The limit 'prescribed by law to the issue of United States notes has been : reached, and the Secretary thinks it clearly inexpedient to increase the amount. When circulation exceeds the legitimate requirements for real payments and exchanges, no addition to its volume will increase its value. On the contrary, such addition tends inevitably to depreciation; and depreciation, if addition be continued, will find its only practical limit in the utter worthlessness of the augmented mass.

When Congress authorized the creation of debt, to a certain extent, in the form of United States notes, and impressed on these notes the qualities of a circulating medium, its action was justified by the disappearance of coin in consequence of the suspension of specie payments; by the necessity of providing a medium in which taxes could be collected, loans received, and payments made; and by the obvious expediency of providing that medium in the form of national issues instead of resorting to the paper of banks. Under the circumstances its action was wise and necessary; but it was equally wise and necessary to limit the extent of the issues by the necessity which demanded them. They were wanted to fill the vacuum caused by the disappearance of coin and to supply the additional demands created by the increased number and variety of money payments. Congress believed that four hundred millions would suffice for these purposes, and therefore limited issues to that sum.

The Secretary proposes no change of this limitation, and places no reliance, therefore, on any increase of resources from increase of circulation. Additional loans in this mode would, indeed, almost certainly prove illusory; for diminished value could hardly fail to neutralize increased amount.

Sufficient circulation having been already provided, the government must now borrow like any other employer of capital temporarily requiring more than income will supply, and rely for the credit which will secure advantageous loans upon good faith, industrial activity, accumulated though not immediately available capital, and satisfactory provision for punctual payment of accruing interest and ultimate reimbursement of principal.

To subscriptions for the remaining five-twenties and deposits for temporary lean, therefore, must be directed all reasonable expectation of means for the service of the current year, except from negotiations under the act of last session. The sums to be looked for from these two sources have already been stated, and amount to $126,059,600. If this aggregate be deducted from the amount to be provided by loans for the last seven months of the current year, already shown to be $352,226,539, there will remain the sum of $226,166,999 to be provided by negotiations under the act of last session; and, under some like act, must be provided in like manner, if the continuance of the war shall make it necessary, the sum of $544,978,548 93, estimated as likely to be required from loans for the fiscal year 1865.

The act of last session authorized the loans supposed to be required for the fiscal years 1863 and 1864; and, of the amount required for the service of these two years to the first of December now current, one hundred and fifty millions in United States notes, and fifty millions by a loan for two years five per cent. treasury notes have already been provided under that legislation. The

act is so well conceived and expressed that little other legislation for the loans of 1864 and 1865 will be required than the application to those years of its leading provisions. It will doubtless be thought expedient this session, as last session, to authorize the borrowing, in some form, of three hundred millions for the current, and six hundred millions for the next, fiscal year. Indeed, the only modifications of the act of last session necessary to adapt it to the requirements of the current and coming year seem to be: (1) the omission of all reference to United States notes beyond the giving a simple authority to the Secretary to ascertain from time to time the amounts destroyed or lost, and to replace them by new issues; (2) the repeal of the existing limitation of the deposit loan to one hundred millions of dollars, and the substitution of a provision for a reserve equal in amount to half the deposit; (3) the permission of the negotiation of loans redeemable absolutely at pleasure, or at pleasure after a time fixed, not more remote than forty years; and (4) the omission, perhaps, of the clause taxing circulation and deposits, as being more appropriate to an internal revenue bill. It is hoped that the other provisions of the last may be retained in the new loan act.

Under such legislation, the Secretary entertains little doubt of being able to obtain whatever funds will be needed, through loans, at reasonable rates of interest, for bonds or treasury notes.

For a warrant of this confidence, however, he must not omit to say that he relies much on the support to be given to the public credit by the national banking system and by the nationalization of the currency. There is, as he thinks, no possibility of a permanently successful administration of the finances, under circumstances involving the creation of large debts, unless loans can be effected in a medium of general and equal credit throughout the country, and not liable to variation in quantity or in value except under the operation of national legislation and the general laws of trade.

