notes must be wholly demonetized; that is, must cease to be currency before specie payment can be resumed.

aware that the public will reply that, "if Banks maintain large amounts of notes in circulation, holding very little coin, why cannot governments do the same? Governments can do the same by becoming bankers, and discounting bills given for merchandise. Their notes, in such case, will circulate as money; and will return to them, provided no bad loans are made, in the payment of their bills. It is not the gold they hold which secures the return and convertibility of their notes, but the merchandise these bills represent. Possessed of this in sufficient quantity, their notes will be returned to them for conversion without effort on their part, if they did not hold a dollar of coin. These taken in, they might make new issues; which would, if based on merchandise, return in the same way as those previously put in circulation. An issue of currency by Banks and bankers is always, as already shown, accompanied by a mutual exchange of obligations,- of those of the borrower, that he will pay a certain sum at a future day, for those of the lender or issuer, that the former can have on demand an amount of coin or merchandise equal in value to the notes issued. The notes are the instrument by which the borrower secures the use of such coin or merchandise. He may pay his bills by returning to the Bank the obligations issued by it, in which case those created on either side are mutually discharged; or in coin, with which the Bank will discharge its notes which have fallen into other hands. When a government issues a currency, no such proceedings take place it alone contracts to retire it. When Banks issue a currency, the receiver as well as the issuer contracts to provide the means for its redemption. The wide difference in the modes of issue of the two currencies will show their difference in kind. Unless governments are at all times prepared to discharge their obligations in the same way that those of bankers are discharged, they can never issue one of the kind that the nation is now seeking to establish.

Governments are not to turn bankers by discounting bills and providing adequate reserves for the discharge of their liabilities. Mr. Chase attempted the rôle of a banker, without any provision for his issues; and soon found himself broken, with the whole government at his back. He had outstand

ing, when he suspended, $33,460,000 of notes, which immediately fell to a discount for gold, although equally receivable with it in the payment of the revenues. Why did they fall to a discount? Simply for the reason that they could be used at their face for one purpose only, the payment of the revenues. Those to whom they might be offered who had other uses for their money would not pay the par of coin for that which would not serve them in its place. If they wanted the latter, the only way to get it would be to sell, in the open market, for what they would bring, the notes they might hold or receive. Such a process would of itself involve an inconvenience which would reduce their value below that of coin. Those first issued got into circulation only for the reason that they were supposed to be convertible into coin. So soon as this could not be had for them, they were reduced in value by being restricted to one use. They did not fall very largely in price, for the reason that it was seen that they would speedily be taken in in the payment of the revenues. No more of the kind were attempted to be issued, for the reason that government had no means for their payment. To attempt the issue of notes payable on demand, without any provision of means therefor, would be to break down its credit altogether. Hence the issue of legal-tender notes, which had a competency (which plain notes did not have) of discharging contracts. By virtue of this attribute they would serve as money, at some value, in almost unlimited amounts. Although they had a competency to discharge contracts, which plain notes had not, they fell, after they had been issued in considerable sums, to prices far below those which the plain notes commanded; for the reason that definite provision was made for the retirement of the latter, while no such provision was made for the former. The value of one could be pretty accurately estimated; that of the other was a mere matter of conjecture. So long as it is believed that the notes will be paid, the legal-tender clause adds to their value. When it is believed that they will not be paid, no one will contract to receive them, although creditors may be still compelled to do so after they become wholly valueless. As they can never serve all the uses of coin, they can never have its value until they are actually exchangeable therefor. To resume, therefore, the government must be prepared to take in, and must take in and retire permanently, all its

notes now circulating as money. Till such provision be made, they will remain at a discount. This proposition is as demonstrable as that an acute angle cannot equal a right angle.

