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 away. Buried treasure, or money so absolutely withdrawn from business and from circulation, as to have no influence upon the owner's mind in directing his expenditure, is not currency; it is an absolute hoard,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 miserly 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 hand waiting the right customer or a satisfactory price; and the line between the currency and the hoard is not more imperfectly defined than that between the property 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 currency, 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 he can get the most taffy for his 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 what 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 94 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:—

Total of debt currency, that is, currency exceeding the money in

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 has 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 have 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 cloth that you your 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

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