The Darlington herald. (Darlington, S.C.) 1890-1895, August 12, 1891, Image 5
SUPPLEMENT.
THE CHEAP MONEY PARADISE.
AN OBJECT LESSON FOR SUB-
TREASURY PEOPLE TO STUDY.
How tor Sooth Aaericon Neigh
bors Tried to Set Rich tod How
they Beeswe Poolers—Pleoty
of Mooej Is all Right If it he
Good IMooey — The Story of the
Cedolas.
In many respects the experience
through which the Argentine Re
public is passing, in an attempt to
increase the general prosperity by
making money cheap and plentiful,
comes closer to the American people
than any of the similar efforts in
other countries which have been de
scribed in previous numbers of the
Century. The Government of- the
Argentine Republic it closely mod
elled u{K>u that of the United States.
It is a country of almost boundless
natural resources, whose develop
ment has I tee ii so rapid us to be al
most without parallel in history, un i
whose growth in wealth, prosjterity
and commercial importance has been
so nearly approached by no other
country in the world as by America.
Its people are an energetic, buoyant,
self-confident race, full of pride in
their country and inclined to the be-
l : ef that it is capable of withstand
ing any strain that may be put upon
it. Ye*, rich and prosperous as they
were, these people conceived the idea,
when a slight check to their develop
ment was lelt a few years ago, that
what they needed in order to attain
the full measure of their prosperity
was to make money “cheap and
--plenty.” i'ercciving i he importance
of their experience as an object les
son for our own couutrv, bearing as
it does directly upon discussion and
propositions current here, we have
gone thoroughly into the matter,
examining all available sources of in
formation, and have thus been able
to prepare for our readers what we
believe to be the most complete as
well as accurate account yet pub
lished.
lu 1873 there was established in
th» capital city of the Argentine
Republic, Buenos Ayres, the Hypo
thecary or Mortgage Bank, whose
main object was to make loans on all
kinds of lauded property. The
principles u]>on which these loans
were to be made were much the same
as Senator Stanford is advocating as
a basis for similar loans by the Uni
ted States Government. Any person
owning landed projierty in the pro
vince could -go to the bank and
stcure a loan for half its value,which
was to be fixed by the bauk’s ap
praisers. The I tank gave hint a
mortgage bond, culled a cedula,
which was to run for twenty-four
years, at from <> to 8 per cents in
terest, 2 j»er cent amortization, and 1
jier cent commission. The interest
was payable ipiarterly, and there
were coupons attached for the tweuty-
fouth years. The cedillas were is
sued in alphabetical series, begining
with A and running to P. They
were bought and sold on the Bolsa or
Stock Exchange, and from their first
issue became an important element
in speculation. The first issue of
seris A was between $13,000,000 and
$14,000,000, the Argentine dollar
being about ninety-six cents of our
money, being bused upon the unit of
the French monetary system. These
remained at par for only a short
time after issue. They were quickly
followed by others, until series A
closed with a total issue of $27,394,-
000. Then came series B with an
issue of 1,092,000, series G with
$813,000, series I) with $288,000, all
at 7 per cent. Then came series £
with a total issue of 15,830,000 at 6
per cent and F with a total issue of
$6,100,000 at 7 per cent Ten years
after the bank’s establishment over
$100,000,000 of these cedulas had
been issued, all baeed, be it remem-
„ bered, upon the landed property of
a single province. They had from
the outset been used for’speculative
purposes, and every year this use be
came more wild and reckless. A
ring was formed between directors of
the bank and certain favored brokers
for the absolute control of the suc
cessive issues. No one could obtain
concession for a loan who did not
make application through these
brokers, and in order that all the
members of the ring might reap their
share of tin profit the value of the
projierty ujion which the loans were
placed was to extravagant figures.
The fictitious prosjierity wh : ch the
Hyjxithecary Bank brought to
Buenos Byres infected the entire re
public, and in 1884 Congress passed
a law annexing a National Hypothe
cary Bank to the National Bank,
which was the fiscal agent of the
Government and of all the provinces
except Buenos Ayres. The issue of
cedulas on the landed property of
the nation was authorized for 50 j>er
cent of its value, at interest from 6
to 8 per cent, with 2 jkt cent amor
tization and 1 per cent commission,
no single loan to exceed $250,000,
and all payable at the end of twelve
years. The issue of cedulas was at
first limited to $30,000,000, but this
was extended from time to time so
that in November, 1890, six years
after the National Bank began the
exprimeut, it had ont no less that
$204,000,000 in gold, all bearing in
terest The Buenos Ayres Bank had
increased its issue of cedulas so that
at the same date it had out no less
than $330,000,000, but these were in
naper, making the grand total of
money which had been loaned upon
lond in the republic during seventeen
years $534,000,000, or over $140 for
every man, woman and child.
