others are inclined to embrace the same opinion, in which they fortify themselves by the example of the Bank of England. We are glad to find Mr. Dallas thinking otherwise; he remarks in his report, that, though Great Britain has succeeded in maintaining the credit of a paper currency not exchangeable for specie, yet a difference of circumstances may render it impossible for us to imitate their example. This diversity of circumstances, is obvious to the most superficial observer. A member of parliament says, in a letter to Mr. M'Arthur, "England is a great company of insurance; the whole insures the parts or individuals, and the individuals are the security for the whole." That nation showed a practical conviction of this truth in 1797, when the bank ceased to pay in specie. The government was involved with the bank, and the people with the government—all must sink or swim together. While the bank-notes were below par, the bank had been paying away, and receiving again, the same gold and silver at a great loss. It was obliged to give 4l. sterling for an ounce of gold bullion; this the government coined for it free of expense; but when it was coined, it was worth to the bank but 31. 128. 10 1-2d. sterling, and it could purchase its own notes with the coin only to that amount. This gave speculators an opportunity of carrying on a clever sort of trade with the bank. They collected bank-notes, presented them for payment, took cash for them at par, and then having melted the coin down, they sold to the bank again for notes at a profit of more than two shillings the ounce. Thus the metal was kept in circulation from the vaults of the bank to their crucibles, and then to the mint; and for each revolution, the bank paid at the rate of more than a guinea upon a pound in weight. An invasion was apprehended, and some creditors of the bank, thinking that their money would be safest in their own keeping, drew specie from the vaults to hoard. Exchange with the continent, being at the same time against England, caused an exportation of the precious metals. deed the ruin with which Bonaparte had threatened England, seemed to be rapidly approaching through the medium of her commercial and financial systems. The situation. justified desperate expedients. The government interposed between the bank and its creditors, and by thus absolving *M'Arthur's Financial Facts. In that establishment from its contracts, or at least suspending the execution of them, it saved the nation. But this could not have been done without the support of publick opinion; all intelligent men knowing that the government was implicated with the bank, and that they themselves were implicated with both, not only approved the measure, but enter into associations in London, and all the principal towns, to continue to receive the notes of the bank at their accustomed value. When we become so implicated with our government, and when a similar crisis occurs, it will be early enough to adopt Mr. Bollman's project of a paper standard, or what would be more simple, though the same in principle, the government may make paper money of its own, as it did during the revolution. The theorists make too great a parade with this measure of the British government. We admit that it establishes a new fact in political economy; it was before thought impossible, that a nation could carry on extensive operations of war, commence and finish without the use of the precious metals, and still preserve its credit, and not materially depreciate its currency. But we are to keep in mind the remarkable combination of circumstances, such as had never occurred before, and perhaps will not again in the history of the world. It must not be forgotten also, that the measure was supported by the expectation, that the notes of the bank will finally be redeemed according to the promise of which they are the evidence. We think that our readers will not hesitate to conclude with us, that gold and silver are the best standards of value. But a standard is good for nothing unless it be used. Unless you apply the measure, you might as well be without it. And what other way is there of measuring value, except that of exchange? There is no mode of making a commodity worth a given weight of gold, but by making it exchangeable for that weight. The propositions are in fact identical. But, says Mr. Bollman and others, who wish to substitute a paper-mill for the Mexican mines, and Perkins's plates for *Platina might be added, and if coined and put into circulation, bearing the same value in comparison with gold and silver that it now does, it would be very convenient to the banks, since the East India merchants would not be continually drawing it from their vaults for exportation. Vel. II. No. 6. 47 the mint, it is impossible to restore a metalick currency, on account of the scarcity of specie. Let the banks send abroad and procure it. But this will require some time. And what then-have not the banks been taking time these four years, and do they now think of making use of this fraudulent pretext to absolve themselves from their contracts? It may be asked, what they shall send to exchange for specie? Doubtless there are merchants willing to import gold and silver for them, and take in exchange the notes of their debtors. But the banks would lose by the exchange. Intolerable! it would to be sure be matter of unspeakable regret, if those corporations, which have for a long time been making promises, which they knew they could not fulfil, and by this deception have divided twelve, fifteen and twenty per cent. annually upon their capital, should be called upon to make any sacrifice. What, it may be inquired, can the government do in this case? It may do as much towards making the banks pay specie, as it has done towards enabling them to carry on this profitable traffick in their notes. It has given them currency by receiving them for taxes and loans, and paying them to its creditors; and by refusing to receive them, it may soon stop their circulation. A reasonable time ought to be