FINANCES OF THE UNITED STATES. 



301 



more than a name, satisfactory enough as long 

 as the times are easy and confidence prevails, 

 but exceedingly dangerous and mischievous 

 when the money market is deranged, and dis- 

 trust has taken the place of confidence.^ The 

 conversion of paper is seldom demanded in any 

 considerable amounts until credit is wavering, 

 and every thing is looked upon with suspicion. 

 Then, the demand is not limited to the 25 or 

 30 per cent, which the banks may have in re- 

 serve. Loss of confidence, and the knowledge 

 that provision for payment is only partial, are 

 precursors of panics, suspensions, failures, and 

 all the disasters incident to such a state of 

 affairs. The Bank of England may be regarded 

 as furnishing the conditions most favorable to 

 the convertibility theory, yet in every time of 

 real need its charter has been disregarded, and 

 the bank has been obliged to suspend. The 

 history of the banks in the United States is 

 but a series of suspensions, occurring as often 

 as conversion was demanded. It is asserted 

 that the welfare and progress of this country 

 are due to the liberal, and not always judicious, 

 use of credit, and especially during the last 

 six or eight years in which there has been a 

 currency based exclusively upon credit. It 

 has held out no false promises, and therefore 

 the country has been exempt from all cur- 

 rency panics or disturbances. 



Those who urge this view maintain that the 

 present currency system is the best and safest 

 ever in operation here. They believe that the 

 premium on gold may be gradually reduced in 

 the next few years, as it has been in the past, 

 until it shall become practicable to obtain 

 coin for paper, in such reasonable amounts as 

 may be required in trade ly exchange at rates 

 merely nominal. They make a distinction be- 

 tween " convertibility by redemption," which 

 is the generally-accepted idea, and converti- 

 bility by exchange, which is their idea. This, 

 they affirm, would bring all the benefits of re- 

 sumption, without any of its attendant dan- 

 gers. The plan involves the recognition of 

 bullion-dealers, who shall be entitled to regu- 

 lar and legitimate commissions, premiums, or 

 profits. The assent of the public to this prop- 

 osition relieves the banks and the Government 

 from the necessity and the burden of furnish- 

 ing coin for nothing. 



Another view which has found much favor 

 during the last few years is, that "the cur- 

 rency should be maintained at its present vol- 

 ume until the industrial and commercial inter- 

 ests of the country shall recover from the 

 effects of the war, and until the natural growth 

 in population and wealth, the revival of enter- 

 prise, the increased facilities of trade, and the 

 expansion of our borders, shall create a legiti- 

 mate use for the whole amount of currency 

 now outstanding." Just how long this will 

 take has not been stated, and probably is not 

 susceptible of demonstration. If the assump- 

 tion is not correct, the whole proposition fails ; 

 for, without growth and increase in resources 



and trade, the currency would forever remain 

 in excess. 



In the view of the Comptroller of the Cur- 

 rency, if it were possible to distinguish between 

 circulation and deposits, making the former 

 payable in specie, while the latter should be 

 payable in kind, much of the difficulty and 

 danger attendant on a return to specie pay- 

 ments would be removed. 



If the banks in cities would agree to settle 

 their balances, through their clearing-houses, 

 in current funds, much of the difficulty of 

 making deposits likewise payable in current 

 funds would be obviated. Ordinarily those 

 very banks pay all deposits in miscellaneous 

 funds, and the obligation to pay specie or law- 

 .ful money only recurs to plague them when 

 they are least able to meet the demand. 



It would be practicable to place the cur- 

 rency on a specie basis long before it would be 

 possible to place the entire demand liabilities 

 of the banks on a similar footing. In New 

 York, provision could easily be made for thir- 

 ty-four million bank-notes ; but, according to 

 established usage there, specie payments would 

 involve provision for over $200,000,000 de- 

 posits. 



The currency of the country at different pe- 

 riods has been substantially as follows : 



On January 1, 1862, the date of the suspen- 

 sion of specie payments, it was thus : 



Bank circulation . . $183,792,079 



Bank deposits 296,322,408 



Specie in bank ; 102,146,215 



Specie in Treasury, say 6,000,000 



Specie in hands of the public, say 100,000,000 



Treasury notes in circulation 33,460,000 



Total $721 ,720,702 



. Deduct : 



Specie in bank $102,146,215 



Bank-notes on hand 25,253.589 



Cash items of banks 27,827,971 



155,227,775 



Active circulation of the United States, Janu- 

 ary 1,1862 $566,492,927 



At the close of the war, October, 1865, the 

 currency of the country was about as follows, 

 with the circulation confined almost entirely 

 to the Northern or Union States : 



National-bank circulation... , $171,321,903 



State-bank circulation 78,867,575 



National-bank deposits 549,081,254 



State-bank do., not large and not easily ob- 

 tainable. 



Specie omitted, as substantially out of cir- 

 culation. 



Legal-tender notes in circulation (as given 

 in report of the Comptroller of the Cur- 

 rency) 704,531,658 



$1,503.855,309 

 Deduct : 



Bank-notes on hand $16,247,241 



Bank cash items (checks not pre- 

 sented, etc.) 72.309.854 



Legal tenders in bank 193,094,364 



281,651 ,459 



Active circulation, October 1, 1865. . . .$1,222,203,931 



The following is a statement of the banks 

 and currency for the six years from 1865 to 

 1871 inclusive : 



