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system which modifies the above calculation. The men who constitute an army are, to some extent drones in private life, and produce much less in the aggregate than they receive from the government in pay, subsistence and clothing; and which receipt from government, being represented by public stocks, augments the national capital to a greater extent than the capital would have been augmented by the soldiers in their civil capacity. This is one element of the seeming practical paradox, that modern wars, instead of impoverishing a country, increase its wealth. And though the munitions of war that are consumed, and the subsistence, clothing, &c., of the troops, would seem to be only compensated for as capital destroyed, by the capital created and paid therefor in public stocks; yet, by the stimulated activity that is evoked by the war consumptions of government, more capital is manufactured and produced than in times of peace. The destruction of capital occasioned by the conflagration of Moscow aroused a creative activity in Russia, which not only soon compensated for the destroyed capital, but it has continued ever since in active operation.

To construct an accurate balance between the capital destroyed by war in any nation, and the capital gained thereby, is however, not the intention of the foregoing remarks. They are only suggestions to establish the following, four general principles : First, that where war consumptions are represented by public stocks, the national capital continues for all commercial purposes, unimpaired by the war. Second, that the only practical difference, as capital, between public stocks and gold, is the taxes that stock requires for its continued vitality. Third, that public stock as capital, is annually productive of more wealth to a people than the amount of interest levied annually from the people in taxation. And fourth, that, as a nation's capital is annually augmented, in war, by the creation of a national debt, and otherwise, to a greater aggregate than the national capital would bave attained, had the nation remained in peace, the augmented capital usually produces a pecuniary productiveness sufficient to counterbalance in profit, to the community, generally, the pecuniary evil of paying taxes on the portion of stock which represents capital that the war consumed. The four enumerated principles operate beneficially to many persons whom nearly every man may designate around him; but the generality of a like favorable operation must necessarily remain a matter of speculation, especially as taxes constitute an evil that every man feels, while the compensating benefit is discoverable only indirectly. Great Britain, we know, has grown rich, despite a taxation that, according to most theories, should have made it poor. Every nation contains some persons that can be benefited by no state of the country. Men of fixed incomes, and men who abstract themselves from all surrounding activities, and men of no enterprise, while they must be injured by a compulsory taxation, cannot be benefited by agencies which they are not compelled to employ, and which they will not adopt voluntarily.

The foregoing consideration of the pecuniary results of war omits any calculation of the loss which a national capital sustains, by the death of capital producers; and in that cold character alone, political economy considers the soldiers who die in battle. From this source the loss of national capital is less than may be supposed, experience testifying that the population of a country is not much diminished by war. We are prone to suppose that every man slain in battle is an unnatural diminution of a nation's population, while the most which can be truly said is, that the death only

anticipates by usually a brief time, the natural death that is the fate of all




The notes, as legal tender, constitute, for all existing debts, an equivalent to gold and silver, for an amount that we know is far greater, in the aggregate, than all the notes which the government has yet created, and the volume of indebtedness being ordinarily renewed daily, to the extent of the day's liquidation, we can hardly conjecture any limit to the amount of such notes, for which an ultimate specie use will not exist. The French assignats, and our own former Continental money, became worthless, because neither France, nor our old Confederation, was commercial enough to afford existing debts of a sufficient aggregate to give a liquidating use to all the assignats and Continental paper that the exigency of the government created.

But though our legal tender notes are in ultimate value equal to specie, they are greatly depreciated from the par standard of gold and silver; the liquidating specie use of the notes on any present day, being insufficient to employ all the notes that are available for such use on the given day; hence, like all other surplus things, the notes decline in present value in a degree proportioned to their surplusage. When banks paid specie for their bank notes, an unfortunate bank would occasionally suspend payments. If it held discounted notes of solvent debtors, and was willing to receive payment thereof in its own bank notes, the bank notes would not depreciate in value so long as the amount of them, collectable daily, was vot in excess of the amount required daily by the bank's debtors; but if the bank notes outstanding were daily in excess of the daily use thereof, every holder would make some concession in price of bis bank potes, to induce the bank's debtors to take them; and the market value of the bank notes would depreciate daily in proportion to the existing daily surplusage. The same principle is operative in our government's treasury notes that are receivable, as gold, for custom duties. The amount daily procurable is in excess of the daily dutiable payments, and the price of the notes recedes from gold in proportion to the surplus. A holder of them who knows he shall need them in payment of duties some weeks or months hence, will not deem their present value to him equivalent to gold; hence, if government should to-day issue a notice that the legal tender notes, shall be hereafter receivable for duties as gold, the notice would not make the notes equal in value to even the present dutiable treasury notes. To become equal in present value to gold, any paper money must possess a present use that it and gold can alone supply. In every general suspension of specie payments by banks, as at present, bank notes never have kept, and never can keep, a par value with gold; and the depreciation of the bank notes is wholly irrespective of any doubt of the ultimate specie redemption of the notes.



