safe simply because the dollar contains 100 cents. If we were on a silver basis, the dollar would still contain 100 cents, but they would be silver cents. The United States dollar is worth not only 100 cents, but 100 gold cents. The dollar is worth 25.8 grains of gold. That measures the market value of our dollar. Whatever 25.8 grains of gold will buy our dollar will buy, and it is worth precisely the same uncoined as coined, for the government stands ready to coin it free and in unlimited quantities.

Then, in addition, every dollar of our currency-gold certificates, silver, silver certificates, United States notes, treasury notes, national-bank notes, subsidiary silver, nickel and copper coins-is redeemable in or exchangeable for gold at the will of the holder. This fixes the stability of our currency. Its value does not and cannot fluctuate. I grant that there is no express statute for the exchange of gold for silver certificates or for silver itself. Silver certificates are, of course, redeemable in silver. Silver certificates are simply warehouse receipts for the number of silver dollars mentioned in the receipt, and on the return thereof the coin can be demanded. But the law expressly provides that the Secretary of the Treasury shall maintain the parity of all forms of money coined or issued by the government. The only way to make a silver dollar, the metallic value of which is but 50 cents, worth 100 cents in gold, is to give gold in exchange for the silver whensoever and by whomsoever demanded. On this proposition the record has been made so that subsequent Secretaries of the Treasury for all time, whoever they may be and whatsoever party they may represent, will find it necessary to overrule the decision of at least one predecessor before they can refuse gold in exchange for silver; and until such refusal silver will remain at par. There being but one way to preserve parity in time of pressure, the best way to avoid a time of pressure is to make public the government's intention to redeem in gold at all times. Thus all forms of lawful money are exchangeable for gold, and national-bank notes are redeemable in lawful money. These provisions make our system absolutely safe, and no man need look the second time at any form of our circulating medium to discover its actual or exchangeable value.

It is the most convenient system in the world, because it is con

structed on the decimal or metric system. It is not necessary to carry a lightning calculator in order to make change.

The system is not perfect largely because it is non-elastic. It fails to respond in volume to the changing needs of seasons and of localities. Attention has been called to this many times and by many people. That there will be no further currency legislation until we shall have experienced a panic occasioned by this want of elasticity, I am convinced. The country does not appreciate the danger, and until the danger is fully understood no remedy will be applied. We came nearer such a panic September 30, 1902, than most people appreciate. The fact that we then escaped does not raise a presumption that we shall always escape. A glaring defect at a vital point will sometime, soon or late, assert itself. Meantime a remedy should be discovered, discussed, and as far as possible agreed upon, so that it may be promptly applied when the people are ready for it.

Let me define this defect more specifically. Annually we have an excess of money during the spring and summer months. Annually we pass through a period of anxiety as we approach the period of crop-moving, for annually the volume of money is relatively insufficient to meet this sudden increase of business. We do not need and must not have inflation. The average amount of money is, in my judgment, abundant. The difficulty lies in the fact that the volume remains stationary. The result is as unsatisfactory as it would be for railroads to run the same number of freight trains with the same number of cars on the same schedule of time at all seasons of the year-rumbling along empty in June and overloaded in October. If such a policy were pursued by railroads, the unnecessary cars would naturally invite loads of straw and chaff and worthless plunder; and when the time came to use the cars in legitimate business, much disturbance would ensue while they were being unloaded and fitted for profitable employment. Similar conditions occur annually in our currency system. Cheap money during summer months, like cheap cars, invites anything and everything except legitimate business; and when the money is needed in the fall, like the cars, it is occupied, and much disturbance to commerce is occasioned by the unloading. In the language of the street this unloading is called liquidation.

Let me use another illustration. You bankers were nearly all reared on a farm, and most of you have led a horse behind a buggy. Those of you who have performed this task have doubtless noticed that when you let the horse out the full length of the halter, be that halter long or short, you have experienced some inconvenience whenever you passed rapidly over rough places, and you have sometimes felt the knot at the end of the strap. Thus by experience you have found it convenient to keep some slack to be let out as occasion requires. We employ every inch of our financial tether all the time, and some fine day the unexpected will cause another acute tension and we shall again feel the knot. Fortunate indeed we shall be if it does not slip through our hand.

