786 



UNITED STATES, FINANCES OF THE. 



look upon such project as a dernier ressort. I rather 

 recommend, and so I do, that the internal revenue tax 

 upon circulation be taken off in whole or in part. 

 This is 1 per cent, per annum, and amounts to aoout 

 three millions and a quarter each year. ... 



I further recommend that this Department be au- 

 thorized to allow to the banks circulation to the 

 amount of 90 per cent, upon the average market 

 value, for the twelve months prior to the deposit, of 

 the United States bonds deposited on security. Thus 

 a bank would be enabled to obtain circulation upon 

 the premium it paid for bonds, as well as upon the 

 par value of them. . . . For greater caution, there 

 may be fixed a limit of value, above which the valu- 

 ation of them for adjusting a ratio shall not go. A 

 collateral advantage, not only to the banks but to the 

 community, is that an amount of banking assets laid 

 away in the premium paid for bonds would thereby 

 be released and brought into active use. It is under- 

 stood, as was before stated, that in business circles 

 United States bonds are taken as a good collateral up 

 to 95 per cent, of their market value at the time. To 

 be sure, there is the right reserved, in case of lower- 

 ing fluctuation in market value, to demand an increase 

 of security. There should the same power be given 

 to this department, and the difference of 5 per cent, 

 in the business and governmental margin, -will coun- 

 terbalance the nimbleness of the individual creditor, 

 greater than that of the public agent, in looking after 

 change in market value and in calling for further se- 

 curity. 



The statements above made show that there is little 

 danger of ultimate loss to the Government or note- 

 holder, upon a circulation based upon the interest- 

 bearing bonds of the United States, though taken as 

 security at a margin coming near to the current mar- 

 ket value thereof. 



The President's remarks and recommenda- 

 tions upon the subject of the currency are as 

 follows : 



If the revenues of the next four years shall be kept 

 substantially commensurate with the expenses, the 

 volume of circulation will not be likely to suffer any 

 material disturbance. 



But if, on the other hand, there shall be great delay 

 in reducing taxation, it will become necessary either 

 to substitute some other form of currency in place of 

 the national-bank notes, or to make important changes 

 in the laws by which their circulation is now con- 

 trolled. 



In my judgment the latter course is far preferable. 

 I Qommend to your attention the very interesting and 

 thoughtful suggestions upon this subject which appear 

 in the Secretary's report. 



The objections which he urges against the accept- 

 ance of any other securities than the obligations of 

 the Government itself as a foundation for national- 

 bank circulation, seem to me insuperable. 



For averting the threatened contraction, two courses 

 have been suggested, either of which is probably feasi- 

 ble. One is the issuance of new bonds, having many 

 years to run, bearing a low rate of interest, and ex- 

 changeable upon specified terms for those now out- 

 standing. The other course, which commends itself 

 to my own judgment as the better, is the enactment 

 of a law repealing the tax on circulation and permit- 

 ting the banks to issue notes for an amount equal to 

 90 per cent, of the market value instead of as now the 

 face value of their deposited bonds. I agree with the 

 Secretary in the belief that the adoption of this plan 

 would afford the necessary relief. 



Bills designed to carry into effect these va- 

 rious suggestions have been introduced into 

 both houses of Congress. The most impor- 

 tant of these are the bills of Senator Aldrich 

 and Representative Potter, which provide for 



issuing in lieu of the 4 and 4| per cents. 2 

 per cent, bonds, having an equal time to run, 

 paying out of the surplus revenues a premium 

 on the bonds taken up equal to the aggregate 

 present worth of the surrendered interest, com- 

 puted at 4 per cent., and for reducing the tax 

 on the bank circulation issued on the new 

 bonds from 1 to per cent. ; and the bill of 

 Senator McPherson, which provides simply 

 that banks may issue circulation equal in 

 amount to the par value of the bonds which 

 they have deposited as security for their notes. 

 The last-mentioned bill passed the Senate on 

 the 25th of February, 1884, all propositions to 

 make the market value of the bonds in any 

 way the basis of the amount of circulation to 

 be issued to the banks having been voted 

 down. 



The Coinage. The following statement shows 

 the coinage that was executed by the various 

 mints during the fiscal year which ended June 

 30, 1883 : 



The deposits of gold coin and bullion were 

 $46,347,106.05; and of silver, $36,869,834.65. 

 Including redeposits, the total amount of bullion 

 and coin received and operated upon by the 

 mints and assay-offices was $87,758,154.05, of 

 which $49,145,559.16 was gold, and $38,612,- 

 594.89 silver. Of the bullion deposited, $32,- 

 481,642.38 in gold bullion, and $32,758,487.68 

 in silver bullion, were of domestic production. 

 The total amount of silver dollars coined under 

 the act of Feb. 28, 1878, to June 30, 1883, was 

 $147,255,899, and to Dec. 31, 1883, $161,425,- 

 119. Of the latter amount, $119,449,385 was 

 held by the treasury, and $41,975,734 was in 

 circulation. 



Exports and Imports. The following table 

 shows the value of the exports and imports for 

 the fiscal year 1883 in the commerce of the 

 United States with the principal foreign coun- 

 tries, in the order of magnitude : 



