Page:The New International Encyclopædia 1st ed. v. 10.djvu/594

* INDEPENDENT TREASURY. 520 INDETERMINATE MULTIPLIERS. nn nccuimil.it ion of funds were perceived, and in 1853 Inrjie redemption!* of bonds were made to nvoid them. In the panic uf 18.'i7 tlic (Jnvcrnnicnt escajwd unscathed, and this added to the popu- larity of the independent treasury system. But «ith the fiscal necessities of the Civil War the principle of isolation was broken down. The banks became essential to the support of the Goveniment. The .Secretary of the Treasury se- cured their aid in makinp the first loans of the war. lie would not recoi.niize their notes in the (iovcrnnient operations, but soon bnuijiht forward his plans for transformiiif; the banks into na- tional institutions under Federal control, with power to issue notes of a kind which could be reoopnizeil by the Government. When tlic na- tional banking system was organized, in 18G3, the banks were allowed to become depositories of the public money, except the receipts from customs, under rcffulations established by the Treasury Department. Customs receipts, beinj; in specie, were excluded from the funds capable of l)eins deposited, since banks were not then paying specie. These (le|)0sits in the banks are secured by bonds deposited with the Treasury Depart- ment. The extent to which the banks have been used as places of deposit has varied with the state of the Treasury and the nature of its operations. When loans have been made the money has been paid in through banks and al- lowed to remain there until expended. In the rc- fuiidini.' opera lions of ISTO the banks sobl nearly $400.nnn.000 worth of bonds, and held at one time (May. 1S7'.)) as much as .*27!t,.i44,t«4.5. On the other hand, when the surplus has dwindled the amount of money so deposited has decreased, while in periods of an abundant surplus it has swollen in size. On October 1. 1002. the amount so deposited in banks was .$120,102,430. The idea of the Independent Treasury Law was that the banks should not interfere with the Treasury, while in its practical administration, with the enormous growth of Government reve- nue, the problem has been for the Treasury' so to conduct its operations that it shall interfere as little as possible with the banks and the ordi- nary course of business. In principle the Govern- ment pays cash, demands cash, and keeps its funds in a strong box — a method of conducting business entirely at variance with the usual prac- tice in mercantile life. The income and out- go of the Government have not, moreover, the regularity which frequently characterizes^ mer- cantile aflTairs. Jloney accumulating in the Treasury in anticipation of future payments is withdrawn from circulation. .Such withdrawal may accentuate a stringency, while the subse- quent payment may aggravate a plethora. As an offset to these disadvantages of the system, it has been contended that it equalizes conditions by (permitting the Secretarv' of the Treasury to come to the ■relief of the money market. Tliis is a questionable advantage. The relief is con- tingent upon a )dethoric Treasury: it is, more- over, largely in the discretion of one man. the Secretary of the Treasury-, whose impulsiveness or conservatism may materially afTect the relief afforded. Finally, when determined upon, it is not always as speedy as desired. The .Secretary of the Treasury can increase the money in circu- lation (1) by additional deposits in banks, (2) by anticipating payments, (3) by redemption or purchase of the public debt. Of these methods the first is gradual, as no transfers can be made from the Treasury to the banks, the latter's holdings increasing only by dejiosit of internal revenue and other general receipts. Moreover, banks have l)een unable, even during ]K'riuds of stringency, to apply for funds that could legally be de|)osited with them, owing to the requirement that such funds were to l>e secured by deposit of national bonds — a requirement sometimes diffi- cult to meet, because of the high price of such bonds. By an order of the .'Secretary, dated October 4. 1002. banks are permitted, under cer- tain conditions, to substitute specified State and municipal bonds for the national bonds hitherto required. It is hoped that in this way the Treas- ury will be able to give a larger measure of re- lief than formerly. The second method applies chiefly to certain definite ])ayinents, like the in- terest upon the public dcl)t. The third is the most satisfactorj-. so long as there is outstanding! a redeemable debt, but cannot be free from criti- cism when the Government goes into the market to buy up its own bonds. Moreover, with the debt limit of the United .States growing less, and with a larger part of the debt held by banks as a security for deposits or currency, this resource is growing weaker. Since any sale of bonds by banks would diminish the circulation in other directions, it is only the bonds held by individuals whose sale to the Government wouUl afTect the volume of the circulation. Hence the 'relief which the Treasury can afford the monetary situation is spasmodic, irregular, and uncertain; it is very far from being a .scientific automatic corrective of the excesses of the money market. It is the opinion of those who have examined the matter in all its details that the inde- pendent Treasury offers the Government no ad- vantages which could not be secured by properly guarded contracts with the banks. .Such con- tracts would relieve the Government of the cus- tody of its own surplus, and would not withdraw that surplus from Die ordinary channels of trade. There is a crowing feeling that our Treasury methods are antiquated, and should be replaced by methods more in harmony with business prin- ciples. It has been pointed out that if others should follow the example of the Government, business would come to a standstill. See Finance; Banks: Banking. Consult Kinley, The Inrtp- poidcnt Trrdsuni St/fitrm of the United States (New York. 1803). INDESTRUCTIBILITY OF MATTER. See Matter. INDETERMINATE COEFFICIENT. See COEFFICIKNT. INDETERMINATE EQUATION. See Equation. INDETERMINATE MULTIPLIERS. The use of indeterminate multipliers is well illustrat- ed by Bezout's method of elimination in solving systems of simultaneous equations. E.g. let it be required to .solve the system of equations, (1) 4x— 5y'+ 2z = 0. (2) 3a; -f 2v + 7- = 28. (3) ,T— II + 2: -5. Alultiplying the members of the first equation by X and those of the second equation by X' and adding to those of the third equation, we obtain the equivalent system. (4) 4x — 5y + Zz = 0. (5) 3x + 2y + 1z = 29.