1835.] 



FARMERS' REGISTER. 



67 



Thus we find, first, that the number of ex- 

 changes has a tendency to increase during the 

 first operation of a money pressure; and second, 

 that the whole circulating medium of the country 

 suddenly, from the very same cause, diminishes 

 in the rapidity of its circulation, and therefore be- 

 comes less efficacious, as I have already proved. 



2nd. Effect of money pressure on actual amount of 

 circulating medium. 



Let us now examine into the state of the cir- 

 culating medium, and see whether during a mo- 

 ney pressure, it has any tendency to increase in 

 quantity, so as to counteract the operation of the 

 causes above specified. It is evident, first, that 

 the money has no tendency to increase inquantitj ; 

 because, first, the banks are distrustful of the cre- 

 dit of individuals, and of one another; the cur- 

 tailment forced on one, communicates to another, 

 and finally all are obliged to curtail their accommo- 

 dations and issues — hence a decided diminution 

 in bank paper. Secondly, gold and silver in actual 

 circulation diminishes in amount, because of the 

 universal disposition to hoard, in consequence of 

 loss of confidence. Thirdly, bonds and bills of 

 exchange will generally diminish in amount, be- 

 cause these depend on credit altogether, and the 

 first effect of the pressure is the destruction of 

 confidence, and the ruin of the whole fabric of 

 credit. Fourthly, stocks of every description di- 

 minish in value, or are entirely destroyed by the 

 disastrous operation of the times. Money, and 

 not stocks, is what the times call for. And thus 

 do we see, that while the exchanges increase, the 

 circulation of the currency grows sluggish, and 

 the quantity in actual circulation rapidly dimin- 

 ishes. 



Combined effect of these causes. 



What, then, let me ask, is the effect of the com- 

 bined operation of an increase in the number of 

 exchanges, greater sluggishness in the circulation, 

 and diminution of the whole circulating medium? 

 Most undoubtedly, a continued fall in prices, until 

 certain causes are thrown into operation, which 

 will counteract, this downward motion. Mr. 

 Hume, in his History of England, says there is a 

 point in the depression of nations, in the scale of 

 circulation, below which they cannot sink. Ame- 

 lioration will then spring out of the very disorder it- 

 self. So I would say, in the disasters of trade 

 and agriculture, there is a certain point of depres- 

 sion below which they cannot go. The self-sus- 

 taining energies of commerce are called into play, 

 and apply the healing balm without the interfer- 

 ence of government. Thus the causes, whose 

 operation I have just been considering, gave a 

 downward motion to prices in our country, until 

 they reached that point which made this one of 

 the worst markets in the world to sell in, and one 

 of the best to sell from. The effect of this on 

 foreign exchange will readily be perceived. More 

 commodities were exported than imported. A 

 money balance was created in favor of the nation. 



wants to get rid of it as speedily as possible, lest it 

 may be caught on him at a still lower point of depre- 

 ciation. Hence the inconvertible paper of the Bank 

 of England, in 1797, soon relieved the money pressure, 

 but only to bring on evils greater still, as an incon- 

 vertible paper always will do. 



Hence a rapid and full current of the metals was 

 soon seen flowing steadily into the. country, and 

 supplying the vast deficit in the circulating me- 

 dium, occasioned by sluggishness of circulation, 

 and diminution of the quantity from general des- 

 truction of confidence and credit. We all very 

 well recollect, that a short time since, almost every 

 paper announced the fresh arrivals of cargoes of 

 iiold and silver — and we know that at this mo- 

 ment, we have more foreign coins in circulation, 

 than have been seen in the country for years past. 

 The banks too seem generally to have drawn to 

 their vaults large portions of the precious metals. 



Effect of importation of precious metals, and of a 

 restoration of confidence. 



Now whilst the importation of the metals from 

 abroad is gradually adding to the circulating me- 

 dium, and therefore partially relieving, by this 

 means, the pecuniary distresses of the country, 

 the number of exchanges in society occasioned 

 by forced sales, will of course have a tendency to 

 diminish, because those sales will become less and 

 less frequent, after the violence of the storm has 

 already prostrated all that could not stand against 

 it. Affairs will soon settle down to this new state 

 of things. Many of the wealthy men of the for- 

 mer epoch, find themselves bankrupts at the com- 

 mencement of the new — others again who could 

 command a little ready cash during the crisis, find 

 they have suddenly become wealthy. From this 

 point, the operations of commerce once more begin 

 to extend themselves. Confidence is gradually 

 restored, and with it the credit system begins to 

 be built up again, and the large accession of mo- 

 ney from abroad, makes the money market much 

 easier than before. The effect of all this is at first 

 to raise prices gradually, and then more rapidly 

 as a spirit of speculation is generated. When 

 prices are sinking, the spirit of speculation sinks 

 likewise, because each individual is fearful of pur- 

 chasing, lest he be injured by a fart her fall in prices. 

 The credit system likewise is greatly contracted, 

 because the rapid fall in prices, and the frequent 

 bankruptcies occurring from day to day, destroy 

 the confidence of man in man. 



Now a rise in prices is accompanied with ef- 

 fects the reverse of these. 1st. The credit sys- 

 tem becomes instantly enlarged. When prices 

 are rising all are on the alert: the energies of man 

 are drawn forth, his hopes which ever have an 

 undue influence, are thrown into play, and the 

 imagination spreads enchanting schemes and pro- 

 jects before him; he is disposed under those cir- 

 cumstances to rush into business, or to get 

 possession of properly, whose enhancement 

 in value from the rising tide of general pros- 

 perity, is alone expected to make him wealthy. 

 The borrower now can much more easily get mo- 

 ney on loan than before, because general confi- 

 dence is restored, and the constant rise in prices 

 makes property a good security which before 

 would have been deemed very inadequate. Buying 

 and selling too under these circumstances, will pv- 

 nerally be'on credit more and more extended in 

 proportion to the restoration of confidence. Now 

 the immediate effect of the extension of credit, 

 and the increased velocity given to the circulating 

 medium, is to produce a superabundance of mo- 

 ney. For, recollect I have previously shown that 

 sluggish circulation and the destruction of the 



