinary session. In the usual course of things it would not have convened until December. Mr. Cleveland duly explained his reasons for summoning the law-makers, in a message which attributed the money panic to the silver-purchase act of 1890 and which simply called upon Congress to repeal that act as a sole remedial measure. The President may live to regret a certain hesitancy and vacillation on the part of the Administration several months ago, at the time when the Treasury's gold reserve was being so heavily drawn upon. A ringing proclamation to the country, at that time, declaring that the parity and interchangeability of all our money issues would be fully preserved, and that the Secretary of the Treasury would be instructed by the President to sell gold bonds to any conceivable extent necessary to avert a catastrophe, would probably have sufficed entirely to prevent any panic whatsoever. The mere declaration, boldly made at the right moment, that the Treasury was perfectly ready to sell bonds and buy gold, would almost certainly have obviated all necessity for any such procedure. Under those circumstances, the heavy flow of gold to Europe need not have worried anybody. The severe stringency abroad, owing to the collapse of Australian banks and to other causes. made a very imperative demand for money; and consequently American securities had to be sent over to New York and sold for what they would bring in gold, in order to meet the European necessity for ready cash. There was nothing alarming in this, provided our own government had reassured the

timid and the doubting by showing that it was serenely prepared to do its duty, and that it would neither allow gold to be cornered nor any kind of outstanding American money to be discredited. But the President and Mr. Carlisle waited, in apparent irresolution, until the authorities of India, without notice to the world, stopped the free coinage of the rupee and altered the status of silver in that vast Empire. The consequence was a further heavy decline in the market price of the white metal, and a dreadful fright in the money centres of this country lest the continued operation of the silver-purchase law should drive us instantly to silver monometallism. It was declared that nothing could give relief except the prompt repeal of that act. Meanwhile, it is instructive to note that while Congress is wrangling, the purchase act is still in operation, gold is flowing back from Europe, and silver money far from being a drug in the market circulates indiscriminately on the strength of the sober belief of the people that the United States will keep its word and float all its money at full par with its best. Repealing the Sherman act would have had the immediate effect of allaying fright. The hundreds of millions that have disappeared from circulation are simply locked up in safety vaults or transferred from savings banks to ginger jars and old stockings. What was needed was some sort of an assurance that would remove men's apprehensions. It seems to us that the Adininistration ought to have given this assurance months ago.

What the

Have Done.

The bankers were the first alarmists. Bankers Might They threw many reputable and perfectly sound business houses into bankruptcy by refusing the ordinary credits needed to "turn over" a stock. But the banks were paid back very sharply for their selfish timidity. Their refusal to perform their functions in the business world naturally led the business community to suppose that the banks themselves were in a questionable condition; and almost every one proceeded to withdraw deposits. Then began that frightened struggle for existence which led the banks to cling at any hazard to their reserves, and to grudge every dollar loaned to regular customers or drawn out on open accounts. And this conduct still more effectually frightened the depositors, who saw no safe course except to draw their money and hoard it somewhere. banks had been equal to the emergency, their whole policy would have been different, from the outset to the end. They would have charged brisk rates, but they would have loaned with the utmost freedom on good security. If necessary, they would have paid a high premium abroad for gold, and they would have deposited more bonds and issued more currency under the national banking laws. This well-established European plan of meeting a stringency by the most liberal extension of credit is one that our American banks should through some form or other of co-operation learn to adopt. Now it happens that the banks have promised the country that they will

If our

Mr. Cleveland's prescription of a repeal of The Question of Monetary the silver-purchase act would leave us Standards. with a large volume of the "Bland' silver dollars and the bullion notes paid out in the purchase of silver under the Sherman act. All this would still be an effective part of our circulating medium, like the "greenbacks," which for years have been kept at a fixed volume of $346,000,000. It is objected that having thus put an end to the current absorption of new silver into our monetary system, we should be on the monometallic gold basis. But we have been on no other basis than the single gold one for many years. Both under the Bland act and under the Sherman act the government has bought silver as a commodity; and silver has not been used as a measure of value. Our use of silver has helped to keep the volume of currency expanding to meet the needs of a growing country; but it has not fixed in any wise the purchasing power of our unit, the dollar. A revised banking system could be made to respond flexibly to the demand for an increased volume of currency, and so far as that is concerned there is no more need

