§ 1.  “ In all the cities and towns throughout the country checks upon credits in banks and bills of exchange have largely taken the place of bank notes.  Not a fiftieth part of the business of the large cities is transacted by the actual use of money, and what is true in regard to the business of the chief cities is measurably true in regard to that of towns and villages throughout the country.  Everywhere bank credits and bills of exchange perform the office of currency to a much greater extent than in former years.  Except in dealings with the government, for retail trade ;  for the payment of labor and taxes, for travelling expenses, the purchase of products ;  at first hand, and for the bankers’ reserve, money is hardly a necessity.  The increased use of bank checks and bills of exchange counterbalances the increased demand for money resulting from the curtailment of mercantile credits.”—Report of the Secretary of the Treasury on the State of the Finances for the Year 1867.

The Secretary here clearly recognizes the existence of two descriptions of currency ;  an inferior and a superior one—the former composed of notes which circulate on the faith of moneyed institutions, the latter of checks and drafts based on bank credits, and circulating on the faith of individuals.  That this latter, being the superior one, tends to supplant the former, we are here assured ;  and that such is the natural tendency of monetary affairs is proved by all experience.  The real need for circulating notes exists, therefore, always in the inverse ratio of the use of checks, drafts, clearing houses, and all other of the various contrivances for dispensing with the services of either the precious metals or the circulating note.

Between these two descriptions of currency there are these important differences, to wit :—

That the note represents actual property of the parties by whom it is issued, that property having been deposited in the Treasury as a security for its redemption ;  whereas the credit represents property temporarily deposited in the banks, and liable to be claimed at any instant :

That, while the note cannot be so used as in any manner to change its relation to the total currency, the credit may be, and habitually is, so used as to duplicate its relation thereto—A, the actual owner, and B, the temporary user thereof, both exercising equal power of purchase and equal power to create a currency of checks or drafts—that superior one with the growth of which there should be diminished need for circulating notes :

That, as the inferior currency yields no interest to its holder, all desire to circumscribe within the narrowest limits the quantity to be kept on hand :

That, as the superior one yields interest to its makers, banks and bankers seek as far as possible to increase it by lending out all the moneys placed with them on deposit :

That, as the people at large find their interest promoted by limiting the use of circulating notes the quantity in actual use changes, under ordinary circumstances, so slowly as scarcely to be perceived ;  whereas, the quantity of credits, dependent as it is upon the arbitrary will of banks and bankers, changes from hour to hour, and with a rapidity that sets at defiance all calculation :

That, consequently, it is the power to create the superior currency, that based on mere credits, which demands to be regulated by law ;  and not that inferior one which is based on property, and which finds its proper regulation in the need for its use by the masses of the people.

These things premised, we may now study the course of things under the State bank system, taking as its type the returns of 1860, as follows, the figures representing millions :—

Total amount . . . .
New York and New England
All other States and Territories


Capital and


The first thing that strikes us on an examination of this table is the entire harmony of the facts here presented with the theory of the Secretary, and with the general impressions on the subject, the proportion of circulating notes to capital and business having been very small in those States in which a credit currency most abounded, and very large in those in which such credits were least abundant.  With a bank capital of but $235,000,000, New York and New England had the use of $178,000,000 of credits created by banks for their own use and profit, being nearly two and a half times the amount of their circulation.  With a capital only one-fifth less, the remaining people of the Union appear to have enjoyed the advantages of the superior currency to the extent of but $43,000,000, and their banks to have been dependent upon the profits of circulation to an amount equal to three-fourths of their whole capital, being about twice that of the trading States above enumerated.

The total currency created by banks for their own profit appears to have been as follows :—

New York and New England, with a population of 7,000,000, and a wealth, as returned by the census, of $3,707,000,000, had credits based upon moneys temporarily in banks to the extent of
. . . . . . . . . . $135,000,000
Circulation .......73000,000

The remaining States, with a population exceeding twenty-four millions, and a wealth of $11,558,000,000, or more than thrice greater, had a bankcreated currency thus composed, to wit :—


In the one case banks might have lived and prospered, even bad they been wholly deprived of the profits of circulation.  In the other, outside of a few cities, no bank deprived of those profits could have existed for even a single hour.

Fully enjoying the advantages of both the people of the one could generally have the use of money at about the legal rate of interest.  Limited almost entirely to the circulation, and that itself in many cases limited by absurd restrictions, those of the other were accustomed to pay twice, thrice, and even four times that rate.  With the one prompt payment was a thing of general occurrence.  With the other, debt was almost universal, not because of want of property, but because throughout a large portion of the Country there existed neither credits, circulating notes, nor any medium of exchange whatsoever.

Such having been the state of things seven years since, under the State bank system, we may now examine the working of the, so-styled, national system, with a view to see if it has tended to correction or to exaggeration of the difficulties that then existed.