Now, what shall be the remedy? Shall it be asset currency? In the popular acceptation of that term, I answer "No!" Asset currency, as commonly understood, would mean inflation, and that we must not have. Asset currency, as commonly understood, would be supported only by the solvency of the bank of issue. That must not be. No currency must be issued under any circumstances that will cause the holder to look twice at it to discover its exchangeability for gold. Shall it be emergency currency? In the popular acceptation of that term, I answer "No!" The United States originates more commerce than any other country on the map, but our chief commercial city is not the world's clearing-house. It ought to be, but it is not. One reason why it is not is the fact that it has sometimes resorted to clearing-house certificates, which is a plea of guilty to an indictment charging bad management locally or bad legislation nationally; and the financial world charges both. Clearing-house certificates must never be authorized by law. Let those who love our country and those who conserve her credit set their faces against such a course with the same intensity as that with which they resist the free and unlimited coinage of silver. Clearing-house certificates debase our currency with the consent of those who are supposed to be the best financiers in the nation. The free coinage of silver would debase it through political upheaval. The threat of both, I doubt not, contributes to that distrust which prevents foreign bankers from keeping their international balances in America. Whatever the remedy shall be, it must not advertise our calamity or our extremity.

Among the many remedies suggested, none appeal to me as strongly as the authorization of additional national-bank circulation. This method involves the right of national banks to increase their circulation in an amount perhaps equal to 50 per cent. of their outstanding volume of government-bond-secured circulation, on which the bank should pay a tax of 5 or 6 per cent. during the time it is maintained, and the government in consideration of this tax, should guarantee its redemption.

I indorsed this plan not long ago in the second largest city of this nation. The next morning one of the daily papers had interviews from several bankers to the effect that they would not issue currency, under ordinary circumstances, if taxed at 5 per cent. This confirmed my belief that the proposition was wise. It certainly would not result in inflation. Though the right to issue additional circulation were granted, I should be exceedingly glad if it were not exercised for many years. It would demonstrate that we had passed over no very rough places.

You may call this, if you please, an emergency provision. So it is; but it injects into our circulation no new form of money as an element of alarm. By eliminating the one statement on the present bank-note, "This note is secured by bonds of the United States," the additional currency could be made identical with that based on government bonds. The Comptroller of the Currency and the bank issuing the currency would alone know of its existence. It would not advertise its existence or our extremity, and I can scarcely conceive of conditions under which it would remain out sixty days. It could be printed and kept ready for issue as occasion might require, and it would be retired, not by gathering up each individual bill, but by a deposit of an equal volume of money with any sub-treasury. Then the notes as they came in would be charged against this deposit until it was exhausted, after which redemption and reissue would run on as before.

CURRENCY REFORM

ADDRESS DELIVERED BY JOHN L. HAMILTON, EX-PRESIDENT OF THE AMERICAN BANKERS' ASSOCIATION, BEFORE THE MICHIGAN BANKERS' ASSOCIATION AT GRAND RAPIDS, JUNE, 1906.

THE American Bankers' Association has a federal legislative committee which has taken up and is preparing a plan1 of currency reform, which we believe will be beneficial to every banker in the United States and in fact to all the citizens of the United States. That committee was one appointed pursuant to a resolution adopted at the last convention at Washington, and by virtue of the resolution I happen as president of the association to be a member of the committee.

The plan provided is this: that a currency commission of seven members shall be appointed by the President of the United States and confirmed by the Senate; the Comptroller of the Currency to be a member of that commission and the other six members to be appointed upon the first commission as follows: two for four years, two for eight years, and two for twelve years thereafter; the commission to be non-partisan, selected from the different sections of the United States. The object in fixing the length of service is this, that an incoming President would have the naming of only two members of the commission, thereby having four members of the commission that would hold over. Hence if by any accident a man who was not desirable, not a safe financial man, should be elected President, he would not disturb the financial conditions of this country. In the minds of the public to-day there is a sentiment that all financial institutions or any other institution of great importance should be under more direct federal control, and that is another reason for the selection of this commission.

It is proposed that national banks be permitted to increase their circulation, in times of emergency or in times of necessity, to an amount equal to 50 per cent. of the bond-secured circulation of the national banks outstanding. The object in basing it upon its bondsecured circulation is this: it was the original intent of the government, when the National Banking Act was formed, to provide a market for the government's securities; that idea still prevails in the minds of the public, and so far as I am personally concerned I believe it is the proper basis on which to base our circulation. If 'This plan was presented to the Association at its annual convention in St. Louis, October, 1906.