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our eye steadily on these great facts," (namely, the fluctuations of a mixed currency in quantity and quality,) "we are enabled to account for all those frightful convulsions in the monetary world which we know take place," such as "overtrading," "speculation," "gambling," "recklessness," etc., etc. It is very clear from this language that Mr. Walker believes our banking system to be an unmixed evil-in fact, the root of all evil, commercially and financially considered.

The first point, to-wit, "the fluctuations in quantity and quality of a mixed currency," is extremely important. Much of the error and prejudice concerning banks arises from not understanding clearly the rules or laws that regulate the issuing of bank bills and the true criterion of their value. In the main, supply and demand regulate their amount and their exchangeable value, or what is the same thing, their "quality."

A bank is established for its dividends, and to facilitate business. It is clothed with limited and well-defined powers, and is managed by, or under the control of, a board of directors. It has four sources of profit-its capital, its deposits, its circulation, and its exchanges. Its circulation, that is, the amount in bills it can have out at any one time, is limited by law, and depending upon the amount of specie on hand. The amount of its discounts is also restricted by law, and, as a general thing, cannot exceed at any time twice the amount of the capital. From them its profits are chiefly derived. When they can be increased and kept up to the limit without issuing bills, as they can in case of large deposits, the bank prefers not to issue bills, and in many instances, where the law allows it to use those of another bank, it does not. It is a common opinion that a bank can, and that it does, at pleasure, increase and diminish its circulation; and that the banks do capriciously affect the money market in this way. This is a great mistake. The true interest of the bank lies in having its customers, and the public generally, successful; consequently it acts with caution and prudence, doing all it can to promote the public good, consistently with taking care of itself. It never issues bills gratuitously, nor without securing or putting into its vaults their value. Every bill going from the bank is a debt against itself, payable on demand; and it is in the hands of the public, who, as it regards the bank, are jealous, unfriendly, and uncharitable.

The interest of the bank, and that of the public, depend reciprocally upon each other; the bank will do all it can in safety to accommodate the public; more than this the public have no right to expect, nor the bank to grant; and it is not only untrue, but absurd, to say that the bank increases or diminishes its circulation capriciously. It might be said with as much propriety that a prudent and responsible merchant buys and sells his goods in the same way. A merchant, in making his purchases, goes into the market remembering that there is a pay-day; in selling, he keeps steadily in view the question of getting his pay; and, not only so, of getting it in time to meet his own payments. This is the principle of the bank. They both may, and do, make mistakes-infallibility is not an attribute of humanity. We find a great fluctuation, as Mr. Walker says, in the amount of bank circulation, not only at periods distant from one another, but at different seasons of the same year, and also in different sections of the country, and he produces a variety of statistics in proof. This fluctuation we regard as perfectly natural, forming no argument against a paper currency. If paper money of itself made the corn grow,

built and equipped the factory, pegged the boots and shoes, constructed the railroad, it might be. Its office is of a very different character. After the corn is grown and ready for market it comes into aid in selling it, and in distributing it to consumers over the country. It lends its aid in the same way in scattering over the country all kinds of merchandise. The factory that turns out a million of dollars' worth of goods, the 80,000 people in Massachusetts engaged in making shoes, say amounting annually to $50,000,000, are all benefited in the same way. As this corn, these goods, and boots and shoes are chiefly sold during five or six months of the year, it is very natural that more money should be required at one time than at another, causing a "fluctuation" in business, and a corresponding "fluctuation" in the amount of paper money in circulation.

Supposing the corn crop should fail, or partially so, and there should. be scarcely any to send to market; supposing the factories should stop, or run half time, and supposing from any cause there is a great depression in business, a "fluctuation" in the amount of paper money in circulation ensues, comparing one year with another, just as it fluctuates in a single year by crowding the business into a few months; this is a logical and legitimate result. Objection might be made with the same propriety to a railroad, because there is a fluctuation in the number of cars sent over it daily, monthly, or yearly, as to our banking system, because of the fluctuation in the amount of bills in circulation. The number of cars is graduated by business and by passengers. Passengers go West to buy corn, and others come East to purchase the products of the factory and the boots and shoes. These articles are sent simultaneously in their opposite and respective directions, creating a necessity for a greater number of cars and a larger amount of money at one time than at another. The condition of the banks in 1857, as compared with 1858, illustrate our argument:

In 1857......
In 1858.

Capital.
$370,834,688
394,622,797

Specie. Loans and discounts. Circulation. $58,349,838 $684,456,887 $214,778,822 74,112,832 583,165,242 155,208,344

Business is extremely light this year as compared with the last, and we see that while the banking capital has been increased very considerably, the loans and discounts have diminished more than $100,000,000, being about one-sixth; the circulation has decreased about $60,000,000, more than a quarter; and the specie has increased nearly a third, upwards of $16,000,000. This condition of the banks is not a matter of choice, in respect to decrease of loans and circulation, but of necessity. Their circulation, business having fallen off, is not required, and, as a matter of course, it returns to the banks.

