four per cent, within a distance of one mile. At this rate, thought I, before I get to New York they will be worth nothing.-So I called for plenty of wine at dinner, in order that my money might not be lost There was a genteel looking man who sat at table with us, and was very civil. But as soon as my companion discovered he was a bank director, I thought he would have eaten him up. He eyed him with infinite contempt-turned up his nose with a most petulent curl-took snuff at him with a look of most tremendous hostility-and repeated to himself- Quel f!' "At New York the little Frenchman got specie, and bills of exchange on Boston for his bank notes, at a discount, I think, of twenty-two per cent; for nothing could induce him to touch any more of the dirty rags,' which was the only name he condescended to call them by. Ah monsieur,' said he, 'I don't know what I have done to be thus murdered by cent per cent.-but, a bon chien il ne vient jamais un bon os.' I now see le dessous des cartes,' and shall take care how I am caught again.' "I comforted him by showing how he could retrieve all his losses, by turning about when he had finished his business at Boston, and shaving his way back to Savannah, by which means he would turn the tables upon them all. He was delighted with this idea, shook hands with me in high glee, and I never saw him more. "The case of this poor stranger, as well as the vexations I myself suffered, from the petty obstacles and constant inconveniencies arising from the depreciation of paper, the diversity in its value, and the difficulty of avoiding impositions in paying and receiving, insensibly drew me on to consider the causes of these extensive evils from which no individual of the community is exempt. I traced them at once to the stoppage, or bankruptcy, to give it its plain and simplest name, of those institutions which, while they refuse to pay their debts, continue to increase their amount for aught we know, and instead of honourably setting about repairing the injuries they have already inflicted on society, are every day adding to their increase. All the interested ingenuity of modern financiers, can never argue people into a belief of what their daily experience demonstrates to be false, or convince them that a paper dollar is equal to a silver one, when they see the banks hoard ing up the latter, and scattering about the former, as if the one was invaluable, and the other worth nothing. "True, the extremity of the evil will cure itself, it is said, and truly it is a marvelous consolation. It would be better however, I think, if it could be cured before it comes to the extreme, before the bubble becomes a water spout, and drowns us when it bursts. When I see institutions springing up every where, without charters, without respectability, without responsibility, and without capital, issuing and circulating millions of dollars in rags; when I see individuals without character commencing bankers, and passing bank notes, where they cannot pass their word or their bond; and when I see chartered banks refusing to pay their legal debts in legal money, dividing nine or ten per cent on the amount of their stock, which they can only do by dispensing every day an enor mous amount of bank notes, which they cannot or will not pay, I think it is time for prudent men to take care of themselves. I think it high time for the farmer to consider whether he will sell the fruits of his labour for rags, which now only derive their value from the credulous folly of the people. Admit for a moment that the public, as will most assuredly be the case ere long, become jealous of these notes, every one will then be anxious to get rid of them, or to convert them into substantial wealth. You cannot get any thing for them at the banks but rags, and if you sue them, you may levy upon their signs, and counters, and desks, but will get nothing more." It has been questioned whether the alleged depreciation of bank notes exists, except in the relation between them and specie. The precious metals may certainly become so scarce, and the demand for what remains, as an article of export, so great, as considerably to augment its value, although the notes given for it might still maintain their full nominal value in exchange for all other articles. The fairest mode of estimating the actual depreciation of our paper money, is by comparing the present price of labour, and of the necessaries and conveniencies of life, (making first every due allowance for the additional taxes, for the state of the foreign markets, and other circumstances) with the price of the same articles when that money was last convertible into specie. On this estimate we believe that the depreciation of bank notes, at least in the city of Philadelphia, is not so great as this writer supposes. The immense sums of specie which have been exported from the country during the long period of our commercial embarrassments, and of which but very little has yet returned, have necessarily rendered coin so scarce in comparison with the bank notes in circulation, that its present price cannot be deemed a true criterion of their general convertible value. Estimating them however on the most favourable principle, and with every reasonable allowance, we still apprehend that they are in fact considerably depreciated throughout all the states in which they have ceased to be convertible into specie. Their depreciation has probably arisen rather from the excessive issue, than from an opinion of the insecurity of the notes: for that part of the capital of the principal banks which consists of public stock has increased in value since the conclusion of the war; and that event cannot certainly have deteriorated the commercial securities on which their money is usually lent. With respect to the utmost expedient extent of the issue of paper money, a dangerous error prevails. It is believed by some that the banks may safely lend as much as the borrowers have actual property to answer for.