Excerpt from Social Economist, Vol. 7: A Journal of American Economics
The existence of the greenback issue, and the legal tender act, combine to make the government of the United States the sole debtor in the country who can be called upon by law to pay coin. The banks are not obliged to pay coin, because the legal tender law stands between them and all creditors. They are solvent so long as they pay in legal tenders. The government is only solvent so long as it can redeem its legal tenders in coin. Not only are the banks solvent on their notes so long as they can redeem them in legal tenders, but they are solvent also on their deposits so long as they can pay the depositors in legal tenders.
The banks, moreover, have large facilities for accumulating coin, and are accumulating it in considerable quantities, although upon the theory of the existing system they do not require it. The government requires it greatly, but has no other means of obtaining it than in receipt of customs duties or on the sale of bonds. This tendency of the banks toward the accumulation of a form of reserve not required by law shows their distrust of the existing law and their lack of confidence in its permanency. Their further determination not to receive silver on deposit, though the law as yet makes no distinction in legal tender quality between standard silver and standard gold, shows that the banks have agreed upon the proposition, as fundamental to their position, that they will transact business hereafter upon the monometallic basis of gold only, and their position is none the less law to them because it has not yet found its way into a statute, and perhaps could not constitutionally take the form of law.
The official Treasury estimate of the stock of gold held in the United States on June ist, makes the total $665,000,000.
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