of a government for which, through its taxing power, the whole means of its people are assumed to be pledged. They are at the outset always well received from the credit attached to them, from the increased activity they impart to all the operations of society, and as a facile expedient for meeting any great emergency. The occasion of their issue is usually one which has roused the spirit of the people to the highest pitch, so that little attention is paid to any voice of warning, the great mass being content to forego present payment for the good of the cause, confident that, the crisis passed, abundant provision for their redemption will be made. As the community among whom they are issued is impoverished in ratio. to their amount, as they are instruments in excess of the means of expenditure, each succeeding issue, no matter how great has been the depreciation, is, consequently, always more eagerly welcomed than the preceding one. The Continental currency, though resting on very feeble foundations, the joint action of the several States over which Congress had no control, was well received, and circulated for nearly two years at the par of coin. As the contest was prolonged the amount was necessarily rapidly increased, prices, from the distrust created, being inflated in far greater ratio. Still no one hesitated to take them at a price, as the greater the depreciation the greater the gain, should it turn out that the Government would eventually provide the means for their redemption. They were as readily taken at one-fifth as at their par value. Nothing, however, could arrest the decline as issue followed issue till the amount equalled $250,000,000. At last their worthlessness became so patent that they fell a vast and lifeless mass to the ground. The histories of the time are full of pictures of the sufferings from the extravagance and waste necessarily resulting from the possession of vast sums which, at a rate, served all the purposes of money; and from the losses to the holders when the final crash came. To greatly aggravate the catastrophe the several States vied with the National Government in vast issues of notes for the common cause, all of which shared a common fate. The terrible disasters that were suffered were held up as warnings for all time, and led to the insertion in the Constitution of the new National Government of an article forbidding the States to emit "bills of credit;" that is, notes to serve as money, a restriction which on several occasions has been held to be as imperative upon the National Government

as upon those of the States.

When the former turned its attention

to the subject of the indebtedness contracted for the prosecution of the war, it provided, by way of recognition only, for the funding of the notes at the rate of one per cent. of their nominal value, although they were still held in great amounts by persons who received them at the value of coin, and although they contributed essentially to the success of the great cause. Not a word of remonstrance was raised at the meagre provision made for them. It was felt on all hands that no plan could render substantial justice to the holders; that the notes were obligations very different in kind from other forms of indebtedness, and that they had about them a taint of fraud in which the people and the Government were alike involved. They were consequently virtually repudiated, while debts contracted by the ordinary methods were funded at their full value, interest added, those of the several States contracted by similar methods for the common cause being also assumed, no provision whatever being made for their notes issued to serve as money.

The occasion of the issue of notes to serve as money by our National Government was the war of the Rebellion. Although nearly thirty-five years have elapsed since their issue, we have not yet had the hardihood to repudiate, nor the manliness, honesty, or sense to retire them. They still remain, in vast mass, the pest and menace of the nation. An explanation of their issue after we had become a great, prosperous and powerful nation, possessed of ample means for every emergency, and of the failure to retire them, involves a monetary history, in brief compass, of the United States.

BANK OF THE UNITED STATES.

Upon the formation of the National Government four matters of paramount importance were committed for his consideration to General Hamilton, Secretary of the Treasury: Provision proper to be made for the public debt contracted for the prosecution of the war; a protective tariff; the coinage; and a symbolic money as the ordinary instrument of exchange. The latter, the only one that here concerns us, was to be provided by a Bank of the United States upon which three prime conditions were imposed a paid-up capital (of $10,000,000); that it should take interest at a rate not exceeding 6 per cent., and that it should deal with nothing but bills of exchange and gold and silver bullion. A double guarantee for

the safety of the holders of its issues was thus provided capital, the preservation of which would be the first care of its managers; and loans only upon evidences of merchandise the speedy consumption of which would return its issues automatically, and without any interposition on its part. It might make losses by the discount of bills for the constituent of which there was no present demand, such bills, however, to bear only a very small proportion to those properly based, and which, consequently, were certain to be paid, the losses being too inconsiderable to affect the general result. The exchanges, of merchandise, in gross, are almost wholly effected by the use of bankers' and merchants' bills, the holders being entitled to that which they represent, or to the proceeds of the same. There is no occasion for the interposition of the Government in such issues. Those receiving the same can easily ascertain whether they have their proper constituent. As those who are to receive the issues of banks,

for the distribution of merchandise, piece by piece, are further removed from the original transaction, the making of the bills, and have no means of ascertaining the adequacy of the security on which they are based, it is proper for Government to see that it be adequate by provision of merchandise, as well as of coin reserves. If it assumed no

