Why should our mechanical industry be made to depend upon the contingency of the holders of specie being either able, or willing, to furnish the credit and currency which that industry requires? Why should all the mechanical labor of the country—labor capable of producing two, three, or four thousand millions of dollars per annum—be compelled to stand still, and the ten or more millions of people, dependent upon the earnings of this labor, be impoverished, and perhaps ruined, whenever the holders of one hundred millions of specie, consulting solely their own interests, decline to furnish the credit and currency necessary to keep this labor employed? Our mechanical industry has no need whatever to ask one dollar of credit, nor one dollar of currency (except for small change), of the holders of specie. There are, in the country, some seventeen thousand five hundred millions of other wealth than specie; an amount of wealth an hundred and seventy-five times greater than the amount of specie. This other wealth, if permitted to do so, is capable of furnishing, many times over, all the credit, and all the currency, which our mechanical industry can possibly require, or use. It can furnish them too, without interruption, at all times, under all circumstances, in peace and in war, in plenty and in famine, in prosper.
Endnotes
1. If, by relying solely upon specie, as the basis of our currency and credit, we lose annually, on an average, ten times as much, in our industry, as our whole stock of specie is worth, it is obviously quite time that our currency and credit were based upon something else.
2. In speaking of “the avarice of the money lenders,” I do not mean that their avarice is any greater than that of other people. They only take advantage of the markets, like every body else. The folly is on our part in forbidding by law all credit and currency except those based on gold and silver; and thus giving to the holders of gold and silver a monopoly, which they use for their own benefit, and for our destruction.
Considerations for Bankers, and Holders of United States Bonds
Chapter I. Explanation of the Author’s New System of Paper Currency.
Chapter II. The Author’s System Cannot be Prohibited by the States.
Chapter III. The Author’s System Cannot be Taxed, Either by the United States, or the States.
Chapter V. Unconstitutionality of the Legal Tender Acts of Congress.
Chapter VI. Unconstitutionality of the National Bank Act.
Chapter VII. Exchanges Under the Author’s System.
Chapter I.
Explanation of the Author’s New System of Paper Currency.
The principle of the system is, that the currency shall represent an invested dollar, instead of a specie dollar.
The currency will, therefore, be redeemable, in the first instance, by an invested dollar, unless the bankers choose to redeem it with specie.
The capital is made up of a given amount of property deposited with trustees.
This capital is never diminished; but is liable to pass into the hands of new holders, in redemption of the currency, if the trustees fail to redeem the currency with specie.
The amount of currency is precisely equal to the nominal amount of capital.
When the currency is returned for redemption, (otherwise than in payment of debts due the bank,) and the trustees are not able, or do not choose, to redeem it with specie, they redeem it by a conditional transfer of a corresponding portion of the capital. And the conditional holder of the capital thus transferred, holds it, and draws interest upon it, until the trustees redeem it, by paying him its nominal value in specie.
Under certain exceptional and extraordinary circumstances, this conditional transfer of a portion of the capital, becomes an absolute transfer; and the conditional holder of the capital transferred, becomes an absolute holder of it—that is, an absolute stockholder in the bank.
In such cases, therefore, the final redemption of the currency consists in making the holders of the currency bona fide stockholders in the bank itself.
To repeat, in part, what has now been said:
The currency, besides being receivable for debts due the bank, is redeemable, first, with specie, if the bankers so choose; or, secondly, by a conditional transfer of a part of the capital.
The capital, thus conditionally transferred, may be itself redeemed, by the bank, on paying its nominal value in specie, with interest from the time of the transfer.
Or, this conditional transfer, of a portion of the capital, may, under certain circumstances, become an absolute transfer.
A holder of currency, therefore, is sure to get for it, either specie on demand; or specie, with interest, from the time of demand; or an amount of the capital stock of the bank, corresponding to the nominal value of his currency.
In judging of the value of the currency, therefore, he judges of the value of the capital; because, in certain contingencies, he is liable to get nothing but the capital for his currency. But if the capital be worth par of specie, or more than par of specie, he infers that his currency will be redeemed, either in specie on demand, or by a temporary transfer of capital; which capital will afterwards be itself redeemed with specie.
All that is necessary to make a bank, under this system, a sound one, is, that its capital shall consist of productive property—its actual value fully equal to, or a little exceeding, its nominal value—and of a kind not perishable, or likely to depreciate in value.
Mortgages, rail-roads, and public stocks will probably be the best capital; and most likely they are the only capital which it will ever be expedient to use.
If further explanation of the nature of the system be needed, at this point, it can be given—more easily, perhaps, than in any other way—by supposing the capital to consist of land—as follows:
Suppose that A is the owner of one hundred, B of two hundred, C of three hundred, and D of four hundred, acres of land; that all these lands are of uniform value, to wit, one hundred dollars per acre; that they will always retain this value; and that they are all under perpetual leases at an annual rent of six dollars per acre.
A, B, C, and D, put all these lands into the hands of trustees, to be held as banking capital; making an aggregate capital of one hundred thousand dollars. Their rights, as lessors, going with the lands into the hands of the trustees—that is, the trustees being authorized to receive the rents, and apply them to the uses of the bank, if they should be needed.
A, B, C, and D, then, are the