The 7.30 three year bonds were paid out to creditors, and exchanged with banks for gold with which to pay interest on the bonds they held. The operation was the same as compounding the interest at 7.30 per cent. The paying out of the notes caused the price to fall to 96. The issue then stopped, and one year certificates paid out until the price fell to 95. The issue was then stopped, and the paper money paid out, which filled the banks and returned upon the Treasury in the shape of deposits at 5 per cent. This resource having reached its limit, the proposition was made to fund the demanded notes in the 5-20 6 per cent stocks. These are called 5-20's, because they are payable at the pleasure of the government after 5 and at 20 years. This resulted in $2,699,400 out of $500,000,000 authorized to be funded. From these circumstances, it is apparent that the only resource of the government in the last six months, has been paper money. There was no desire to invest in the stocks, even at 7 per cent, when money was only worth 5 per cent in the open market. Under the influence of the paper, prices apparently rose, and the rise drew considerable amounts from Europe. The rise was, however, only apparent, since on the day of the Secretary's report, United States 7.30's were at 5 per cent premium, and gold 34 per cent premium, which was equal to a premium of 14 per cent for the stocks in gold. On the 26th June, the 7.30 were at 4 per cent premium, and gold 9 per cent. Thus the bonds had, for gold, fallen to 31 discount, although they had risen for paper.

The receipts of the government, in the six months, for customs and other sources, were $30,000,000, which, added to the increase of debt, makes $254,000,000 paid in the six months for expenses, besides large amounts in arrears, estimated at $100,000,000. Under these circumstances, the Secretary came forward and asked for $150,000,000 more paper money, and to remove the limit on the amount of deposits that might be received at interest, and for the right of purchasing any United States stocks. In other words, to inaugurate a bank of discount, deposits, and circulation to the extent of $300,000,000. These resources were supposed equal to the $250,000,000 that would be required until January 1, 1863. The fact of the demand shows that the Secretary does not delude himself with the idea, that much stock can be sold in the market, at a time when capital has ceased to accumulate in the country, and is becoming constantly deteriorated. There is another delusion which has yet to be dispelled. It is that which seems to be common to many members of Congress, viz. That paper money may be a permanent resource. Up to a certain point, the channels of business will absorb circulation, and that point depends upon the quantity of crops and goods produced, and the activity of trade. The moment that point is passed prices rise; if the circulation is gold, it flows off to other countries, until the currency is depleted. If the currency is paper, prices continue to rise exactly in proportion to the quantity of paper put out, and it soon ceases to be a revenue. To illustrate, if the crop of wheat is 100,000,000 bushels, or 20,000,000 barrels of flour, the price may be $5 per barrel; when the currency amounts to $100,000,000, if the government adds $100,000,000 to the currency, the flour may be $10, and the farmer pays his tax with half the quantity of produce. In other words, the government revenue really falls one-half, and everything it buys doubles in price. The expenses of the war increase in the proportion of the paper. If in the first

year of war at specie prices, the expense is $620,000,000, the second year in paper will cost $1,200,000,000. Thus every dollar of paper the government puts out, takes so much from its revenue, until it ceases to have any. The usual resort in such cases is forced loans, payable in the depreciated paper, in order to get it out of the market. The whole then becomes obsolete. The real and only capital of the country depends upon production. From this alone arises any surplus which can be loaned to the government. The productions of the United States have hitherto been very large, but it is not so now, for the reason that war absorbs all productive powers. We are now producing battles and not wealth, but we are rapidly spending that which was before produced. In illustration of this diminished production, we may take from official sources, the leading agricultural productions of the Southern country, which re-ult altogether from black labor. The gross number of blacks was, in round numbers, 4,000,000, all of these are not engaged in field labor, but if the products are averaged upon the whole, the ratio is as follows for 1860:

