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Age. 42 43
45 46 47 48 49 50 51 62
54 55 56 57 58 59 60 61 62 63
65 66 67 68 69 70 71 72 73 74 75
Babbage Morgan Davies'
Equi- Equi- Equitable, table. table. 125 115
206 201 233 222 215 254 240 229 271 259
242 291 280 259 314 304 279 343 328 816 381 354 372 438 882 458 516
413 580 627 446 746 775 482
1000 1000 521
ActuaAmica- Actua. Actua- Actua- Actua. Actua- ries, afble, to ries' ex- ries, re- ries, ries, late ries, 5th ter 1st 1841. perience. made. town. years. year. year. 117 109 118 110 178 119
123 124 113 122 115
123 127 132 118 127 120 188 127 132 140 123 132 126 194 132 138 148 129
133 202 138 144 157 136 145 140 211 144 161 160
153 147 222 152 158 176 151 162
234 159 166 187 160 171 165 246 166 175 197 169
181 175 258 174 185 209 180 192 186 267 181 196 222 190 203 198 276
208 235 203
216 211 287 196 222 249 217 230 226 290 2115 236 264 231 245 242
295 216 257 281 247 262 259 300 229 270 300 264 280 278 806 244 289 321 283
301 299 315 260 310 345 304 323 321 329 279 322 373 327 346 345 349 299 355 405 352 372 371 375 322 379 440 379 398 898 405 348 405 478 409 426 427 439
376 433 618 441 456 458 474 407 463 661 476 489
491 610 441 496 606 515 525 528
479 580 653 557 567 569 585
520 569 702 601
613 753 649 667 669 665 612 664 807 702
730 708 663 724 861 759
788 797 753 718 790 919 819 854 871 803 778 802 982 885 924 963
856 .840 944 1048
956 1002 1042 913 904 1030 1119 1032 1088 1135 977
972 1121 1194 1115
1231 1045 1041 1221 1274 1204 1275
1117 1113 1331 1368 1300 1374 1399 1191 1185 1451 145 140 147 148 127 126 157
151 155 157 134 133 169 164 163 162 167 142 140
182 176 176 170 178 148 147 197 186 190 179 189 155
213 198 206 190 200 162 165 230 211 224 204 210 170 176 249 224 244 221 220 181
190 269 288 268 240 228
196 206 291 253
295 259 235 217 225 314 268 327
280 242 243 249 339 284 364
303 251 276 280 366 301 403 327 260 314 315 395 319 457 853 274 359 360 426 327 513 381 290 410 411 460 375 571 411 308 467 469 497 500 632 444 328 630 535 537 750 722 480 347 599
680 1000 804 518 401 674 696 626 1000 660 477 755
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100
Art. IV.-CURRENCY OF THE UNITED STATES.
To the Editor of the Merchants' Magazine : -
The currency of the United States consists of all the metallic money not in absolute boards, and the sum of the immediate liabilities of the banks, except the coin in their coffers. The sum total of currency in money and bank debt is permanently the same as would be present in the nation and be offered, or in readiness to be offered, in gold and silver, in exchange for commodities and property, and in the payment of debts. When it exceeds this the course of exchange is against us, and money runs awar. Buried treasure, or money so absolutely withdrawn from business and from circulation, as to have no influence upon the owner's mind in directing his expenditure, is not currency; it is an absolute hoard, having no more effect upon prices or upon business than if it did not exist. But we must not confound this iniserly store with the stocking deposit of the Dutch farmer, for example; which, although a reserve fund, influences his expenditure, and, as there is more or less of it, induces him to hold his commodity at a higher, or sell it for a lower price. The proportion of money thus at rest, in relation to the volume of currency, is not greater than the proportion of commodities at rest, in relation to the whole circulating property which necessarily remains on band waiting the right customer or a satisfactory price; and the line between the curreney and the hoard is not more imperfectly defined than that between the properts in and out of circulation. There is always a considerable quantity of property not in circulation, that is to say, not offered for sale
, that some large price would tempt the owner to part with, and there is about the same proportion of money in idleness that may be tempted into action by offering for it a sufficient quantity of property. These two opposite exchangeable values neutralize each other.
