PHILOSOPHICAL SOCIETY OF WASHINGTON. §5 



nature which issued notes which were redeemable — at least pro- 

 fessedly — in coin at sight. The Federal Congress refused to re- 

 charter the Bank of North America in 1188, and similarly re- 

 fused to charter any other bank, but the State legislatures sup- 

 plied this deficiency. There was a notable difference between 

 this mode of sustaining a paper circulation and that which had 

 prevailed in the colonies. These bank issues were professedly 

 at least, and at the outset, undoubtedly, based upon coin redemp- 

 tion on demand. The colonial bank-issues were irredeemable 

 and based "on wind." But the State bank system had from the 

 beginning inherent defects which in time proved to be the source 

 of evils only a little less serious than those which had beset and 

 disgraced the colonial system. There was no maximum limit 

 to the amount of notes which they might issue, and no minimum 

 limit to the amount of coin which they must keep on hand for 

 redeeming the notes. These limits rested wholly upon the dis- 

 cretion and honor of the bankers, and the willingness of people 

 to accept and pass the notes, and refrain from presenting them. 

 The result was that many banks pushed their circulation to the 

 utmost and reduced their specie to the lowest limit they dared 

 to. Many banks collapsed, leaving millions of worthless notes 

 in the pockets of the people, and the credit of the best banks 

 suffered by reflection. 



In the mean time it is difficult at present to ascertain with all 

 desirable e.xactitude the part which gold and silver performed in 

 the currency of the country during the first quarter of this cen- 

 tury. There were very many banks in the New England and 

 Middle States which were managed by as sound and conserva- 

 tive a policy as the general system would admit of. In that por- 

 tion of the country the disease of a rotten currency had gi'eatly 

 abated and the malady was transferred to the Southern and 

 Western States. Coin was used in the New England and 

 Middle States in notable quantity, but paper was still the chief 

 circulation. The use of coin at all events was sufficient to ren- 

 der potent and oppressive an evil which had been growing ever 

 since the first coinage act in 1182, and which had reached serious 

 proportions in 1820. There was very little gold in the country, 

 and very little came in from abroad. When the balance of trade 

 was in our favor the balances were remitted chiefly in silver. 

 When it was against us a great demand arose for gold to settle 

 it, and very little gold was procurable. To financiers the cause 

 oft he trouble was perfectly obvious. A hundred dollars in 

 gold had by law in America the same debt-paying power as a 

 hundred dollars in silver. In Europe $100 in gold would pay 

 as much indebtedness as $106 in silver. No merchant would 

 send to Europe, if he could help it, $106 when $100 would do 

 equally well. Nor would an Englishman send £106 worth of 

 gold to America when £100 worth of silver would be just as good. 

 Hence we sent to Europe all the gold we could muster and 



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