Of these quantities, about $230,000,000 were exported out of the country. The whole is an average of $70 per head for each black, in addition to the other productions. The war has stopped that production, and regarding the Union as a whole, which is responsible for her war debt, it is so much wealth to be deducted from the means of payment; the resumption of these productions, after the war, depends upon the Status of the producers. If the war lasts three years, the loss is $1,000,00,000, supposing the production to be resumed afterwards. It is true that the blacks are employed producing food, but that is consumed by themselves and the troops at the North. The returns of the Treasury Departinent, show the annual production of agriculture and manufac tures at the North to be $1,500,000,000, and the number of able bodied workers is 5,000,000, which would give $300 per head each, or $60 per head for each person, but there are 750,000 employed in the war, consequently, the production is diminished $225,000,000 per annum. Thus admitting that the whites in the Southern armies produce mostly nothing, the war stops the production of wealth equal to $600,000,000 per annum, to this add the actual expense of the war, $700,000,000 for the first year, and the yearly cost is $1,300,000,000. The exhaustion of capital takes place step by step with the accumulation of debt. There is more to pay, and less to pay it with. We may now look at the actual revenues of the governinent for the past 40 years, that is, from 1821 to 1861, inclusive. They may be said to have been derived altogether from customs, and are given in the last annual report of the Secretary of the Treasury, at $1,21,456,369. This is an average of about $30,000,000 per annum for the whole period, and it has been derived from duties upon imported goods. It is obvious that goods imported, are only the proceeds of the sales of American produce abroad, consequently, the amount of imports depends upon what we have to sell. The produce exported, and the value

of imports, exclusive of specie, have been as follows, according to the tables contained in the last annual report of the Secretary of the Treasury:

.

$273,576,287

In

This excess is accounted for by earnings of American vessels abroad, stocks sold abroad, &c. The general result is, therefore, that more than 60 per cent of the goods imported in the last 40 years, were paid for by that black labor which is jeopardized by the present war, and, as a consequence, more than 60 per cent of the whole government revenue has been derived from the same source. That revenue can be supplied only by taxes. other words, had that description of labor not existed in the past forty years, the Northern labor would have had to pay over $3,000,000,000 in taxes to sustain the same revenue-and, consequently, if events destroy that labor, for the future, the whole weight of the great expenses, and the existing debt, must be paid by taxation at the North. From these facts it is apparent, that a great deal depends upon the financial management of the war. If a system of unbounded extravagance, with that which now exists in paper money, is to be pursued, because the members of the present Congress are so wanting in every statesmanlike virtue, that they prefer national ruin to the risk of losing their own places, speedy bankruptcy must result. On the other hand, an adhesion to a specie basis, with adequate taxation to meet the necessary expenses, may keep the debt within a manageable amount. The present financial system already totters to its base. It will be remembered that the disappointment caused by the annual report of the Secretary of the Treasury, in December last, produced a panic which drained the banks of $20,000,000 of gold, and made them suspend in three weeks. Since then we have exported $20,000,000 of gold. The banks of the three cities hold $6,000,000 less than they did in April. The weekly export is $3,000,000, and the premium is 9 per cent.

The public are losing confidence in Congress, and a slight movement like that of December, will cause all the gold to disappear in a week, and the premium become enormous. The quantity of gold in the country is by no means large. At least $60,000,000 of what there was is hoarded at the South, and the available balance is small, as seen in our March number.

ENLARGEMENT OF THE CANALS.

MEMORIAL OF HON. 8. B. RUGGLES TO THE PRESIDENT ON BEHALF OF THE STATE OF NEW YORK.

To his Excellency, Abraham Lincoln, President of the United States:"

THE Legislature of the State of New York, on the 22d of April, 1862, passed an act to adapt the canals of the State to the defense of the northern and northwestern lakes. Their joint resolution of the same date requested the Governor of the State "to take such measures as he shall deem necessary and proper for inviting the attention of the general government to the measures proposed in the act, and their great importance to the national interests."

Pursuant to that resolution, the Governor, having transmitted to the President of the United States a copy of the act duly authenticated, specially delegated the undersigned, as having been officially connected for several years with the canals of the State, to present the subject proposed in the law to the consideration of the general government. In the execution of that duty, the principal facts necessary to be understood have been verbally communicated to the President, but, under his permission, they are now respectfully laid before him in writing, and somewhat more in detail.

They fall under the two general heads of the national defense and the national commerce.

