IN SENATE,

April 12, 1833.

REPORT

Of the committee on finance, on the bill from the Assembly relative to reducing the rate of interest, and sundry remonstrances against the same.

Mr. Bronson, from the committee on finance, to whom was referred the bill from the Assembly to reduce the rate of interest to 6 per cent and discount to 51, and guard these rates by the existing usury penalties; and to whom also was referred the several remonstrances from the cities of New-York, Hudson and Albany, and from the county of St. Lawrence, against the passage of said bill,

REPORTED:

That the important bearing of the proposed enactment upon the industry of our State, the elaborate discussions had thereon, the anxiety manifested in relation to the measure, and the diversified views of legislators, commend it to the careful consideration of the committee, and demand their best efforts to elucidate a subject somewhat perplexed by subtleties and speculation. They propose,

1st. To explain the distinction between capital and currency: 2d. Describe the appropriate office of each and the laws which govern them, and allude to our banks:

3d. Inquire into the necessity or propriety of regulating by law the hire or interest to be paid for capital.

And ist. Capital comprises all the commodities of a country which have value, including the soil, mines, manufactories, and [Senate, No. 106.]

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their products, as well as merchandize and the artificial channels, the vehicles, craft, ships, &c. which circulate it.

The amount 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 800 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 11 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 seeking 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 convenience 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 real 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 utility and perfection of currency,

The process of regulation is as follows: A superabundant currency at a given place becomes 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 thereof 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 equilibrium,

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-preservation, 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