Only two kinds of currency fulfil these conditions: the first, a circulation of coin; the other, a circulation of notes of uniform description and value, issued by the government, and either paid directly to government creditors, or supplied to banking associations to be employed in general business.

The circulation now generally used in this country, except so far as it consists of bank notes, is of the latter sort; and no circulation, not immediately convertible into coin, can be better.

It is an error to suppose that the increase of prices is attributable wholly or in very large measure to this circulation. Had it been possible to borrow coin enough, and fast enough, for the disbursements of the war, almost if not altogether the same effects on prices would have been wrought. Such disbursements made in coin would have enriched fortunate contractors, stimulated lavish expenditures, and so inflated prices in the same way and nearly to the same extent as when made in notes. Prices, too, would have risen from other causes. The withdrawal from mechanical and agricultural occupations of hundreds of thousands of our best, strongest, and most active workers, in obedience to their country's summons to the field, would, under any system of currency, have increased the price of labor, and, by consequence, the price of the products of labor, which

the prices of many things would have risen, in part from other causes, as, for example, the price of railroad bonds from vast increase of income through payments for military transportation, and the price of cotton from deficient supply. Much the greater part of the rise of prices not accounted for by the causes just stated, as well as much the greater part of the difference between notes. and gold, is attributable to the large amount of bank notes yet in circulation. Were these notes withdrawn from use, it is believed that much of the now very considerable difference between coin and United States notes would disappear. Certainly there ought to be no difference in favor of coin, when it is remembered that United States bonds bearing six, or even five, per cent. coin interest are intrinsically worth, unless the theory of national bad faith or national insolvency is to be admitted, more than their amount in coin; and yet such bonds can now be had for their amount in United States notes.

Nor can a condition of affairs in which excessive prices prevail, or national notes command less than par in coin, be regarded as of permanent duration. While it lasts, it must be borne with patience, and made tolerable by economy. No useful remedy will be found in extravagant increase of salaries and disbursements, but an aggravation rather of the evil. All proper measures should be adopted to hasten the return to the normal condition of prices and business; the patriotism and intelligence of the people must be relied on for the rest.

The Secretary has heretofore expressed the opinion that whatever may be the true degree in which the currency of the country is affected by a bank-note circulation, issued without national sanction and by corporations independent of national authority, and not receivable for national dues, it cannot be questioned that in some similar degree the negotiation of national loans must be prejudiced and their value to the national finances diminished. This opinion is confirmed by observation and experience.

Impelled, therefore, by a profound sense of the present necessity of a national currency to the successful prosecution of the war against rebellion, and of its utility at all times in protecting labor, cheapening exchanges, facilitating travel, and increasing the safety of all business transactions; and at the same time unwilling to urge even salutary and necessary reforms in such a way as needlessly to disturb existing conditions or impair the value of existing investments of capital, the Secretary recommended, in two successive reports, the authorization. of national banking associations, to which the capital of the corporations now issuing notes for circulation might be transferred, with advantage to the parties in interest as well as to the general public.

The sanction of Congress was given to these views at the last session; and the simple assurance thus given that, henceforth, the country is to have a national currency secured by a pledge of national bonds, and the belief that this currency will at no distant day take the place of the heterogeneous corporate currency which has hitherto filled the channels of circulation, at once inspired faith in the securities of the government, and more than any other one cause enabled the Secretary to provide for the prompt payment of the soldiers and the public creditors.

If the policy thus indicated shall be fairly and judiciously pursued, and pro

per measures adopted to induce the conversion, at the earliest practicable period, of the bank corporations of the States into national banking associations, and of the corporate circulation into national currency, the Secretary believes, and, as he thinks, not without good grounds, that all the money needed for prompt payment of troops, and for the most vigorous prosecution of the war, can be obtained by loans on reasonable terms; while all interest on debt, and all ordinary expenditures, and a considerable part also of the extraordinary expenditures caused by this war, will be met by the ordinary resources. Nor does he doubt that, through wise legislation, sustained by intelligent popular will, and supported by prudence and energy in civil and military administration, national currency can be so approximated in recognized value to coin, that a resumption of payments in specie can be brought about much sooner than even sanguine persons now permit themselves to hope.

