The Journal of Banking
by William M. Gouge,

Vol. I., No. 17,
Wednesday, February 16, 1842.

Resumption of Specie Payments.

We have received a copy of the Winchester Virginian, of January 19th, in which is a very able memorial to the Legislature of Virginia, urging a resumption of specie payments.  The author requests us to say, if his views are correct.  The particular question on which he wishes our opinion is, we presume, embraced is the following extract.

"Coin (gold and silver) will not circulate with irredeemable paper.  When the latter circulates, the former ceases to be used as a currency, becomes an article of merchandize, and is bought and sold like other valuable commodities, and like them its rise or fall, as compared with irredeemable paper, depends upon the quantity of the latter issued. --And the enhancement in the value of the precious metals as compared with irredeemable paper, indicates as truly the excess of the issues of that bane of our country, as does the thermometer the temperature of the atmosphere.  Thus, when one hundred and ten dollars of paper are necessary to command, one hundred dollars in coin, it indicates an excess in the issues of paper of ten per cent.

"Now if this rule be true, and many practical men concur in the belief that it is so, it proves that the entire amount of excess in the circulating medium of this State is six per cent., that being the premium the precious metals bear in this market.  And all that is required in order to a resumption of specie payments, is a curtailment of the discounts of the banks to an extent sufficient to diminish the circulation of the State six per cent., and an avowal by them of their abandonment of their present dishonorable course.  And while we are not sufficiently familiar with our local currency to warrant us in forming an estimate of its amount, we hazard little in saying that it falls very far short of half the aggregate of the discounts of our banks.

"But suppose the circulation of the banks be equal to half the aggregate of their discount, then a resumption of specie payments can be brought about by a curtailment of the discounts of the banks three per cent., and then all the ills with which the community have to contend, and under which the honest and industrious laboring classes suffer so much, can, by so small a sacrifice, be removed.  In other words, the rights of the masses are outraged, the laws set at defiance, public morals corrupted, and all other ills of an irredeemable paper currency are inflicted upon us, in order that a few bank favorites may be able to borrow, use, and pay interest upon three per cent. more money than they would be able to command under another and better state of things;  and in order that the banks may draw an interest upon six per cent, more bank credits than they can keep in circulation, and do that which is honest.

We have consulted with our friends on this subject, and we find them all, both practical bankers and scientific economists, of one opinion, namely, that the question is not one of quantity only, but of quantity and quality combined, and that the extent to which the banks must reduce their discounts in order to resume and to sustain specie payments, depends on a variety of circumstances.

As a small excess in the quantity of any commodity, be it paper-money or any thing else, may cause a considerable fall in its value, it is quite possible to suppose a case in which a smaller reduction than is mentioned in the quotation above given, would bring a depreciated currency up to par.  Such would be the case, if the inhabitants of the district in which the notes of the bank circulated, owed nothing to the inhabitants of other districts, if they had full confidence in the bank making the issue, and more especially if most of those holding the notes of the bank or having deposits in it, had an interest, either as stockholders or as borrowers, in supporting the credit of the institution.  In supposing that the inhabitants of the district owe nothing to the inhabitants of other districts, we suppose also that the bank itself owes no balances abroad.

On the other hand, let it be supposed that the inhabitants of the district owe large amounts to the people in other places, --that, through a series of events, confidence in the bank is shaken-- and that most of its notes and deposits are in the hands of persons who have no interest in supporting its credit.  Then, a considerable reduction must be made in the amount of the current credits of the bank, in order to bring them up to par.

One of the reasons alleged by our banks for not resuming specie payments, is the large amount of debts due, not by the banks themselves, but by the merchants of Philadelphia to their eastern correspondents.  The New Englandmen choose to have the payment of the debts due to them postponed, rather than be paid in a depreciated currency. --Should the banks resume specie payments, a large amount of bank deposits, now lying dormant, would be called for either in specie or its equivalent, and meeting such demands would, to say the least, prove extremely inconvenient.

