138 THE FARMER AS A BUSINESS MAN. 



beginning of the Civil War, bank-notes were in universal use 

 in this country, forming practically the only currency, except, 

 after 1849, on the Pacific Coast. No bank can issue paper 

 money except as authorized by law, and the laws which 

 authorize the banks to exercise this function always prescribe 

 conditions which are presumed to assure the redemption of the 

 notes in coin, on demand, at the counter of the bank which 

 issues them. In the wealthier states of the east these laws 

 were fairly well framed and enforced, and, as a matter of fact, 

 did, as a rule, assure the redemption of notes on })resentation, 

 except in times of the occasional "panics" against which 

 probably no legislation whicli will permit bank-notes to 

 circulate at all, can be effective. A bank which is required to 

 keep on hand such a coin reserve as will enable it to pay off 

 nearly all its outstanding notes at once, would liave no motive 

 to issue the notes, and would not do so. Any country whose 

 currency is mainly bank-notes must expect a general suspen- 

 sion of specie payments in times of panic. But while, during 

 our period of bank currency, the laws of most eastern states 

 assured the redemption of bank-notes in most cases, such laws 

 in the then western states would have prevented the issuance 

 of any bank-notes. In those states there was almost no coin, 

 because there was nothing to exchange for it except land, and 

 those who had the coin did not want the land, or if they did, 

 could obtain it without coin. Any law, therefore, which 

 required coin reserves even sufficient for ordinary purposes, 

 much more for stability in times of trial, could not have been 

 complied with. "Money," however, of some kind, the people 

 must have or they could not speculate, and speculation was 

 the one thing which they were determined to engage in. The 

 Legislatures, therefore, permitted banks to issue notes without 

 any adequate provision for their redemption in coin. In most 

 cases the notes were supposed to be secured by bonds or other 

 securities, usually based on land and exchangeable for coin 

 only in case the lands could be sold for coin, which every- 

 body knew was impossible. It was a time when banks w^ere 

 organized by special charters rather than under general laws, 

 and many of these charters were so loosely drawn as to make 