The Secretary has already referred in general terms to the reports of the heads of the various bureaus and branches of administration in his department. A peculiar interest is felt at this time in their operations, and especially in the operation of those most recently brought into existence.

The Comptroller of the Currency reports the organization under the national banking act, prior to the 29th of November, of one hundred and thirty-four associations; all which, upon the suggestion of the Secretary, have adopted the name of National Banks, distinguished by order of organization and by locality. These Banking Associations have been formed in seventeen States and the District of Columbia, and have an aggregate capital of $16,081,200. The great care and labor required for the preparation of suitable notes for the new national currency has delayed its issue beyond expectation; but the printing is now begun, and the several associations will be supplied with the amounts to which they are respectively entitled within a few weeks. Besides the associations reported as actually organized, there are many others in process of organization. There is hardly a State not controlled by the rebellion, and hardly a considerable city, in which a national banking association has not been organized, or is not being organized. Even New Orleans is not an exception to this

statement.

Thus the great work of introducing a permanent national currency has been entered upon in a spirit and with an energy which promise perfect success The Secretary thinks he risks nothing in saying that within the present year the benefits of the system will have so approved themselves to the sense and patriotism of the people, that it will be beyond the reach of successful assault.

The Comptroller has indicated some amendments to the law which the Secretary concurs with him in regarding as important to its success. As among the most essential of these, the Secretary asks the special attention of Congress to the proposition for a uniform rate of interest, and the repeal of the section which connects the issues of national currency in any degree with State banks. The Secretary also recommends, as likely to be useful, a provision to be made by law for the deposit with national banks, and also with the Treasurer and Assistant Treasurers, at such rates of interest and for such periods of time as the Secretary may prescribe, of moneys paid into or invested under the orders of judicial

courts. It is not impossible that in this way many millions would be placed in the treasury at moderate rates of interest.

The Secretary has already referred to the recommendation of the Commissioner of Internal Revenue in favor of increased duties. He cannot add anything to the general considerations he has already urged in favor of augmenting revenue by these methods. It may be useful, however, to invite special attention to some considerations which enforce the recommendation of a duty of 23 per cent. a year on corporate note circulation.

The proposition contemplates a duty of one-fifth of one per cent. per month on circulation; and the Secretary suggests, in addition, one twenty-fifth of one per cent. on deposits in each month, making twelve twenty-fifths a year. Under the existing law the duty on circulation is one per cent. a year on a certain proportion; two per cent. on amounts exceeding that proportion, and one-fourth of one per cent. on deposits. The small addition proposed will not be regarded as unreasonable or onerous, when it is considered that all corporate circulation is in fact a loan by the people to the banks without cost, except that of preparation, and without interest, except the duties imposed on it. The whole question then resolves itself into this: Is the duty proposed, added to the State taxation, and the cost of preparation, more than equivalent to a fair interest for the loan? If not, surely it should be paid without demur as a reasonable contribution to the common welfare. The duty proposed on deposits is much lighter for obvious reasons. Its whole amount is less than one-half of one per cent. per annum; and being in the nature of a tax on profits, rather than on property, will distribute itself among all who partake of the benefits of the deposits, and press hardly on none.

It is proposed to make the duty payable in small percentages, because it will be thus distributed over the business of the year; and, because, by requiring monthly returns of circulation and deposits with reference to the duties, information will be regularly obtained in respect to the amount of circulation of all descriptions in the whole country, the publication of which will be an important benefit to all men of business, as well as a valuable guide to financial legislation and administration.

Monthly returns are now required of many of the national banking associations, and should be required of all; and from them, as well as from the banks not organized under national legislation, should be required a fair contribution to the general burdens of the people. The Secretary refers to Congress the question, whether the duty on national currency and the deposits of national banking associations shall correspond with the duties on other circulation and deposits. He thinks that for the present, at least, some discrimination in favor of the national associations may be properly admitted in consideration of the indispensable importance of a national currency, not adapted only, like United States notes, to temporary emergencies, but permanent in its very nature, and adequate to all demands of business, and capable, at no distant period, of being made equal to and convertible into coin, and therefore its real representative and equivalent.