Legal tender notes are rather more desirable than bank notes, they sub serving some uses which the bank notes cannot; while the bank notes can subserve no uses which the legal tender notes cannot subserve. Nor can

this relative value ever be changed to the disadvantage of the legal tender notes, the banks being compelled to receive the tender notes in all payments due to the banks, and hence, are indirectly compelled to receive them on deposit, as money; for, should the banks refuse to receive, on deposit, legal tender notes, as was once mooted, all bank debts would be paid in legal tender notes; and thus, by the amount of tender notes forced on them, the banks would lose all the proposed advantages of a discrimination between the two currencies. Legal tender notes are thus assured permanently in every locality of the Union, a value equal to bank potes; and the present depreciation of the legal tender notes, as compared with gold, is a common depreciation of paper money, and not invidiously peculiar to the government currency.










A belief is common that every possessor of paper money, legal tender notes included, is injured by the depreciation of the paper, to the extent of the premium that is paid for gold. This estimate is essentially fallacious. Whenever banks have suspended specie payments, specie has immediately advanced in value over the bank paper. The reason for such advance is obvious enough when we reflect, that the banks are almost the sole possessors of the specie of a country. Whoever receives specie, forth with deposits it in some bank, relying that he can obtain any desired quantity when he applies therefor, with the paper of the bank ; hence, when all banks suspend specie payments, the whole existing specie of the country is forth with excluded from public use, arbitrarily imprisoned in the banks' vaults; and however much the actual need of specie is diminished by its being no longer required by banks as a basis of their issues of notes, yet the remaining uses for gold, the dutiable uses, the exportable uses, the hordable and mechanical uses cannot be supplied; and therefore a rise in price must ensue, precisely as coffee, tea or sugar would rise in price, if all the wholesale dealers therein would suddenly refuse to part with any of the articles, but doggedly keep them locked up in their warehouses. And especially inust we remember that usually banks suspend specie payments greatly in advance of the exhaustion thereof from their possession. The banks in New York City possess, at this moment, nearly forty millions of specie, chiefly gold; and a like plethora exists in all the city banks of the Union; and measurably in country banks. Need we wonder, therefore, that this open monopoly of the precious metals, this abstraction of them from all customary uses therefor, should create, in the exchangeable value of specie, a rise over paper independent of any depreciation of the paper money! Our wonder may rather be that gold and silver have not appreciated further, and doubtless they would have appreciated greatly further, had not the dutiable uses of specie been supplied by the thirty millions, more or less, of outstanding treasury notes which were procurable by the public, and by the sums in gold which have been disbursed by the government, in payment of interest on the public debt. THE EQUIVALENCE BETWEEN PAPER MONEY AND SPECIE, IS ALWAYS PRO


During specie payments, bank notes are governed in quantity by the amount which can be paid on demand in specie; hence, when any exigencies diminish the specie of the banks; or any exigencies have caused a greater

issue of bank notes than the specie of the banks can surely redeem, every bank hastens to diminish its outstanding bank notes, by diminishing its outstanding debts ; that the equilibrium may be restored between the amount of the circulating medium, including bank deposits, and the obtainable gold that is sufficient to liquidate, on demand, the bank notes, &c., that are daily bought for redemption. Bank notes and gold are thus artificially made to occupy an equal value. But a man who estimates as a loss the present difference between the value of bis paper money and the value of an equal number of dollars in gold, subjects himself to a further fallacy by reason that the paper dollars in his possession are probably much more numerous than the number would have been had gold and paper continued artificial equivalents of each other.