Another reason with our banks for not resuming that the public have so entirely lost confidence in them, that no man, not having an interest in supporting them as a stockholder or a borrower, would trust them a day longer than he could possibly help.  The market people might receive their notes, but they would not take them home with them.

Should our banks resume, there would be a demand for both bank notes and bank deposits;  but it would be for the smallest amount with which it would be possible to carry on the wholesale transactions of the town.  People would not, as they did in former days, hoard bank notes and bank deposits, with just as much avidity as their forefathers did gold and silver.

The demand for money, be that money paper or metal, is two-fold.  First, to pay debts which are due, or to make purchases which are immediately desirable.  Secondly, as an investment, which will afford the means of paying debts or making purchases in some after time.  Our money is at present inconvertible paper, and its value is maintained in the market by this two-fold demand.  We hoard to a certain extent even inconvertible notes, and inconvertible deposits, because we suppose that they may a week, or a month, or perhaps three months hence, be as available in paying debts and making purchases as they are now.  But let the banks resume specie payments, and the whole demand for money as on investment, even if it is intended to be held in that form for only one month, will be for metallic money.

These causes would operate with more force in Philadelphia and its neighborhood than in Virginia, and in some other parts of the country.

The effects of the measures taken to produce a resumption of specie payments, are sometimes very different from what are anticipated.  When the question was agitated in Great Britain in 1819, Ricardo gave it as his opinion that a resumption would not cause a greater fall than four or five per cent. in the prices of commodities.  In a debate in the British Parliament some years afterwards, Earl Grey said "he looked back with astonishment on this opinion, as it was now an indisputable fact that the approaching return had the effect of depreciating property thirty-five per cent."

Perhaps this fall of prices was in part owing to other causes.  We are strongly inclined to think it was.  And that, among other causes, the great disorders which prevailed in the United States in 1819, and subsequent years, had a great effect on prices in Great Britain.  If but one of the leading branches of industry in a country be greatly depressed, every other branch will feel the effects thereof.  As Great Britain has its chief foreign maket in the United States, whenever we get into trouble, several of its leading branches of industry are greatly depressed, whereby all the rest are affected.

Another cause to which we are disposed to attribute the great fall of prices in Great Britain, is the change from a silver to a gold standard.  Before the bank restriction act in 1797, silver was, to a great extent, the practical standard in Great Britain, so far as any metal can be considered as the standard in a country using paper money. --During the interval that elapsed between the suspension and the resumption of specie payments, gold rose greatly in value as compared with silver.  In 1797, one ounce of gold was worth, say, 1.5 ounces of silver.  In 1821, one ounce of gold was worth nearly 16 ounces of silver.  Since the resumption of specie payments, silver has not been a legal tender in Great Britain for a larger amount than forty shillings.  We believe that British writers on the currency, have not duly considered the effect which this change of standard produced;  and that the fall of prices which they attribute solely to the resumption of specie payments, was owing in part to the adoption of gold as an exclusive standard, without due reference to the fact that a great rise had taken place in the value of gold as compared with silver.

As our banks have the option of paying in either gold or silver, and as gold is now estimated at our mint at its true market value, we should not have this difficulty to contend with.  But we should have others of a not less serious nature, arising out of the general want of solid capital on the part of the banks, and a general want of ability to pay on the part of bank debtors.

The paper of a particular bank is at, say, only six per cent. discount: but that it is not at a discount of twenty or thirty, is perhaps owing only to the forbearance of other banks which are its creditors.  And these other banks are enabled to exercise such forbearance only by means of various contrivances, by which they support their own credit, many of which contrivances are known only to the initiated.  Perhaps the exercise of forbearance by the creditor banks towards the debtor banks, is merely the result of policy.  They may know that by pressing their demands for payment, they may lose every thing.  They may hope to gain something by temporising.  They may fear to produce a run on themselves, by treating other banks as the Northern Liberties Bank lately treated the Girard.

In the present condition of things, we do not look upon the prices which bank notes bear in the market as a fair test of their ultimate value.  Such value as they possess, is, in a great degree, the result of cunning, combination, contrivance, policy, and mutual forbearance, arising from a sense of mutual weakness.