The error in Mr. Walker's argument is fundamental. His premises are wrong, and, as a matter of course, his conclusions are wrong. He puts an effect for a cause. He assumes that the banks create and regulate the business of the country, when, in fact, the business exists, and the banks come in to afford facilities for transacting it.

His method of determining the value of paper money (he calls it the "quality") is certainly erroneous. Assuming that it may be worth at one time 90 per cent, at another only 50, at another only 10, or even 5 per cent, he comes to this conclusion by comparing the amount of specie in the banks, at a given time, with the circulation. For instance, in 1840, the circulation of all the banks in the United States was, in round figures,

$107,000,000, and they had only $33,000,000 in specie, leaving the bills worth, by his criterion, only 31 per cent. We are at loss in determining why Mr. Walker adopts this method of discovering the value of the cir culation. Why should specie be regarded as the true exponent of the value of our currency, or the debts of the banks, any more than it should be of the debts of individuals or of the community? It is a well-known fact that deposits are as much a debt in all respects against a bank as circulation. În 1840, these same banks owed to depositors, in round figures, $76,000,000. The depositors have the same right in law and equity to draw out the specie that the billholders have, and, as a general thing, they could do it with greater facility, having large amounts, while the bills are scattered over the country.

If the value of a bank's indebtedness is to be decided by its specie, certainly the deposits should be an element in the calculation. In the case cited, the result would be very different from Mr. Walker's conclusion. The deposits added to the circulation make $183,000,000, leaving the bills worth not 31 per cent, but 18 per cent. Now we regard this criterion, of judging the value of bills, as utterly fallacious, for a variety of reasons. There may be two banks having each $200,000 as a capital, and each having $100,000 in specie and $300,000 in circulation, and yet the bills of one may be worth in fact twice as much as those of the other. This is not an extreme case, and to a man who is acquainted with banks it is obvious, and at once understood. It is true a bank agrees to pay its bills and deposits in specie; but scarcely any person makes a deposit in a bank, or takes one of its bills, with reference to its specie. Other considerations control him. As a general rule he prefers not to take the specie; when he does, it is an exception. There are but about four cases in which a man wants coin-namely, to send abroad; to pay government; to make change; and to make a legal tender in case of anticipated litigation. This view was most strikingly exemplified last year, at the time our banks suspended. Although it was expected for weeks, and known for days, that they would suspend, there was no run upon them. Nobody doubted their solvency, or judged it by their specie. Let us examine a moment, and see where this criterion of Mr. Walker's will lead to.

As I have before said, the banks promise to pay their debts in specie. So do the savings banks-so do all merchants-bonds and mortgages, and all obligations of almost every name and nature, are payable in specie. The deposits in the savings banks in Massachusetts in 1856, amounted to upwards of $30,000,000, and they held less than $500,000 in specie, leaving, according to Mr. Walker's criterion, the deposits worth a fraction over one-and-a-half per cent. We have no doubt that the individual and corporate indebtedness of the country at the time of the crisis of last year was, at the lowest calculation, five thousand millions of dollars, all payable in specie, and the specie in the country did not much exceed two hundred and fifty to three hundred millions, leaving the debt worth about 5 per cent. It is only necessary to carry out Mr. Walker's reasoning to its ultimate results to expose its absurdity.

The second general argument of Mr. Walker is, that paper money, not having the cost value of coin, can perform well only one function of money, to wit, that of medium of exchange; and not being a standard of value, it is local in its use-" money at home, and moonshine abroad." The enemies of our banking system have a peculiar way of reasoning. Not content with charging upon the banks all the evils which business is

heir to, they attribute to them and paper money certain powers or functions which no friend claims they possess, and then proceed in the most formal manner to prove that they do not possess them. This is precisely what Mr. Walker does. He objects to paper money because it has not all the power of coin, and because it is not a standard of value. He might as well object to a horse because it is not a cow, or a steamboat because it is not a railroad car. We must take paper money as it is. It has no value per se. It is merely a representative of property-it cannot, in the nature of things, be a standard of value. It is simply a medium of exchange within a limited sphere; that is, where it is known. Where it is not known, it is as Mr. Walker says-" moonshine."

The third general proposition of Mr. Walker is, that paper money causes an extension of credit; an increased demand for foreign products; and, consequently, the export of specie. All this comes to us in the form of mere assertion. Still, it may be true. We are not favored, however, with either facts or arguments to aid us in determining the case. old syllogistic system of logic is relied upon :-the banks produce all our commercial and financial evils-the extension of credit is an evil-therefore the banks caused it.

