As a result of these conditions, the country witnessed, during the recent panic of 1893, a resort to every kind of device known to banking and permissible by law, to increase the volume of the currency and meet the enhanced demand for money caused by the utter failure of credit. Certified checks, certificates of deposit, clearing-house certificates, and other devices were resorted to, and even then thousands of solvent institutions over the country were obliged to close their doors, and the industry of the whole country was paralyzed.
The events are of too recent occurrence to need rehearsal here. It is a sad commentary on the wisdom of our legislators that, notwithstanding all the tinkering and patching that our financial system has undergone, and the voluminous debates in and out of Congress for years past, the volume of our money has been so far from keeping pace with the demands of commerce that prices have been falling for a quarter of a century, culminating last year—a repetition, unhappily, of previous experience—in a collapse of the overstrained credit that was vainly trying to do the work of money, and bringing ruin and disaster to thousands.
The condition of our monetary laws to-day is such that, except by the slow increment of gold production, which must be shared by all the world, we possess no means of meeting either the increasing demand for money that expanding population and commerce bring, or the sudden demand that a failure of credit may bring at any time. This, obviously, is a blunder on the part of our law-makers that amounts to a crime.
It is not surprising that under such conditions the industries of the country are crippled and that thousands of men should seek work in vain. Still less surprising is it that in the face of a continually increasing value of money, or decreasing prices of nearly everything else, prudent men choose, as far as possible, to turn their capital into money, lock it up in safe deposit vaults, or let it lie idle in banks, rather than take the great risk that any active use of capital under such circumstances carries with it. When money is increasing in purchasing power from five to seven, and even a higher per cent. per annum, as has been shown to be the case many times in the past, it means that the man who locks his money up in a vault gets that percentage of return for letting it lie idle; or that the man who loans it, even at a low rate of interest,—if a loan with safe security can be found at such a juncture,—makes the five to seven per cent. resulting from the increased value, in addition to what he gets as interest.
Men cannot be blamed for declining to engage in productive enterprises under such conditions, nor for hoarding money instead of using it; the blame lies on the system that not only permits but compels such action.
There is evidently no inducement for men with money to invest it in any productive business with the certainty, under existing conditions, that the record of the past will be that also of the future, and that if a return of confidence again expands credit and stimulates business to a new activity, it is sure to be followed, at no distant day, by another collapse.
It must be conceded, with these considerations in mind, that the imperative need of this country is for a money that shall be at once more honest, more simple, and more elastic, and, at the same time, adaptable to the varying demands of commerce.
Any change in a money system must, of necessity, cause some disturbance of business, and such change should be so devised as to cause the least possible disturbance, and do as little injury to vested interests and existing obligations as possible.
The system chosen should, moreover, be adapted not only to the needs of the present, but also to the possible requirements of the future, so that no change of system will afterwards be called for to meet further changes in demand, and cause again a disturbance of commerce. In short, it should be a system logical, economical, scientific, and permanent,—not a makeshift, to be changed in the next Congress by the addition of another makeshift, in the manner in which our present crazy patchwork of money has been created and maintained.