In a few words, we do not look upon a resumption of specie payments as an object as easy to be effected as some people imagine.  Few of our banks ever had any capital but the stock notes of their subscribers.  A bona fide payment of these stock notes, under present circumstances, is impracticable.  They have not, therefore, in their capital, the means of resuming, that is, of paying their debts, for their very capital consists of nothing but promises to pay.

If they had confined their discounts to commercial paper, resumption would be easy.  But they have not done this.  They have made most of their loans to land speculators and stock jobbers.

There is no use in concealing from ourselves the real difficulties of our situation.  Full two-thirds of the banks in the "suspended district" never can resume and sustain specie payments.  The sooner, therefore, they make the necessary preparation for winding up their affairs, the better will it be for them, and the better will it be for the community.

"The History of A Little Frenchman and his Bank Notes," has been extracted by us from a pamphlet published in this city in the year 1815.  At that time, as now, the banks were in a state of suspension, but then every body that chose made money out of paper, and notes for the fractional parts of a dollar took the place of silver change.  Without a knowledge of this fact, some passages in "The History of A Little Frenchman" will not be understood by readers in this vicinity.

The History of a Little French Man and his Bank Notes.

Travelling lately in a stage from the South, I fell in company with a little Frenchman of rather singular appearance and dress, who, contrary to the characteristics of his good humored nation, seemed animated by an inveterate propensity to grumble at every thing.  He never paid or received money without a vast deal of shrugging of his shoulders and other tokens of dissatisfaction, and whenever he handled a bank note, eyed it with a look of most sovereign contempt.  He talked English tolerably well, except when he was in a passion, when he sputtered French most vehemently.  His complexion and dress denoted him to be of the West Indies --the first being a sort of mahogany color, and the latter as follows, as nearly as I can recollect.  His hat was exceedingly high-crowned, and his little pigtail queue dangled from under it, like a rat's tail.  He had rings in his ears --a coat with long skirts-- cut nearly to a point, and reaching to his ancles --a white dimity waistcoat, and breeches, with gold buttons;  and he wore a watch with a chain and trinkets that reached half way down to his knee.  His appearance, dress, and, above all, his ill humor, excited my curiosity and induced me to inquire into his history.  The second day, having got a little acquainted, he let me into the secret of his dissatisfaction.

It seems the little man had arrived from Cuba, with about eight thousand dollars in gold, which by way of security he lodged in one of the banks at Savannah.  When he came to demand his money, he was told they did not pay specie, and he must therefore take bank notes or nothing.  Being an entire stranger, and ignorant of the depreciation of paper money, arising from the refusal to pay specie, and from the erection of such an infinite number of petty banks in every obscure village without capital or character, he took the worthless rags and began his journey northward.  Every step he proceeded his money grew worse and worse, and he was now travelling on to Boston with the full conviction that by the time he arrived there he should be a beggar.  It was in Philadelphia that he told me this story.  "Diable" exclaimed he as he concluded -- "your banks ought to be called bankrupts-- not one of them can pay their debts --or will pay them, which is the same thing-- yet they pretend to make a distinction between the notes of one bankrupt and the notes of another."  "Voila" said he, holding up a parcel of ragged dirty bills, pregnant with filth and disease --"Voila-- it is like making a difference between the rags of one beggar and the rags of another."

There was so much truth in all this that I did not care to deny his position.

Proceeding on our journey we stopped at Bristol, about 20 miles from Philadelphia.  The little Frenchman took something to drink at the tavern, and offered a bill issued by the landlord of the hotel where we had staid in the latter city, who, it seems, in order to be in the fashion, had also commenced Banker among the rest.  This note his brother landlord at Bristol refused to receive in payment.  The little Frenchman, not understanding the distinction made by a discerning public, between the rags of one bankrupt, and those of another, now gave himself up for a ruined man, supposing that he had at last got to the extreme verge of the circulation of his bank notes.  He seemed to behold the spectre [of] poverty full before him, and to contemplate his gold buttons, that I dare say had descended down to him through several generations, as a last resource against starvation.  He looked at me for consolation, with such a disconsolate shrug, such a glance of absolute despair, as would have touched the heart of even a bank director.