The demand notes first issued by Mr. Chase, after their dishonor were only at a small discount, for the reason that they were receivable in payment of the revenues. Now, assuming that those annually collected in the United States equal $300,000,000, should the government issue its notes receiv able in their payment, without interest, it is probable that at least $100,000,000 of these would at all times be outstanding, and in the hands of the public for the purposes they would serve. These notes would be current as money, at a discount equalling the interest that would accrue, at a low rate, on their amounts, from the time of their issue till they were returned to the Treasury. If they bore an interest at the rate of, say 2 per cent, they would circulate as money at their par value. In this way, and in this way only, might a government issue a convertible currency; which, except in extraordinary emergencies, would be maintained at the par of coin. As the proper constituent for its retirement would be provided, it would exert no effect to inflate prices. The objection to such a currency would be the constant liability to its excessive issue. Its proper amount would soon come to be measured by the necessities of government. This of itself is sufficient reason against its use. Another reason, not so conclusive, but still sufficiently so, is that by the use of its notes bearing no interest, government could not, on their issue, realize their par value; while, if they bore interest, it could not get them in at their par value. In either case, the notes would be in the nature of a loan, upon which interest would have to be paid, either directly, or by selling them below their face. The ordinary operations of government should never be carried on by borrowing, but by capital in hand, or the symbol of capital. They should, in great measure, be carried on by the latter, precisely as the ordinary operations of society are carried on, for the purpose of allowing gold and silver to serve as reserves rather than as currency.

Payments abroad, as far as the government was concerned, would, even if the country were on a specie basis, be made by the use of symbols rather than of coin. It would make its

remittances in bills, leaving it to the drawers to send forward their proper constituent. To meet them, it might not be necessary to send forward a dollar of coin. If this were required at all, it would only be to make good any balance growing out of the ordinary operations of trade. All such balances must, in the long run, be paid in merchandise by countries that are not producers of the precious metals. This country, as it is a producer, would, after resumption, be a large exporter of them as merchandise. Even in such case, government would never become the direct exporter of them. In the purchase of bills, the notes and credits of a specie-paying Bank would serve to it all the uses of coin; and, from their greater convenience, would be preferred thereto, precisely for the reason that they are preferred to coin by the commercial public. The sellers of bills, producers of merchandise, would prefer, for their own convenience, to be paid in symbols rather than coin. With very large payments to be nominally made in it, years might elapse without the export of a dollar of it. When the work of redemption is fairly entered upon, this country will for some time be a large importer of coin from the very countries to which it is now most indebted. These will not only be wholly paid in merchandise, but they will be compelled to send us large amounts of coin, in discharge of the balances arising against them in the course of trade. Ours will then, for a time, become the creditor instead of the debtor nation. Resumption is to inaugurate an era of economy; an excess of exports of merchandise over imports; a “balance of trade" in our favor, to be paid in coin. If government can discharge all foreign obligations by the use of symbols, still better can it discharge by their use all domestic ones.

A currency of the kind described must be issued by Banks, or a Bank. Private bankers, no matter the extent of their means, and however competent they might be to issue a currency, could not give sufficient guarantees for its uniformity and stability, nor could they perform for government all the duties required in its operations. The Bank whose currency government is to use should be created by it, that it may be in a position to impose and enforce conditions necessary to its own protection as well as to that of the public. Such currency could not be furnished by Banks generally, for the reason

that conditions necessary to be imposed would be too onerous to be borne by them, and could be borne only by the Bank which was to become the depository of the revenues of the government, and which, for this reason, would attract to itself very large deposits from the commercial and mercantile classes. The Bank to be created should be required to deposit with the government the bonds of the latter, to the extent of at least $100,000,000 (with provision, if proper, for their increase), the interest of which should not exceed 3 per cent, as security for the public deposits, and as ultimate security for its creditors. It should be required to establish branches in every State in the Union, and in every city having a population exceeding 50,000; and to transfer, without charge, the public revenues from place to place. In providing for its capital, the Banks, wherever the parent Bank or a branch was to be established, should for this purpose be allowed to combine their own capitals. In this way, that for a National Bank might be provided, without any increase for the country, and without supplanting or invading the rights of those already in existence. Assuming the coin in the National Treasury to equal $100,000,000, this sum, transferred to the Bank, would form adequate reserves for an issue of convertible currency the amount of $300,000,000, as at least one-third that sum would be maintained in circulation in the collection and disbursements of the revenues. For such an amount of notes, only a small amount of reserves would be required. A panic in Great Britain has no tendency to send home the notes of the Bank of England for coin; nor would it, in this country, have a tendency to send home the notes of a Bank receivable in the revenues; for, whether valuable or not, they would always in the end serve to the holders in the place of coin. That transferred to the Bank, consequently, could be made the basis for an issue, in addition to that required in the operations of the government, of $200,000,000 of convertible notes, to serve for the purposes of production and trade. In this way the government could immediately place itself on a specie basis, as could individuals who had sufficient means therefor. The Bank would at once become the depository of all the specie in the country, and whatever was imported, or produced from the mines: so that its means of making loans upon a specie basis would undoubtedly increase much faster than