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it is not convenient for a man in Providence to go to Hartford, Albany, Portland, or Montpelier, to get his specie, and as others will not go with. out compensation, therefore these issues shall all be redeemed in Boston or New York. Money in either of those places, is money everywhere ; and whatever will command money in those places, will command it in any part of the country that trades with them. The public have a right to require security for their redemption, beyond the character of the issuers for wealth and character, to be deposited at the place of redemptionnot in mortgages, requiring months or years for their conversion-nor in stocks, half or the whole of which may evaporate in the day of trial, but in real cash for a certain proportion to the circulation, and substantial securities, of an active character, for the remainder.
The issues being redeemed at a fixed point, to which they naturally tend, it becomes at once the interest of every bank to collect and send there the bills of all other banks. They are wanted to redeem their own bills. Each bank, having its own circle to supply, is jealous of any intrusion; and no sooner does a foreign note cross the line, than it is instantly seized upon, and sent on its way homeward, by way of the point of redemption.
The business of banking being free, the number of banks would somewhat increase in some sections of the country, and probably diminish in others. Banks to issue notes would, as they came into existence, be additional watchers of the whole currency. Each bank would gain for itself, if possible, a circle to be supplied by its issues. In so doing, it would, to that extent, narrow the circles of all others; while the public would watch over all. The notes could only circulate in the circle where they were well known. The moment they get out of it they fall into the track which carries them immediately to the place of redemption.
The laws regulating the rate of interest must be repealed. It is not enough to say they are useless. They are a positive injury to the whole community. They restrict the natural flow of the currency,
promote unsteadiness in trade. The sooner we do away with them the better.
Congress must enact a general bankrupt law, to apply not only lv individuals but corporationsmat least, to all banking institutions. The currency must be kept convertible, at every hazard. This principle must be adhered to, and never deviated from, upon any consideration of expediency whatever. Therefore, every institution issuing currency, to say the least, should, on finding itself unable to keep in step, stand out of the ring, and settle up its affairs.
Let the banking system be based upon these principles, and the currency never could become redundant. The money market might become tight, and money scarce. The rate of interest would test that. But the moment the foreign exchanges, which are the test of the currency, began to rise, and a demand for specie be made on the central point, it would be felt by every bank in the country, redeeming there, as certainly as a touch of the heart is felt through every artery of the system. And in the requisite curtailment to reduce the currency to its level, every bank would bear its exact proportion. Not, indeed, its exact proportion in the ratio the circulation of each bank bears to the whole currency, but in proportion as the business of the bank and the section of the country dependent on it, had been unduly extended. An agricultural district would not be compelled to curtail much; some districts, perhaps, not at all; while districts dependent upon commerce would be drawn upon more heavily.
Those districts of the country which contain the greatest amount of currency in the shape of deposits would be subjected to the heaviest draft. A contraction of the currency usually falls upon this part of it. The amount of bank notes does not differ at different times so materially as the amount of deposits. They are the same as circulation in all respects, except form. The two are convertible into each other, at the pleasure of the holder; and the possessor of one can do nothing which cannot be done by the possessor of the other.
We are aware of much difference of opinion upon this subject among well-informed men; but, after careful examination and much reflection, we can come to no other conclusion than what we have here briefly expressed, which is, that they are the same; and that he would be an improvident legislator indeed, who should attempt to manage a currency upon any other theory.
The Suffolk Bank system, which prevails in New England, is founded essentially upon the principles we have laid down. Whether it was set on foot after a diligent examination of these principles, we know not; nor do we know who was its originator : but certain it is that some Boston man deserves the credit of bringing into existence the most perfect system of banking ever yet devised. Experience for seventeen years has proved it to be as nearly perfect as any system can probably ever be. It is self-acting. It needs no regulator, for it regulates itself
. _ Amid all the convulsions that have occurred within a few years, New England has weathered the storm better than any other section of the country. Banks in New England seldom fail; and, probably, would never fail, if it were not for the chartering system—if they were allowed to spring into being under some general law, as the wants of the public required, and the public left to form their own opinion of the character of their proprietors for honesty and ability. The banks that have failed in New England since this system went into operation have, in almost all instances, been established under authority of charters granted to irresponsible persons; or, if granted to men of character, have been bought up and controlled by those who have used them as mere engines for speculating on the community.