As well as I could, I explained to him the difference between a tavern-keeper's note, and a bank note, and comforted him with the assurance that by the time he arrived in Boston, provided he met with tolerably honest brokers, his stock of notes would not be diminished more than fifty per cent.  The little man drew from his waistcoat pocket a great gold snuff box, opened it with extreme deliberation, took a long despairing pinch of snuff, and heaved the heaviest sigh I ever heard from one of his countrymen.

"Monsieur," said he "does the legislature of your country permit this system of swindling, this inhospitable custom, which falls so heavily on the traveller and stranger, to pass without censure or punishment ?  Is the privilege of coining money, one of the highest attributes of sovereignty, permitted thus to be exercised by bankrupts, and tavern-keepers, whose notes will either not pass at all, or pass under a depreciation, which increases in the ratio with the distance you are from the place of emission ?  In all civilized countries the counterfeiting of a circulating medium is severely punished.  And where is the difference, whether a man imposes upon me a fictitious note, or a note that he knows will not command the value expressed on the face of it ?  The one indeed is forgery, the other rank imposition, but the offence to the individual, and the injury to society, is of the same nature."

"But," said I, "it is supposed that every body knows the value of every species of bank paper as well as the credit of every individual who issues notes, and to be ignorant of such things, is only to suffer those consequences which naturally spring from ignorance in every circumstance and situation of life."

"With merchants," he replied, "whose business it is to make themselves acquainted with the course of exchange, the value of money, and the credit of individuals, ignorance of these things may indeed be blameable.  I however am no merchant, but a stranger, visiting your country, with objects having no connection with trade, and my first experience is that of imposition, practised by public institutions as well as private individuals, upon strangers, and apparently sanctioned by the government.  I have been taught, sir, that the first duty of a government is protection to its citizens;  the second, and one not less solemn, to guard the rights, the feelings, and property of the stranger."

"And yet, sir," answered I, "it would seem to be an unwarrantable interference with the rights of the citizen, or an association of citizens, to restrict them from making that use of the credit they have in society which seems to be warranted by usages that are analogous.  All persons are allowed to issue notes of hand in the common course of business, which pass according to the degree of credit enjoyed by the maker, and where is the difference between issuing a piece of paper, payable at some distant period, and one payable at sight ?  Government cannot interfere with the credit of the citizen, nor prescribe limits to public confidence in any circulating medium."

"Your argument is somewhat specious," rejoined the little Frenchman, "but though the analogy is pretty strong between the case of the note of hand, and the bank note, there is a difference, marked and definite, which destroys the application of your argument to the latter.  Men are, from their habits of business, accustomed, before they take a note of hand, to enquire carefully as to the credit of the person who is responsible for the payment, and before they receive it, must be satisfied as to that particular.  But it is different with regard to any circulating medium.  That passes from hand to hand without question or jealousy, and the inquiry is, not whether the makers are solvent, but simply if the note is genuine.  To strangers particularly your argument will not apply, for they are accustomed to do as they see others do around them, and for a stranger to refuse taking money which he saw every body around him receiving, would indicate either an uncommon degree of caution arising from ignorance, or an extraordinary deficiency of that liberal confidence, which is the usual accompaniment of an enlightened understanding.  It is competent," continued he, "to all legislative bodies to curtail the issue of so great a quantity of paper as will depreciate its value, because they are the rightful guardians of the public credit, which always suffers in consequence.  Whenever this happens, the specie of a country ceases to circulate, and is hoarded up by the prudent and the suspicious.  The result is, that paper becomes the only circulating medium, and if it continues to be taken after its makers have stopped payment, it is taken at a depreciation, which will increase in proportion as public confidence is weakened, by the removal of the only check on the issue of paper;  that is, the responsibility to redeem it with specie.  I, sir, do not mean to throw out any insinuation against the character of any banking institution, but this I will say, that men never ought to be permitted to act without responsibility, where the temptation is so great to act without honesty.  And this applies with additional force to incorporated bodies.  Single men have an individual character to forfeit, but bodies of men have little check of this kind, there are so many to share the disgrace, that it falls but lightly, and one keeps the other in countenance.  Directors of banks are but men, and men, under present circumstances, exposed to great temptations.  It would be useful then to watch them, not so much because they are worse than others, but because they are more exposed to those temptations that so often prostrate the best minds, and overcome the strongest principles."