of using silver than of using any other commodity. We ought to get rid of the Sherman act for the same reason that it was desirable to get rid of the Bland act. Silver should either be used as a full money metal, or else it ought to be discarded, except for convenient and limited use in subsidiary coinage. We can open our mints to the free coinage of silver, in which case we should, under existing world-conditions, become almost immediately, in point of actual fact, either a gold monometallic country or a silver monometallic country, depending simply upon the ratio adopted by law and the market fluctuations of bullion. If the coinage ratio were pretty close to the market ratio, we should have an alternating standard; and the money that was cheapest for the day or for the year would be the one in which men would naturally make their payments. The existence of this alternating standard in so large a country as ours, might have the effect to steady somewhat the bullion market, and to lessen the range of fluctuations. If the leading countries of the world would join us in fixing a legal ratio for free coinage, it is the opinion of most thoughtful Americans that the market divergences would be reduced to a mere ebb and flow, and that the existence of a double standard, contradictory as the thing might seem on its face, would be possible.

[Copyrighted by Silver, Burdette & Co.] PRESIDENT E. BENJAMIN ANDREWS.

Insufficiency But why not accept the simpler concluof Gold as a sion, and acquiesce in the use of the sinWorld Standard. gle gold standard? The broad argument against this conclusion is the widely accepted fact that gold is steadily gaining a larger purchasing power, and that long contracts made in gold work hardship. One of the elements of a sound money is stability; and it is quite as objectionable that the monetary standard should gradually depress prices

by subtly growing dearer, as that it should gradually inflate prices by subtly growing cheaper. The statisticians are not fully agreed; but the best authorities seem to be ranged upon the side that regards silver as having departed far less than gold from the average value of staple commodities. It is an extremely difficult question, and it is not wise to dogmatize about it or to speak in a superior tone. But it is a fact that silver is the money metal of a majority of the world's inhabitants; and it might be argued with some show of reason that, if bimetallism is an ignis fatuus, and the whole world must come to a single metallic standard, then silver would be a safer and more satisfactory money substance than gold. With the earnest contention of the West and South that silver ought to be a full money metal, we, for our part, agree emphatically. The logic that makes gold the standard of value in India cannot rest satisfied until China and South America are on that same basis; and the depressing effect of this successive conquest can but be very severe and very widespread. Gold monometallism cannot stop at the present lines; and its universal adoption would in our judgment be more baneful than a transfer to silver monometallism.

But it does not follow that the American What Can be Done silver party is wise in its practical profor Silver? gramme. We think it extremely unwise. Nothing of permanent benefit could be gained by making this an exclusively silver country. The interests that would suffer immediate detriment are so vastly greater than those that would gain, that a reaction would be inevitable, silver would be discredited, and the cause of universal gold monometallism would be tremendously accelerated. What then can be done? For our part we are much inclined to adopt precisely the views expressed in a letter from President E. Benjamin Andrews, of Brown University, to the editor of this magazine. Dr. Andrews is a sound economic scholar, and his experience as a member of the recent Silver Conference in Brussels has given added prestige to his utterances. His letter is as follows:

Editor of the Review of Reviews:

SIR: It seems to me clear that the commercial world can never again know stability until the pedestal of full money on which the world's business stands is enlarged by the addition of silver to the world's volume of full, final, exportable money. To such restitution of silver to its ancient function I see no safe or sure road save through international agreement; and to this there is, to my mind, no other certain means but the cessation of silver purchases by the United States. So long as we continue to purchase silver, Europe will fully expect to see us soon upon a silver basis. That, of course, would relieve the silver troubles of Great Britain, Holland, Germany and France for an indefinite time to come, and would render it unnecessary for those nations to take any action on the subject. But if we stop buying silver the gold price of silver will so fall as to render the new British experiment in India a total failure. Another result would be a further appreciation of gold (fall of prices) in England itself, so terrible that the most obdurate monometallist would at last begin