Elastic

currency. Elastic currency is currency the volume of which would be regulated automatically by the demands of busine . In order to attain that end it would be nece ary to authorize the i ue of circulating notes by banks under such conditions as would make it profitable to the banks to increase the volume of their oust and ing notes in times of trade activity and large demand for money and make it expensive for them hal ——. to maintain a large volume of outstanding circulation in times of busine depre ion and stagnation in the money markets. Various propositions to provide for such a currency have | been advanced, all based on the theory of note i ues secured, at least in part, by the general a ets of the banks instead of by a deposit of bonds and regulated by a graduated tax on the amount of circulation i ued, the high tax being expected to discourage exce ive i ues, except at times when the need for more money is marked and imperative and when its absence would result in stringency and abnormal interest rates, thus discouraging enterprise and restricting busine . There was a plan at one time for an elastic currency based on bonds. It was proposed that the government should i ue bonds which might at will be converted by the hoiders into; currency and which might be rei ued by the government for currency. The bonds were to bear interest only while outstanding. It was a umed that when money was in exce ive supply the bonds would be held in preference to currency, while on the other hand, when the supply of currency was inadequate the deficiency could readily be made up by converting bonds into currency. The bonds were to be sold by the government for gold which was to be held as a special fund so that when bonds were turned back to the government the currency exchanged for them would be secured by the gold received for the bonds. Two objections to the plan were raised and caused it to be abandoned. One objection was that the proceeds of the bonds would not be available for the general purposes of the government. The other objection was that the plan made the government responsible for the regulation of the money market and imposed an additional tax on the people to the extent of the interest paid on the bonds. As far back as 1869 a plan for an elastic currency was laid before Congre . It was known as the 3.65-bond plan. It | was proposed that the government should i ue bonds bearing interest at 3.65 per cent a year, both principal and interest payable in greenbacks (United States notes). Holders of the j bonds were to be permitted to exchange the bonds for greenbacks at any time and to receive interest at the rate of 3.65 per cent (1 cent a day on each $100) while they had been outstanding. Likewise, holders of greenbacks were to be permitted to exchange greenbacks for the 3.65 bonds at any time. The scheme was pronounced ingenious but unstable and nothing came of it. Also see A et currency; also see Emergency currency. Embezzlement. Fraudulent appropriation of money or property held in trust; a deficiency caused by a breach of trust. Emergency currency. The name applied to currency in-: tended for temporary use in times of acute money stringency or financial panic. Many plans have been offered to provide for such an i ue. The object has been attained indirectly in times past by the voluntary action of clearing house a ocia-: tions in many cities. | For example, in 1893 the clearing houses in New York, Boston and Philadelphia i ued in the aggregate $63,900,000 in clearing house loan certificates. ‘These certificates were used | in the settlement of balances between the member banks and an equal amount of money was released to supply the void made in the circulating medium by the heavy gold exports and the withdrawal of money from the banks for hoarding and for current hand-to-hand use. In some Southern cities the clearing houses i ued loan certificates in as small amounts as 25 cents for popular circulation, so urgent was the demand for currency. The question of the legality of this latter action was not raised at the time because the crisis was so acute that wisdom seemed to forbid any questionings that might make it worse. ) It is urged, however, by the advocates of an authorized method of emitting an emergency currency that definite legal:. means should be devised for similar situations in the future. | Some advocate the organization of state clearing a ociations empowered to act under the combined credit of all the mem-. ber banks; others would give to individual banks, acting under the approval of the Comptroller of the Currency, the right to emit temporary notes; while still others urge the organization of a great central bank, in which the other banks shall be stockholders, which shall have the power to provide a temporary note i ue for such emergencies. / | | J _ Also see A et currency; also see Elastic currency. 184