§ 2.  Under the State bank system, as has been shown, the distribution of credits and circulation among the States was very nearly in accordance with the Secretary’s present teachings.  How far it is so now, under this, so-called, national one, organized by the Secretary himself, it is proposed here to show.

By the report of the Comptroller, just now published, the following was the state of things in October last, two years having then elapsed since the date of the Secretary’s decree issued at Fort Wayne, by which the public were advised that “paper money” was too abundant, that speculation must cease, and that “contraction” must be the order of the day, the figures, as before, representing millions :—

Total . . . . . . .
New York and Now England. . . . . . .
All other States and Territories . . .

Capital and


The total circulation had, in seven years, increased 90,000,000, but instead of finding that increase in those parts of the country in which credit least abounded and circulating notes were most needed, we find the whole of it, and even 10,000,000 more, to have been distributed by the then Comptroller, and now Secretary, to those very States in which credits were most abundant and a paper circulation least required.

Comparing now the bank-created currency of the two periods, we obtain the following figures :—

New York and New England,
present population 7,000,000
Credit currency



Other States and Territories,
population 30,000,000




In the first, population could have but very slightly grown.  In the other it had increased to the extent of many millions, and yet, while nearly two hundred millions had been added to the one, less than one hundred had been secured by the latter.  Such has been the working of a system that is styled national, but that is not only sectional as regards the North and the South, but also as regards the Centre and the West as against the North and the East.

In the intervening period the necessities of our people for a general medium of circulation had grown south and west of New York thrice more rapidly than in the country north and east of the Delaware.  In many of the older States, poorly supplied before, the check and draft currency had wholly disappeared.  Throughout the West new territories had been settled, and new States had been created, in which credit had as yet obtained no foothold whatsoever.  Nevertheless, in the vast region south and west of New York, with four-fifths of the total population of the Union and two-thirds of its wealth, the quantity of circulation granted by the financier who has so much complained of the “plethora of paper money” has been, as here is shown, $10,000,000 less than it had been when Kansas was but beginning to be settled, and when many of the present States and territories had scarcely yet found a place on any map whatsoever.

Circulating notes are least needed where credit currency most abounds.  Such is the Secretary’s present text.  Cities, then, are the places at which banks least need to avail themselves of the privilege of furnishing circulation.  That such was the practice under the State bank system is well known to all.  How it is now, under the one organized by the Secretary himself, and how his system compares with that be had found established, is shown by the following figures, representing, as before, millions :—

OCTOBER, 1860.

New York

New York




Capital and



Excess of


Of $90,000,000 addition to the currency in that form of which the Secretary is now so generally accustomed to speak as “ paper money,” no less than $50,000,000 are here shown to have been given, and given, too, by himself as Comptroller of the Currency, to those three communities in which, by his present showing, circulating notes had been least required ;  $10,000,000 having at the same time been withdrawn from the country south and west of New York, embracing States and Territories almost forty in number, with a population numbering little less than 30,000,000, and growing by millions annually, the needs of all for some general medium of circulation being, man for man, thrice greater than those of the people of the cities whose past and present have been above described.  The Secretary’s theories, as given in the passage of his report heretofore quoted, are excellent.  Can he now explain why it is that his practice has been so different ?

The bank-created currency of those cities at the same periods may thus be stated :—

Credits based on loans of moneys at the credit of individuals


The Secretary denounces speculation, and professes to be earnest in his desire to put it down.  Nevertheless, here, in the very centres of speculation, three great trading cities, we have, under a system organized by himself, an increase of currency amounting to $168,000,000, or within little more than $60,000,000 of the total quantity that, excluding Philadelphia, is allowed to all the States and Territories, of the Union south and west of New York, with four times the population and with twice the wealth of New York and New England.  Not content, even, with this, the great opponent of speculation and of “paper money” has been unwearied in his efforts still further to deplete the centre, the west, and.  the south, and to perfect the centralization already so far established, by compelling all their banks to provide in one alone of them funds for redemption of their circulation, after having already provided for the same by deposits in his own hands at Washington.  A better provision for the maintenance and extension of the speculative spirit, so often and so bitterly denounced by himself, could scarcely have been devised.

The 50,000,000 additional circulation thus injected into the great centres do more to cause what it is the fashion of the day to style “inflation” than would be done by 500,000,000 of the one, two, and five dollar notes required “ for the retail trade, for travelling expenses, and for the purchase of products at first hands,” those purposes for which money is really, in the Secretary’s view, to be regarded as a “necessity.”  By whom, however, were they so injected ?  By the Secretary himself, in his capacity of Comptroller of the Currency !  He, therefore, it is, who is to be regarded as the great “ inflationist ;”  yet does it please him to style as such all those who fail to see that the resumption of specie payments can by any possibility be attained by means of measures tending to total destruction of the societary circulation.

