REDEEMABLE BANK NOTES AND DISCOUNTS

Jan 23, 2016 | Debt, Economic Collapse, Fiat Currency, Financial Literacy, Monetary Education

800px-War_of_wealth_bank_run_poster

The 1896 Broadway melodrama The War of Wealth was inspired by the panic of 1893.

These Are Always Dangerous and Always Breeders of Panics – Gage and His Associates Attempting to Fasten Spurious Money on Country.

Paper issues redeemable in coin and the loaning of banking deposits, called bank credits, are the explosives of finance and the breeders of panic, according to the Silver Knight-Watchman. Money redeemable in other money and the compound loaning of deposits have been the cause of every financial panic of which we have any record. Redeemable paper and bank credit furnish for the time being additional means for the purchase of property, and in that way temporarily cause a rise in prices.

If such credits could be made permanent, and not abused by excessive issues, they might have no bad effects. But all paper which is not money, but convertible in to money, and all bank credits which are not based upon a like quantity of real money held by the bank issuing the credit, are the sources of panic, bankruptcy, and ruin.

The credits which pass for the time a being as money, inflate prices, encourage imports and force the export of coin, which prevents the forthcoming of money when demand is made to meet the paper promises. The time must come, sooner or later, when real money cannot be had to meet outstanding promises. When the first crash comes the community is brought face to face with a vast volume of credits which they have been dealing in as money, but which are not money, and cannot be made good for want of money for redemption.

The history of bank issues and bank credits of every description in Europe and America is a history of inflation, robbery and collapse. Men of sense ought to know that there must be some relation between promises to pay money and the money with which to make payment, and that human nature is such that if people are allowed to issue promises to pay, and increase their wealth in that way, they will do so without regard to the fate of their victims, who, when the crash comes, hold their promises. As long as money manipulators are allowed to issue paper and pass it off as money and draw interest on their debts, they will do so, and while they are doing this, they will imitate the Pharisees of old, whose peculiarities are described in the New Testament.

Banker Gage, his associates and the entire money manipulating forces of the United States and London are now engaged in trying to fasten upon this country a volume of spurious money which they insist shall be redeemable in gold. They expect to deceive the country by the pretense that the hundreds and perhaps thousands of millions of credit which they will issue is as good as gold because they promise to redeem it in gold. The promise they make is precisely the same as that which has been made in every instance where credit money has been issued and repudiated after it had served the purpose of robbing, the community. There are some who admit that bank credit of every description issued by private persons or corporations is dangerous, because it always ends in a collapse.

But they say the government can issue credit money with perfect safety. We deny that proposition in toto. Mark the difference between silver coin and silver certificates and greenbacks and treasury notes. Silver coin is full legal tender, redeemable in nothing. Silver certificates are legal tender for the payment of public dues and they are redeemable in silver coin which is in the treasury, dollar for dollar.

These certificates have given the government no concern. No obligation was created by the issue of silver coin, nor by the issue of silver certificates, except to safely keep the silver coin for their redemption. Both are issued by the power of the government to create money, and when that power is exercised there is no after-clap about it anymore than there is after-clap in the passage of any other law. But the greenbacks are credit money. They are legal tender and that makes them as good as any other real money while they are out, but the United States has promised to redeem them in gold and silver coin at the option of the government.

The executive department has given away or sold that option. We do not believe they are fools enough to give it away, because it is worth hundreds of millions. But ever president, from Hayes to McKinley, has insisted contrary to law that the creditor was entitled to demand gold for greenbacks! Behold the calamities resulting from the power of the bondholder to demand gold for the greenbacks. If that power had not been impossible for Mr. Cleveland to have frightened the banks and the community and brought on the panic of 1893.  

He declared that greenbacks were payable in gold: that the country would be dishonored if it did not pay them in gold, and unless the purchasing clause of the Sherman Act was repealed the country would be utterly bankrupted and that it was then on the verge of bankruptcy. This slander on the public credit by the president of the United States and the secretary of the treasury and by other high officials of the government and bank officers brought on the panic of 1893, which still continues, and which has wrecked the fortunes of millions of honest and industrious people.

Nothing illustrates the wickedness of issuing credit money when the government has power to issue real money better than the use made of the greenbacks, and nothing illustrates more graphically the beneficial effects of issuing real money than the honest, steady work done by silver and silver certificates.

We do not propose to occupy space with the discussion of credit money of any kind, whether issued by the government or by private parties, because it is too manifest that money redeemable in other money is a trick and device to deceive the public and induce people to conform their business operations to a volume of money which does not exist, and which must inevitably disappear and spread ruin everywhere.

What argument is there in favor of the government issuing credit when it costs no more to coin real money than it does promises to pay? Real money will never bankrupt the government or swindle the community, and it is the duty of the government to furnish that kind of money. The duty of the government does not end there. It should make it a criminal offense for any person or corporation to issue any kind of currency to pass as money. Checks, bills of exchange, and other devices to facilitate business are all that are required it the government does its duty and maintains a volume of money sufficient to keep pace with population and business.

In this connection the distinction between bills of exchange, checks and the like and credit money must be borne in mind. The former are simply orders for money in existence, and do not pretend to be more than a transfer of the title of that money, whereas the latter purport to exercise a money function in themselves, and are not the representatives of any money in existence, or any money which will be found in case of stringency.

First appeared in Natchitoches Populist on June 3rd, 1898 (Here)

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