How long the little man would have gone on I know not, but by this time we were at Trenton, where, some how or other, he got a note of twenty-five cents, drawn by the captain of the Steamboat, and another of the same amount drawn by some post-master in the neighborhood, notwithstanding, since the catastrophe of the tavernkeeper's note, he had become extremely suspicious in receiving rags, as he called them.  He examined them with a look of profound sagacity, but being rather near sighted, and reading English with some difficulty, his care was generally thrown away, as happened to be the case in this instance.

Having hired a carriage to take ourselves and baggage to Brunswick, it happened that my companion was called upon to pay the toll at the turnpike gate.  For this purpose he took out the Steam-boat, and Post-master's notes;  but alas! he had got just beyond the sphere of their circulation.  The driver of our carriage pointed his whip to a little brook about three hundred yards behind, and mentioned they did not pass beyond that, northward.  I have seen many men in a passion in my time, but none that came up to the little Frenchman, who, in addition to the loss of his money, suffered the pangs of mortified self love, connected with the idea of having been a dupe.  He began to sputter in a jargon of unintelligible French phrases, so closely treading on the heels of each other, and so jumbled together without any sort of connexion, that one would have thought a dozen Frenchmen were talking all at once, and each on a different subject, as I have sometimes heard them do, at a French café in New York.  After a while he seemed to recollect himself, shrugged his shoulders, sat down, took a pinch of snuff, and exclaimed-- "La patience est amare, mais son fruit est doux" [patience is bitter, but its friut is sweet].  "Boutez en avant" [push ahead] said he to the driver,who understood no more French than one of his horses.

After a silence which lasted some miles he suddenly moved himself with the exclamation of Il vaut mieux tacher d'oublier ses malheurs que d'en parler." [better to forget misfortunes than to speak of them].  But,monsieur, please to inform me what advantege can result to the community at large by the emission of this infinite variety of rags ?  On the contrary is it not in the highest degree pernicious to the interest of every class of people except bank directors and stockholders, who, by shaving the rest, manage to divide nine or ten per cent. per annum as I understand ?  Suppose for instance a men has an income stationary and independent of the usual contingencies of trade and accident.  Instead of receiving it in silver or gold, or paper equivalent in value, he now receives it in rags, and is obliged to give twenty per cent. more for every article he consumes.  And what advantage is there to counter balance this.

"A vast many, monsieur," replied I.  "In the first place money becomes so plenty that it is hardly worth having, which is an excellent thing.  In the second place, people that had not a sixpence before, can become immensely rich by setting up a bank, and issuing paper money to any amount, which they may do without any danger, as nobody pays cash for their bank notes now-a-days.  "Eh bien ?" [How ?] said the Frenchman, with a look of curiosity.

"I will tell you, monsieur.  A number of persons in some little village of forty or fifty, or perhaps a hundred houses, get together, choose a president and directors, adopt some high sounding same, get a handsome copper plate, and strike off bills to the amount of half a million, establish a good understanding with some bank in the large cities to circulate their notes, and away they go with each as much money as he can stow in his saddle bags, to circulate it as fast as possible all over the country.  Nay, so very liberal are these gentlemen, that they will be infinitely obliged to any man who will borrow a few thousands from them.  In this way they drive their rags into circulation, the people get accustomed to see them, and the directors all at once become rich men."

