The Madisonian. [volume] (Washington City [i.e. Washington, D.C.]) 1837-1845, 1838-06-02
DEFERRED ARTICLES.
FREE BANKING.


The following clear and sensible view OF
this subject, which is so little understood, but
SO specious and deceptive in its golden pro-
misses, we take from the Southern Patriot OF
Charleston, s. G. As we entirely concur
with the Editor in his opinion on Free Bank
ing, we endorse them with our appreciation.
FREE, BANKING.
The notion Of creating bank capital on mortgages
OF real estate or on the pledge of public stocks ap-
Pearsto occupy much OF the attention at present Of
lhose who wish TO effect the double purpose OF i'm
proving our system Of currency and calling into ac-
usny The dormant resources of real capitalists whe-
'her IN this country or in Europe. The New York
scheme seems TO be the origin of most Of these at
tenptS II would really appear as if il were con
cepea that any amount of capital may be employed
IN banking that the mercantile agricultural wants
OF me country may require without reference to that
equilibrium between the currency Of this and other
parts OF The commercial world, which Is an import
am element IN any system Of circulation that may
be devised. In the New York plan but one object
seems 70 have occupied the minds Of lis framcrs-
To w.t. the security Of the holder while level Of
Vaiue DetWeen the money OF the u. s.. and the mo-
ney Of other countries with which we have constant
commercial intercourse, appears 10 have been en-
nrey lost sight Of. The idea is propounded in the
utmost confidence, of extending by associations of
capitalists private banking al Rb,tum. Capitals of
my millions Of dollars are spoken Of as about be-
ing called suddenly into existence by the magic
words free haGe in bankiag, as If Increase of wealth
depended on legislative fiat or the mere will 10 be-
come rich and prosperous
We have no question but what the confidence of
the community in bank issues may be entirely Sc
cured by the devices of ingenuity but the laws OF
nature cannot be counteracted by artificial contr-
vances, however well adjusted on system One of
these laws is that there is balance be maintained
between the productive powers and commercial en-
dependencies Of trade. Ii the only true measure of
Inc quantity OF paper money that can be put into cir
cuation Is The desire and ability of individuals 10
borrow OF banks of issue, then the whole labor of
the country might be diverted into one department Of
production and there could be nothing like relative
excess OF produce in that department. Thus, lift two
thirds or onehaG the value of the lands and slaves
employed In the cultivation of cotton should be
mortSaged TO create fund for banking-turned BY
the alchemy of credit into capital as the basis for
issues OF paper money, and each mortgager were TO
borrow in proportion 10 his wealth we should have
nearly every slave now employed in the culture of
other products converted into a cultivator Of our
great staple. We need scarcely say that the equili-
brium between the wants Of its purchasers and the
ability OF lis producers would be entirely de-
stroyed
But il is on this equilibrium that the level Of mo-
ney and prices depends. We are all aware that an
excessive stimulus TO production il not attended by
an equal stimulus TO consumption, is accompanied
by such fall d value that the medium of circua-
ZION pafiakes also OF relative depreciation with
that OF product. We see il constantly ,exemplifed
that mere temporary excess from crabundant
crops unacconpaned by a correspondent increase of
consumption haycs less value in the hands of the
cullVator thar II his crop not above average
product. What then would it be il his lands and
negroes were coined into credit, and he could con-
vert two-thirds even oReh half Of their value into
the means OF extending his cultivation!
All schemes of banking which do not look TO the
preservation Of the relative value of the currency
compared with the currencies of other countries
regard the security of the holder
las seems 10 be The case on the New York pan0 IS
detective in one of the main ingredients of sound
system We may argue this question until dooms-
day. and we shall arrive in the end the sole legiti
mate, practical conclusion, that the true and only
mode OF preventing deprec ation of paper money
from eccss is its ready convertibility into gold or
silver. This is the law of nature which the wit OF
man can neither evade nor circumvent by devices
The principle OF forming portion of banking capt.
tai OF Securities, whether public or private, placed
IN pledge with public officer guarantee for the
issues, and which can be quickly convertible into the
precious metals, is salutary to certain extent.
This prevents depreciation u the currency from dis
credit but leaves the evil of depreciation 1roa excess
without remedy, by allowing unlimited competition,
in the formation Of Bank Capital and the creation
of paper money. We, therefore, think the princi.
pie, that free trade in banking, in permitting the al
most unrestraned issue Of paper money to private
Associations and individuals extremely dangerous.
1t is, in effect, an abandonment OF the Standard and
guaging the currency by false measure, namely,
the wants of producers and of commercial persons,
by those new facilities which to be found in the
mortgage of Real Estate, and the pledge Of Stocks.
There cannot be too great competition in banking on
real capital placed deposite, but the substitution of
one species of credit for another be it public pri
va,e making the measure of the issues of paper the
extent to which that credit can be used will and
must work, in the end, injuriously.