156 MONEY AND CREDIT 



Act of 1873 had been passed in time to prevent us from sharing the 

 embarrassments of France, Germany, and India. Our monetary 

 equilibrium would have been reached when specie payments were 

 resumed in 1879, and we should now have four or five hundred mil- 

 lions more gold and less silver in circulation than we actually possess, 

 since all of our silver certificates might have been gold certificates 

 if Congress had so willed. 



Two matters of importance, both incidental to the Civil War 

 and contributing to our monetary equilibrium, remain to be men- 

 tioned. First, the national banking system. The public records 

 show that Secretary Chase adopted this plan as a means of selling 

 bonds and procuring money for the war, but that it had no per- 

 ceptible effect in that way. To recast the banking system of a 

 nation requires time, even when one knows how to go about it and 

 has all power in his hands. Mr. Chase's modus operandi was defective, 

 and he did not have unlimited power. The plan contemplated that 

 'all banks should secure their circulating notes by government bonds 

 deposited in the Treasury, but the federal tax which eventually 

 compelled them to do so was not enacted until the beginning of 1865, 

 and was not put in force until after the war was ended. Conse- 

 quently no bonds were bought for this purpose during the progress 

 of the war, except a mere bagatelle taken by the voluntary action 

 of a few banks. Nevertheless the new banking system was and 

 remains a gigantic success for banking purposes and a great bulwark 

 of our monetary stability. So far as it supplies us a currency, it 

 supplies one that is at par everywhere. It organizes credit and 

 vitalizes the productive capital of the country admirably. It does 

 not, however, supply a circulating medium to the extent that its 

 resources and reputation would justify. Of $2,500,000,000 now 

 circulating, national bank notes are only $432,000,000, about 

 one sixth of the whole, and little more than one half of what the 

 law authorizes the banks to issue. The bank-note circulation does 

 not keep pace with the country's growth in population and trade, 

 and since all other fiduciary circulation is limited by law and has 

 reached its limit, further expansion will be mainly by means of 

 gold certificates. 



This brings us to another incident of the war period, which has 

 proved to be a great convenience and an aid to monetary equilibrium. 

 The law authorizing the Treasury to receive deposits of gold and to 

 issue certificates therefor of $20 and upward was passed in 1863. 

 In the panic of 1893 the greenback redemption fund was reduced 

 below $100,000,000. The law required that the issuing of gold cer- 

 tificates should be suspended whenever that condition existed. 

 For some unexplained reason the Treasury officials thereupon treated 

 the law as though it were repealed, and refused to resume operations 