“ Capitals,” said Mirabeau, “ are necessities, but if the head is allowed to grow too large, the body becomes apoplectic, and wastes away.”  That, precisely, is what is here occurring, the whole tendency of the Secretary’s system being in the direction of causing accumulation of blood in and about the societary heart, to the utter destruction of circulation throughout the body and the limbs.  Hence it is that property in New York city has attained such enormous prices, and that we are now daily called upon to read of the “unparalleled advance” that, according to the Tribune, has taken place in the adjoining States, New Jersey and Connecticut.  Passing outward, however, into Pennsylvania, we find a totally different state of things, miners and farmers being thrown altogether idle, and the depression there being quite as little to be “paralleled” as is the advance in the States so liberally patronized by our consistent Finance Minister.

To find his system working in full perfection we need, however, to look further south—to Georgia, Carolina, and Alabama.  Doing this, we find the same Tribune, the especial advocate of his most unphilosophical and most exhaustive system, speaking to its readers in the words that follow :—

“ A correspondent, writing from Hinesville, Liberty County, Georgia, says :  ‘ A sale has taken place at this county seat that so well marks the extreme depression in the money market that I send you the particulars :  Colonel Quarterman, of this county, deceased, and his executor, Judge Featter, was compelled to close the estate.  The property was advertised, as required by law, and on last court day it was sold.  A handsome residence at Walthourville, with ten acres attached, out-houses, and all the necessary appendages of a first-class planter’s residence, was sold for $60.  The purchaser was the agent of the Freedmen’s Bureau.  His plantation, four hundred and fifty acres of prime land, brought $150 ;  sold to a Mr. Fraser.  Sixty-six acres of other land, near Walthourville, brought three dollars ;  purchaser Mr. W.D. Bacon.  These were all bona fide sales.  It was court day, and a large concourse of people were present.  The most of them were large property owners, but really had not five dollars in their pockets, and in consequence would not bid, as the sales were for cash.’  In Montgomery, Alabama, lots on Market Street, near the Capitol, well located, 50 feet by 110 feet, averaged about $250 each.  The Welsh residence on Perry Street, two-story dwelling-houses, including four lots, sold for $3500 ;  Dr. Robert M. Williams was the purchaser.  The same property in better times would not have brought less than $10,000.  The Loftin Place, near Montgomery, containing 1000 acres, was recently rented at auction for forty cents an acre.  The same lands rented the present year for three dollars an acre.  About thirty real estate transfers were recorded in Nashville last week ;  prices were low.  In Portsmouth, Virginia, a house and lot, formerly of the Reed estate, situated on the south side of County Street, near the intersection with Washington, was recently sold to Mr. Ames for $750.  A building lot at the intersection of South and Bart Streets, brought only $125.  A portion of Woodland, the late Judge John Webb Tyler’s estate in Prince William County, Virginia, has been purchased by Mr. Delaware Davis, of New Jersey, at $20 an acre.”

The more the blood is driven to the heart the more do the limbs become enfeebled, and thus greater becomes the liability to paralysis, to be followed by death.  The Secretary has been, and still is, driving all the blood of the Union into the States and cities of the north and east, and with every step in that direction the circulation becomes more and more torpid and the paralysis more complete.

§ 3.  Of the agricultural departments of France a very large proportion are steadily declining in population, the main reason therefor, as given in a highly interesting paper recently published,2 being to be found in “a total absence of that power to supply themselves with circulating notes which elsewhere results from the presence of banks or other establishments of credit, or that of individuals whose signatures to such notes command the public confidence.”

Agriculture, for this reason, fails in those districts to obtain the aid of capital, except on conditions so onerous as to be ruinous to the borrower.  Just so has it always been throughout more than half the Union ;  the farmers of the Mississippi Valley, and the planters of the South and Southwest having been compelled to pay for the use of circulating notes twice, thrice, and often even five times the rate of interest paid by their brother agriculturists of New England and New York.

So did it continue to be until the needs of war compelled the Treasury to do that which it should long before have done, furnish a national machinery of circulation, by means of which the farmer might be enabled to buy and sell for cash, and to pay in cash his mason and his carpenter ;  thereby, and for the first time in our history, enabling these latter in their turn to acquire that feeling of real independence which results from exercise, of power to choose among contending shopkeepers that one which would most cheaply supply the cloth, the coffee, or the sugar required by their families and themselves.  At once the whole position of affairs was changed ;  the needy farmer and laborer, begging for credit, disappearing from the stage, and the anxious trader, begging for their custom, taking their place.  It was a revolution more prompt, more complete, and more beneficial than any other recorded in financial history ;  its direct effect having been that of supplying the inferior, the most useful, and the least dangerous currency to those portions of the country which, while abounding in labor and in natural wealth, were as yet too poor to command the services of that superior one by which, in the course of time and in accordance with the Secretary’s present teachings, it was to be replaced.