-Let us test this opinion by an extreme case. Suppose every proprietor in the United States were furnished with bank notes equal to the amount of his whole property. There would then be in circulation above thirty times more money than we should want. Every one would be anxious to dispose of his own surplus, and the whole mass would consequently become depreciated. The amount of the currency of any nation should not exceed the sum necessary to make payments for that portion of the national capital which is usually in commerce. A sum comparatively small with respect to that capital will be sufficient for that purpose; for the same money will serve for many payments; and by means of bills of exchange and other in struments of commercial credit, one debt is compensated by another. It should also be considered, that the high value often attributed to landed property is in part imaginary. It depends, in some measure, on the opinion of the stability of the government, the just administration of the laws, and the small proportion of such property likely to be offered for sale. It is also an erroneous opinion that the interest demanded by the banks upon their loans will be an adequate check upon borrowers. The honest and the cautious indeed will borrow no more than they can properly and prudently employ; but the unprincipled, the extravagant, and even the sanguine and adventurous, will endeavour to borrow all they can obtain. In this view, the depreciation of the notes will not lessen the demand for them. They will be wanted whether they lose five, twenty, or fifty per cent, and the greater their depreciation the larger will be the amount requisite for any particular speculation: so that each new issue will increase the evil. Our author's indignation is directed chiefly against the smaller and lately established banks; the suppression of which would, in his opinion, be a public benefit. "The community," he observes, "may yet be saved millions by timely means to destroy the wretched little institutions that have sprung up in consequence of the stoppage of their betters, and which, while they insolently refuse to give a currency to the paper issued by the government of the United States, expect us to put confidence in their own worthless rags. It is not long since the paper currency of Germany was taken up at one third its value, and that one third paid in a new emission of paper money. A few years since the Danish government made an issue of small paper bills, which would not pay for the paper, printing, and engraving. There are numerous instances in the history of every nation in Europe, of the consequences of issuing paper money, after it has ceased to be the representative of specie, and if any more is wanting, let us remember CONTINENTAL MONEY. If such has been the case with established governments, is it to be supposed that the catastrophe will not happen to associations of few individuals; or that the faith of a government is not at least equal to the faith of associations that have already refused to fulfil their engagements a thousand times? "It is certainly a matter of infinite surprise at first view, that people should put such confidence in the notes of banks without charter or capital, and at the same moment refuse to accord it to the paper sanctioned by the government. But on reflection we perceive at once, that this is owing to the arts of a combination of interested individuals, who endeavour to destroy the credit of that paper whose circulation would interfere with that of their own institutions. This is the true secret of the apparent absurdity of placing a greater reliance on the credit of institutions which have already refused to pay their debts according to the tenor of their contract with the public, than on that of a government of infinite resources, and possessing domains a thousand times more extensive than were ever enjoyed by any state or po, tentate that ever existed." It may be remarked from these extracts, that this bold and dashing writer does not allow himself time to make any accurate calculations, or even to notice some very important distinctions. Before he described the notes of our banks as "worthless rags,"*-pieces of fine paper with pretty pictures engraved on them, he should have inquired whether those banks possessed any property, or whether it was likely they would give their notes away, or lend them to notorious cheats or insolvents. He would have found that the capitals of at least our principal city banks, consist chiefly of public stock, whose value is now indisputable; and that such is the caution of their directors, that no other lenders make so few bad debts. In his comparison between the paper money of governments and bank money, he has overlooked the most remarkable circumstances by which they are distinguished from each other. When governments create a paper currency, ⚫ Page 24. |