"Comment," [Well] said the little Frenchman.  "I see how it is with monsieur the bank director and the stockholder.  Il en fait ses choux gras,[he makes his cabbage large-- gets much by the process]  but what becomes of the farmer, the mechanic, and the men who receive salaries from government and who is to pay the notes thus issued ?  I do not find that one dollar in ten of paper money is represented by specie."

"True," replied I, "one half of these petty institutions have no more specie in their vaults than I have in my pocket.  Many of the directors are men of nominal, perhaps real estate, but then you are to understand, that they expressly stipulate that nothing but the funds of the bank shall be liable for the debts of the institution, and that all their private property is excepted."

"The funds of the bank -- le diable est aux vaches ! [The devils is among the cows -- every thing is in confusion].  What ! have you not told me they have no funds but paper rags, and consequently cannot pay any thing else.  In what then do their funds consist ?

"They consist," said I, "in notes of hand of individuals, which they give the bank in exchange for its notes.  These are the only real capital of the bank, and are generally renewed at sixty days, for the accommodation of the bank and its debtor mutually.  For if the bank were suddenly to call for payment, about three-fourths of the debtors perhaps could not pay;  they would break, as it is called, and the bank would thus lose the only capital it can boast.  So you see, monsieur, the basis of all this enormous issue of paper bank notes, is only paper notes of hand.  This mutual caution between the bank and its debtors is exceedingly convenient and advantageous.  The debtors who amount to a very large portion of the merchants, circulate their bills for them, and give them all the currency in their power, for you will perceive, that if the banks were obliged to pay cash for their notes, they could not discount three times the amount of their capital, the people having discounts would of course be obliged to pay their notes, and the holders of bank stock be under the dreadful necessity of contenting themselves with legal interest for their money."

"Ah hah !" said my companion, "I see it plainly enough.  But then monsieur will allow me to suggest, that this must at length come, "a l'extinction de la chandelle." [extinguish the candle]  There will be an end to this at last;  and then who will be the loser, when you get to "cul de sac ?"

"Why, sir, the man that happens to be in possession of the rags, as you are pleased to call them.  He will go to the bank and demand payment: they will give him the choice of rags belonging to other banks, but no money.  That they must keep in their vaults, for fear it should go out of the country, as if it might not as well do this, as be buried where I believe it would puzzle the directors themselves to find it.  Well, he takes his rags, and goes to another bank, where he can get other rags, but no money.  They never covenanted, not they, to pay money for their notes, and when they promised to redeem a rag, with five, ten, or twenty dollars, they meant only that amount of other rags.  Nay some of them will point at the tenor of the promise in the note, which perhaps runs thus, as I have seen in some cases, "The President, Directors, and Company of ____ Bank, promise to pay to Peter Gudgeon, or bearer, Ten Dollars according to the articles of this association, and not otherwise."  Now the articles of association thus referred, may, for ought I know, stipulate that he shall be paid in ten dollars worth of moonshine, or old rags, or in old Continental Dollars, or in bank notes, which, if things go on as they have done, much longer, will be of about equal value."

The poor little Frenchman fell into a short reverie, and I dare say, thought of his pretty, bright, chinking, half-joes and doublons in the Savannah Bank.

"He will at last," I replied, "come around and round to the old starting place, after being sent from one to another, and bandied about, like the pig in the story.  They will all be ruined together, and go one after the other.  The butcher will beg in to kill the ox --the ox will begin to drink the water --the water to quench the fire --the fire to burn the stick --the stick to lick the pig --but the pig wont go to school, until it is too late to profit by the lesson."

"Oui" --ejaculated the little Frenchman, who, like Sancho, seemed to have a bundle of proverbs in his belly-- "Oui-- Pas à pas, on va bien loin -- a barbe de fol on apprend à raire [step by step we can go a long ways]-- a man who swallows rags at this rate must be un sot à triple etage[a triple blockhead] --a bon chat, a bon rat-- a parcel of rogues playing on the credulity of a parcel of fools --n'emporte." [No matter]

We now arrived at Brunswick, where we slept, taking the steam-boat the next morning for New York.  In paying my bill, I received from the master of the house, some notes which, when I offered them in the steam-boat, I found had depreciated three or four per cent. within a distance of one mile.  At this rate, thought I, before I get to New York they will be worth nothing.  So I called for plenty of wine at dinner, in order that my money might not be lost.  There was a genteel looking man who sat at table with us, and was very civil.  But as soon as my companion discovered he was a Bank Director, I thought he would have eaten him up.  He eyed him with infinite contempt --turned up his nose with a most petulant curl-- took snuff at him with a look of most tremendous hostility -- and repeated to himself-- "Quel foutre !" [What a scoundrel!]