Of all the machinery of commerce there is none which renders so large an amount of service as that which facilitates exchanges from hand to band.  The more it abounds the more rapid is the circulation, and, as in the physical body, the greater are the health, the strength, and the force.  It is, however, the one that is always last obtained, and most difficult to be retained.  In furnishing it gratuitously to the centre, south, and west, the Treasury rendered a larger amount of service to our whole people than it would have done had it given the gratuitous use of railroads whose cost would have been twice as great as its own amount.  That service was found in the increased demand for labor, to the great advantage of those who had it, in its various forms, for sale—the farmers, mechanics, and laborers of the Union.  To some extent, however, it damaged those who made no profitable use of their own physical or mental faculties—annuitants, mortgagees, and other persons in the receipt of fixed incomes.

That, however, is the necessary result of beneficial changes of every kind, all such improvements manifesting themselves in an elevation of the labor of the present at the cost of accumulations of the past—the rate of interest always falling as labor becomes more productive.  Instead, however, of so regarding it, those who suffered have, of course, insisted that it had been nothing but “a forced loan;”  that, for that reason, it should, at the earliest possible moment, be repaid ;  and that the whole people should, for their benefit, be deprived of all the vast advantage which, under pressure of the war, had been so promptly gained.  By whom, however, had the loan been made ?  Had it not been by the whole body of the people ?  Assuredly it had, and that same body had been the recipient of its products.

It had been simply the one great corporation of the Union combining with its members for obtaining, free of charge, the use of machinery of inestimable value, in default of which the societary circulation had previously been so much and so frequently arrested as to cause waste of labor to an annual amount twice greater than the circulation that had thus been furnished.  It was that corporation combining with its members for their relief from the oppressive taxation of usurious capitalists, money-lenders on the one hand, and traders on the other.  Of those who made the loan none complain.  None suffer ;  there being not even a single one who cannot, on the instant, be reimbursed, obtaining from his neighbor property of value fully equal to that which be had given for his share of this, so-called “loan.”  What they do complain of is that, while willing to extend their loans, and to do so without charge of interest therefor, they are not permitted so to do ;  and here they complain with reason.

The Secretary insists, however, that this is only “paper money,” of which there exists, in his opinion, so great a “plethora,” that, at any sacrifice, this loan must be repaid.  Seeking this “plethora,” we look to the South, and find plantations being almost given away, because of the almost entire absence of currency of any description whatsoever.  Turning next to the Mississippi Valley we find currency so scarce that manufacturers and traders pay for its use twice and thrice the usual rate of interest ;  farmers, meanwhile, finding difficulty in obtaining it on any terms whatsoever.

Coming now to the centre, we find it to be so little superabundant as to compel the employment of bank certificates—a sort of bastard “paper money” that otherwise would not be used.  Passing thence to the North and East, the centre of speculation, and therefore, perhaps, in both the past and the present, so largely favored by a finance minister who professes himself opposed to “speculation,” we find an abundance, and perhaps even the “plethora” of which he has so much and so frequently complained.  Taking, however, the whole Union, we find that of this terrible “paper money” the quantity in actual circulation cannot be estimated at more than five hundred millions of dollars, or little more than a dozen dollars per head.  With less than half the need of it per head, France has a circulation of thirty dollars for each individual of her population ;  and yet, with even this large supply, her agricultural districts are even now actually perishing for want of some representative of money to be employed in the effectuation of exchanges.  Of all the countries of Europe there is none in which there exists in such complete abundance that superior currency which, as the Secretary assures as, and as we know to be the fact, tends to supplant the circulating note, as is the case in Britain.  Yet even there do we find the circulating medium, per head, to be twice as great in quantity as among ourselves.  Nevertheless, with these facts before him, and in direct opposition to his own most recent teachings, the Secretary assures us that it is to the excess of “paper money” we are to look when desiring to find the “obstacle” which stands in the way of “a return to a stable currency !”

Scotland, as stated in the article above referred to, has for each 5000 of her population a place at which money operations may be transacted.  Nevertheless, there is no country of Europe in which circulating notes are so generally used.  This, according to the Secretary, should make of it a good place to sell in and a bad one in which to buy ;  there yet is none in Europe better in which both to sell and to buy.

Jersey, one of the little Channel islands, with a population of 55,000 gathered together in a space less than half that embraced within our city limits, has no less than seventy-three places at which monetary affairs may be transacted ;  and yet, with all this vast machinery for supplying the superior currency, her people use of notes, none of which are of less than $5 value, more than $400,000, or almost $8 per head.  Add to this the gold and silver that must necessarily be used, and we obtain a larger proportion than is now in use by a people of little less than 40,000,000, scattered over half a continent, among by far the larger portion of whom there exist none of those appliances by means of which, in more advanced communities, the use of money, whether the precious metals or the circulating note, is so much economized.  Excluding New York and New England, and allowing for the general absence here of those means, the circulation of Jersey is ten times greater per head than that of nearly forty of our States and Territories ;  and yet, not only does this little island enjoy the highest degree of prosperity, but there is not a spot in Europe in which excess of currency stands less in the way of both buying and selling with advantage.  The facts and the Secretary’s theory do not, therefore, harmonize with each other.  So much the worse, he will probably reply, for the unfortunate facts.

