« PreviousContinue »
he procured for his family. The only persons benefited, would be those who were in debt. They would pay their debts for about one-half of the value they received, but then those whom they owed would suffer to the same extent. The whole world would probably be deceived, and imagine they had grown suddenly rich; because any man could say, if his property had been worth ten thousand dollars, that it would now bring twenty thousand dollars, and totally forget that his twenty thousand dollars in coin, even if he had them, would purchase only ten thousand dollars worth of property. It is the fluctuation which is mischievous, and not the much or little which may be permanently in circulation. Nor would it make any material difference if one half the coin which now circulates were struck out of existence, if all contracts and all prices were altered, at the same moment, to correspond to the new value of the precious metals.
It is objected to banks, that they have too much power in causing these fluctuations in the circulating medium, by enlarging and contracting their issues; whereas it is thought, if there were nothing but specie, there would be always the same amount in circulation. But this idea is fallacious. Money-lending would not be stopped, even if banks were annihilated. It existed before banks, and will exist after them,
if they should ever be destroyed. Individuals would be still more cautious than banks, in times of difficulty and scarcity. There is, indeed, the greatest propensity to hoard, among a people who have few commercial transactions.
Great diminution of the circulating medium may take place by bad legislation. In this country, banking is under the control of the different governments, both state and national. They create many or few; and, by the creation of a great number, may double the circulating medium in a few years. Of course, the whole country will imagine that it is growing suddenly rich. All kinds of production will be carried to the utmost, and unproductive consumption will be pushed to a corresponding height.
All the money that any people want, is enough to represent the productions which are on their way from the producer to the consumer, and the real estate which, every year, changes hands. Now, as a large part of the population of every country is agricultural, and consumes at home their own productions, those productions are not represented at all in the currency. The currency of a country need bear but a small proportion to the annual productions even, of that country, leaving out of view the value of their real estate. The wheat crop alone, is, perhaps, worth all the specie there is in this country
the present year. But then the contrivance of banking tempts people greatly to enlarge the circulating medium, far beyond the demands of regular business. A man may turn his house into money if he pleases. He may not, it is true, convert it into silver dollars or gold eagles, but he may into bank notes. He may sell or mortgage his house, carry the notes to the bank and get bank notes in exchange for them, and then throw them in to swell the volume of the currency. Something like this was actually done in the state of New York during the late banking mania. A large number of banks were created, based, as it was said, on real estate; that is, real estate was pledged for the redemption of the notes. But nothing could have operated worse. They continued to swell the amount of a baseless currency; and when confidence became shaken, it was found that though houses and lands could be changed into bank notes, they could not be converted into silver dollars. They were the first to explode; and by destroying confidence in all banks, they helped to annihilate that mighty mass of fictitious currency, upon which the real business of the country was transacted.
Hence, then, one cause of the late commercial disasters. Improvident legislation led to the unnecessary increase of banks, and the consequent rise of prices; and as unwise and ca
pricious a change brought the general government in collision with the banks, destroyed their credit, and reduced the currency even below the specie basis. Now, debts contracted under an inflated currency, become absolutely ruinous. It takes twice, and sometimes thrice the real property to pay them more than they represented at the time they were contracted.
Hard times may be created by exorbitant taxation, especially if the money be raised to pay a foreign creditor. Taxes are of two kinds; those which are raised to support government, as it is called, and those which are raised to pay the interest on public debts. Taxes, after all, go to the support of some body; and if expended in the support of government, they are laid out by the functionaries of government in the necessaries and luxuries of life, or in the provisions for the army and navy, and thus go to sustain our brothers and sons, and may thus be said to come back again to the producers. The very money which is collected in Gay street, at the custom house, on the merchandise that goes into the interior, is paid out again, in Howard street, for flour and bacon, which come from the consumers of the imported article. Such sums as are thus collected and paid out from year to year, are not much felt; but if a country falls into a war, in which this annual taxation is too small to de
fray the expense, then a loan is contracted, which is nothing less than spending beforehand the earnings of future years, and sometimes future generations. Thus this country, in less than three years, contracted a debt which was so much subtracted from her industry for more than twenty years. Governments may run in debt for public improvements. This is done with the expectation that the revenue derived from them will meet the interest, and that the value added to the property contiguous to the improvement, or affected by it, will be equal to the original outlay. In the great work of the New York canal this expectation was realized in both particulars. The tolls more than pay the interest; while the value added to the lands and property affected by it, has been, perhaps, ten times the amount of money originally expended. The canal has done more. It has been a source of revenue to the state.
In Maryland, we attempted the same gigantic enterprises; but with a smaller territory and a thinner population, every one of them has failed to be profitable. Nay, the seven millions invested in one of them is, as yet, a total loss, as much as if swallowed up by an earthquake, or expended in an unprofitable war. Indeed, a loss of that amount of money might soon be repaired; but in the shape of public debt it is a perpetual weight, sinking the state to poverty