We have, then, a controlling measure of price in the volume of currener, the public instrument of exchange. As that volume increases in relation to the circulating property, the value of money falls in a general or average rise of prices; and as it decreases in relation to the circulating property, the value of money rises in a general or average fall of prices. So far as price is concerned, of course the effect is the same if the circulating property increases or diminishes in relation to the volume of currency; for as it increases in quantity its price falls, and as it diminishes in quantity its price rises; but it is not by any means the same in regard to value or wealth; for the variation in the volume of currency merely alters the value of money, it does not affect the absolute value of other property, and the nation is just as rich with little money and low prices, as with much money and high prices; but when the property of the country diminishes in quantity the public wealth declines, although prices rise'; and when the property increases in quantity the public wealth increases, although prices fall. This is more apparent in an isolated community or nation, such for example as Japan has been for two centuries past. Every nation is quite as well off with little money as with much; but a commercial nation or community, such as Japan bas now become, is vastly better off with the less money or more limited currency. Japan, with a limited currency, having a plenty of circulat
ing property, has now the most valuable money in the world; it is valuable because of the quantity of property it will exchange for, and nothing but war or non-intercourse can prevent her from becoming an immense exporting nation. I think Europe and America will be astounded at the extent of production, activity of business, and increase of wealth, in Japan in a very few years, if the empire escapes internal dissention and external war.
It is the quantity and quality of cultivated land, dwellings, warehouses, ships, steamers, factories, schools, utilities of all kinds, and everything that contributes to human enjoyment, which constitute wealth; this wealth is the same in value at any price; it is not, therefore, of the least importance what volume of currency we possess, so that the coins are not too diminutive or too large for convenient use, excepting the less currency the better for the convenience of handling, and because where there is the least currency relatively, money will buy the most; and where money will buy the most, business will go. As with individuals so with nations; where the best bargains are to be had customers are plentiest and make the largest purchases. What we want, then, is to increase our stock in trade and not our currency; for money itself will come fast enough by the increase of commodities; no earthly power and no contrivance can keep it out of the country, excepting this that we employ, of cheapening it with an admixture of fiction. The little child, soon as he learns the meaning of a cent, knows enough to go to the shop where be can get the most taffy for bis money; and when he grows to manhood he pursues the same simple principle in buying goods; but the sophistication of the currency system blinds him to the fact that the increase of currency and cheapening of money locally by his community, more than elsewhere, adds cost to his goods, enhances their price without increasing their value, and drives his customers into other shops, in other cities, or in other countries. The cheapening of money is a local loss of business and wealth, infallibly.
The effect of change in the volume of the currency follows an immutable law, however delayed by longer or shorter maturing credits, or however obscured to the mind of the unpracticed observer. It is therefore a matter of the greatest importance to know wbat the currency is and where to look for it.
We must look for it precisely where it would rest if the whole were exclusively metallic, to which volume it must ultimately return from every aberration; the true money or specie measure being determined and marked by the par of exchange on London of 95 per cent, or $4 86 65 to the pound sterling. It will be observed, that with a pure metallic currency, the banks could not be under demand liabilities, either to the public or to each other, without coin in hand dollar for dollar against them; each debtor bank must therefore hold the coin; so that the balances due to banks, as well as to individuals, are currency occupying the place of coin, and the balances due from banks, as well as from individuals, are loans. Thus, taking the returns at Washington, with an approximate estimate of the amount of specie in circulation outside of the banks, I find the national currency, with a proper nomenclature, as follows, nearest to January 1, 1860:
Bank notes in circulation
without money, estimate . Balances due to banks....
Total of debt currency, that is, currency exceeding the money in
the nation..... Bank deposits absolute in specie..
83,594,567 Government treasury, including balances at credit of disbursing officers, specie....
10,160,000 In circulation among the people including bankers in California, estimate...
Total of money in the currency
Total currency of the nation......
IMMEDIATE LIABILITIES OF THE BANKS.
Debt currency, as above.....
$435,242,957 Absolute deposits, as above...
$83,594,567 Absolute deposits with California bankers, say.
2,000,000 Money in banks.....
85,594,657 Total of immediate liabilities.....