When the National Bunk went in
to the hypothecary business in 18tS4
paper money was at j>ur with gold.
Several severe checks to the national
prosperity were felt during that year.
Cholera made necessary a rigorous
quarantine against Mediterranean
steamers anb cheeked immigration.
Heavy floods during the fall delayed
the shipments of crojis from the in
terior to the sea-board. A new Gov
ernment loan $90,000,000 was to be
placed, but the European market,
« hich was exjiected to take $10,000,-
000 of it, was so nearly sated with
Argentine investments of one kind
or another that it declined to take
more than $3,500,000.
In January, 1885, a run began
upon the Provincial Bank of Buenos
Ayres, and comjtelled it to suspend
specie jiayoent*. Wherenjtou the
Presigent of the Republic declared
the national currency a legal tender.
Gold rose at once to 17 per cent jire-
mium, and then to 20 per cent. In
February it had reached 33 jter cent,
and it continued to rise steadily till
at one time it was tt 300 per cent.
That is to say $400 in jiujter wae
worth onlv $100 in gold. From tile
moment that the gold standard was
abandoned the demand for more
money began to be heard, and it was
poured out by the Government in al
most unlimited volume. Under the
pretence of creating a sounder finan
cial system and securing a more
stable currency, a law was passed it
November, 1887, establishing a sys
tem of State banks, forty in nuqiber,
similar to our national banks. These
started with a capital of $350,000,-
000, and began to issue paper money,
not being required, as our banks are,
to be able at all times to redeem their
notes with gold. When the pre
mium on gold had reached 40 per
cent, the Government took th« posi
tion that the Increase was a trick of
the brokers, and not in any way an
outoome of currency inflation, and
issued a decree allowing the banks
to issue currency jiractically without
limit At the same time the Gov
ernment, to satisfy the demand for
gold, and prove ita belief In its own
contentions, threw $30,000,000 of its
gold reserves on the market The
gold premiun continued to rise with
no perceptible check, and as it rose
the banks [toured out more and more
[taper money in a frenzied attempt
to check its upward flight
It was discovered after a time that,
through trickery, there were several
millions more of this irredeemable
paper money in circulation than had
been supposed. A provision of the
national banking law requried that
all banks reorganizing under it
should withdraw and cancel their
old notes when they put their new
ones in circulation. Several banks,
in collusion with dishonest officials,
violated this requirement, and kept a
large paft of their old issue iu circu
lation with the new. At one time
the amount of this fraduleut money,
based on nothing whatever, amoun
ted to $60,000,000. Some of th>s
was afterwards destroyed, but the
latest official estimate put the
amount still in circulation at over
$35,000,000. As the latest attain
able b>tal of the regular paper issue
of the banks places it at $345,000,-
000, the grand total of paper money
in circulation in March of the pres
ent year, worth about 25 cents on
a dollar, was $380,000,000, all irre-
de unable, and decreasing in value
ever day. This was a par capital
circulation of $100 for every man,
woman and child in the republic.
That ought certainly to have put
“plenty of money in the pockets of
the people,” for $100 is the highest
sum per capita our wildest cheap
money advocates have ever demanded.
* * * In 1886 the Natronal Bank
had a capital of £10,000,000 sterl
ing, and tile I’rovincial Bank one of
£8,000,00<», sterli ng. Not a pen ny of
the latter remained: The National
Bank had lost £8,800,000 of its £10,-
000,000, and owned the Government
£14,000,000. These two banks had
lost, therefore, during five years’ ex-
[m rieuce with cheap money based on
landed property, alwut £30,000,000
sterling, a sum more than double the
capital of the Bank of England.
When the collapse came the na
tion gave itselt over, as France had
done two centuries earlier, to rage
and despair. Men who were belufved
to be worth millions found them
selves paupers. One man who had
been worth $20,000,000, which he
had accumulated during a lifetime’s
devotion to honest industry, but who
had been tempted to venture it in
speculation, lost every dollar.
THE SIH-TREASIRY BILL.
In our last w eek’s issue we printed
the full text of this proposed measure,
and gave as much space as was possi-
I le to extracts from the speeches of
Dr. Stokes ami Senator Butler, the
former supjsiriing and the latter
opposing the Bill.
