ment of one kind of currency, as it would speedily be followed by the issue of another. The return of their bonds would enable them to provide coin reserves, far exceeding in amount any that would be required in their operations. The bonds held as security for their notes, equalled, according to the last annual report of the Comptroller of the Currency, the sum of $337,170,400. There were held by them, in addition, at the same time, securities of the United States to the amount of $47,840,150; the total amount equalling nearly $400,000,000. The coin value of their securities largely exceeded that

sum.

Assuming the Banks to resume with total liabilities of $800,000,000, and that they should hold at the time, in coin, a sum equalling 25 per cent of this amount, one-half their government securities would provide all the reserves required. Why should they not be allowed to become possessed of their capital as fast as it can be reclaimed, even if they remain national institutions? As it is, not a dollar of the whole. $400,000,000, or at least of that portion of it held for their circulation, is available as banking capital! The Banks cannot resume, for the reason that that which is to enable them to do so is out of their possession, and must always be so, so long as they issue notes. As long as they are deprived of it, they must remain at a dead lock, so far as resumption is concerned. But if the present system be abolished, what, it is inquired, is to become of the people, the poor, ignorant, and innocent note-holders? What has become of them for the past fifteen years, and what has been the result of the paternal action of government during the whole of this period? During the whole of it, their measure of value and instrument of exchange has fluctuated all the way from thirty-five to ninetyfive per cent of its par value; in consequence of which, all ideas of relation of cost to value have been well nigh lost, and all the operations of society brought, as it were, to a dead stand. Would the people, could they have had their own way, have for fifteen long years put up with the currency which has been imposed upon them? With Banks alone to furnish it, it is impossible that an inconvertible currency should long remain in circulation. Strong Banks will always be speedily compelled to resume; weak ones, to go out of existence. Government officials are certainly, of all parties, the last to be

intrusted with the direction of the business operations of the country. Who, but these, brought her into her present dilemma? The beauty and excellence of Mr. Chase's measures have been their theme from their adoption to the present time. They successively repeat the same story, parrot-like, from year to year. Their iterations, however absurd they may be, tend to confirm the general delusion. Would the people, left to themselves, make use of weights or measures to be selected by lot or chance; no two of which, though nominally the same, were alike; and which could not fail to involve in loss, often excessive, one, and perhaps both parties to their use? And yet this is precisely the condition of the country in reference to her paper money. She cannot get out of her dilemma, as her hands are fast tied. Why not, for the future, let the noteholders take care of themselves? Has not experience shown that they are as competent to do this as the government? They would not be compelled to receive the notes of a single Bank. They could always demand to be paid in coin at the rate of bank-notes. They would always demand to be paid in it, were there any cause for distrust. They should always be encouraged to exercise a distrust of bank-notes, precisely as the managers of Banks should be encouraged to exercise it in reference to bills offered for discount. Neither notes nor bills should be accepted until a case had been made out in their favor. Mutual distrust, or caution rather, is the essential condition of all sound banking, as of all the business operations of society. If note-holders understand that they have no protection but the capital of Banks and their competent management, there will be very few unsound ones. Why does not government interfere in all the transactions of society? Why does it not say to a builder of ships, that he shall not begin the construction of one till he has deposited in the Treasury a sum equalling the value of the ship he is to build, as a guarantee that he will discharge all obligations contracted in its construction? How many ships would be built under such provisions as these? Would not the parties who were to deal with the builder protest against them, for the reason that they would destroy his power of purchasing their materials or labor? And would they not demand that he should be left with his means, for their advantage as well as his own? Would any one purchase a bill of exchange, were he told that

it might not be paid on its presentation, but that the equivalent therefor had been provided by the drawer on its return, not in merchandise but in securities? Bills are used in foreign trade to serve as money. They will not be purchased if they will not serve as such. To remit one that might not be paid might involve a loss far greater than its amount. The operations of commerce and trade can no more than those relating to real property be carried on by instruments severed from their proper constituents. The purchaser wants the specific thing contracted for, not some other which may have no relation to it. To require drawers of bills to put up securities for their payment, in addition to the merchandise represented by them, would be to abridge commerce, between nations or countries widely separated, to one-tenth its present proportions. Purchasers would be the last to require such deposits, as they would very properly infer that, to make them, drawers had been compelled to divert some portion of that which should provide for their bills. So with the notes of Banks. These represent their bills. By means of the former, their holder can obtain the proportion of merchandise for which they call. He does not want an interest in securities locked up in Washington; but that which he can eat, drink, and wear. far as the bills discounted do not represent merchandise, the Banks must make up the deficit in coin. All safety-fund Banks are constantly liable to make issues which do not represent capital, as a means of supplying the place of that with which they parted in order to purchase their securities. They are taught to regard the notes delivered to them with so much. ceremony and formality, as money to be used in any way they choose. Not the first attribute of money has been given to them. It can only be given by their being made to represent, in the discount of bills, merchandise which will be certain to retire them in its purchase for consumption. It is impossible sufficiently to impress this fact upon the issuers of a currency created by safety-fund Banks. Hence the constant disturbance and disasters arising from their operations. The issuers of a currency without any special provision for its redemption are not liable to similar temptations and mistakes. They see that the only way in which they can secure circulation for their issues, and bring them back without loss to themselves, is to base them upon capital that must soon be taken for con