It is, however, as he says, an irredeemable currency, and therefore an “obstacle” to resumption.  The first of these assertions is true, and here we are happy once again to agree with the honorable Secretary.  Whether or not it really constitutes the obstacle, and whether or not the Secretary’s movements tend to remove that which is certainly the real one, we may now inquire.

4.  By the present banking law it is required that before any association of capitalists, large or small, shall commence supplying their neighbors with machinery by means of which they may be enabled readily to make their various exchanges, they shall lend to the government an amount one-ninth greater than that of the circulating notes with which they desire to be supplied ;  and that the bonds they are thus required to buy shall be placed in the Treasury, to be there held as security for payment of the notes.

That done, and the notes received, it is then required that with these latter they shall purchase a certain proportion of Treasury notes payable on demand, to be held by them as further security for the payment on presentation of any portion of their own circulation.  Further, in the event of failure of payment, their stockholders are made to a certain extent individually liable for any ultimate deficiency of assets, whether as regards the holders of notes, or the owners of credits on the books.

Having thus defined the terms on which the several portions of the country might be enabled to furnish their various neighborhoods with machinery of circulation, and having provided such restrictions as rendered it most difficult so to do except in rich and populous districts, it might have been supposed that then it would have been everywhere left to the people themselves to decide whether they would, or would not, have among themselves institutions of credit empowered to supply them with circulatory notes.  Not so, however, the law providing that whensoever such circulation shall have been anywhere issued to the extent of $300,000,000, all power for further issue shall cease, and thus establishing a monopoly in the bands of those who first had taken possession of the little that had been granted.

Compliance with these conditions was easy in those communities within which credit institutions already largely abounded, and in which, by the Secretary’s own showing, circulating notes least were needed, to wit, New York and New England.  Most difficult, however, must it prove in all of those in which such notes most were needed, to wit, the centre, the west and the south, those in which the superior currency of checks and drafts least existed.  Most of all was it easy in those large cities in which, as shown by the Secretary himself, “ not a fiftieth part of the business is transacted by the actual use of money ;”  and in which, as he further gays, “ except in dealings with the government, for the retail trade, for the payment of labor and taxes, for travelling expenses, the purchase of products at first bands, and for the banker’s reserve, money is hardly a necessity.”  Of all this the Secretary must have been then perfectly aware, and so having been, it became his duty, in his then capacity of Comptroller of the Currency, so to act as to secure to the States and Territories least provided with the superior currency the largest possible share of the limited quantity of the inferior one that has been thus allowed.  Directly the reverse of this, however, we find him to have added $100,000,000, to the previously existing circulation of those States in which credits most existed, and $50,000,000 to that of the three cities in which circulating notes were least of all required ;  while actually diminishing by $10,000,000 the allowance to the whole country south and west of New England and New York.  Had it been his especial desire to produce the inflation of which be has since so much complained, he could have chosen no better mode of operation.

By this course of action there was established a monopoly of money power without a parallel in the world ;  that monopoly, too, created by the Secretary himself in those very centres of speculation in which each additional million does more to produce “inflation” than could or would be done by any ten millions scattered throughout the pockets of the farmers and laborers of the east, the west, the south, or the southwest.

The counterbalance to this monopoly was found in the existence of a machinery of circulation that had been created by the people themselves for the purpose of enabling each and all of them readily to exchange their services and products.  The one tended towards enabling capitalists of the cities to compel the interior more and more to depend on them for performance of all their exchanges, and thus to give them more complete control over the farmer and the laborer.  The other, on the contrary, tended towards enabling farmers and laborers to exchange among themselves, freed from the control of city capitalists ;  and for that reason, perhaps, it has been that our Finance Minister has been so unwearied in his efforts to drive it from the stage.

For the accomplishment of that object he and his particular friends have done their utmost towards destroying the confidence of our people in each other, and in the country’s future.  From day to dray has “contraction” been insisted on, accompanied by the assurance that prices must be made to fall ;  that property of any description whatsoever bought to-day might be valueless to-morrow ;  that mines opened, furnaces or houses built, this year, must prove in the next to be worth far less than they had cost.  Raids have been made upon banks.  Interest-bearing securities have been withdrawn from them for the express purpose of compelling them to heap up greenbacks in their vaults.  Factories and furnaces have been closed that might and would have consumed hundreds of thousands of tons of coal and bales of cotton.  Mines have been abandoned, and manufacturers have been ruined.  Paralysis has been brought about through the whole extent of the Union, and all these things have been done to the ends that the people might be deprived of a circulating medium created by themselves and for themselves ;  that the monopoly of the extreme, North and East might be perfected ;  and that the “speculator” might in this manner be driven from existence.  To what extent these latter have been attained, we may now inquire.