assigned, at which the government will receive the notes of no bank which does not pay specie. At least, some arrangement should be made which might prevent the port of Boston paying five, ten and fifteen per cent. on importations, more than is paid at the southern ports. Mr. Bollman estimates the amount of the circulating medium in the United States, at one hundred and fifty millions of dollars; and says, that to resume specie payments, fifty millions of specie will be necessary. We do not know what are the grounds of this opinion; but he states a fact which does not much corroborate it. The bank of the United States, he says, at the commencement of its opera tion, issued notes to nine times the amount of its specie. There was in June, 1815, in the banks of Massachusetts, specie to the amount of 7,400,000 dollars. The deposits and specie in the hands of individuals, were at a low estimation 2,600,000. Suppose there were in the other states of New-England half that sum. Allowing that the quantity in all the other States is equal to that in New-England, there is in the United States, specie to the amount of 30,000,000 of dollars. This is one fifth of the circulating medium required by the exigencies of the country. A small addition to these resources, and proper management, would restore the currency. It is true, that the charters of the banks in Massachusetts contain an excellent provision, that they shall not owe debts to more than twice the value of the specie in their vaults. But then banking companies may be incorporated, that may subscribe stock as well as money, in imitation of the plan proposed by Hamilton, and adopted by Congress in 1791, and which Mr. Dallas proposes again in his report. It is impossible to say what amount of notes may be issued on a given quantity of specie, since it depends on the advantages which the exportation of specie offers, on the skill and integrity of the banking company, and its hold on the publick confidence. Application has been made to Congress, to assist the banks in resuming specie payments, by prohibiting the exportation of the precious metals. Would it not be better to impose a small duty on the exportation, as it would not so much abridge the liberty, which is the life of trade, and might be less likely to prevent the importation? We do not agree with Mr. Bollman, that bank-notes should be a tender, nor do we subscribe to his opinion, that there should be but one bank in the United States. It is needless to discuss the latter opinion, for there is no probability of the abolishment of the state banks. We know not why the Constitution should have left, in the individual states, the power of constituting corporations for banking, while it took from them that of coining money, unless it was supposed, that the prohibition of making any thing'a tender in payment of debts, except gold and silver, would prevent any abuse of that power. From the manner in which Mr. Dallas expresses himself, in his last report, we suspect, that he supposes the government of the United States to possess the power of making what it pleases, a tender. We pass this topick by also, under the impression, that whatever may be thought of the power of Congress in this respect, no one will deem it advisable at present to transgress the limits prescribed to the individual states. Some regret that the number of our banks is so great. There are more than five hundred private banks in England, which is a good authority for the pretty liberal multiplication of such institutions. Adam Smith is of opinion, that The busi every considerable town should have a bank. ness is on this account less profitable, but this argument may be urged in favour of any monopoly. When bank-notes become the general currency, and half or more of the gold and silver has been exported, it is said, that the banks, if called upon, could not fulfil their engagements. This would no doubt be true, if you could persuade all the holders of notes to demand an immediate payment. But the difficulty is, to form a general combination for this purpose; to prevent which, and render it ineffectual, is one branch of the art of banking; and if a corporation conducts its business prudently and skilfully, it will always be as able to fulfil its engagements, as any other trading company. Besides the specie in the vaults, or the capital paid in by the stockholders, bank always has discounted paper, equal to the amount its notes in circulation. It chooses its securities and the time of payment. One cannot conceive, that an institution of this kind should become insolvent, except by folly or knavery. Every merchant of extensive connexions, generally owes more than he could pay with the money he keeps on hand, but these debts are due at different times, and he makes arrangements to meet them, by collecting debts due to himself; of these debts, some are probably contracted before hand, others he creates by making new sales. The situation of the bank then is similar to that of the merchant, except that the bank trades only in contracts and specie, the merchant trades in these and numerous other things: the merchant knows when he shall be called upon to make payment, the bank is trusted indefinitely, and is constantly liable to demand. The bank must calculate on the probability of any demands being made, and what their extent may be. The ability of each depends upon that of the debtors to each. When affairs go on in a regular course, a bank may calculate pretty safely on the time and amount of the demands to which it may be subject. At least it may safely assign limits, which they cannot well exceed. It must consequently proportion its issues to the result of this calculation. Besides the small demand for specie, created by the domestick expenditure of the customers of a bank, we think of only four causes which can operate to return its notes upon it. Rival banks frequently run upon each other, till each finds it a loss of trouble and expense, and is convinced of the other's resources being sufficient-notes are brought in when |