1. The practicability of employing canals as engines of national defense mainly, arises from the recent unexpected but very important discovery, that impregnable mail-clad vessels, comparatively small in size, are capable of effectually resisting vessels of vastly greater dimensions; and further, that one such impregnable vessel would be able, in a few hours, to destroy a whole squadron of vessels-of-war of the descriptions heretofore in use. This striking truth, so signally demonstrated by the recent achievement of the Monitor upon the waters of the Chesapeake, almost within the hearing of the national capital, must inevitable work a radical revolution in naval warfare. Among its other singular and immediate results, is the greatly increased importance which it imparts to canals of moderate volume, heretofore supposed to be useful for carrying vessels of commerce. As carriers of impregnable vessels of-war, they assume at once a new dignity. They rise to the rank of naval channels, and become necessary parts of the machinery of war.

The interesting question then arises, what dimensions are required for a canal to enable it to pass impregnable vessels adequate to the defense of our national waters, and especially the great chain of lakes?

On this point testimony is at hand of the highest authority, derived from a source no less reliable than ERICSSON himself, the inventor of the Monitor. A letter herewith transmitted from that distinguished engineer

and mechanician states: "That an impregnable war vessel of 25 feet wide, and 200 feet long, with a shot-proof turret, carrying a gun of 15inch caliber, with a ball of 450 pounds, and capable of destroying any hostile vessel that can be put on the lakes, will draw, without ammunition, coal, or stores, but 6 feet and 6 inches water; and, consequently, will need only a canal wide and deep enough to float a vessel of those dimensions, with locks of sufficient size to pass it."

The Erie and Oswego canals of the State of New York, respectively connecting the Hudson River with Lake Erie at Buffalo, and Lake Ontario at Oswego, are 70 feet wide, and 7 feet deep; but their present locks are too small for the purpose in question. The cubic contents of a lock required to pass the impregnable iron vessel above described are about 38,500 feet. The present Erie and Oswego locks, which are but 18 feet wide, 110 feet long, and 7 feet deep, contain but 13,800 cubic feet. If enlarged to 26 feet wide, and 220 feet long, (to admit the swing of the gates,) they would contain 39,900 cubic feet.

In point of capacity, the canals of Canada far exceed those of the State of New York. The locks of the series of canals around the rapids of the St. Lawrence, within the British dominions, which afford direct and easy access from the Atlantic into Lake Ontario, are 45 feet wide, 200 feet long, and 8 feet deep, and have a cubic capacity of 72,000 feet. The present locks of the Welland Canal, which opens a similar passage from Lake Ontario into Lake Erie, are 26 feet wide and 150 feet long, with a cubic capacity of at least 31,200 feet, which may be readily increased to the full amount required by lengthening the locks.

The Rideau Canal, which connects Montreal with Kingston, on Lake Ontario, through an interior route by way of the Ottawa River, is 5 feet deep; but its locks are 33 feet wide, and 142 feet long. Their present cubic capacity is only 23,430 feet, but if lengthened to 220 feet, would be 36,600. The greater width of the lock would measurably compensate for the shallow draught, and permit the passage of war vessels of dangerous dimensions.

From this brief summary it will be seen at once that the British Government, whether designedly or not, has secured to itself means of naval access to the lakes far exceeding those the United States now possess, and that the only appropriate and certain remedy for this evil is the adequate enlargement, without delay, of the locks of the American canals leading into that important chain of waters. On this point the opinions of our intelligent and loyal citizens are very decided. Numerous petitions have already reached Congress from the inhabitants of the cities adjacent to the lakes, (including, among other eminent individuals, a former President of the United States,) in which they forcibly and truly state that "the United States have no impediment to offer if, during the season of navigation, a fleet of British gunboats from the Atlantic shall purpose to take possession of the entire chain of lakes and connecting rivers," and earnestly solicit the government to adopt measures for their defense, without delay, by the enlargement of the locks of the Erie and Oswego canals, expressing their opinion that "the immense national interests involved in the military possession of these waters can be secured in no other mode at so small a cost of time and money."

The country has learned with much gratification that the Committee on Military Affairs of the House of Representatives, in Congress, have