Prof. Laughlin showed the usual gold-bug worship of British finance in this:
“In the Bank of England the first moment of stringency the rate of discount is raised. That has the effect of preventing all unnecessary loans. The borrower who has good collateral will get the money if he is willing to pay an increased rate. Our system is such that we can loan until we come to the legal limit; and is deficient in that respect, as we cannot loan at a greater discount because of the iniquitous action of the usury laws. You can help a customer by increasing the rate. Just at the moment of the greatest stringency our American system is deficient.”
Ordinary decorous language would fail to characterize that infamous statement. The fact is that the British system is utterly brutal. Our “iniquitous usury laws” prevent a man from giving everything he has to the banks in hard times. The British system is that of Jay Gould in his gold corner of 1869. He settled with his debtors by “taking all they had.” He was merciful, and forgave them the balance; which is the usual stock exchange style.
In coin-paying eras corrupt governments and Shylocks have debased coins to make them go further. In these credit-mongering times they try to bring their coin basis down to one metal, gold, and clamor for extreme fineness of that, in order to make their inverted pyramid of credit go further and sell dearer. The policy of Great Britain, for instance, has been to make gold, its standard, so dear and inaccessible to the foreigners and debtor class that they would find the other commodities in the market cheaper than the gold in the market, so that settlements in other commodities would be preferable. The retention of gold in the Bank of England, by raising discounts in panicky times, though murderous (“kindness,” says Mr. Laughlin) to individual active business men, is a necessary factor in this piratical scheme, and the fulcrum upon which England derricks into her treasure vaults the plunder of the whole world. Business is made a lottery, turning out dazzling prizes that keep merchants from rebellion. Long-headed American Shylocks hope to see the United States as much more successful in plundering the globe, in this way, as our country is larger than England.
Finally, as to Laughlin, with what bitter scorn this statement from the “closet scholar” will be greeted by the thousands of manufacturers who, during panics, have had to shut their factories for lack of cash “to pay the hands”—though they had all but gilt-edge collateral:
“The monetary function has to do solely with exchanges of goods; it hasn’t anything to do with their production.”
The Washington “Currency Reformers.”
In finishing this bird’s-eye view of the financial history of this country, a brief review of the current financial plans cannot well be avoided. It may be said of them, in a general way, that no other set of robbers ever before attempted to secure a law guaranteeing them unrestricted right to plunder with unlimited government protection. The out and out black-flag pirates, as represented by Walker of Massachusetts, have a plan as simple and explicit as a patent medicine. It runs thus: “Retire the greenbacks, kill silver once for all, and let the bankers manage the currency.” This obsolete idea, that banks should issue money, is showing all the vim of a death struggle. But a thousand columns of speeches in the Congressional Globe on the safety of the national bank system are answered by this solitary fact: In the year 1893, three hundred and sixty banks west of the Alleghanies, owing $125,000,000, went to smash, and about a dozen bankers are now in prison or exile, while many more escaped as by fire.
The Baltimore Plan, which a while ago had the sanction of the Comptroller, Secretary of the Treasury and the President, is, in a word, a scheme for issuing circulating notes by both national and State banks, otherwise than upon the pledge of government bonds as now. The banks are to issue notes upon their own assets, supplemented by a deposit of a certain amount of greenbacks, as a safety and redemption fund. The theory of this plan is that when any special demand for currency arises the banks will make a special issue of notes to supply it; and that as soon as this demand ceases the banks will retire the notes it has called out. Thus the quantity of currency available will, it is assumed, never be either deficient or excessive; and there will never be at any point either a monetary stringency or a monetary plethora. Were the function of currency exclusively that of facilitating exchanges, such a system (like that of 3-65 interconvertible bonds) might be useful. But currency serves the additional purpose of measuring the price of commodities; and since its relation to those commodities is determined by its volume, any change of its volume changes its value also, and consequently impairs its stability as a measure of prices.
Again, as to the State bank feature of the Baltimore plan, the idea prevails extensively in the agricultural districts of the West and South that the chief business of a bank is to lend money to borrowers. That is why they clamor for the removal of the ten per cent. tax on State banks. An abundance of greenbacks and silver would do away with most of the need of borrowing from banks. That’s what’s the matter with the banks.