From the report of the Comptroller just now issued we learn that on the first of January, 1867, the loans on private security by the banks of New England and New York were $404,000,000, and that nine months later not only had there been no contraction, but there had been an actual increase of their amount.

At the first of these dates they held $297,000,000 of interest-bearing public securities.  At the last, their amount had fallen $14,000,000, the whole effect of a nine months’ vindictive warfare having been that of compelling them to disgorge public securities yielding them an annual interest of probably $800,000.  Placing against this the higher interest, that lenders had, by means of the Secretary’s aggressive policy, been enabled to secure, the balance in favor of the banks would probably count by millions, for all of which they had been indebted to the policy announced in the celebrated but unfortunate Fort Wayne decree.  The policy that carried us through the war favored those who had labor to sell and money to borrow.  That of the Secretary favors those who have money to lend and labor to buy ;  and hence it is that the societary circulation becomes daily more and more impeded, and that the Treasury daily loses power.

Throughout the North and East there was certainly a plethora of currency needing to be corrected.  Has the Secretary, with all his efforts, succeeded in making this correction ?  On the contrary, he has not only proved himself utterly powerless in that direction, but has, by largely withdrawing that machinery on which, almost alone, were dependent the people of more than half the Union, made the centres of speculation relatively far more powerful than they had ever been before.  To what extent this course of action has tended towards facilitating resumption may be now examined.

§ 5.  The Secretary’s policy of “contraction,” as has been shown, has been fully operative in all those portions of the Union that did not enjoy the benefits of that superior currency of checks and drafts which, as he informs us, have so largely “taken the place of bank-notes,” and that, for that reason, most needed such notes, the national circulation having been reduced more than $70,000,000, without provision of local currency to take its place.  It has been wholly inoperative in all those centres of speculation in which “not a fiftieth part of the business is transacted by the actual use of money,” the “plethora” still existing just where the Secretary had himself created it, monetary starvation being, meanwhile, the lot of two-thirds of the whole population of the Union, and their position, relatively to the highly speculative North and East, undergoing daily deterioration.  In this state of things it is that the Secretary has graciously announced his determination to postpone resumption for another year, giving to banks and bankers to July, 1869, for preparing to “face the music.”  More simple, and more in accordance with what, as we think, he must have known to be his real position, would it have been had he at once announced a postponement to the Greek kalends, a day whose arrival was never to be apprehended.  That under the present system it never can, by any possibility, arrive, will be clear to all who shall take the trouble to study the existing relation of banks and people, banks and State, as it will be now exhibited.

On the first of October last the debts of banks to individual depositors amounted to . . . . . . $ 538,000,000
Their debts to banks and bankers, a very considerable proportion of which was from city to country banks, and bearing interest, were . . . . . . . . . 112,000,000
Circulation . . . . . . .300,000,000
  $ 950,000,000
On the same day they held of legal-tender notes, of various descriptions. . . . . $ 157,000,000

Let us now suppose that notice bad then been given them to be prepared on the first of January to face their creditors and meet their obligations.  Such preparation would, of course, have involved the calling in of hundreds of millions of loans, attended with bankruptcy of thousands if not even tens of thousands of miners, manufacturers, traders, “speculators,” and others interested in the general business of the country, to be followed by a general failure of institutions whose stockholders were all, to a greater or less extent, liable for payment of their debts.  Would the banks have done this ?  Assuredly not, if any other course were open to them.  Would there then have been any other ?  Most assuredly there would.  They might then have chosen between bankrupting the Treasury with large profit to themselves therefrom, or becoming themselves bankrupt with still greater loss ;  the one course simple and readily pursued, the other difficult and trying to the consciences of all who might, even for a moment, think of its adoption.

On the day thus supposed to have been appointed, the first of January, the Treasury was owner of $88,000,000 of gold.  On that day the banks held probably the same amount as in October of Treasury obligations redeemable in gold—to wit, $156,000,000.  By presenting little more than half of these for payment, they would at once empty the Treasury vaults, while still retaining nearly $70,000,000, every dollar of which would be from that moment receivable at the custom-houses, though not necessarily receivable by the claimants of interest on the public bonds.  From that hour the Treasury would be bankrupt, as interest could be no longer paid.  Is it, then, the banks that need to be protected against the State, or the State that needs, by continuing the suspension, to be protected against the banks ?  Assuredly it is this latter.

Would, however, the banks so have acted ?  Most certainly they would.  They held then, as they now bold, in their own hands the means of protection against a policy that is both insane and vicious ;  and had they failed to use it, they would have fully earned the censure of their fellow-citizens and of the world at large.