We gather from the returns of the banks in the New England states, that have been published from time to time and have been within our reach, facts that demonstrate our theory to be the correct one; and, probably, the only theory in the world fortified satisfactorily by an experience of a series of years.
Were our country like England, with a central and independent government, and our whole trade turning upon a common centre, like London, the theory we have advanced could easily be put in practice. The English government might now save all further trouble, by requiring all the banks in the kingdom to redeem at the Bank of England. Instead, then, of inquiring how to construct a regulator for the banks, either by a government bank of issue, or otherwise, they would have a perfect self-regulating system. Were it not that they have approximated towards this system, by allowing the country banks to redeem in Bank of England notes, the English currency would long ago have been as “ deranged” as our own.
In our own country, the case is materially different. Our government is of a character so mixed, and power is so divided between national and state sovereignties, each claiming to possess powers in relation to the creation of banks, which, if exercised, tend to nullify the other, and the states
differing from each other in their views so far, that any scheme requiring the co-operation and assent of all, might at once be set down as one which could not possibly be carried into effect.
The currency of the country is a currency of bank paper; and, in its present state, admitted by everybody to be sadly imperfect, in many parts of the country irredeemable, and therefore such as the government cannot possibly countenance by receiving it.
The government cannot, however, confine itself to metallic money only. The experiment may be said to have been fairly tried ; and however easy to be carried into effect in theory, in practice it has been found impossible to receive and collect the public money and transact the public business without the intervention of bank paper. A currency exclusively metallic is found-200 expensive, and the necessity for economizing in the use of it is absolute.
If the government must use paper, whose paper shall it use ? That of state banks? They have repeatedly proved dangerous depositories, and ought never to be used again. Even if founded upon the credit of the states, they have proved no better than banks under ordinary charters. The funds of the government should not be trusted in individual hands. There is but one alternative. The government will probably find it necessary to have a bank for itself.
Our remarks have reached an almost unreasonable length, and yet, to go into the subject of a national bank would require more space than we have already occupied. We shall therefore content ourselves with giving a general outline of such an institution as would comport with the principles we have endeavored to illustrate :
It would of course be so far owned and controlled by government, as that the public, through the government, should have such a knowledge of its concerns as could be given by the most regular and perfect publicity. Yet it should be so far independent of the government that it could be managed free from its control, and with all the skill and judgment that could be introduced by a body of private stockholders.
It should be placed at the commercial centre of the country-New York.
Its capital should be small, so as easily to regulate itself; and yet large enough to inspire confidence in its stability—but not large enough to undertake the regulation of other banks.
Its capital should be invested in solid securities for the most part, that its means might not in a floating shape be perverted to advance the interests of a few
individuals ; yet of a character which in times of pressure would draw the money of capitalists to its aid in case of unforeseen emer.
Its funds derived from circulation and deposits, to be invested solely in domestic bills of exchange and specie.
In its business of receiving and disbursing the government funds, and selling and collecting its exchanges, it could receive the notes of all solvent banks, and return them home for redemption.
By means of branches judiciously distributed at different points of the country, it would in this way bring the currency into the most perfect working. No banks would long continue to pay specie at home, when they could redeem in the notes of other banks at some common point, and motives of self-interest would, in a very little time, lead every bank in the
country to redeem at the national bank, or one of its branches : the branches turning upon their centre; and by this compound movement the whole currency be brought into a most perfect system of self-regulation.
The large deposits made to effect these redemptions would be profitable to the bank; the regularity of redemption favorable to the state banks, and a strong motive furnished every issuing body to continue its redemption, because of the instant discredit sure to follow a failure.
If the currency became redundant it would be instantly perceived, and as quickly remedied. And the power to do so existing, it could not fail to be exercised, for though money became scarce and the rate of interest high, yet, as we have before said, the currency should be preserved, whatever might be the consequences.
Without entering into the subject at greater length or more minutely, we submit our observations to the reader. We do not pretend to have presented any thing very new, but have merely endeavored to set forth what we think a proper application of well-known principles. If in our views we are right, the good sense of the reader will easily discover it, and will as easily point out our errors if we are wrong.