So

sumption. An unsecured currency, therefore, is much more uniform in amount and value than a secured one, and consequently far preferable. The losses of the holders of the unsecured notes of the New England Banks during the continuance of the Suffolk system did not, in ratio to their amount, equal one-tenth those of the holders of the notes of the New York safety-fund Banks. Under the former, from its efficiency in enforcing constant redemptions, it was hardly possible that any Bank should become so embarrassed as not to be able to provide for its liabilities out of its means. If these were not sufficient, the stockholders of the Banks were liable to an amount equal to that of the shares held by them. No safetyfund system assumes to provide security for deposits, which are currency equally with notes, and by means of which Banks are much more liable to become embarrassed than by means of their notes. The principle of security, if it be worth any thing, and if it would produce its proper results, should apply to both kinds of currency. It is not, however, either from notes or deposits that the greater part of the losses incident to banking operations arise. The Bank of England has paid specie on all its liabilities for fifty years past; yet its action may have been instrumental in promoting enormous inflations, to be followed by excessive contractions, in consequence of which losses have been caused equalling many times its own circulation. The moment the issues of a Bank cease to represent merchandise speedily to enter into consumption, it is exerting a disturbing influence on affairs, in ratio to the extent of its operations. If the ordinary instruments of distribution were suddenly destroyed, the loss that would be caused would exceed tenfold their value. If these be the notes and credits of Banks, a great inflation and subsequent contraction of them will often result in losses many times greater than the whole circulation issued. It is in this way that nine-tenths of all the losses incident to or caused by Banks arise. The chief care, consequently, in their administration, and in legislating in reference to them, is to guard, not so much against losses occasioned by their inability to meet their obligations, as against the disastrous influence they may exert over prices, and over production and trade. They may be instruments of immense mischief at the same time that they possess means amply sufficient to discharge all their liabilities. The remedy

can come only from systems of redemption which shall immediately return upon all the Banks every issue that is not employed in the distribution of its proper constituents. So far as the public is concerned, a note issued by a Bank, based upon an United States bond, produces precisely the same effect. as a note issued in the discount of a fictitious bill. It serves not as the instrument of distribution for a corresponding amount of merchandise, but as one for the consumption of an equal amount of accumulated capital. As capital so symbolized is not, as a rule, made the basis of reproduction, there has been an excess of expenditure equal to its amount, with a contraction usually far more excessive than was the inflation.

A safety-fund system, in whatever light viewed, is radically vicious. It is impossible that it should be established throughout the United States, and at the same time provide a currency that will not be either deficient in amount, or inconvertible and depreciated. Our present national system would never have been established, had Mr. Chase possessed a competent knowledge of the laws and functions of money. His great theme was a "credit circulation,”. a circulation sustained by faith, not by works. When any one took a note of a Bank created by his system, he was told to look confidingly toward Washington, and believe that locked up in the vaults of the Treasury was a security which possessed a value in coin equal to all the notes the Bank might issue. Suppose the holder did not want a government security, but food. Could he avail himself of the former, he would still have to convert it into money, which could only be effected at an expense and loss of time, involving a loss of interest, equalling perhaps twothirds the value of his note. At one time, since the safetyfund notes have been issued, they were worth, in coin, only about one-third of their nominal value. It is little consolation to be told that Mr. Chase was as wise as his time. The misfortune is that he was as reckless and unscrupulous as he was ignorant. He could not rest till he had hopelessly involved the whole country in the meshes of paper money. His first achievement was the establishment of an inconvertible currency of United States notes. Upon this superstructure he erected his safety-fund system. But for one, he could not have established the other. By means of the former, the