MONEY ITSELF POSSESSES NO UNVARIABLE VALUE. When specie and paper are at par value with each other, the supply of money is often much less than the demand; but of its consequent rise in value, no standard measure exists, except a simultaneous depreciation in the market price of houses, lands, and all other commodities : and when specie and paper are at par value with each other, and an excess of the supply exists over the demand, no measure exists of the consequent depreciation in value of money, except a simultaneous rise in the price of all saleable commodities. In neither of the above alternatives are we accustomed to say that money is depreciated in value, or appreciated, though the said cases are no way essentially different from what paper disconnected from gold is now evincing. All we can properly say now is that relatively to each other, paper exists in excess of the demand, and gold exists short of the demand. Abstractly considered, the uses for gold have diminished, by reason that it is no longer used as money, nor as a basis of our paper currency; and therefore the supply of gold should properly exist in excess of the other demands therefor, and its exchangeable value should fall; but it seems to rise in value, a rise occasioned in no small degree artificially by its engrossment in banks.

Having thus considered the natural laws of monetary affairs, we may examine what may be done, artificially, to make a government's legal tender notes more nearly equal in value to gold than they are at present, government being said to desire such an equivalency. It may be accomplished equally well, by either diminishing the quantity in existence of the notes, or increasing the uses therefor. To increase the use, no measure is so available as to induce the holders to fund the notes in some permanent stock of the United States. The notes are now fundable in a five years, 6 per cent. stock, which practically is found an insufficient inducement to accomplish the desired end. The 20 years 6 per cent, stocks are, on the contrary, selling at a premium, but as government will not issue those stocks for legal tender notes, the preference evinced by the public for the long stocks, is not available to diminish the existing surplus of the legal notes. A general privilege to convert the tender notes into the long stocks might operate measurably to overcome the present excess of par value, which the long stocks now sustain ; yet the existing premium on the 20 years stock, shows the direction in which a new demand may be created for the legal tender notes; and the like may be said of any new stock more lucrative than 6 per cent., or longer than 20 years, that may be deemed proper for the given end. The existing convertability of the tender notes into only a five years stock, has no effect but to protect from depreciation





the existing 20 years stock, and thus to benefit the holders thereof; but how far a motive so personal and limited in its operation, should control the government, the government alone can decide. TENDER NOTES, BY

NO INTEREST, CREATE THAT MUST SEEK SOME PRODUCTIVE INVESTMENT. The legal tender notes originated in a belief that the notes would supersede bank notes, and hence be needed as currency ; but every bank prefers to issue its own paper, and to use the legal tender notes for other purposes ; and as the public seeks no conversion of bank paper into tender notes, bank notes, answering, practically, all the purposes which the legal tender notes subserve, the whole mass of tender notes only augments the existing surplusage of capital that is seeking a profitable investment. The result of the surplusage is seen in the unprecedented magnitude of the deposits of banks everywhere, and in the stimulated and unhealthy competition that exists for all interest-bearing stocks, and, as usual, by sympathy and contagion, for all other stocks, and, ultimately, for all kinds of property ; for though speculations commence in intellectual considerations, the intellect becomes, eventually, subordinated to man's emotions, and speculation becomes a passion, which, ultimately, like extreme bunger, devours indiscriminately whatever comes within its reach. Some men continue intellectually possessed enough to know the nature of the speculatory traffic that is in progress, but they will purchase at high prices what they know to be worthless, believing that less intelligent or more reckless speculators will repurchase the articles at still higher rates.

Government has in leavored to create a lucrative use for the legal tender notes only in five years 6 per cent. stocks, already alluded to; and in giving 4 per cent. interest on deposits thereof, with the assistant treasurers ; but the rate of interest proves itself, like the offer of stock, to be an insufficient inducement to the holders of the paper. Why enough interest should not be given to ab:orb the notes in either deposits or stocks, is difficult to comprehend; for no good reason is apparent why government should not


it wants what is requisite to obtain the money, instead of unnecessarily creating a surplus of unproductive capital.

pay for the



As a means of borrowing money, no mode can be devised so prompt, effectual, and little expensive, as the issue of legal tender notes to the extent of the sums from time to time desired ; if connected therewith, a profitable use for the notes can be created; but to issue the notes without supplying such a use, the notes become a species of forced loan without interest, and therefore the worst conceivable means of obtaining money, excepting taxation, taxes being a forced gift, and, therefore, worse than a forced loan. We may concede that government can raise all necessary funds by sales of new stocks, and taking in pay therefor irredeeemable bank notes ; but independently of the large gains which loan contractors would exact from the government for becoming the instruments of diffusing such stocks through the community, and the necessity which would ensue that the government should circulate among the public creditors, irredeemable bank notes, as was practised in the war of 1812, the circulating medium would be increased by the operation as much as by the issue of legal tender notes. Even should government issue proposals for new loans, receiving in payment only its

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