Page:The Economic Journal Volume 1.djvu/817

NOTES AND MEMORANDA 795 which are full legal tender. Furthermore, there are still existing nearly 70 millions sterling of the old Treasury notes issued during the Civil War the so-called greenbacks; and lastly, there are over 20 millions sterling of bank notes. Now, it is clear that money cannot be created at this rate in any country indefinitely. The Unite(t States are growing very rapidly in population and wealth, and the area under cultivation is being constantly extended; therefore a considerable addition to the money in circulation is, no doubt, required every year; and the bank notes being secured on the deposit of Government bonds in the Treasury, when the bonds are redeemed an equivalent amount of bank notes has to be cancelled. millions sterling of bank notes cancellation has, of course, made room silver. There are still outstanding, as Up to the present time about 50 have been so cancelled; and the for an equivalent amount of has just been said, over 20 millions sterling of bank notes, and their gradual cancellation will ?ontinue to make room for fresh silver notes. But even if the whole of the bank notes could be withdrawn and cancelled during the next two years, their place would be more than filled b?/ the new silver notes issued. It is extremely improbable, ho?ever, that the bank notes will be cancelled very rapidly. The greater part of them will remain out for years, and yet silver notes will be issued at the rate of about 11 millions sterling per annum. Unless, then, some plan is devised for .cancelling the bank notes, and also for withdrawing and redeeming the old Treasury notes, or greenbacks, it is clear that sooner or later the circulation will become saturated by the issue of the new notes. No wise man will dogmatise as to when the point of saturation will be reached, but every sane man must see that some time or other it is -certain to be reached. However rapid may be the growth of the United States in wealth and population, they cannot use in the per- formance of their business more than a certain amount of money. When the point of saturation is reached, the new notes issued cannot remain in the circulation. At present they are freely taken everywhere because, as stated above, they are redeemable in silver or gold at ?he option of the Secretary of the Treasury, and the Secretary now gives .gold when it is asked for. When the time comes that fresh notes .cannot remain in circulation, they will be presented at the Treasury for redemption in gold. If the Secretary of the Treasury then freely pays out gold, the whole of that metal in the Treasury will be in danger .of being withdrawn, and then a fear will arise that the reserv? which is-held for discharging in gold the liabilities of the American Govern- ment will altogether disappear. A doubt will spring up whether the interest and principal of the Debt will be paid in gold; and further- more, if the greenbacks have not been redeemed, a doubt will be .excited whether they will be redeemed in gold on presentation at the Treasury. But once a doubt of the kind arises, the credit of the Government will be so shaken that all confidence will disappear. On z?he other hand, if the Secretary of the Treasury feels it to be necessary