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their products, as well as merchandize and the artificial channels, the vehicles, craft, ships, &c. which circulate it.
The arrount of capital thus defined, owned or possessed by the citizens of this State, or invested in it, we estimate at a sum not less than 100 millions of dollars.
The valuation by the town and county assessments, including the stock of chartered banks, would amount to about half that sum, allowing for other corporate property not returned by them, for under valuation, for personal property which escapes the assessor, and it is believed the above estimate is below the truth.
The currency of our State amounts to about 14 millions, of which say 12 millions are bank paper, and 2 millions are metal.Our currency, therefore, bears the proportion to our capital of it per cent; that is, for every hundred dollars of capital we possess one and three-fourth dollars in currency.
OFFICE OF CURRENCY, AND THE LAWS WHICH
GOVERN IT. The office of currency is to measure capital when it changes owners, or passes from producer to consumer, saving to parties the trouble of sceking out each other and exchanging their products. Thus, a person possessing a commodity and wishing to exchange it for another, first converts it to currency, and with that seeks out the article which he desires to possess. The currency is not an object of desire to either party, except so far as it facilitates the exchange of the commodities they would part with for those they would possess, and it is always dismissed so soon as it has performed this office of measuring the value of the article exchanged, and is again required to minister to the convenierce of others in the same manner.
It has been estimated by writers of authority that one dollar of currency would exchange five dollars worth of commodities each year; thus our 14 millions would exchange 70 millions annually. Although currency bears so small a proportion to capital, yet it is of the first importance that it should be well regulated, measuring capital with precision and steady uniformity; for it is this small amount of currency (one and three-fourth dollars to the hundred,) which stamps on capital its apparent value; we say apparent, for it does not affect its rcal or intrinsic value. A well regulated cur
rency, or in other words, a uniform measure of capital, performs not only our domestic exchanges faithfully, but the foreign also; it regulates our exports and imports with all the precision of which such exchanges are susceptible. But a deranged currency not only exchanges onr domestic products imperfectly, but perplexes foreign trade, deranging exports and imports, and baffling the skill of the merchant in his efforts to equalize the markets of the commercial world. Thus a superabundant currency operates upon the capital it measures like a short yard stick, a light weight, or a small measure; while a contracted currency operates like the long stick, the heavy weight, or the large measure. Each extreme is alike mischievous. Abundant or degraded currency apparently swells the value of commodities, and we say houses, lands and merchandize are dear, whereas in truth, money is cheap, or currency is degraded. Thus, a man purchasing a farm, or merchandize, at a time when currency was degraded, being too abundant and too cheap by 25 per cent, and being obliged when his payment falls due to convert the same farm or merchandize into a currency restored to its true standard value, would find to his cost that the capital which had been measured to him at $4,000, and for which he had obligated himself to pay in currency, would, by the corrected and true standard, be measured back at $3,000, and that he had lost by this derangement of currency 25 per cent of his estate, while the estate itself, the farm or merchandize, had neither gained or lost in its intrinsic value; but his loss had been produced by the use of a fluctuating measure or standard, a loss as fatal to him as if the estate had actually withered to two-thirds of its dimensions under his possession.
The currency of a country will always be best regulated when left free to obey the impulse of commerce, unshackled and unembarrassed by legislation. Such impulse will expand and contract its volume, expel it from a country when it has become abundant, and restore it again when it has become scarce, Commerce tends with all its force to equalize currency as well as all exchangeable commodities among trading communities, at home and abroad; and although, like the tide, it is perpetually ebbing and flowing, and never finds an exact and quiet level, yet commerce will not tolerate great inequalities in the currency of the trading world, unless thwarted by political events or legislative enactments. It is this approach to equality of distribution which constitutes both the util. ity and perfection of currency,
The process of regulation is as follows: A superabundant currency at a given place beeomes a degraded currency, compared with that of the rest of the world. It gives to exchangeable commodities a false value, raising the price of exportable articles until they will not pay cost and freight; then the dollar, the guinea and the doubloon drop their character of currency or measure of value, assume that of merchandize, and take the place of the bushel of wheat, the barrel of flour and the bale of cotton, which the merchant rejects, and go abroad in lieu thereuf to pay a debt, or in search of foreign commodities with which to gorge a market rendered voracious by this excess of currency. An equilibrium is soon restored by the four fold operation of refusing to export the domestic products which accumulate at home, where they are useless, by superadding foreign commodities to a market already overstocked with them, and by transferring specie from a country where it is abundant and cheap, to one where it is scarce and dear. Thus money rises, commodities fall, exportation increases, importation diminishes, and the vibration thus produced is not arrested until the redundant currency has become a contracted one; commodities in their turn become too cheap, and money too dear, and the former are sent in search of the latter to restore again the equi. librium.
