EXCHANGE. 



ing that they were not to be paid, but 

 renewed, when due, has virtually deprived 

 the banks of the real command of their 

 resources ; and this has been the chief 

 cause, why all the banks in the United 

 States, except those of New England, 

 were obliged to suspend specie payments 

 in August, 1814, or soon after. 



Since we have thus touched upon the 

 suspension of specie payments by our 

 banks, and have pointed out one of the 

 causes thereof, it may not be amiss to 

 pursue the subject a little further. Whilst 

 our banks, from a general spirit of over- 

 trading, and particularly in that kind of 

 loan for long periods, which cannot fail 

 to paralize the power of a banker, they 

 were induced, either from motives of pa- 

 triotism or of speculation, to make con- 

 siderable loans to the government. These 

 loans called for an issue of bank notes, 

 the same as if they were made to indi- 

 viduals, and the circulation being sur- 

 charged with paper, more of these notes 

 were returned for payment than the 

 banks could meet, with their immediate 

 resources. The excess occasioned by 

 these loans to government might, it is 

 true, have been absorbed by reversing 

 the operation, that is, by selling the 

 stock for the very notes with which it 

 was purchased; but the banks, influenc- 

 ed in this respect by a sordid spirit of 

 avarice, preferred the disreputable alter- 

 native of stopping payment, whilst they 

 possessed ample means to support their 

 credit. But this was not all. During a 

 state of war, it was an easy matter to 

 palliate the disgraceful measure, by re- 

 presenting to the public that it was one 

 of choice, and not of necessity ; but what 

 ought to have been the course of the 

 banks after the restoration of peace ? 

 Surely to return to the practice of cor- 

 rect and honourable principles, by pay- 

 ing their notes with the punctuality which 

 they demand from others. So far, how- 

 ever, from pursuing this course, they 

 plunged themselves deeper into disgrace 

 and the public into distress. Consider- 

 ing themselves as no longer bound to 

 the fulfilment of contracts, no longer 

 obliged to limit the amount of their 

 loans, they extended their purchases of 

 government stock, and their discounts of 

 notes, to an excess, which created a de- 

 preciation of their paper from 15 to 30 

 per cent. 



In vain were they told, that the system 

 pursued by them was dishonourable and 

 ruinous. That the prices of commo- 

 dities were elevated, just in the degree 



that bank notes were depreciated ; that 

 helpless, aged, and labouring people, who 

 were living upon fixed incomes, or wages, 

 were deprived by them of their property, 

 and that a system of over-trading, ruin- 

 ous to the merchant, would be the re- 

 sult. Still they persevered, and still 

 would they continue to persevere, if a 

 resolution of Congress, and the establish- 

 ment of a formidable rival, the Bank of 

 the United States, had not compelled 

 them to recur to the moral obligation of 

 contracts. That institution, which com- 

 menced its operations at Philadelphia on 

 the first of January, 1817, effected an ar- 

 rangement with the banks of that city, 

 New York, Baltimore, and Richmond, for 

 the resumption of specie payments on 

 the 20th of February following, which 

 engagement has been thus far complied 

 with, (March 1817.) 



During the deplorable anarchy which 

 so long prevailed amongst the banks, a 

 number of curious particulars were ex- 

 hibited, in relation to foreign as well as 

 domestic exchang-es. The course of ex- 

 change between all the different cities, 

 measured in paper money, showed pre- 

 cisely the degree of the different depre- 

 ciations, and the difference in price, at 

 different cities, of a bill upon Boston, 

 where money was standard, was always 

 equal to the relative degree of deprecia- 

 tion. Specie also bore at every place, 

 upon an average, the same relation to pa- 

 per as a bill upon Boston, and this was 

 of itself sufficient to show, that all the 

 talk about balance of trade was idle anl 

 deceptive. 



EXCHANGES, arbitration of, are calcula- 

 tions, made to find through what inter- 

 mediate place it will be most advanta- 

 geous to draw or remit. 



The person who draws a bill of ex- 

 change, is called the drawer,- he upon 

 whom it is drawn, the drawee; and if he 

 undertake to pay the amount, he is then 

 called the acceptor. The person to whose 

 order it is to be paid, is called the payee, 

 and if he appoint another to receive the 

 money, that other is called the indorsee, 

 as the payee is, with respect to him, the 

 indorser ; and any one who happens for 

 the time to be in possession of the bill, is 

 called the holder of it. 



It was above stated, that the real ex- 

 change between two countries never can 

 exceed the expense and risk of trans- 

 porting gold and silver from one place to 

 the other ; and yet, notwithstanding the 

 correctness of this position, most commer- 

 cial people in the United States were led 



