Phenix gazette. [volume] (Alexandria [D.C.]) 1825-1833, 1832-01-17
1CoMMuNIcATED.l

TO the People of tie United Staies.-No. Ii.
In my last number mentioned the basis from
which the Banks derived their profits. | will
continue the subject, in order to convince any I'd
tional mind that the system is precarlous. unset
ted and speculative. For instance-Since all
Banks which, have come within my knowledge
orr mate alike. they are all liable to so to decay
from the same causes, 1t is the general plan of
these institutions to issue larger capital in pa
per than they retain in their Golfers, generally es-
timating ,ha' if in their Golfers they have depo
sit of 100. 900 dollars, they may safely issue three
times that amount in paper, without knowing at
the time Of that issue what quantity is necessary
for circulation; for the demands Of society are
the only criteria BY which to estimate the quant-
~ which may be safely issued; for it is entirely
immaterial from what cause it may arise, that it
the amount issued is beyond that demand, the
destruction of the Bank becomes certain.
A case in point. Many years ago there was
established in Scotland Bank called tyre. which
appeared TO have turned topsy-tur,y the greater
part of the mercantile population bath of Scotland
and England; and SD great became their pros
poets Of wealth from an ideal capital, that the
Directors themselves. blinded BY the mania. d.
rec,ed -four lines as much paper to be issued as
they had Of cash capital in their Golfers. Had
the Directo', been less frantic, and had confined
the issue Of paper within the limits Of the public
demand, the, might have survived a wreck which
involved thousands Of individuals in bankruptcy.
II was found, upon experiment, that the cash
fund would have kept in circulation three times
as much as it was worth; but the one-four,h more
than was needed. produced on immediate run on
the Bank ,chich is al,cays certain TO produce its
dissolution, whatsoever that - run" takes place.
Besides these considerations, which. together
with my remarks in my first number, subjoin
the following commentary:
100000 dollars are paid in cash by the stock.
holders, upon which il is presumed an interest is
paid. This cash capital is locked up from gene
raj use, in order TO enable corporate body to
issue in lis stead 100000 dollars Of paper, which
depends upon the cash deposit for its daily ex-
isence; for, let that cash capital, thus purloined
fro'n the use of society, be thrown at any time
into circulation, the Bank. as an institution be.
comes nstanter ,nsolvent. the people have the
bas - hold, after paving all the premiums the
Be"k has drawn, after paving the whole expense
o. e institution, and the interest upon the very
cash deposit; for when dirideads Of profits are
declared, all the expenses Of the institution are
deducted from any reported result Of profit; and
certainly care will be taken to be credited BY the
interest paid on the cash deposit
There is part Of the operations Of Bank
now to be developed. which all persons will de-
nounce, because it is the cause Of greater injury
to society than any other which belongs to the
system, being insdiOas in its character, imposing