5. Under the existing system, when the banks suspend specie payments, we see that their bills not only continue to circulate, but that they maintain a value, in the market, very nearly on a par with specie. Why is this? It is principally, if not solely, because the bills of each bank are a legal tender in payment of any debts due to that bank. Inasmuch as the public always owe a bank more (by the amount of interest on loans) than the bank owes the public, there is sure to be a demand for all the outstanding bills of a bank, to pay the debts due to the bank—provided the debts due to the bank be solvent. It is this fact, that keeps the bills of the bank so nearly on a par with specie. That is, the bills are worth very nearly dollar for dollar, because they will pay debts to the banks, dollar for dollar, which would otherwise have to be paid in specie.
This fact, in regard to the circulation of the bills of suspended banks, under the existing system, sufficiently demonstrates that the paper currency now proposed, would not only circulate, but that it would maintain a value very nearly, if not quite, on a par with specie; because it would not only be a legal tender, dollar for dollar, for all debts due to the banks, but would also be redeemable in Productive Stock, which would always maintain, very nearly or quite, a par value with specie, in the market. In this latter respect (of being redeemable by Productive Stock) the proposed currency would have a clear, and very important, advantage over the bills of suspended banks, which now circulate, and maintain their value nearly on a par with specie. There is, therefore, no ground for saying that the new currency would not circulate, if it were offered, when we see that a far less safe, less redeemable, and less desirable currency, to wit, the bills of suspended banks, under the present system, do not only circulate, but maintain their value so nearly on a par with specie.
6. It may be supposed, at first view, that merchants, especially importers, might reasonably object to the proposed currency, on the ground that their interests require that the currency of a nation be such as can be converted into specie, whenever they (the merchants) may have occasion to export specie.
Admitting, for the sake of the argument, that the merchants might suffer some inconvenience of this kind, the effect would only be to make them more careful to keep the imports within the exports of the country. And this benefit to the country would counterbalance a thousand fold any inconvenience to the merchants.
The merchants have no claim that the whole country shall depend, for a currency, upon a commodity, or commodities, like gold and silver, which the merchants can at pleasure carry out of the country, leaving the nation destitute of a currency. And it is nothing but suicide for a people to depend upon such commodities for a currency.
Under the present system, whenever the balance of trade is much against us, the merchants export specie in such quantities as to cause sudden and severe contractions in the currency, a great reduction in the price of commodities relatively to specie, (that is, a great rise in the price of specie,) general bankruptcy among persons in debt, general stagnation in industry and trade, and immense distress and ruin on every hand. This state of things checks importations for a while, until the balance of trade turns in our favor; when the specie returns, currency expands, credit revives, industry and trade become active, and, for a time, we have what we call prosperity. But in a few years, the merchants again export the specie, and the same catastrophe is acted over again. And such must continue to be our experience, until our present vicious system of currency and credit shall be corrected. This no one seems to doubt.
Certainly such evils are not to be endured by a whole nation, from no motive but to maintain a currency, which the merchants can export, whenever they shall have imported more goods than the legitimate exports of the country will pay for.
It is the proper function of merchants to conform their business to the interests of the people, in the matter of currency, as much as in the commodities bought and sold with and for it. And it would be as legitimate for the merchants, instead of supplying the people with such commodities as the latter desire, to dictate to them what they may, and may not, buy, as it is for them (the merchants) to dictate to the people what currency the latter shall use.
It is the legitimate function of merchants to buy such commodities as the people have to sell, and to sell such as the people wish to buy. So far as merchants do this, they are a useful class. And the principle applies as well to the currency, that is to be bought and sold, as to any other commodities. And, as matter of fact, whatever this principle requires of merchants, they readily acquiesce in. They adapt themselves at once to any system of currency, that happens to prevail for the time being. And certainly no class will more eagerly welcome any system of banking, that will furnish them, at all times, with abundant credit, and abundant currency, and cash payments in trade; for such a system would be a guaranty, to them, of a safe, constant, and profitable traffic, in the place of the present fitful, chaotic, and perilous one, in which so many of their number are being continually wrecked.
So far as the export of specie is concerned, probably not one merchant in a hundred—perhaps not one in a thousand—has the least interest in it. A currency, that will pay their bank notes, is substantially all that, as a class, they demand, or desire.
But, in truth, the system would favor, instead of injuring, the interests even of those few merchants who occasionally do export specie; for it would put at their disposal nearly all the gold and silver of the country, for exportation, or any other purpose. That is to say, the merchants could export nearly all the gold and silver, without affecting our home currency; and consequently without disturbing industry and trade. And this is one of the great merits of the system. The presence or absence of specie in the country would not be known by its effects upon the general body of currency.
If the paper currency, now proposed, were introduced throughout the world, gold and silver would enter very little into the internal commerce of nations. They would go back and forth between nations, to settle balances; and would be found, in large quantities, in seaports as merchandize. And merchants would purchase them for export, as they would any other commodities.
7. The system proposed would obviously tend to the concentration of specie, in large quantities, in the seaports. This would enable the banks, in the seaports, to pay specie, if it should be at all necessary. And this would enable the banks, in the seaports, to furnish a specie paying currency for the interior of the country, when the banks themselves, in the interior, would not pay it. The advantage of circulation, which the seaport banks might thus obtain over the banks of the interior, would be great enough to compensate for any little trouble it might be for the former to pay specie. In fact, this interior circulation might very probably become so extensive, as to be a source of great profit to the seaport banks.
If the seaport banks should send their currency, in large quantities, into the interior, the banks of the interior would have little need to redeem their currency with specie. It would be sufficient for them to redeem it with the seaport currency.
8. The system is practicable for the further reason, that it can be introduced without the aid of bank charters, or special legislation of any kind. It stands wholly on common law principles; and companies can go into business under it—as they go into mercantile, manufacturing, or any other business—when it suits their interest or pleasure, without asking the consent of a body of ignorant, conceited, tyrannical legislators, who assume to know what business it is, and what business it is not, best for men to engage in; instead of leaving the wants of mankind to give direction to their industry and capital.
The banks, too, when established, would be free of all special control, oversight, taxation, or interference by the government. As the banks would ask no favors of the government, in the way of charters, monopolies, or otherwise, the government would have no more excuse for specially taxing them, or for sending Commissioners to pry into, investigate, or report their affairs, than it now has for specially taxing