68 



FARMERS' REGISTER. 



[No. 2. 



credit system generated an extraordinary demand 

 for money, which flowed into the country through 

 the medium of importations. The increased ve- 

 locity of circulation and the re-establishment of the 

 credit system have just the opposite effect, viz: to 

 increase the apparent amount, and the real effica- 

 cy of the whole circulating medium. Now when 

 we reflect that the currency has received immense 

 additions during the money pressure from abroad; 

 that the portions hoarded by individuals are thrown 

 into circulation so soon as the panic subsides — that 

 the banks which have rode through the storm are 

 beginning to increase their business and push out 

 their paper, and thus add to the circulating me- 

 dium; that the United States' Bank has recovered 

 from the shock which it sustained by the re- 

 moval of the deposites, and is consequently, en- 

 abled to do a more liberal and extended business, 

 thereby enabling other banks to enlarge likewise; 

 we are not to wonder under these circumstances, 

 that we have a redundant circulating medium; 

 especially, when we recollect that this increased 

 currency is circulating with greatly increased ve- 

 locity: and the effect of these combined causes 

 must be a vast enhancement of prices, and a con- 

 sequent rage for speculation. I will exemplify this 

 by a very simple illustration. Let us suppose a 

 particular neighborhood, whose exchanges in or- 

 dinary times, are effected by $1000. Now I 

 have shown if any causes operate to make the 

 circulation only one-half as rapid as the ordinary 

 circulation, then the $1000 will not appear to our 

 little district to be more in amount, or in real effi- 

 cacy, than $500. In this state of things, throw- 

 ing out of view all other causes, prices in the 

 neighborhood supposed would fall to half their 

 former amount. Now let us farther suppose that 

 this lidl in prices should cause an importation of 

 $500 additional into the neighborhood, anil that 

 the rapidity of circulation was again restored. Do 

 we not clearly see that we should have a currency 

 redundant by $500. And this would not only, on 

 the great principle of supply and demand, carry 

 up prices to their former level, but would increase 

 them in the case supposed, fifty per cent, beyond 

 that level. Now what I have been saying here 

 of a neighborhood, may with equal propriety, be 

 said of a whole nation. Let us suppose, for ex- 

 ample, the circulating money of this country to be 

 $100,000,000, in ordinary times; that the circula- 

 tion becomes suddenly onlv one-half as rapid as 

 before, then the whole $100,000,000, even sup- 

 posing the quantity kept in circulation undimin- 

 ished, will perform no more exchanges than 

 $50,000,000 would with the former rate of velo- 

 city in the circulation. Prices then would gene- 

 rally sink to half their former amount; money 

 would flow in, let us suppose $25,000,000, and 

 immediately afterwards, the restoration of confi- 

 dence, and the consequent re-establishment of the 

 credit system would communicate to the circula- 

 ting medium the same velocity as before, you 

 would then have a redundancy of twenty-five mil- 

 lions of dollars, and a consequent rise of prices 

 at least twenty-five per cent, upon the principle of 

 supply and demand alone. But the probability is, 

 prices would rise greatly beyond this point, in con- 

 sequence of the effect produced by a speculating 

 mania — for when prices are rising, every one 

 wants to purchase — few are capable of reason- 

 ing upon the causes; hence an artificial competi- 



tion is generated among the buyers and property 

 rises greatly beyond what it should do, upon the 

 principle of actual supply, and efficient demand. 

 The reason of man on these occasions seems to 

 be completely unhinged. He looks forward to 

 the realization of wealth by changes in the price 

 of property which he holds in his hands, and al- 

 most every one is disposed to turn speculator. 

 And this speculating mania is generally fust felt 

 in regard to stocks, whose value is ever fluctua- 

 ting, and therefore liable to the most sudden im- 

 pulses, upwards and downwards. I understand 

 at this moment the stock-jobbing spirit to the north 

 has risen to a most extraordinary height. A gen- 

 tleman, under date of the 2Sth ult., writes me 

 from Philadelphia, that rail roads and canals are 

 the order of the day there — that the papers scarce- 

 ly find room for politics. He says, "two subscrip- 

 tions have been opened for canals since I came 

 here. The whole stock for the first was taken in 

 thirty minutes. In the second, the whole stock 

 was taken by the commissioners before the doors 

 were opened. A rush and disappointment follow- 

 ed. Millions could have been taken," &c. All 

 this arises from restored credit; from throwing sud- 

 denly the hoarded portions of money into circula- 

 tion — from increased velocity of circulation — from 

 issue of banks, &c, all of which have contribu- 

 ted to make currency redundant, prices exorbi- 

 tant, and the spirit of speculation wild and reck- 

 less. When I saw certain politicians congratula- 

 ting the nation upon fresh arrivals of gold and sil- 

 ver a short time since, I could not but reflect upon 

 the shallow knowledge of political economy which 

 such congratulations proved. The influx of gold 

 and silver was the clearest proof that could be fur- 

 nished, of the general distress of the country; 

 of the loss of confidence and credit, and of the 

 stagnation of trade and the circulation. The im- 

 portation of the precious metals could only be ef- 

 fected by parting with a large portion of our 

 wealth;and as soon as a sound currency and healthy 

 circulation could be restored, this newly acquired 

 portion was to be entirely redundant, and even 

 mischievous in its operation, by raising in the 

 community a speculating mania. 



What is to check this rise in prices and spirit of 

 speculation? 



I will now examine into the manner in which 

 this rise in prices is ultimately to be checked, and 

 the spirit for speculation to be cured. And here 

 let me observe, that as there is a certain point of 

 depression below which prices will not go, incon- 

 sequence of the influx of precious metals which 

 this lowness of prices will certainly produce; so 

 likewise there is a certain point in the eleva- 

 tion of prices beyond which they cannot well 

 go, because of the efflux of the precious me- 

 tals. It is this efflux which finally checks the 

 speculating mania. 1 will explain: a rise in 

 prices, when very great, make our country a good 

 market to sell in, but a very bad one to sell from; 

 hence our imports will greatly overbalance our 

 exports, and a money balance will be created 

 against the nation, which must be paid in money. 

 This produces the exportation of money until the 

 redundancy is sent off; then prices fall, and ruin 

 overtakes the most adventurous in the game of 

 speculation — they involve others, and prices once 