Such are the laws by which commerce and currency mutually govern and control each other, and when the currency consists of metal alone, its ebb and flow is so gradual as never to produce agitation, unless impeded or impelled in its progress by political convulsions or unwise and fickle legislation; an abundance or scarcity is hardly felt before it is corrected.
Not so, when 12 parts of the 14 of our currency is paper, which cannot like metal assume the character of merchandize for exportation, Commerce is then compelled to make all her drafts on this small stock of metal which the banks have collected to her hands and hold ready for banishment at the shortest notice. And at the moment commerce begins to exhaust the metal, the banks, under the influence of a panic, and in obedience to the law of. self-preser. vation, withdraw the largest possible amount of their paper currency in the shortest period of time, until by the combined efforts of all the merchants and all the banks, a pinching and cruel dearth of currency is suddenly produced, measuring out the debtors capital to his more fortunate creditor with unrelenting extortion, It
is true this severe process soon restores order and health to the commercial community, but like the tornado which replaces a pestilent by a salubrious atmosphere, leaves abundant traces of its devastating march.
BANKING. This important subject, which the Bank Commissioners have discussed with ability, demands from us a brief notice, from its connexion with the subject under consideration.
If our banks could be restrained to their legitimate office, of furnishing our currency, and affording a safe deposit for the idle capital of our citizens, and possessed the power of withdrawing at pleasure a portion of this currency, as it became redundant, without producing revulsions in commerce, they would fulfil the office for which they were created, and prove abundantly useful to the public.
The bank capital of our State amounts to about twenty-five millions,..
$25,000,000 The currency,
14,000,000 Deposits of idle capital, say
$49,000,000 being the amount of the debt due the banks, excluding the United States branches.
If we assume that fourteen millions of currency are required to perform the exchanges of our State, then banking capital to an equal amount, say fourteen millions, it is believed would be adequate to our wants, and sufficien: for all useful purposes.
Of these fourteen millions of capital, ten might be invested in public stocks, or permanently loaned on bond and mortgage, while the remaining four millions were held in specie; with the capital thus disposed, these banks might safely exchange their credit in bank
paper for good commercial bills or notes, payable at two, three and four months, and thus would the banks furnish the fourteen millions of bank currency required, and would hold, in addition to their capital thus secured, fourteen millions of commercial paper, representing the exchangable commodities of the country, always convertible to currency, and always to be converted and applied to their payment as the discounted bills reached maturity; every
cancelling or payment to be followed by the discount of a new bill and a new issue of bank paper; and thus would a sum equal to such capital be loaned and redeemed four times each year, amounting in the aggregate to fifty-six millions. If each 90 day loan of bank paper performed two exchanges of property before it returned in payment of the bills discounted, one hundred and twelve millions of commodities would be exchanged annually with this bank currency, a larger sum we doubt not than would require the agency of currency.
With such a reservation of specie, say four millions, and with good bills, equal in amount to the currency in circulation, and payable at the rate of more than one per cent, or one hundred and fifty-five thousand dollars per day, being about one million per week, the banks could never be embarrassed, or alarmed by any commercial revulsions, and might witness the exportation of their specie with calm indifference, knowing that a few days' receipts would be equal to any redundancy of currency, they night have issued in exchange for business paper; for it will be recollected that this redundancy cannot be very excessive when confined to such operations, and it should also be borne in mind, that the banker has to provide, in case of emergency, to redeem an amount equal to the difference between the minimum and maximum of the circulation. If ten millions shall be the minimum, and fourteen millions the maximum, then four millions will be the most that can be thrown back upon the banks, leaving at the least ten millions suspended in circulation.
We have thus endeavored briefly to describe strict, rigid and useful banking, a system by which the banker could contract or enlarge his business gradually, and would never, under the influence of panic, diminish the currency so much and so suddenly as greatly to distress a whole community, and would possess the means in his specie and business paper, to meet all exigencies without resort to his bond and mortgage debt, or to his public securities, both of which would stand apart as a safety fund for his bill holder.
If it were necessary to wind up the whole system, and abolish the banks, a single year would suffice to accomplish it, and replace their paper by specie to the amount of fourteen millions; a year of