tation of the national debt raised by subscription in depreciated paper, and of the national expenses occasioned by the increased prices of naval and military supplies immensely added to the burthens of the people.

2. The second example referred to, is the supension of payments by all the banks of the United States, south of New England, in August, 1814, and which continued until February, 1817. Those who can remember the events of that period will not have forgotten the abuse of the public forbearance exhibited by them upon that occasion. The sanction of the community was extended to them during the continuance of the war then existing with Great Britain, on account of the belief that their condition was forced upon them by the peculiar circumstances of the country; but no sooner had peace returned in the early part of 1815, than all their pledges were violated, and instead of manifesting by their actions a desire to contract their loans so as to place themselves in a situation for complying with their obligations, they actually expanded the currency by extraordinary issues, whilst there was no existing check upon them, until its depreciation became so great that speculation and overtrading in all their disastrous forms, involved the country in a scene of wretchedness, from which it did not recover in ten years.*

3. The third example referred to is that which took place in some parts of the United States after the general suspension of payments in May, 1837. In the state of Mississippi was this criminal conduct displayed to the greatest extent. Not only were new banks established, but those which previously existed were guilty of the most unjustifiable issues of paper,

* For a particular history of the money crisis of this period, see a report made to the Senate of Pennsylvania on the 29th of January, 1820, by the author of this treatise, Appendix, H. See also Gouge on Banking.

upon the plea, that by making advances to the planters upon their crop of cotton, they would be enabled to hold it for a higher price, and not be forced to submit, as always before, to the fair and natural competion of the market. Under the delusive expectation that such engagements might be advantageous to them, a large number of planters were most shamelessly plundered. Every emission of notes made by these accommodating banks depreciated the currency more and more, so that the planter who was to receive $60 in paper per bale advance, found when it came into his possession that his $60 in paper would not buy more provisions and clothing for his slaves, and other supplies for his plantation and family, than $40 good money would have bought. In the mean time the banks shipped the cotton, converted it into available funds at New Orleans, Philadelphia, or New York, and with these very funds, perhaps, bought up, at a great depreciation in the market, the very notes with which they accommodated the planter, who, on the restoration of specie payments in Mississippi, is expected to pay up the balance of his account in hard money or its equivalent.*

*How far he will be able to comply with his engagements may be inferred from the following paragraphs from newspa

pers.

"The

From the National Intelligencer of 4th April, 1839. Vicksburg Whig of the 13th ult. gives quite a gloomy picture of the monetary affairs of Mississippi. It represents the darkest days of 1837, as presenting but a faint picture of what is now exhibiting in every town and country of the state. Goods have been sold at less than half the original cost, and lands and negroes have gone off under the sheriff's hammer for one fifth of their value."

We

From the New Orleans True American of about 18th April, 1839. "The state of affairs in Mississippi is any thing but flattering. The greatest distress seems to prevail. The newspapers teem to overflowing with legal advertisements. hear daily of the sacrifice of property, and credit is a thing which is sometimes talked of but hardly expected, much less known.

CHAPTER V.

OF THE COST TO A COMMUNITY, PECUNIARY AND MORAL, OF BANKS OF CIRCULATION, COMPARED WITH THE BENEFITS DERIVED FROM THEM.

HAVING shown in former chapters that banks of circulation neither create capital nor make money permanently plenty, nor promote national wealth by the facilities they afford to the circulation of the existing capital, which are the three particulars upon which their importance to a country is generally considered to rest, and that in reality, their only power to do good is limited to the simple operation of substituting their paper for a portion of the coin which would be required for the currency if there were no banks, by which a country gains a sum equal to the profit earned upon the amount so substituted employed in commerce, and the advantage arising from the employment of a medium, for large payments and for inland

It is

Some estimate may be placed on the situation of things in Mississippi from the fact that on a single offering day, upwards of 5000 notes were tendered the Union Bank for discount, amounting in the aggregate to about $15,000,000! Great distress must prevail, and the worst may not yet have come. a bitter thing to wake up from the dream of exhaustless wealth to the reality of embarrassment and a future poverty and labor. Such we fear has been the fate of many, and we trust that their backs may be strengthened to the burthen.”

From the Raymond (Miss,) Times of Sept. 1839.-" Good plantations with every improvement and convenience, such as houses, gins, and negro cabins have been often sold at from $2 to $5 per acre.

99

From the Nashville Whig of — April, 1840.-" We were informed last evening, by a gentleman just from Vicksburgh, who had been over a considerable portion of the country in the vicinity of that city, that five out of every six of the cotton farms were now vacated and lying a barren waste-farms, too, which but a year or two ago, were worth from $10,000 to $50,000.

transmission more convenient than coin, I come now to inquire what is the probable amount of this gain in the United States, and whether the expenses incurred in the support of, and the evils constantly liable to result from, the abuse of the circulating banking system, do or do not counterbalance this gain. In the result of this inquiry, every individual in the community is interested; and as I have no motive in this investigation but the establishment of truth, I beg the reader to watch my arguments and positions closely, in order that he may detect any untenable or erroneous positions, should such be advanced.

The

It is perhaps no easy matter to ascertain with any reasonable certainty the amount of currency required for the use of the population of the United States, now supposed to amount to about sixteen millions of souls. The only estimates hitherto made, have been founded upon rather a sort of conjecture than upon any accurate knowledge respecting the fact. As regards the specie portion of it, there is no existing document that can throw any light upon its amount. known fact that much is imported, which does not appear on the custom house books, and that most of the plate manufactured in the country is made from melted coins, added to the probability that more is at this time hoarded by timid people than in ordinary times, arising from the late suspension of specie payments by the banks, precludes the possibility of any exact estimate and whether the true amount be fifty millions of dollars or a hundred millions of dollars, or some intermediate or even greater sum, it is not possible precisely to determine. The common impression appears to be, and it may possibly be as near the truth as any other sum that could be designated, that it is at this time about eighty millions of dollars.*

*This amount was assumed by Mr. Webster in a speech early in 1838. The secretary of the treasury, in his report on the finances of 3d December, 1838, assumes it to be from eighty-five to ninety millions of dollars.

In regard to the extent of the paper portion of the currency, the statistical documents which have appeared at times from the treasury department, have been imperfect, from the want of uniformity in the dates at which the different bank statements have been made out, as well as uniformity in the mode of the banks. stating their accounts, the absence of which renders them not easily understood. From the different estimates that have appeared, it may, perhaps, be assuming a fair amount, to take the actual paper currency at one hundred millions of dollars; and we shall accordingly reason upon the presumption that banks, by the substitution of their paper in the place of coin, enable the country to employ that sum as commercial capital, and of course to add to the wealth of the country the annual profit resulting therefrom.*

The next point to be considered is, how much is the probable annual gain made upon this sum from its employment as commercial capital, instead of its being employed in the comparatively unprofitable service of a circulating medium.

We find that upon the security of state and other stocks of indubitable credit, we have borrowed capital in Europe at five per. cent per annum. But capital would not be sought for at that rate of interest, unless a profit could be made beyond five per cent. by its employment in some productive branch of industry connected with agriculture, commerce, or manufactures; for without such productive employment, there could be no accumulation of national wealth, and, consequently, no means of paying the interest. It would perhaps, be a fair supposition to assume in the United State ten per cent. per annum as the average return upon the employment of capital including the compensation for the services of the undertaker of an enterprise; and the profit, therefore, that the country.

* Mr. Webster assumed this ferred to in the foregoing note.

as the amount in the speech reSee also Appendix. (C)