In addition to this we have invited
any of our subscribers who wished
'to discuss the matter, to scfd in their
communications and they would be
published provided the rules we
deemed necessary were complied
with. We have considered it of the
most paramount inijtortunce that
thisproj*osed Bill should lie thorough
ly discussed and understood by all
of our people, and in presenting, as
we do jn this issue, our own views,
it must by no means lie taken as an
evidence that we propose to shut off
discussion, and wish it distinctly un
derstood that we will lie glad to hear
from any of our sttbscriliers on the
subject.
The very first section of this Bill
contains the seeds of strife and dis
cord, in providing for the selection
of a site for the Bub-Tr-asury ware
house by a vote of the people. As a
matter of course the elections would
engender a great amount of bitter
ness on account of the great efforts
that would be made in regard to its
location, and charges of trickery
would be the rule and not the ex
ception. The ultimate outcome of
it would be that Congress would
have to decide, and the matter of
location would be virtually in the
hands of this tiody.
Another defect iu this 1st sec
tion is tl at it provides for the elec
tion of the manager of the Sub-
Treasury, by the people of the t!onn-
try. Even if it were not micousti-
tutional. Congress would never allow-
the disbursement of public money to
be in the hands of any official elected
by a popiflar vote. His election
would not be a guarantee of his in
tegrity or ability. »
It is very probable that the pos
tion of manager would be held by «
politician and not by a business ex
pert It would entail a very com
plicated system of bookkeeping, and
unless managed with great care and
system, dire confusion would result
if the Bill were to become a law. If
the president or secretary of the
'Treasury were to appoint the mana
ger, then, under existing circum
stances, we would have t republican
official to grade onr cotton, and so
far as* that is concerned be abso
lutely at his mercy. He could un
dervalue the cotton of his political
enemies and overvalue that of his
party associates and any relief from
such arbitrary measures would Im
practical ly hopeless.
Section 2 provides that eighty per
cent of the net value of any pro-
dud, deposited in Sub-Treasury,
be advanced to the owner of said pro
duct, on which interest at the rate of
one per cent shall be charged. As
the Government has to pay from
three to four per cent for the money
it borrows it is difficult to see how it
can manage to lend it at one per
cent. It must al o be borne in
mind that the price of cotton is
fixed in Uverpool and not in the U.
S.
Small counties could not avail
themselves of the provision of this
act, and would be put at a great
disadvantage: the Government lend
ing money to the fanner who lives
in a large county and refusing it to
the man who is so unfortunate to
live iu a small county. The whole
Bill is the worst kind of class legis
lation, and if it were to become a
law would result in the financial
ruin of the very class it projioses to
benefit; furnishing as it would the
very information that would enable
speculators to reap a rich harvest
from their knowledge of the size if
the crop.
This Bill proposes to appropriate
the sum of tifty-milloa dollars for
the erection of these warehouses, and
large as the sum is it is entirely in
sufficient to erect fire proof ware
houses iu every county that could
avail itself of the provisions of this
bill; especially when we consider the
great bulk of the grain crops in pro
portion to their value.
Even if the Bill was practicable
and of unquestioned value; there
would be no chance of its jittssage,
for the simple reason that the west
would in all probability be more bit
ter against a measure calculated to
benefit the Bouth, than the North
would. As an illustration of this
take the cotton tax; an arbitrary and
unjust burden forced upon us just
after the war; and yet we have never
lieeu able to get the money refunded.
Of course the largt majority of
farmers who advocate this very un
wise and impracticable measure do
so in all honesty, but the politicians
who are supporting it are
• imply actuated by selfish motives
and would turn against it to-morrow
if there was anything to be gained
I y it. They are office seekers, and
anything else would do as well as
the Sub-Treasury, provided it afford
ed them the opportunity to pose as
the self appointed guardians of the
a ile. A good many of them know
ectly well that there is not the
slightest possibility of the Bill ever
becoming a law; but then
it will float them into of
fice; and that accomplished, the
people may take care of themselves
so far as they are concerned. A peo
ple incapable of managing their own
affairs should live under a king and
not attempt a republican form of
government, which is only tit for an
intelligent self reliant and freedom
loving jieople. The farmers them
selves woit'd be the first to rebel
against paying the taxes that would
necessarily be levied to reimburse
the Gover intent for the very large
losses that would inevitably accrue
from the failure of a good many far
mers to redeem their produce. The
advocacy of this Bill has already, and
will still put men in office, but there
is not the remotest possibility of its
ever becoming a law, and nobody
knows this any better than some of
its office seeking advocates. The
revision of the tariff is the only hojie
for relief, and the sooner we re
cognize this fact, the better it will
be for the farmer and everyone else.