The debts due to depositors by the banks of New England and New York, and those of the three chief Atlantic cities, exceed $500,000,000.  Add to this their circulation, and we obtain an amount little short of $700,000,000, to meet which they hold somewhat more than $100,000,000 of Treasury obligations payable on demand, a quantity very insufficient for meeting their creditors, but quite sufficient for enabling them to hold the Treasury itself in check.  There is thus at the heart of the system, and centre of the “speculation” so much denounced by the honorable Secretary, a force that can at the shortest notice be brought to bear upon him, and against which be would find himself as utterly powerless as did Canute when he undertook to check the rising of the tide.  In establishing the great money monopoly of the East and North, the Secretary did but create a monster, a sort of monetary Frankenstein, armed with power to control himself, the author of its unfortunate existence.

That the Secretary knows and feels all this is proved by his extreme anxiety to be authorized to go abroad to beg for loans, and to dress up his securities in a manner calculated to please the fancies of the little capitalists of France and Germany, Switzerland and Holland.  His fellow citizens are anxious to lend him all he, needs, and wholly free of interest.  Rejecting all such aid he, placed in the direction of a community possessing greater mental and mineral resources than any other, seeks to be allowed to peddle his wares in all the towns and villages of Europe, and thus to present in fullest relief the miserable state of weakness to which, by means of a policy the most narrow and unstatesmanlike, our people and our government have been reduced.

Closing his eyes to the fact that throughout the whole of his ministerial life we have been exporting bonds by tons weight,3 the Secretary now urges that he be permitted to create new bonds, to be exchanged for gold by means of which to effect resumption.  Simultaneously with this we have an estimate of customs revenue for the realization of which we must, allowing for frauds of various kinds, import more than $400,000,000 of foreign merchandise.  Add to this freights, interest, and expenses of our people resident or travelling abroad, and we obtain a gold demand for Europe of fully $550,000,000 ;  or more than twice the amount of all the tobacco, oil, cotton, and other products we have for export.  In our relations with foreign countries there is an annual deficit of hundreds of millions to be paid in gold or bonds, and it is in the face of this great fact that the Secretary proposes to go abroad to purchase the gold by means of which be is to be armed with power for controlling a great monopoly, which but for himself would never have had existence.  With every step in this direction he is still further weakening both the people and the State, and making new preparation for our arrival at that goal toward which, from the hour of his taking the direction of our finances, we have been tending—that of bankruptcy of the Treasury and final repudiation of the national debt.

Had the Secretary studied our financial history, he would have seen that whenever the societary circulation had, as in the protective periods ending in 1835 and 1847, been rapid, the many who had had need to labor and to borrow had been strong for their contest with the few who had need to purchase labor and had money to lend ;  and, that then, and then only, had the nation been strong for the assertion of its proper place among the Powers of the world.

It was the many who made the recent war.  It was they, and not the few, who gave the government power for suppressing the rebellion.  Almost from the hour, however, of the appointment of our present Finance Minister the alliance between the many and the Treasury ceased to exist, and hence the present weakness of the State.  From that hour there has been an incessant effort at strengthening the few for their contest with the many, and hence it is that such large fortunes have been accumulated by those connected with Treasury operations, the whole people meanwhile suffering under a necessity for paying greatly increased rates of interest, and banks and bankers building palaces while laborers and their families perish because mines and mills stand closed ;  their owners having been almost, even when not altogether, ruined.

The road in which the Secretary demands that we now travel finds its termination in repudiation.  That such is the case is proved by all the recent movements.  If, then, the holders of our bonds desire that the national honor be maintained, let them insist upon such a change of policy as shall tend towards early restoration of the societary circulation.

§ 6.  The societary circulation becomes more rapid, men become more prosperous and more free, and the State grows in wealth, strength, and power, as the circulating note, readily exchangeable for coin, takes more and more place of the coin itself.  Still more rapid is the growth of all, as that higher currency of credits, upon which are based the checks, the drafts, the clearing-houses, and other machinery for economizing the use of money, tends to supplant both the metals and the note ;  every movement in that direction as much indicating progress as does the substitution of the wagon for the pack-horse ;  the locomotive, in its turn, supplanting both horse and wagon.  For speed and economy the highest form of currency almost emulates the electric telegraph, the circulating note finding its correspondent in the postman of modern days, and the precious metals in the messenger of olden times, when the public postman had as yet scarcely made his appearance on the stage.