We are well aware that when new views upon any subject are brought before the public, or when old and established principles are illustrated, so as to give them an application different from that which accords with the current of public sentiment, the degree of attention paid to the views of the writer corresponds almost exactly with the reputation he may have acquired in the public estimation. For our part, as we wish in the present case that our views may be tried upon their merits, and stand or fall as they may prove to be well or ill founded, without reference on the part of the public to the character or standing of the promulgator, we write anonymously.
Art. III.-THE PROGRESS OF AMERICAN COMMERCE.
Within a pe.
In entering upon so wide and fruitful a subject as the commerce of the United States, we are naturally led to go back to its original condition, and to trace its progress, step by step, to its present state. riod of less than two centuries, it has grown to an importance that is now second to that of Great Britain alone; and its rapid advance exhibits, more prominently than any other national interest, the extraordinary enterprise of the American people, developed in great measure, and fostered by the spirit of our government.
During the early period of our colonial existence, when the extensive territory which now constitutes the domain of the United States was subject to the jurisdiction of foreign powers, it was controlled by that arbi. trary colonial policy which formerly characterized the nations of Europe, and more particularly the British empire. Although the country possessed a fertile soil, prolific in all the resources of agricultural wealth, with navi. gable rivers running from the heart of the country to the seaboard—thus furnishing channels of navigation from the greater portion of the interior to the frontier—and its shores were then, as now, washed throughout nearly their entire borders by the ocean, that great highway of nations ;
the few feeble settlements which had been made by the English, the French, and the Dutch, from Louisburg to Florida, and from Boston to the banks of the Mississippi, were crippled by burdensome legislation, and made tributary to the parent governments abroad. This was especially true of the colonial establishments which were planted upon what now comprises the territory of the eastern states, first colonized by England, and those of the French, westward from the shores of the great lakes. These establishments were themselves the dependencies of their respective mother countries, which viewed them with but little interest, excepting so far as they contributed to the wealth of the parent government. The English emigrants of the east, planted upon a soil uninviting for the most part, were prohibited by the parliament of Great Britain from engaging in those branches of industry which might compete with foreign labor; and the French government, which it is well known, previous to 1760, held the greater portion of the western states, confined the energies of the set. tlers to the adventures of the fur trade, which poured its cargoes into the port of Marseilles, instead of the cultivation of the soil. The policy of the two colonial establishments was moreover controlled by royal govern. ors, resident in the colonies, and linked to the interest of their respective monarchs; and with such encumbrances, it could hardly be expected that either portion of the country should have made very rapid advances in the national enterprises which might have contributed to the commercial strength of those settlements.
With so sparse a population as the country then contained, being estimated as late as 1700 at only 260,000, and pressed down by such legislation, it is not to be supposed that the people should have advanced to any considera. ble growth in the interest of commerce. The few provisions which were raised from agriculture, and the product of the fisheries, together with the lumber, and the tobacco of Virginia and Maryland, the principle staple of those colonies, the last constituting nearly one third part of the total exports of the country, before the revolution, comprised the great bulk of our trade. Had the emigrants indeed been disposed to supply the adjacent territories with the products of their industry, they would have been unable to do so, in consequence of the commercial restrictions enforced upon the manufacturing interest by the mother country. Yet notwithstanding the despotic legislation of the parent government, we find the industry of the people early devoted, in some measure, to shipbuilding an interest which soon attracted the attention of the British crown. Manufactures had already excited their jealousy, and why should the colonists be permitted to build ships that might operate as the agents of their commerce, since Great Britain had herself undertaken the business of supplying the colonists with the products required from abroad? But the emigrants who had settled upon the barren and rocky region of the New England seacoast, cut off in great measure from the pursuits of agriculture, were induced to direct their attention to commerce and navigation, and soon manifested a remarkable aptitude for the art of shipbuilding. The success of the colonists in this respect, soon awakened the jealousy of the mother country, and as early as 1670, Sir Joshua Child dec ed, “Of all the American plantations, his majesty has none so apt for the building of shipping as New England, nor none comparably so qualified for the breeding of seamen, not only by reason of the natural industry of the people, but principally by reason of their cod and mackerel fisheries ;