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The Principle of Credit -The United States built up by Credit-Gold and Silver a Credit Currency Is Bank-paper Money?-The Invention of Paper-Money a great Advance in Civilization-Facts to illustrate its Economy and Necessity -It greatly augments the Facilities, Scope, and Powers of Commerce.-Facts and Authorities to this Point.— Banking the Instrument of Paper-Money-The American System of Banking-Principles and Benefits of Banking.-Adam Smith's Doctrine that Paper-Money banishes Specie, not applicable to the United States-The Precious Metals the only sound Basis of Banking-The visionary and unsettled Opinious of European, particularly British Economists, as to the Basis of Banking.- Sir Robert Peel right at last in his Bill of 1844. -A Government Bank necessarily in a false Position-The Subtreasury a Government Bank-Treasury-Notes are Post Notes-All the Functions of the Treasury, by making it a Government Bank, merged in that Bank-The Effects Danger, and Power of this Institution—It subverts the Banking System of the Country -The Instincts and Propensity of the Federal Government for Banking, as illustrated in the Subtreasury.

As we are now approaching that department of the monetary system, which has much to do with the principle of credit or faith, it may be well to say a few words on this great bond of the social state. Endeavors have been made to scandalize credit, by representing it as synonymous with faith reposed in false pretences; and on the basis of this assumption, a theory has been set up, that credit is a vice, and ought not to be tolerated. This doctrine was first promulgated from the most eminent civil position in the land; and the unearthly scream, the barbarian whoop of a servile minion, to the great affright of men less mad, sitting in grave assembly in the halls of legislation, gave out the word, "Perish credit!" This is a libel on humanity, and on virtue. The great benefit and blessing of Christian civilization, is the increase and strengthening of faith among men; and not the least important ramification of this virtue, is commercial credit. There may be too little; it is impossible there should be too much of it. Its prevalence and growth are proof of a sound state of public morality.

It was by credit, or a sound state of public morality—which is the same thing-that the United States rose from their small beginning to their present magnitude. Commercial credit was one of the most important elements of society during our colonial history; for there was very little money. Public faith of this very kind, was the great secret of our success in the revolutionary war;

for money which we had not, or credit which is the same thing, is the sinews of war. It was commercial integrity which carried the nation through the years of the confederation; for there was no money to begin with, and we were constantly running in debt. On the verge of dissolution as a political body, on account of commercial embarrassments, it was credit that saved us at the time of the adoption of the federal constitution. It was the revival of credit by the establishment of a national bank in 1791, that gave us a new start; but there was very little money in the country. It was the vital power of the credit of that institution, which carried the nation onward in a career of prosperity for twenty years; and in the meantime, state banks arose in various parts of the country, apparently diffusing a beneficent influence. But the war of 1812, and the non-existence of a national bank for four or five years, brought us into commercial troubles again. But credit came to our aid, a new national bank was chartered in 1816 for twenty years more, and but for the want of an adequate protective system for a few years previous to the tariff of 1824, which sent the specie out of the country, there would have been uninterrupted prosperity. It was credit that carried the nation through that trial, and raised it again to unexampled commercial vigor, under the tariff of 1824, and onward, till the low duties of the last years of the compromise tariff of 1833, again drew off the precious metals, and doomed the nation to start again on credit. From the beginning of our history, down to this time, credit has been the soul, and the great power of the nation; and no people on earth are more indebted to this virtue. There must always be a substantial ground for credit; or else it can not flourish. That ground is public virtue-moral integrity. It hardly need be said, that all public measures which nourish credit, secure its foundations, surround it with safeguards, and build it up a glorious temple, in any community, constitute one of the most important and effective elements of public economy.

We proceed to observe, that gold and silver, used as money, officiate in two representative capacities, one representing the joint values of these metals in all the uses to which they are applied; and the other representing every species of property of a commercial value, in its character as the recognised currency of the world, in the way of expressing that value, and in consummating commercial exchanges. It is the first of these representative functions which we have occasion now to notice, for the purpose of reviving a statement before made, viz., that gold and silver, used as money,

are a mere credit currency, representing all the values arising from the great variety of their uses; and their credit is based upon these values, their value as money being but a fraction of the whole, itself borrowed from these other values. It is certain, as before shown, that they never would have been used as money, but for their other values; and therefore, as money, their credit may be said to be based entirely upon them.

Our object in making this idea prominent here, is to show, that money, in all forms and substances, is a credit currency, and derives its credit from considerations extraneous to itself. There is, however, a substantial advantage in favor of gold and silver, as money, arising from the fact, that they are imperishable parts of the great masses of the same substances, always worth their weight for any of the great variety of uses which constitute their value, and are capable, at any time, of being put back into those uses. This is what is commonly called intrinsic value. The gold and silver, contained in money, are, confessedly, substances which have a value in themselves for other uses, equal to their weight. Nevertheless, when employed as money, they rest on the basis of that credit which they derive from their adaptation to other uses. These values are sufficient to constitute gold and silver, in the form of money or bullion, an adequate basis for a secondary currency, if the interests of the public and of trade require it.