At New York the little Frenchman got specie, and bills of exchange on Boston for his bank notes, at a discount, I think, of twenty-two per cent., for nothing could induce him to touch any more of the "dirty rags," which was the only name he condescended to call them by.  "Ah, Monsieur," said he, "I don't know what I have done to be thus murdered by cent per cent. -- but a bon chien il ne vient jamais un bon os. [a good bone never comes to a good dog]"  I now see "le dessous des cartes, [now I see how the game is played]" and shall take care how I am caught again."

I comforted him by showing how he could retrieve all his losses, by turning about when he had finished his business at Boston, and shaving his way back to Savannah, by which means he would turn the tables upon them all.  He was delighted with this idea, shook hands with me in high glee, and I never saw him more.


According to an Italian proverb, "When the ship is lost every sailor knows how she might have been saved."  There were, however, in Pennsylvania, not a few who, when the work of "internal improvement," was commenced, knew the manner and pointed out the way in which the ship of State might be saved.  They urged the immediate imposition of taxes, sufficient to pay the interest on such debt as might be annually incurred.  If their advice had been followed, no more works would have been begun than it would have been in the power of the State to complete: and lavish expenditures would have been avoided.  Feeling the burden of taxation, the people would have watched carefully the application of the public funds.  No Gettysburg rail-road would then have been begun.  And the commencement of other rail-roads and canals would have been postponed till the increase of wealth and population would have justified such undertakings.

Other counsels prevailed, and the result is that the State is bankrupt.  The Governor may force another loan from the banks, sufficient perhaps to pay the interest on the public debt due on the 1st of February last: but the contraction of even a voluntary loan to pay interest, is a violation of the best established principles of finance, and a forced loan is still more objectionable.

But even supposing enough money extorted from the banks to pay the February dividend, still the credit of the State will not be maintained.  It owes large sums to the laborers on the public works, to those who have supplied wood for the locomotives on the rail-roads, and to others.  The editor of the West Chester Republican says he knows of "laborers on the public works, with large families, with from eight to ten months wages due to them."  The claims of these men are quite as sacred as those of the fund-holder.

Nor is the prospect of the revival of the State credit very encouraging.  The amount received from tolls on the rail-roads and canals, is very considerable, but it seems the whole amount is required to pay the expenses of superintendence, and keep the public works in repair.  Some revenue will be got by taxation;  but as the State is bound to receive its own bills of credit or "relief notes" in payment of taxes, it can do nothing more during the present year than redeem such portions of the public debt as are represented by "the relief notes."

The banks have ruined the State: and the State has ruined the banks.  Such are the blessed fruits of a connection of Bank and State.


It was thought by some that all that was necessary to enable the Philadelphia banks generally to resume specie payments, was "to throw the Girard Bank overboard."  Thereby, said they, "the currency" of the city will be so much reduced in quantity, that what remains of it will be of equal value with silver.

The error consisted in not considering that questions of this kind are not questions of quantity only, but quantity and quality combined. -- The Girard Bank was "thrown overboard," and the Pennsylvania also;  and thereby the amount of current bank credits, was suddenly reduced two or three millions.  Yet the residue of our "currency," instead of rising, fell in value, as compared with specie.

Before the explosion of the Girard Bank, exchange on New York was at about 5½ to 6½ premium.  And specie bore about the same premium in bankable paper.  Since the explosion, exchange on New York has been at 8 per cent. premium, and specie as high as 10 or 12 per cent. premium.

