The Massachusetts spy, and Worcester County advertiser. [volume] ([Worcester, Mass.]) 1825-1831, 1826-06-07
LEor HE YNassactuseHs Spy
THE SCARCITY OF MONEY.-No. 9.
On the Drain of Spec;e

For HE oMassactuseHs Spy.1
THE SCARCITY OF MONEY.-Eo. 9.
On the Drain of Specie
In late paper ! submitted some remarks
10 Sow the errors Of the theory that attribute:
our commercial embarrassments to the excess
OF our imports above our exports, and then
observed that this excess is supposed to have
It's untavorable operation by the drain Of spe-
Gle which il produces. 1t would certainly be
unnecessary 10 inquire into the existence aud
nature of an operation which is referred TO a
cause that is only hypothetical, If it were not
the fact that there are among us more beiev-
eTs in the drain Of specie than in the theory of
the balance of trade; and of these the greater
proportion consider that this drain is sufficient
ly proved by the fact that specie is scarce,
and give themselves little trouble about its
remote causes. | will now consider in what
manner, and to what extent, the scarcity Of
specie may be Injurious TO national prosperity,
and point out some circumstances in our do,
m este condition, which may tend to cause a
deprivation il not drain Of specie. To Eacili-
tate the exchange of the products of industry,
It 10 necessary that a circulating medium
should he provided, which has a common val
NC in the estimation of those who trade to-
gether; but the quantity of the material that
has this character is Of Importance no further
than It respects convenience and incopven-
fence; hut for this it would be Indifferent
whether il were as rare az platina, or as a
hundant as iron. Yet the me Of album
dance or Of scarcity Of the material selected,
would be sufficient TO destroy at once its u;il
ity and IFS value. II the whole quantity Of
specie ia the commercial world were augment
ed, the value Of each coin would be diminish
cd in an inverse ratio to this increase, until
they would attain the abundance and The
worthlessness of the iron cufrencyo of Lycnr-
gus. II this abundance happened 10 any sim
gle coU0:ry. it would only furnish an article OF
export TO other countries where the supply was
more scanty, and, in this respect, the specie
would be no better than an equal value of
merchandise which had a similar market. 1t
is remarkable chat, on the general subject OF
wealth, there prevails An error that would
never occur il the mind. Of thosc who arc
least conyersant with buying and selling,
when they judge Of oxpediency in relation 20
the Interests of themselves or their neighhors.
IF any man Of common understanding had the
election, TO take the capital of his intended
business in specie, or in stock aud other neCes-
sary outfit, we cannot doubt that he would
choose The latter. Yet what exertons have
been made by those distinguished mon.t whose
wisdom the government OF the world has been
committed, and to what restraints aud sacrifc
es have their people suhmtted, to promote
the abundance OF specie, and, in foreign COM
Inerce, TO compel a preference for the article
which the interest of the merchant: would often
pro0pt him to decline.
, Suppose that cotton, Instead of silver. were
the article which was more abundant in orr
Country thar in Europe. what should we think
Of the merchant who should neglect to send
MS cotton TO a foreign market, and choose
rather TO deposit il in a warehouse for the sake
OF keeping the value within the country
This conduct, absurd as il appears, would be
as wise, and far more successful than the at
tempt TO retain specie by an investment in
bank stock. The merchant will, at least, OBJ
tain his first object, the retention Of the mer-
chandise by the bars and bolts Of his ware
house. But the specie will remain much
longer, il il is suffered to circulate a: large,
than after il is appropriated as the capital Of a
bark such disposition Of it will but furnish
wings 10 ensure and hesten it's departure. An
explanation of this effect deserves particular
attention, as it may discover the reason why
specie constitutes so small portion Of the
circulating medium Of on: country. II is well
known that il is a privilege of banks to en-
large their capitals by the issue oil their own
bills on good securities Of short dates, which,
whenthcy become due, will provide for the
redemption of the bills But. in the issue OF
these bills, care must be taken not TO exceed
the amount which tAe demands Of business
will hold in circulation until the securities be-
come due. By this process in the case under
consideration, an addition is made to the quan-
tity of the circulating medium OF the country,
similar 10 that which would be produced by
the creation Of an equal amount Of silver coin,
and there viii be the same superiority, which
viii be attended by similar depreciation
But this depreciation does not extend to for
eign market, which gives no credit to the
bank paper; there the deprecated specie is
received at its full value, and the merchant
who exports ii makes an adventure which, IN
the FIRST instance, is equally profitable 10 him
self and to the country; but IFS permanent
effect deserves consideration, and il will be
found to be Of a different character. These
exports will imperceptiby exhaust The stock
Of specie in the country, until the circulating
medium shall consist of bank paper alone,
whose value depends on the public conf
dencc, that the hanks are prepared to perform
theiS engagements by payment in specie,
which has become impossible. In this state
OF things, the banks must contract their BUSH
nsss so as to rcliaquish their profits, or expose
themselves to continual danger Of iasolyency.
II may be further observed, that every new
hank divides and dminishes the share of this
addition TO the currency which was enjoyed
by the banks previously established, aud in.
creases the temptation and the danger OF
transgressing the limit Of safety. The able
directors Of the bank OF England have the
ia r IL, asr nln