Some deny, that a paper medium is money; others even deny, that it is a currency. The second appears to be the denial of a fact; and the principle, as we suppose, on which the first denial is made, viz., because bank paper is no more than a representative, would also prove, that an eagle and a dollar are not money; for, as before shown, they also are mere representatives. But it is not much matter what things are called, if we are understood; and those names are doubtless best, in the use of which we can be best understood. Bank paper, passing for money, is commonly called money, and that is enough to justify a conformity to usage.

Assuming that no paper-money ought ever to be in circulation, which is not good for the amount in specie, whenever demanded by the holder; and that no institutions for such issues should be authorized, without being obliged to conform to this rule, it may be said, that the invention of paper-money, on such a basis, has proved scarcely of less importance to society than that of a metallic currency. Each was a great advance in civilization. So inconvenient is the primitive mode of barter, that, even where the

precious metals are wanting, men but little removed from barbarism, can not be induced to return to it; but they will substitute something for a common currency, which always has a market value for exportation, by which gold and silver, in some foreign country, can be realized, thus recognising and establishing the great principle of a specie-basis. In California, hides are said to be the common currency, and though inconvenient, the basis is as valid as that of the best paper-money in the United States or in Europe, because, being in demand, they will be redeemed in the way of trade. These hides discharge the functions of money, are money, and have a value in themselves as truly as gold and silver. The adoption even of such a currency is a great improvement on the mode of barter. But the adoption of a gold and silver currency, or its substitution for barter, was a convenience to society, the measure of which can hardly be estimated."

Before gold and silver had become a universal medium, convenience and necessity, in ancient times, and in some countries, forced men to invent common mediums, to escape from barter. Homer says that the armor of Diomede cost nine oxen. The Abyssinians have used salt as money, because it was scarce and precious. In Newfoundland, dried cod were once used as money, and in Scotland, nails. In some parts of India and Africa, shells have performed this function. The legal currency of Lacedæmon was iron, and of the early Romans, copper. We hear of a variety of other currencies among barbarians. All these, and many other examples, indicate how strongly nations and tribes were and have been pressed by convenience and necessity, to agree on a common currency, before gold and silver had got into general use, as such.

But since the adoption of silver and gold as a currency, some portions of the world have advanced so much and so far in the modes of civilization, that an improvement on a metallic currency became as necessary to meet the exigencies of the commercial world, as that improvement on the system of barter. Good and important as a metallic currency was, when first invented as a substitute for barter, in process of time-when faith between men grew with the growth of civilization, to a high value, and when great expedition was required, in frequent and large exchangesa metallic currency became an obstacle, an impediment to the machinery of the commercial world, not to the same extent, but ṣomewhat in the same manner, as barter was before it. It was inconvenient, unwieldy, gross, and as such, incapable of those quick

and large operations between remote points, which the state of society and of the commercial world required. The invention of paper-money was equally natural, and equally necessary to the improved state of society in which so much business was required to be done, on the principle of faith, under proper forms and securities, as originally was the invention of a metallic currency as a substitute for barter. It became impossible to do the business of the commercial world without it; and it is found scarcely less convenient in the ordinary transactions of trade, than in the larger operations of commerce.

The following facts will show how utterly impossible it would be to do the business now required, with a metallic currency. The receipts and payments of six banks, in the city of New York, on a specie basis of $3,000,000, from the 1st to the 10th of December, 1846, were more than $60,000,000, with an actual use of less than $200,000 of specie for the whole amount; or with less than $20,000 of specie a day, for average transactions of $10,000,000 a day. There were, at the time, 23 banks in the city. What amount of business the remaining 17 did, in the same ten days, we are not informed.

As instances of the comparative expense of making exchanges, between remote points, by specie and paper mediums, or through banks and a metallic-currency system, the following facts are sufficiently instructive: In the operation of the subtreasury, the government of the United States paid $3,950, in November, 1846, for the remittance of $503,000 in cash, from New York to New Orleans; and in December, following, $9,000 for remitting $1,300,000 in cash, from the same city to the same; whereas, other remittances, about the same time, amounting in all to $1,669,314, from New York to New Orleans, through the agency of banks, cost the government-0. During the existence of the bank of the United States, all the banking business of the government, averaging some twenty millions a year, cost-0. The transfer of specie, between the United States and Great Britain, costs at least 3 per cent., or $35,000 for every million.

Besides the risk and expense of transactions of commerce with gold and silver, between remote points-remote as many of the above-named transactions of the New York banks-it would have been impossible to do but a small fraction of the above business of $60,000,000, with gold and silver, in the same time, even if the parties were all in New York. Experience is the same in all

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