Electricity and steam need the curb.  So does the highest form of currency.  The wagon horse needs the spur.  So does that description of currency which takes the form of circulating notes.  Crises, public and private, come when the former is left wholly uncontrolled.  Stagnation and weakness follow in the train of measures preventing development in direction of the latter.  That such is the case is proved by every page of our financial history, yet do our legislative records present a constant series of efforts for prohibiting the use of the note and thus compelling use of the metals, a course of proceeding just as philosophical as would be one that should look to forbidding wagons lest they might lessen the demand for pack horses.  Time and again has it been proposed that our people should be prevented from giving or taking any note of less denomination than $10 or $20.  As often have they been forbidden to avail themselves of the services of any that should be less than $5 ;  and yet, despite bf all opposition, the note has held its ground and grown in public favor.  Not only so, but it must continue so to do, despite the recent declaration of our honorable Secretary that to all systems under which “circulating notes are issued” he finds such “ grave objections,” that “if there were none in existence in the United States he would hesitate to recommend or to indorse the most perfect that had ever been designed.”

Greatly admiring the credit which so supplants both the note and the metals that the use of either almost ceases to be “a necessity,” he thus strongly opposes the note which constitutes the intermediate step between the metals and the credits.  Unable to recommend the dangerous wagon, he greatly admires the safety and celerity of the locomotive and its train.  Common sense, however, teaches that as the wagon is useful as preparation for the engine, so the note is needed as preparation for the credit, and that both are evidences of advancing civilization.

Beyond the Atlantic there is no country that has so much as Scotland tended towards substitution of the readily-transferable note for the slow-moving metals, yet is there none that less has suffered from financial crises of her own creation.  Directly the reverse of this, we find in England a constant series of regulations as to who might, or might not, issue notes, and as to the minimum value of such as might be issued, the whole at last culminating in an absurd and preposterous system that has, in its little more than twenty years of existence, given to the world no less than three financial crises, each more severe than that by which it had been preceded ;  and the last so greatly so that recovery therefrom has scarcely as yet commenced.  By that law it was provided that the curb should be used where the spur had most been needed, leaving at the mercy of banks and bankers that higher currency, created for their own especial use and profit, in relation to which control was really required, while checking and controlling that inferior one with the use of which all seek to dispense as far as is consistent with the convenient effectuation of their exchanges.  Such having been its necessary tendencies, the extraordinary expansions and contractions that have attended its brief existence offer no cause for wonder.

At home, in the New England States, there was presented for examination a banking system directly the reverse of that of England, the most free, the most natural, and therefore the most stable and useful, of any the world had ever known.  Nowhere had currency been so cheaply furnished.  In none had redemption been so uniform.  Instead, however, of studying it, the originators of our present system studied carefully that of England, finally adopting it, with the addition of new and burdensome restrictions in reference to that inferior currency which most was needed, and leaving, as in England, wholly unchecked that superior one to which we had in all the past been indebted for every financial crisis with which the country had been afflicted.

Bad as was this law itself the danger that it threatened was intensified by the organization under it that followed, the then Comptroller of the Currency, and now Secretary, having applied the spur in all those portions of the country in which the curb had theretofore been needed, while reserving this latter for those of them in which institutions of credit least existed, and in which their careful nurture was most required.  Hence the situation in which he now finds himself, face to face with a great monopoly whose power increases with each and every of his efforts at its limitation.

Desiring now to reach resumption we must wholly change our system, ceasing to use the spur in that only portion of the country in which the curb is needed, the north and east, and declining to apply this latter in the centre, the south and the west ;  in all of which the prosperity of the people and strength of the State would greatly be promoted by increased facilities of exchange.

Circulation demand’s to be re-established throughout the Union, and to that end we need to calm down the excitement which exists in close neighborhood of the heart ;  at the same time adopting measures tending to stimulate the body and the limbs that are now so nearly torpid.  That such measures may be adopted it is needed that our legislators begin to appreciate the folly of a system that leaves to banks, bankers, and “speculators” the entire and absolute control of that superior currency whose power for good or evil so closely resembles that of electricity, while refusing to permit the miner and the laborer, the mechanic and the farmer to determine for themselves how much of the inferior one they will carry in their pockets.

The road by which we now travel is, to the people at large, a painful one, and one by which resumption never can be reached.  That by which we should travel, though somewhat long, would be travelled joyfully by all but those who are now financially and politically so largely profiting by the general distress.  The Treasury forces have been long arrayed on the side of these latter, and hence the weakness of the people and the State.  It is for Congress now to see that this no longer be the case.


* This is probably much less than the truth, there being checks and “cash items” that to some extent must have borne interest.  Opposed to them there are surplus funds which are additions to capital.  The one would probably balance the other.

2 Journal des Economistes, September, 1867.

3 One of the agents charged with care of the foreign mails has stated recently, to one of our diplomatic representatives in Europe, that each and every trip throughout the last two years he had carried registered letters containing bonds the weight of which varied between 60 and 300 pounds.  This is for but one of the several weekly lines of steamers, and to estimate the total quantity at but 150 pounds per week, would give a ton weight per quarter.  It is in the face of this that it is now gravely proposed to create a new loan specially for Europe.