notes, even though the stockholders should sink their whole capital. In estimating the extent of this depreciation, the purchasers of such bank notes would probably expect a full remuneration for the risk they would run of not being paid at all, and ample interest for the longest period of time that they might possibly have to wait, before that fact could be ascertained; and it is more than probable, that amongst these purchasers would be found many solvent debtors of the bank who would postpone the payment of their debts, and plead inability in order to profit by the lowest stage of the depreciation.* * As a specimen of the extent to which Bank notes may be depreciated by the mismanagement of Banks, the following quotations are given. From the New Orleans Price Current and Commercial Intelligencer of the 25th April 1840. Specie, Rates of Specie, Bank Notes, &c. 5 to 6 per ct. premium. Alabama State Bank and Branches, 3 66 4 discount. 4 66 6 30 66 635 66 5 66 75 West Feliciana, at Woodville 66 16 BOOK FOURTH. HAVING, in the foregoing three books, laid before the reader the laws which regulate a metallic, a mixed, and an inconvertible paper currency, respectively, together with such collateral subjects as appeared to me to be necessary to a full understanding of the whole question, I shall, in the present book, invite his attention to a few matters of a miscellaneous character, which do not exclusively belong to either of the foregoing classifications, and the substance of which will be found in the heading of the several chapters. CHAPTER I. EXAMINATION OF THE QUESTION, OF WHAT DOES A CURRENCY CONSIST? THERE is, perhaps, no subject upon which more various and more erroneous opinions prevail, than that which we now propose to examine. The expansion of the currency, the contraction of the currency, the depreciation of the currency, are every day expressions, and yet very few persons can precisely point out the real elements of which the currency is composed. In many public documents, of late years, in which reference is made to the currency, one would be led to infer, that the coin in possession of the public, and the bank notes in circulation, constituted the whole of the currency; and that, consequently, the currency was depreciated or improved according as these two elements were augmented or diminished. Newspa per writers and editors, too, generally take this ground, and it is really amusing to see the frequent attempts that are made by them, to illuminate the public mind as to the condition of certain banks, by a mere statement of their notes in circulation, without discriminating between post notes and notes payable on demand, and leaving out of view entirely, the amount of deposites and other immediate liabilities of the banks. The most palpable error, however, that prevails in relation to this subject, is the notion entertained by many, that bonds, bills of exchange, and promissory notes, constitute a part of the currency. If this be true, currency, or, what is the same thing, money, would become plenty in proportion to the multiplication of these evidences of debt; whereas, every man of observation knows, that just in proportion as they are multiplied, currency or money becomes scarce, owing to the demand that arises for the means of paying them when they have reached maturity, or are becoming due. Indeed, so far are these securities from constituting any part of the currency, that they even require a portion of that which is currency always to be kept on hand by the persons who are bound for their payment, in order to meet them at the appointed time. The most that can be said of this class of obligations is, that they are contracts for the payment of currency or money, at a future day, and as far as they are negotiated or assigned by endorsement, in the course of business, they constitute a portion of those various substitutes for currency, by which the country in which they are used is saved from the expense of maintaining a larger metallic or paper machinery for carrying on its trade. Their operation, in fact, may be compared to that of the clearing house of London, whereat, by the daily meeting of the clerks of all the bankers, to make a mutual exchange of the acceptances of the principals of each, instead of a payment in money, which would be necessary if each acceptance were paid at each banker's counter, a very large amount of currency is economised, to the great benefit of all the parties. Nor is the opinion less erroneous of those who suppose that public securities and the certificates of bank, canal, and railroad stocks, and such evidences of property, are currency. These are in truth nothing but titles for property of a particular sort, and no more constitute a part of the currency than the deeds for lands and houses which the owners of that species of property possess. With these preliminary remarks, I will now state in the first place, that the currency of a country in which there is no paper money, consists, and consists only, of gold and silver, and any other commodity which constitutes a legal tender, and which every creditor is obliged by law to accept in discharge of a debt. Thus, in Virginia, in the year 1618, tobacco was made a legal tender at three shillings per pound; and in Massachusetts in 1641, corn was made a legal tender at a fixed price; and in 1643, Wampompeag (an article of traffic with the Indians) was invested with the same power in payment of debts to the amount of forty shillings, the white at eight a penny, the black at four a penny, except for county rates.— Thus, also, in Maryland, so late as 1732, an act was passed making tobacco a legal tender at one penny a pound, and Indian corn at twenty pence a bushel. In all these cases, the articles thus made a legal tender, constituted a part of the currency as much as gold and silver; but as such absurd regulations could not but have led to the immediate production of extraordinary quantities of the articles named, it is presumable that they are to be regarded as the mere follies of a moment.* *For a highly interesting and instructive history of the medium of trade, before the introduction of paper money into the American Colonies, and of the paper money issued by the various colonies, see "History of Paper Money and Banking," by William M. Gouge. |