XXXVII. CHAP ficient quantities from their unaided resources; and the wages of labour, from the scarcity of hands, were so high 1837. that capital had little inducement to migrate from Eng 5. tages of a land to settle in a country where, although rent was nothing, the cost of production was double its own. The produce of the mines of gold and silver over the globe had been so fearfully diminished by the disastrous wars consequent on the South American revolution, that the annual supply for the use of the whole world had fallen below £9,000,000—not half its former amount—and this was nearly all absorbed by the necessities of Europe. Thus America, albeit splendidly furnished by all the blessings of nature, might have been chained to a slow progress, and at length slumbered on with a population doubling, like Europe, in five hundred years, were it not for one discovery which supplied all deficiencies, and kept it abreast of its destiny. This discovery was a PAPER CURRENCY. This powerful agent for good or for evil was never Vast advan- more required, and has nowhere produced more imporpaper cur- tant effects, than in the United States of America. It is America. historically known that the establishment of their inde rency in pendence, like the successful issue of the war of Rome with Carthage, and Great Britain with Napoleon, was mainly owing to the paper bearing a forced circulation, which was so plentifully issued by the insurgent States during the course of the contest. During the war with England in 1814, cash payments were universally and unavoidably suspended, and an immense amount of confusion and mercantile distress ensued in consequence in all the States of the Union. Banks had been established to the number of 246, which issued their own notes without limitation, which circulated through all the States of the Union, some at par, others at various degrees of discount, sometimes as much as a half, according to the reputed solvency of the establishment from which they issued; and the mass of notes in circulation was as great XXXVII. 1837. Feb. 20, as it afterwards became in 1834, with a population nearly CHAP. double, and transactions three times as extensive. was impossible that such a state of things could be allowed to continue, and to get out of it, Government, in 1816, established, by an act of the Congress, the famous Bank of the United States, with a capital of 35,000,000 dollars, and a charter for twenty years. Such was the combined energy and prudence of this great establishment, that, soon after its opening, cash payments were 1817. resumed in all the banks of New York, Philadelphia, Baltimore, Boston, and soon after in all the banks of the Union. This important transition, however, was not made without great difficulty and an immense amount of embarrassment and insolvency. Between 1811 and 1820 no less than 165 banks, in different parts of the Union, either became bankrupt or withdrew from business. During this period of return to cash payments, industry was essentially blighted, suffering was universal, and the people, glad as usual to fix the responsibility of misfortune on any one but themselves, generally ascribed it to the banking system, which, though grievously abused, had Voyage en been the main-spring of their progress, and the principal i. 45, 46. cause of their prosperity.1 1 Chevalier's Amerique, 6. perity of to 1835. Great as these evils were-the unavoidable result of an immense issue of paper without either responsibility or Great proscontrol-they were in a considerable measure modified by America the prudent conduct, high credit, and great influence of the from 1820 United States Bank. Such was the effect of its general direction in banking affairs that all the disasters of the six years preceding 1820 were forgotten in the unbounded prosperity of the fifteen years which succeeded it. Although the United States shared to a certain degree in the commercial disasters consequent on the resumption of cash payments in Great Britain in 1819, and the consequent monetary crises of 1825 and 1832, yet this period was, upon the whole, one of extraordinary and unprecedented prosperity over their whole extent. Prices were XXXVII. 1837. CHAP. high, but wages were still higher; ease and contentment generally prevailed; cultivated land was encroaching at the rate of seventeen miles a-year over a frontier seventeen hundred miles in length, upon the gloom of the forest; and the seaport towns on the coast, sharing in the vast commerce which such a rapid increase of production required, were rapidly advancing in wealth, population, and enterprise. During these fifteen years the population of the United States advanced 65 per cent; its exports and imports doubled, and a vast stream of emigrants from the British Isles, which had come at last to be above 50,000 a-year, added to the prolific power of nature in providing hands to keep pace with this immense increase.* It is to the influence of the American banks in furnishing the means of cultivation and improvement to the hardy settlers in the forest, that the superior aspect of the American side of the St Lawrence to the British, i. 392-394.' which has attracted the notice of every traveller, is mainly to be ascribed.1 1 Chevalier, As the paper currency of the United States has done such great things in sustaining and vivifying the industry of the country, it was not to be expected that it could * POPULATION OF THE UNITED STATES. 1820, 9,638,226 12,853,838 17,068,660 -American Census, 1840. EXPORTS AND IMPORTS OF THE UNITED STATES FROM 1824 TO 1837. XXXVII. 1837. 7. whole, of States have been conducted without many instances of reckless, CHAP. some of culpable, mismanagement. So great had the demand for money become in consequence of the immense undertakings which were everywhere going forward, that Prudence, the discounts of the banks in the year 1831 had reached upon the the enormous amount of 250,000,000 dollars, great tes the United part of which was discounted at the extravagant rate of banks. 15, 18, and 20 per cent. On the 1st January 1835, there were in the United States 557 banks, besides 121 branches ;* their capital was 231,250,000 dollars * Number of Banks, Capital, Cash held by each, Bills under Discount, and Notes in circulation, on January 1, 1835, in all the States of the Union: The proportion of cash held by and notes in circulation of the Bank of XXXVII. 1837. CHAP. (£57,500,000), the notes they had in circulation amounted to 103,692,000 dollars (£25,500,000), their annual discounts were 365,143,000 dollars (£90,600,000), and the entire treasure in their vaults was 43,937,000 dollars, or £10,990,000. These figures demonstrate that, however reckless and extravagant the issue of some of these banks had been, yet their conduct upon the whole had been safe and judicious; for the proportion of notes issued to the gold and silver possessed, was, on the whole, as 11 to 26, or as 1 to 2;—a proportion greater than what has for a century been deemed necessary by the Scotch banks, whose prudence and good management have become proverbial; and more than triple the proportion of specie to notes out-held during the same period by the Bank of England. 8. chase of Far West notes. One main use to which these large issues of the banks Vast pur- had been applied was in the purchase of waste lands on the lands in the frontier, which were in great part bought with advances made with these by banks established in the States to which the lands sold belonged. So rapid had been the progress of population and increase of cultivation on the frontiers of the forest, or in its recesses, that advances made on the security of lots purchased rarely proved unfortunate, the rise in the value of the lot bought increasing so rapidly as in a few years to much more than pay off the loan contracted. The territories at the disposal of the States were immeuse; they amounted to 990,000 square miles, or about 680,000,000 acres. Of these the Government, since 1784, had sold above 60,000,000, and the sales had of late years gone on increasing in an extraordinary progression: in seven England, Scotch and Irish banks, on an average of the month preceding April 12, 1856, was as follows: Notes issued. Cash held. £9,806,880 £20,225,564 6,474,712 2,122,893 £30,485,659 £13,610,211 Of the cash held by the Bank of England, £8,000,000 must be retained in the issue department; so that the real stock of bullion against £20,225,000 in notes was £1,806,000 in April 1856.-London Gazette, April 12 and May 2, 1856. |