such duty a currency, the instruments of distribution, piece by piece, would, in time, equally with bills of exchange for its distribution, in gross, be issued by individuals or firms, every one possessed of capital being competent to issue instruments for its distribution. Such currency would in many respects be superior to that of corporations from the greater uniformity of issue, more abundant provision of capital, and more competent and trustworthy management, the chief care of the issuers being the preservation of their capital; and as no issues would be accepted by the public but those of concerns of undoubted standing and solvency. Railroads could be constructed at less cost and operated far more economically by individuals than by corporations, from the keener sense of personal interest that would always be present, but such advantages have to be foregone from the amount of capital often involved, and for the reason that, being institutions, their management must be intrusted to bodies. having perpetual existence. The advantages of banks are that they are the only means by which, in numerous places, capital dedicated to a specific object, and subject to few risks, can be combined. A currency alike for distribution of merchandise in gross, and piece by

piece, should be issued where it is produced. As the issues of banks should always and everywhere have the same value, it is proper that they be under the supervision of a common authority. The newer States will never, in such matters, adopt proper precautions, so strong with them will be the temptation to create banks for the purpose of borrowing instead of lending money.

The Bank of the United States was the custodian of the public revenues which were made receivable in its notes (never legal tender). As it received in the ordinary course of business, for whatever purpose drawn, the notes of the State Banks, of which great numbers were speedily created, it had to account to the Government at the par of coin for such as were received in the payment of the revenues. The bank consequently, for its protection, enforced daily settlements, all balances on either side being payable in coin, unless, as the stronger institution, it extended credits, as was often the case, on balances in its favor. By such provision a Clearing House was in effect established of which every bank in the country, as the necessary condition for securing circulation of its issues, was, whether willingly or not, a member. With such provision it was impossible that there could be any inflation of the currency, or that any considerable balances, to be discharged in coin, could arise either in domestic or foreign trade, the currency in use being wholly one of symbols, every issue being discharged by the purchase for consumption of its constituent within a period of, say, sixty days, no new issues to follow but to represent new creations of merchandise. As for the Government it never had the custody of a dollar of its funds. All accumulations of these, beyond its immediate wants, were loaned by the bank, and remained in the channels of production and trade. The coin for which it had any occasion was supplied by the bank. All remittances abroad on its account were made by the bills of the bank as a drawer of foreign exchange, to cover which, as in ordinary affairs, merchants' bills were remitted. The relation of the Government to the bank was precisely that of any other customer, the bank loaning the balances, for which they had no immediate use, of all its customers. Thus at the very beginning of our history, and for the first time in history, a new and gratifying spectacle was presented of a currency always perfect in its kind, always equal in amount to the subjects of consumption, specie being discharged from the ordinary operations alike of

Government and people. The nation, consequently, at the very outset entered upon a career of prosperity which, considering the lack of artificial highways, and of those improvements in the mechanic arts which have since changed the whole face of society, was without a parallel. During the whole period of its existence there was never a moment in which the bank was pressed for metallic money, nor in which there was not an abundance of it for every use to which it might be called. The result speedily disarmed all constitutional objections which had been raised, Mr. Jefferson himself when he came to the Presidency approving an act for the establishing of a branch in New Orleans upon the acquisition of Louisiana from France, as much an original act as that creating the bank.

Although the bank had been the instrument for the creation of a currency, perfect in its kind, by means of which capital was almost wholly discharged from the exchanges, the rates of interest being thereby greatly reduced, the extension of its charter, strange as it may seem, was refused. As the greater part of the currency had been supplied by the State banks, it was assumed that they were competent for the issue of all that was required. The fact was overlooked that their currency was maintained at the par of coin wholly through the control exercised over them by the National Bank. The organized opposition came from these institutions chafing under the supervision which the bank exercised over them. Several of the Eastern States, among them Massachusetts and Pennsylvania, memorialized Congress against the extension of the charter. There was still a lingering opposition to it on constitutional grounds. Upon the winding up of the bank the Government from necessity was compelled to place itself in the same relation to the State banks that it had previously occupied to that of the United States. No sooner was it seen that the latter was to go into liquidation than the former, subject to no adequate control, began to increase largely their issues to fill the vacuum about to be made in the circulation. Great numbers of new banks were created for the same purpose. The object of the establishment of the Bank of the United States was to provide a currency always the symbol of capital. The States left to themselves were certain to create banks the issues of which were to supply the place of capital instead of being the representatives of it. No restrictions consequently were imposed as to their