The reduction of our "currency" in amount has had no tendency to raise it in value, because it has been brought about in such a way as to shake confidence in all kinds of bank securities.  Specie bears a higher premium than exchange on New York, because there is a greater demand for real money as an investment than to pay debts, or to make purchases at the eastward.  Men know not in what else they can make investments, with any degree of safety.  State stocks are daily falling in value, and not without reason.  So also are bank stocks.  The United States Government is acting on principles of policy, which, if persisted in, will, in a few years, reduce its securities to a level with those of the States.  Houses and lands must fall in price.  So also must commodities generally.  In what else then, than gold and silver, can men make investments, and rest assured that they will, for any length of time, retain their value ?  The result is, that large amounts of specie are brought from New York, and still larger amounts will be brought from foreign countries, if the present state of public feeling long continues.

Relief Notes.

In June last, the General Assembly of Pennsylvania, authorized the issue of certain State bills of credit, or "relief notes," as they are called, and gave currency to them by providing that they should be received not only in payment of debts due to the State, but in payment of debts due to the banks employed to issue them.  As the stock of the State in which these bills were to be funded, was then 20 per cent. below par, they would, if they had passed at all, have passed immediately at a considerable discount, if they had been receivable only in payment of debts due to the State.  But as they were receivable also in payment of debts due to the banks, they obtained currency at bank par.

One of the effects of these issues was to diminish sensibly the amount of specie in circulation.  Still they answered the purposes of a mere circulating medium, imperfectly indeed, but they had a value as such, and the people had given value for them.

Suddenly a bill is introduced into our House of Assembly, to compel the immediate resumption of specie payments;  and this bill contains a proviso that "the relief notes" shall no longer be a tender for debts due the banks, but only for debts due to the State.  This at once deprives "the relief notes" of great part of their value.  They cease to be currency, and become merchandize.  They fall from bank par to 50 or 75 cents on the dollar.

Some persons are disposed to regard this as a trifle;  and it is a trifle to the rich man, who has but few of these notes on hand.  But it is no trifle to the laborer who can earn but 50 cents a day, and cannot find steady employment even at that low rate.  It is no trifle to the poor widow, who can earn perhaps but one dollar a week.

The kings of France and England used to do great injustice by sudden alterations in the weight, and consequently the value, of the current coin.  Republican legislators in modern times, do as much injustice by the violent alterations they make in the value of the paper money created under their auspices.

Bank of the United States.

Mr. Jaudon, who was, with others, bound over by Recorder Vaux, to answer a charge of defrauding the stockholders of the United States Bank, had his case brought before Judge Randall, by means of a writ of habeas corpus.

Among the witnesses brought forward on this occasion, was Ashbel Green Jaudon, a brother of the accused.  He testified that "Nicholas Biddle and Samuel Jaudon entered into a partnership in the great cotton speculation and furnished him, the witness, with funds of the bank to carry on the business as their agent.  Under this arrangement, he obtained at different times, about two millions of dollars from the bank, with which he purchased cotton and tobacco at New Orleans.  He was allowed two per cent. commission on these purchases --and stated that this charge was added to the original cost of the merchandize.  The goods were then shipped by him to the most eligible European markets and sold.  Besides the commission allowed him for purchasing the cotton and tobacco, which amounted to about $40,000, the witness said he received a "bonification commission" on the return or proceeds of sales, which amounted to upwards of $20,000 more --making his compensation as agent rising $60,000.  The money was obtained from the bank by credits passed to the witness' account, on tickets or orders signed by Mr. Cowperthwait, Cashier.  The profits arising to the principals in this transaction, amounted to about $50,000 --which was equally divided between them.  The witness said he paid the $25,000 due to Mr. Biddle himself;  the remainder was passed to his credit, he being then in London.

"It also appeared in evidence before the judge, that this business was conducted through the Committee on Foreign Exchanges, and apparently with their knowledge and consent;  but two of the gentlemen who were members of that committee at the time, testified that they were wholly ignorant of the nature of the transaction, and would not have permitted it, if they had known it."