individuals, banks can be thrown into bankruptcy and compelled to go into liquidation, but such a step only aggravates the distress of the public, and is rarely adopted; and the banks are permitted to escape, only to repeat the operation as soon as confidence has been restored through the aid of the Sheriff.* The extent to which banks are enabled to lend their credit by means of the specie basis system of banking will appear from an examination of the following table, which is an abstract of the Commissioners' Report of the banks of Connecticut for a period of twelve years, from 1837 to 1847 inclusive and the year 1849. The banks of Connecticut, it should be mentioned, were conducted during this period with as much safety to the public as those of any other State in the Union:

Kellogg, who gives this table, in commenting upon it, says: "By the foregoing table it will be seen that the average amount of the specie held by the banks in the State of Connecticut, for the twelve years, was $478,719, while the average amount of their loans to the public, during the same

*See page 20.

†Kellogg's New Monetary System, page 204.

period, was $11,669,457-more than twenty-four and onethird times as much money as the banks had specie. The annual interest on $11,669,457 was $700,167. If they could have loaned only their specie, the interest would have amounted to but $28,723. The banks gained from the public annually $671,444 above the interest on their specie; and, in the twelve years, $8,057,328. They collected this interest in advance, and made their dividends half yearly to their stockholders; therefore, it is proper to compound this interest half yearly, which would swell their gains to nearly $12,000,000, that is to say, $1,000,000 interest annually. These were actual gains, as much realized by these banks as if they had produced and sold annually $700,167 worth of agricultural products." (The statements of the banks of any of the large cities, published from time to time in the newspapers, will disclose a similar inflation of credit at the present time. The fact that the National Banks do not redeem their notes in specie makes no difference. They are banks of issue and belong to the specie basis system all the same.)

The banks of the United States have been compelled to suspend specie payments at various times as follows, to wit: in 1809, 1814, 1819, 1825, 1834, 1837, 1839, 1841, 1857, 1861, and in 1873 currency payment. These suspensions have invariably occasioned great public distress, and in several instances have involved the entire country in bankruptcy and ruin, from which it took years to recover. In March, 1809, a legislative committee of the State of Rhode Island made an examination into the affairs of the Farmers' Exchange Bank of Gloucester, and it was found that the bank had $580,000 of its notes in circulation, and only $86.16 in its vaults for their redemption. Before the end of the year a general suspension of the banks of New England took place, and it was discovered that they were nearly all in the same condition-no specie and nothing to show but the worthless notes of speculators.

CRASH OF 1814.

In 1814 all the banks outside of New England, including the forty-one banks chartered by the Pennsylvania legislature in the early part of the year, were obliged to suspend specie payment, occasioning great distress. The people were helpless, and could do no better than to use their depreciated notes. This condition of affairs lasted for years. The following table shows the depreciation of the notes of the banks of the cities of Baltimore, New York and Philadelphia during the suspension:

Philadelphia.
Per cent.

New York.
Per cent.

Baltimore.
Per cent.

ness of such an operation, in the ordinary course of things, was sufficient to involve the government in perpetual einbarrassment, and to defeat many of its best measures, even when there was the utmost good faith and promptitude on the part of the States, in complying with the requisitions. But many reasons concurred to produce a total want of promptitude on the part of the States, and, in numerous instances, a total disregard of the requisitions. Indeed from the moment that the peace of 1783 secured the country from the distressing calamities of war, a general relaxation took place; and many of the States successively found apologies for their gross eglect in evils common to all, or complaints listened to by all. Many solemn and affecting appeals were from time to time made by Congress to the States, but they were attended with no salutary effect. Many measures were devised to obviate the difficulties, nay the dangers which threatened the Union; but they failed to produce any amendments in the confederation. An attempt was inade by Congress, during the war, to procure from the States an authority to levy an impost of five per cent. upon imported and prize goods, but the assent of all the States could not be procured." ??*

The population of the thirteen colonies was estimated in 1775 at 2,448,000, and the entire property of the country at less than $600,000,000. That a paper currency, issued to an excessive amount, by thirteen sparsely settled colonies, in a state of rebellion, under a revolutionary government possessing, only a shadow of authority, against the most powerful nation on the earth, should have circulated at all, is one of the most remarkable facts connected with the Revolution, and is to be accounted for only by the patriotism of those engaged in that memorable struggle. But, as we

*Story on the Constitution, Vol. 1, page 171.

Jefferson's Works, Vol. 9, 'page 272.

have seen, it circulated for over a year at par with silver, and in 1778, three years after the first emission, it depreciated only to $1.75 for $1. Congress resorted to various measures to sustain the credit of Continental bills, but, as ought to have been expected, without success. Money, as has been fully explained, derives it power to represent value from law, but there must be value in property or products, for which it can be exchanged, for it to represent, and the law must emanate from a responsible source-from a government possessing the right and power to command such property for its uses, otherwise it is only money in name. It is worthy of note, too, that Continental bills were not issued in the form of paper money, such as was first introduced by Massachusetts, and subsequently adopted by many of the other colonies, but in the form of promises to pay specie, at certain specified times, which, under the circumstances, was a manifest impossibility. The gradual depreciation of Continental money, as it passed from hand, inflicted a loss upon each successive holder, which came to be regarded in the nature of a tax or contribution towards the cause of independence. The large sums held by individuals after it ceased to circulate were taken at its greatest depreciation, and no great loss was sustained. When, after it had seen the liberties of the people vindicated, it sank, in the moment of victory, quietly into its grave, no commercial crash or money panic attended its fall. Its ghost has troubled no one since, except the advocates of the British system of bank currency, which, perhaps, is: only in accordance with the eternal fitness of things.

BANKS OF THE UNITED STATES.

We come now to a new era in the history of American currency. When the colonies entered the Federal Union,