$520,837,524 It follows that the ratio of their money to their immediate liabilities is as 16.43 to 100. The ratio of money, outside of the hoards, to the total currency of the nation, is as 29 to 100; and this indicates the method of doing business; the exchanges at wholesale and retail being effected approximately with money 29 per cent, and debt 71 per cent; besides some that are made by the direct barter of commodity for commodity, without the intervention of debt or money. Obviously debt must be created and discounted to bring the debt currency into existence, and it is kept alive by continued renewal or kiting of the notes and bills of customers, against the notes and inscribed credits of the banks. The bank debt is, therefore, merely a portion of the circulating debt of the community, which compels the exchanges to pass through a circuit of debt and credit, by removing so much money from the country, which circuit would otherwise be made with money. This circuit is made by the transfers of raw material, and articles partially and wholly finished, through the hands of manufacturers and tradesmen to the consumers, and the return of the consumer's commodity or produce to close the transaction, when the two producers and consumers are mutually paid. Approximately these transfers are five each way; so that we cannot be far wrong in estimating ten exchanges to the circuit. Consequently we maintain a commercial debt upon the above figures of $4,352,000,000, or ten-fold the sum of the debt-currency, that need not and could not exist with a currency exclusively of money. Every merchants' stock of goods greatly exceeds the sum of currency he retains on hand; and this law of the exchanges in the circuit of money seems to determine the ratio of goods offered for sale, with other circulating property, to be approximately as 10 to 1 of the currency throughout the country.
So completely has the idea of money in the debt currency taken possession of the public mind, that it is difficult for people to comprehend how the above incubus of debt is created, or why there is any more of it than would exist with a money currency. But money is a value purchased with another value in goods, and comes in return for merchandise sold to California and to other countries; debt bas no part in its creation. The debt currency is not a value ; it is a fiction of money manufactured virtually out of nothing, and is, when created, like every other debt, in excess of all the money and property in the world. An illustration will show how this worse than useless load of debt and embarrassment is entailed upon us.
You have 100 yards of cloth for sale at $5 per yard that I want; and I bave 2,500 pounds of wool for sale at 20 cents per pound that you want; either commodity amounting to $500. Simple barter would effect the exchange in the most economical manner, and satisfy us both, without debt or embarrassment; but we do not know each other's wants, and do not meet in the market; a middle man or merchant is therefore necessary to us both. If he has $500 of money, as he would have under a money currency, to pay for your cloth that you can pay for my wool, the exchange may be effected without debt or delay of settlement. It is triangular barter; gold, a third commodity of value, being employed as a medium of exchange; but, by the present system, we expel the gold, and thence comes the necessity of debt to create the debt currency and maintain the banks. A merchant gives his note for your cloth, and the same or another gives his note for my wool; then, according to the present custom of making the utmost possible use of banking, you give your note for the wool, and I give my note for the cloth; and now the bank is ready to accommodate all parties in accommodating itself. You and I get the merchant's notes discounted; he gets our notes discounted, and the bank gives in exchange--what? Certainly not money, for that yields no profit; it must lend what has no existence, and make a currency of its debt, over and above its money and capital, on which to charge interest as money, to make dividends; of course, it lends its debt in the form of notes or inscribed credit. You and I now owe $500 each; the merchant owes $1,000, and the bank owes $2,000; and here, on $1,000 of value, by reason of the absence of $500 of money in the currency, is $4,000 of debt created, more useless and unnecessary than a fifth wheel to a coach ; $2,000 of it is debt currency which infallibly drives from the country $2,000 of gold, and compels the next traders to go through the same operation of running in debt to effect their exchanges. And what capital is employed in these transactions? Clearly not a dime but yours and mine; your cloth and my wool: our capital maintains the merchant and the bank, and all their clerks and rent and charges; we are entangled in a useless debt, with the fluctuating values of a currency continually expanding and contracting to accommodate the cupidity or necessities of the bank, and we run the risk of bankruptcy, out of the proceeds of our own labor, which, under a money currency, would have been exchanged without any risk whatever. Every time the cloth or the wool is exchanged in its progress to the consumer, more debt and more currency of the same sort are created, and an oppressive mass of debt is thus built up and maintained to expel money, postpone payments, and embarrass everybody.
There is no objection to the merchant in this business; he is a necessary and economical agent in finding and opening markets and effecting exchanges, securing to the producer uninterrupted employment at home; and, in transferring a commodity from where it is of less, to where it is VOL. XLIII.-NO. V.