soon Mr. Gates and his friends had had to pay for three million bushels of corn. But all the time they were putting on a bold front in the "grain pit" and successfully bluffing the bears. The price of the corn ran up from 60 to 90 cents per bushel, and predictions of dollar corn were being joyfully made in the pit. But farmers and other holders did not wait for the dollar. From 70 cents upwards they sent in every bushel they could muster, and Mr. Gates saw that if he was not to get his full twenty million bushels he would get an inconveniently large portion of it. So he called a halt and came to terms with the shorts.

How the two sets of plungers arranged their "draw" is of no public interest, still less which of them had the best of it. But it is of public importance that immediately the end of the corner was announced corn dropped back from 80 cents to about 65 cents a bushel. A rise of 25 cents per bushel, engineered in a few weeks, ended appropriately in a fall of 15 cents in as many hours. For the farmers who were sharp enough to sell on the rise the corner was a stroke of luck, but for traders who were frightened into buying on the rise by the alarm of an impending corner it was the reverse. To the legitimate grain market it was a demoralizing evil, and for American finance it is an obvious misfortune that men like Mr. Gates, capable of imperilling a whole community for the sake of a few million dollars profit, should be recognized financial leaders. Twice within a year he brought the country to the brink of a panic-first by his Louisville rig and next by his corn corner. On both occasions he had to be called off at the last moment in order to avert a catastrophe, but he will often be heard of again at the same game.

The more respect one feels for institutions like the stock and produce exchanges of the United States in their legitimate sphere, the more he will regret the flagrant abuse that is frequently made of the facilities they offer for useful and even indispensable classes of business. The more liberal his views as to American methods of speculation in grain and stocks, the stronger will be his criticism of operations which go far beyond the widest limit of financial ethics. Markets liable to be upset by "squeezes" and corners of the Gates type are not in a fair way to be accepted as international models.

STRENGTH AND WEAKNESS OF AMERICAN

FINANCE.

BY ELLIS H. ROBERTS.

[Ellis H. Roberts, treasurer of United States; born, Utica, N. Y., September 30, 1827; graduated from Yale, 1850; principal, Utica free academy, 1851-59; editor of the Utica Herald, 1851-80; member of New York legislature, 1866; member of congress, 1871-5; assistant treasurer of the United States, 1889-93; president, Franklin National bank. New York, 1893-7; treasurer of United States since 1897.]

The United States is not asking for new loans. The government is not increasing its debt by long bonds or by exchequer bills for temporary needs. If in any month outlay exceeds income, the deficit is covered by previous surplus laid away. Individuals and corporations reach out for vast sums in loans, but the nation is not a borrower in any market. market. Its interest bearing debt at the beginning of the fiscal year 1898 was $847,365,130, and the annual interest was $34,387,315. A loan of $200,000,000 was made by popular subscription for war purposes. Yet at the start of the fiscal year of 1904 that debt was only $895,157,440 and the annual interest $24,176,745. In the interval the government has paid the cost of the Spanish war, $20,000,000 under the treaty of Paris, and $50,000,000 on account of the Panama canal. Now the nation stands on a granite basis of credit, and over the door of the treasury may be inscribed: "We are not borrowing here."

This fact reduces the financial problem to simple terms. The government leaves the loan market alone. Enough factors remain, however, to make it worth while to study the strength and the weakness of American finance. For a full discussion of our theme, we might perhaps be required to treat of the receipts and disbursements of the government. We may, however, in these partisan days leave this branch to the orators and the press of the political parties, who will be quite ready to thresh out the straw to the uttermost. In an ideal currency system, one would not expect to find besides subsidiary and minor coin, and the disappearing treasury notes,

six classes of money-gold coin, uncovered notes, certificates issued for gold, certificates issued for silver, bank notes and legal tender silver dollars. Or only four classes might be named, to wit: gold and its certificates, constituting 44.1 per cent; silver and its certificates, 21.2 per cent; uncovered notes 13.2 per cent; and bank notes, 17.2 per cent. The financial architect would seek to be rid of uncovered notes and legal tender dollars, and might look askance at the large bank circulation.

The United States notes, at first and still in theory a forced loan, began without reserve behind them. The resumption act which aimed to redeem them in gold, gave them a power for mischief as weapons for assault on the official treasure. Danger arose when the revenue was inadequate, and the treasury became impoverished. Peril ceased when a surplus was created, and the yellow metal flowed into the national coffers. In itself the United States note is weak; it gains strength as gold is put behind it. The practical banker may join with the theorist in the wish that it may pass gradually into the gold certificate. That change is going on without jar or friction on two paths; first, by the increase in the gold in the treasury, and second, by the use of notes of $10 instead of those of larger denomination. In five years the $10 notes have run up from just less than $100,000,000 on July 1, 1900, to $193,459,321 in 1902, to $245,440,011 on the same date in 1904. The treasury gross gold in the same period from $423,577,971 rose to $681,838,821, and is now over $700,000,000. Thus these greenbacks have turned from large notes in chief part to be 70.7 per cent in $10 bills, for which the demand always, with rare exceptions, exceeds the supply. In the same five years additions of 60.9 per cent to the gross gold in the official vaults have been made. The share of the uncovered notes to the total currency is steadily growing less. From 33.6 per cent in 1880, and 23.4 per cent in 1900, it has fallen to 13 per cent. The danger from them has diminished in certainly as marked a ratio. They are to decrease, while the general volume is to increase. Congress could without friction use at once $50,000,000 of the gold reserve for certificates of $10

and $5, as a substitute for United States notes for redemption, and in each succeeding year apply a like sum for the inflow to continue such change. The redemptions of United States notes last year were $122,680,000 and the average for five years $101,231,200. It would be easy to transform half of this sum into gold certificates. By this process the United States notes would grow less weak, and before very long become in fact gold certificates, as they are now in essence, in the ratio which the reserve holds to them, or 43.2 per cent.

The silver dollars have of late been severely assailed in and out of congress. They are denounced as excessive in volume and as a menace to the integrity of the currency. Demand has been loud for their redemption in gold, and for the reduction of their number by coinage into fractions. Predictions have been put forth that some official may, at his option, pay them for interest or some other high obligations. Assault on a fortress does not prove that it is vulnerable, but it does challenge vigilance and defence. While additions to the silver dollars were constant, their force for evil or for good grows apace. The repeal of the act for the purchase of silver set a barrier to the current and checked it. The recent stoppage of the coinage of dollars fixes a limit to their volume, and permits a calm survey of their use and their abuse. Silver dollars in circulation and not covered by certificates on July 1, 1900, were $65,889,346, and 3.2 per cent of the total currency. The volume increased for three years, but the ratio fell to 3 per cent of the total circulation. In the fiscal year 1904, including the coinage for treasury notes, the volume became $71,561,684, or 2.8 per cent of the total circulation. The silver dollars in the treasury reach the maximum from October to December annually, and the minimum in July or June. In 1900 the difference between summer and early winter was $8,203,467; in 1901 it was $10,422,985; in 1902 it was $6,651,358; in 1903 it was $9,794,447; and in 1904 it was $10,011,539. This is a margin of practical elasticity in these metallic dollars, and marks the currents of their use in the varying seasons. This elasticity is in so far an offset to the weakness of such coinage.