424 



FARMERS' REGISTER. 



[No. 7 



the currency of a country is composed entirely of 

 coin, it is then the most sound and invariable, of 

 which the nature of thin<z;s will admit. It is then 

 subject to no fluctuations but those which, arise 

 from the increase or diminution of the quantity of 

 the precious metals throughout the world, which 

 can never be rapid, and upon those genera! laws 

 of supply and demand, which are the sure regula- 

 tors of value. The prices of property and commo- 

 dities utider such circumstiinces, remain steady for 

 long periods toii-elher. Speculative fortunes are 

 rarely heard of, and the mass of The people, aware 

 that indti^ti-y is the only legiiimate source of 

 wealth, apply themselves to their respective em- 

 ployments, and depend upon their labor, not upon 

 chance, for support. Such would be the state of 

 things, even if there were bard<s of deposite and 

 discount. As no power of creating artificittl money, 

 of investing a shadow with the appearance of svh- 

 stance, would any where exist, the solidity of the 

 currency wouhi not b6 disturbed; for after the 

 organization of such banks, there would be neither 

 more nor less money in the community than there 

 was before. Such might even be the state of 

 things if the circulating power was exercised to 

 the extent we have prescribed, but only permit the 

 boundary of prudence to be passed, and there is an 

 end to stability. JElouses, lands, commodities, and 

 produce are alike cast upon the waves of specula- 

 lion. The price of to-day is no criterion for the 

 price of to-morrow, and the community, instead 

 tjf having solid ground to move upon, resemble 

 travellers treading upon quicksands, which threaten 

 every moment to swallow them up. 



So soon as bank notes or credits are issued be- 

 yond the point we have designated, the currency 

 becomes depreciated Irom excess, below the cur- 

 rencies of other countries, inasmuch as we then 

 have more coin and paper united, than the propor- 

 tion which is required to maintain it at its proper 

 level. With the depreciation of money, the nomi- 

 nal prices of propeity and commodities experience 

 a rise, which having Ihe appearance of a real en- 

 hancement of value, deceives the community, and 

 invites to all the speculation, overtrading and im- 

 prudence, which are ever attendant upon fluctua- 

 tions. The coin, soon finding itself involved in 

 the depreciation brought on by an excess of paper, 

 leaves the country, in order to seek eibroard that 

 value to which it is fairly entitled, and which it 

 can no longer command at home. Export follows 

 export, and the increasing demand made upon the 

 banks by the returning of their notes for payment, 

 finally compels them to make unexpected and ur- 

 gent calls upon their debtors, which are followed 

 by a general fail ot prices to a point below what 

 they originally stood at. Lands which before had 

 been elevated to an artificial height, are suddenly 

 depressed below their former i)rice. Agricultural 

 produce, merchandise, and other commodities, ex- 

 perience the same reduction, and a stagnation of 

 trade, a suspension of industry, an unsettled state 

 in the pursuits of the whole community, and the ruin 

 of thousands, are the inevitable consequence. All 

 these effects may take place from the overtrading 

 of banks, even whilst they shall be enabled to 

 meet the payment of their notes in coin, but they 

 will be experienced in their most destructive stages, 

 when a suspension of payment is the result ofiheir 

 imprudence and mismanagement, j^gainst such 

 suspension the public have no guarantee, but in the 

 imposition of the most rigorous restrictions. 



Having thus given an analysis of the hanking 

 system, your committee will proceed to consider 

 how far the arguments in favor of banks above 

 adduced, are in accordance with sound reason, lor 

 by no other criterion is it possible to judge of their 

 trill h or fallacy.. 



.In the first place, then, it is said that banks are 

 u.seful to the public, inasmuch as they afford facili- 

 ties in the safe keepins of money, in the payment 

 of large sums by checks or translijrs on their books, 

 in the transmission offiinds, .in the furnishing of a 

 conven ent and portable currency, and in the loan- 

 ing of money to merchants, fi^irmers, and others 

 who have occasion to borrow, j^ll this is true; 

 and your committee mosf heariily concur in the 

 declaration, that as far as banks perform these 

 operations, they merit the support of the putilic 

 and of Ihe legislature. But it will be recollected, 

 that all these services are rendered to the com- 

 munity, in their capacity of banks (f deposite and 

 discount, against which objections can scarcely be 

 raised, even by the most cautious, and not in their 

 capacity ofbanks of circulation, the exercise of the 

 power of which, is, as has been before observed, 

 what produces all the evil which banks are capa- 

 ble of creating. 



In the second place, it is asserted that banks in- 

 crease the capital of the community, by the emis- 

 sion of their notes. This position your committee 

 are prepared to show, is in the highest degree er- 

 roneous, and entirely at variance with the acknow- 

 ledged principles of political economy. The capital 

 of a community consists of the capitals, or in other 

 words, of the property, merchandise, products, 

 commodities, coin, and all articles possessing value, 

 which belong to all the individuals who compose 

 that community. A mere promi.^e to deliver a 

 given quantity of provisions, clothing, or materials, 

 on demand, is not capital, or otherwise the whole 

 wealth of a nation might be doubled at pleasure, 

 by the mere emission of written promises. Neither 

 is the creation of a promise to pay on demand a 

 certain quantity of gold and silver, capital. A 

 bank note, when it is not the actual representative 

 of coin deposited in the vaults of a bank, is in fact 

 nothing but the credit of a bank in a visible, nego- 

 tiable, and convenient form, to which the public 

 are willing to ascribe the properties of money. 

 But it is said, that inasmuch as bank notes are 

 considered as money, their plentiful emission, at 

 least makes money more plenty. Strange as it 

 may appear, even this is but partially true. When 

 notes are first issued to excess, money, as it is 

 called, is plenty loith those to whom it is loaned, 

 but after the notes are once distributed throughout 

 the channels of circulation, the rise which takes 

 place in the prices of property and commodities 

 from the depreciation of the money, is ji'st in pro- 

 portion to that excess, so that it requires the whole 

 quantity of medium to perform the functions which 

 were before performed tiy the less quantity. This 

 position may be exemplified thus : if the whole 

 quantity of gold and silver in the world were to be 

 suddenly doubled, it would require two dollars to 

 purchase what could be before bought for one, and 

 alter the prices should become settled upon the 

 new scale, money would be no more plenty than it 

 was before. Plenty of money does not so much 

 depend upon the absolute quantity of coin or bank 

 notes which are in possession of the public, as upon 

 the quantity of saleable products and commodities 