The

It is impossible to determine from facts whether our system of paper money produced the results alleged, so far as the extension of credits and the increased demand for foreign products are concerned, for we have no facts or figures that directly bear on the subject. This is not true, however, in regard to the export and import of specie. We have reliable statistics concerning them, and also of the amount of paper money in circulation each year, at least for the last thirty years.

The excess of importations over the exportations of specie for each five years from 1830 to 1849, inclusive, is as follows:

From 1830 to 1834. $24,812,910

From 1835 to 1839.
$31,327,885

From 1840 to 1844. From 1845 to 1849,
$15,939,560
$9,315,676

From 1850 to 1854, our exports of specie were largely in excess of our imports. The excess in these five years amounted to $121,806,669. In 1855, the excess was $52,587,531; in 1856, it was $41,537,855. In seven years, from 1850 to 1856, inclusive, the excess of exportation of specie was $215,932,055.

We will see for a moment how the movement in specie squares with Mr. Walker's argument. These statistics, and those of the banks, are the only reliable facts we know of that directly bear on the question; and what are the facts, and what do they teach us? and what are the fair logical deductions therefrom?

After examining carefully, and we think critically, the bank statistics, and also those of all the great interests of the country, we have come to the conclusion that the banking capital and the amount of paper money in circulation have decreased, from 1830 to 1856, inclusive, a period of twenty-seven years, three-quarters; that is to say, in 1856 the banking capital and the paper money in circulation were each only one-quarter as much as in 1830; therefore there has been a decrease of three-quarters in the period named. This decrease has not been uniform from year to year, but in the aggregate the result is as we have stated, and in considering another branch of the subject we shall attempt to demonstrate it. It will be borne in mind that Mr. Walker's argument, or rather asser

tion, is, that paper money causes an extension of credit, an increased demand for foreign goods, and consequently the export of specie. We contend that facts disprove his conclusion, and therefore his assertion falls to the ground.

From 1830 to 1836, inclusive, a period of seven years, we imported $42,252,113 more specie than we exported. From 1850 to 1856, in the same length of time, we exported $215,932,055 more than we imported. In the former period the paper money in circulation, in round figures, was four dollars to one dollar in the latter, and yet we imported specie largely, and in the latter exported still more largely. Now, it may be said that during the latter period we were producers of specie, and as a matter of course exporters. Admit this for argument's sake. Our facts are then conclusive as against Mr. Walker's assertion, for from 1830 to 1849, there was a very rapid decrease in paper money, and also a large diminution in the importations of gold and silver. From 1830 to 1834, we imported $24,812,910 more specie than we exported; from 1845 to 1849, we imported $9,315,676 more than we exported. Here is a falling off between these two periods of two-thirds in the importations of specie, and the paper money decreased about in the same ratio. Now, if these facts stood in the relation of cause and effect, we should have strong grounds for concluding that paper money brought specie into the country. But we do not assume this. We simply say these facts disprove conclusively Mr. Walker's assertion, that paper money necessarily drives specie out of the country. We wish to discuss the question fairly. A good cause is not strengthened by claiming for it what it does not possess, neither is a bad cause overthrown by denying it the little good that may rightfully belong to it.

Mr. Walker's next assertion is, that "paper money stimulates and depresses credit." Volumes have been written in favor of this statement, and yet we have seen no direct proof of the statement in the sense in which it is intended it should be understood. It is obvious, however, that whatever enlarges the sphere of business, extends improvements, or stimulates production, evidently, under our vicious credit system, "stimulates and depresses credit." Our whole commercial system is floated along on credit. If the proof of this depended upon the cash transactions, that is, on the exceptions to the general rule, they are really too small in number to prove it. But more of this at another time.

The next point we notice is Mr. Walker's assertion respecting paper money, that bankruptcies occur "just in proportion to its expansibility and contractibility." Here is great exactness, considering there is no proof excepting the following statement. He says:-"We have seen it asserted, but do not recollect upon what authority, that the comparative bankruptcies among business men in the different countries named were as follows:In France, 15 out of every 100; England, 35; Scotland, 60; United States, 80." This comparative statement would be much more forcible if it were more comprehensive. If Mr. Walker had only "remembered " about other countries-for instance, in Asiatic Turkey, among the Bedouins, 0 out of every 100; in European Turkey, 1; in Rome, 2; in Spain, 3; in Portugal, 4-he would have had a regular progression, not only in figures, but as it respects currency and banks, or bank facilities. In Turkey they have a purely specie currency; in Rome, only now and then a fugitive check or draft is seen; in Spain, paper money of the same

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