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all their issues as fast as current payments return them, without, however, as usual, keeping up the currency by fresh discounts. If the payments at the banks amount in the United States, for each day, to $300,000,000, the withdrawal of the usual facilities at the banks by contraction, to the extent of even one-half, would rapidly absorb the stock of bank notes and deposits applicable to current payments, and of course make these payments daily more difficult, and finally, to a large extent, impossible. High interest, such as eighteen, twenty-four or thirty-six per cent. per annum, supervenes in this hour of trial to check still further the circulation of that portion of the bank notes and deposits not absorbed by the banks."

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"The contraction in New York, in the panic of 1857, is a specimen of what the banks are constrained to do, to save themselves. They can only protect their coffers by refusing to issue the usual supply of currency. The diminution of loans and deposits in the banks of New York stood thus in August and October, 1857:

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Loans.

$121,241,472

108,777,421

97,245,826

Deposits.

$92,356,328

75,772,774 52,894,623

"This exhibits a reduction of discounts, in one month, of $13,000,000, and the succeeding month of $11,000,000; that is, $24,000,000 in sixty days: in one month deposits ran down, under this operation, $17,000,000; in the succeeding month, $23,000,000; making, in the two months, a reduction in the chief medium of payment of $40,000,000. deposits were thus reduced nearly one-half. It cannot be surprising that, under such a process of contraction, interest went up to between fifteen and thirty-six per cent., and exchange down to nine or ten per cent. below par. What the banks did in New York was done, in a greater or less

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degree, in other cities; bankruptcy, ruin and destruction followed. It is estimated that from five to six thousand failures occurred, involving an indebtedness of from $280,000,000 to $300,000,000, with a loss to creditors of more than $150,000,000. But this loss bears no comparison with that arising from the depreciation of securities, and from the fall in price of real and personal property, which, judg ing from the results of estimates carefully made, cannot be less than $500,000,000, and may not improbably be twice that sum. The loss sustained by the men who labor for their living is even more severe in its consequences, if not equal in pecuniary amount. A million of men idle for six months involves a loss to the country of $150,000,000, besides the loss upon the machinery, shops, tools and factories, which stand idle when the workmen are unemployed. "The late panic has inflicted, in all its bearings and ramifications, a loss upon the country which may be variously estimated from $500,000,000 to $1,000,000,000. No doubt the ill effects of the panic were much enhanced by the previous abuse of credit, and that a considerable portion of this devastation should be set down to that account. With every allowance in that respect, we shall have a vast sum of loss to charge to the panic; and whether this sum be $400,000,000, or $800,000,000, matters not to our view. The loss was, to great extent, unnecessary, cruel, terrible-a loss which has carried privation, distress and ruin to a million of homes. For a time, at least, not yet passed, it reduced hundreds of thousands of the best people to a state of entire dependence, if not beggary.

"What was the occasion of these dire calamities? The banks of the United States had a reserve of specie for sev eral years previous to 1857, and during the first half of that year, amounting to somewhat over $50,000,000; and of this,

the banks in the city of New York held a little more than one-fifth. To save this amount of specie, the banks contracted the currency one-half, denied the usual facilities upon their books, put up the rate of interest from twelve to thirty-six per cent., put down exchange upon England to nine or ten per cent. below par, reduced the revenue from customs to less than half the usual amount, drew a surplus of $20,000,000 of gold out of the public treasury, and drove the government to an issue of paper promises to pay its current expenses, deprived hundreds of thousands, perhaps millions, of their customary employment, caused some five or six thousand failures among men of business, and finally inflicted a loss on the country, in the depreciation of securities, in the reduction of prices and by insolvency, of several hundred millions.-Not to save this sum of fifty millions from being lost, sunk in the ocean, or thrown away, were all these evils encountered, but merely to prevent it from passing into circulation among the people, or at the worst, to prevent it from being exported in payment of debts due in foreign countries. Nine-tenths of the debts of the country are paid, as we have seen, by the agency of discounts and deposits, with some aid from the circulation of the banks; but the banks have been placed under such heavy penalties to pay all their liabilities in specie on demand, that when they are threatened with a panic, a commercial revulsion, or a heavy export of specie to foreign countries, they are compelled, like Sampson in the temple of the Philistines, to pull down the whole fabric of credit, public and private, about the ears of the people, to disturb and check the progress of industry in all its departments, to make bankrupts of their customers, and to sow pauperism broadcast in the field of labor.

"This compelled policy of the banks, under the stringency

of the laws which govern them, has been called paying specie. But with how little propriety. Instead of paying their liabilities with commercial promptness and the faithfulness of those who are discharging a legal and moral obligation, they resist it with all the power and weapons they can command. In the struggles incident to this resist ance, they strike down friends as well as enemies, and deprive the public of an amount of currency necessary to business, ten times greater than the specie they are unwilling to pay out. And this is the convertibility so long aimed at, and to secure which so much legislation and so much thought has been expended! This is the triumph of banks which pass through a season of panic and revulsion without suspending!—a triumph like the victory which leaves 100,000 dead bodies on the field of battle, which makes 10,000 widows, 50,000 orphans, and 200,000 paupers."

THE LEGAL TENDER PAPER MONEY SYSTEM.

With the clear and comprehensive analysis of the principles of the bank currency system, contained in the foregoing extracts from The Ways and Means of Payment, before us, it is not difficult to understand how public notes issued by the government can perform the functions of a medium of exchange.

The great object of trade is the exchange of commodities and services, and it is immaterial to the parties interested whether this exchange is effected by means of a medium possessing intrinsic value, or representative value, as long as it is done with equal safety, convenience and cost.

Public notes, like bank notes, are virtually based on commodities moving in the channels of trade. There is a constant interchange of commodities and services on a vast scale going on between individuals, growing out of the

necessities of government, Federal, State and local. Το effect this exchange a medium is required. On the one side are the people, who are obliged to contribute out of their substance in proportion to their means towards the expenses of government. On the other, there is a vast multitude of people to whom the government, Federal, State and local, is indebted for commodities and services. The people possess abundant property and products desired by the creditors of the government, and the only problem to be solved is as to the manner in which the exchange can be equitably, speedily and economically accomplished. This can be done, and as it is a matter in which the entire nation is directly interested, it is eminently proper that it should be done, through the instrumentality of public notes issued by the government. Individuals engaged in trade employ the superior credit of banks to enable them to exchange commodities and services; and this superior credit of the banks, for reasons which have been fully explained, serves the purposes of money, in the interval between the time it is issued, in the form of bank notes, to creditors of the banks, until it is returned by the debtors of the banks. In the same manner the superior credit of the government, issued in the form of public notes to the creditors of the government, performs the functions of money, until it is returned to the Federal Treasury by the debtors (tax payers) of the government. The bank notes rest upon the credit of the institutions which issue them, and are a lien upon the assets of the banks, which consist of the property of the banks and of their debtors. The public notes rest upon the credit of the government, and are a lien upon the whole property of the nation. Thus far the analogy between public notes and bank notes is complete, with the advantage largely in favor of public notes, for two reasons: in the first

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