CHAPTER III. 



THE currency: ITS EVII.S AND THEIR REMEDY. 



Bank-bills are doubly guaranteed. On one side there is the 

 capital of the bank, which is liable for the redemption of the bills 

 in circulation; on the other side are the notes of the debtors of the 

 bank, which notes are (or ought to be, if the bank officers exercise 

 due caution and discretion) a sufficient guaranty for all the bills: for 

 no bills are issued by any bank, except upon notes whereby some re- 

 sponsible person is bound to restore to the bank, after a certain 

 lapse of time, money to the amount borne on the face of the bills. 

 If the notes given by the receivers of the bills are good, then the 

 bills themselves are also good. If we reflect a moment upon these 

 facts, we shall see that a bank of discount and circulation is in 

 reality, two banks in one. There is one bank which does business 

 on the specie capital really paid in; there is another and a v-ery 

 different bank, which does business by issuing bills in exchange for 

 notes whereby the receivers of the bills give security that there 

 shall be paid back by a certain time, money to the amount of the 

 bills issued. Let us now investigate the nature of these two differ- 

 ent banks. 



THE BUSINESS OF BANKING. 



Peter goes into the banking business with one dollar capital, 

 and immediately issues bills to the amount of one dollar and 

 twenty-five cents. Let us say that he issues five bills, each of 

 which is to circulate for the amount of twenty-five cents. James 

 comes to the bank with four of Peter's bills, and says: "Here are 

 four of your new twenty-five cent notes which purport to be payable 

 on demand, and I will thank you to givemea silver dollar forthem." 

 Peter redeems the bills and in so doing pays out his whole capital. 

 Afterward comes John, with the fifth note, and makes a demand 

 similar to that lately made by James. Peter answers, slowly and 

 hesitatingly: "I regret— exceedingly— the force of present circum- 

 stances; but— I — just paid— out my whole capital— to James. I am 

 — under — the painful necessity — of requesting you — to wait a little 

 longer for your money." John at once becomes indignant and 

 says: "Yonr bills state on their face that you will pay twenty-five 

 cents upon each one of them whenever they are presented. I present 

 one NOW. Give me the money, therefore, without more words, for 

 my business is urgent this morning." Peter answers: "I shall be 

 in a condition to redeem my bills by the day after tomorrow; but 

 for the meanwhile, my regard for the interest of the public forces 

 me unwillingly to suspend specie payments." "Suspend specie pay- 

 ments!" says John. "What other kind of payment, under Heaven, 



