The Madisonian., 1840-01-28

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banks. Now Why is her system steady Because
her trade is small and steady The single cry VI
Liverpool, says AIR McCuoke, exports hve ii"es as
much as all Scotland. Soms suppose that The seadi-
ness of the monetary system oil Scotland Is oue 70
The seadiness of The Scotch charscter bul this Is
partially lrue-it is much more TO b. sserioed 10 me
aleadinrss of her small trade there Is no mere ma
onal charac er that can prevent wildness ot Pecu-
la,ion. when prices are rapidly advancing. The
peoole of Scotland, In the celebrated Daren ad-
venture, were as madiy speculative as any people
ever have been and they would be SO again, II their
nosi,,on did moi cut them of from that great Hue
mating ternaiional trade Of the world which will
vr fll into the hands OF the ma ions most wealthy,
and OF most favorable position.
II sometimes happens that peculiar circumstances
throw large portion OF this commerce into The
hands of people without banks and without paper
money and whenever it occurs, we see them sub
lecled to the same tremendous revusions as 10 the
banking countries. Thus, owing 10 Holland having
fallen into the possession ot Napoleon, Hamburg en-
joye the advantage Of being the chief importers of
Brush and American produce for Germany ana 'ne
surrounding countries, in the yeats 1877, ~, W
The supply al fr. was very limilsd aud prices ra-
pdly rose this stimulated speculation, which
and November OF that year, eigh'y-lwo houses failed
Tor about % 500 OC0 banco maj Ks, equal TO Sl2OOo-
900 and The rate OF discount 10 5per cent, Now
be Il remembered, that Hamburg was perfect sPeci-
men of what is called hard money people. Yet her
failures were for more than $1,000 OOo 10 she space
Of three months; and Bremen, Frankfort and Am
serdam, and many other towns on The continent,
were Tor season, completely paralyzed by 'his re-
vulson. We must remember further, 100, lha'
every failure implies credit, and hence, we must ad-
nit in this case immense structure oi cfed' up
on a purely metallic currency. could illustrate, u
necessary, by the revulsons in Paris, in 1913
But again it sometimes happens in banking coun-
tries that these periods OF speculation come on "hen
there is no elpdasion Of bank credH and there are
sometimes, violent convulsons accompanied even
by bank expansions showing most conclusively mat
under all circumstances, there Is vast amount Of
private credit which may operate wihou', OF even
in direct opp son 10 bank agency wiii illustrate
this by The great pressure in England IN lolo IS
well known that the celt brated emblrso oi Mr Jei-
ferson followed By The non-iniercuurse resolutions
under Mr.. Madison together with the lawieSs de-
cfees OF BonaraHe, contributed 10 produce search
" in Great Britan oi imported articles. All these,
in consequence, began 10 rise, and with this rise
commenced mad spirit of speculation, running
through The latter par of lS07-ahole OF )sOS. and
greater pal OF 1909. Ia this last year il was per-
ceyed that The imagnalons Of speculators had out
run The reality The bubble was iull blown; and
with The downward rush oil prices in 1910, came on
one Of the heaviest pressures, perhaps, maj have
ever bsen known in Great B iiain. In the single
month Of December 273 bankruptcies were an
uounced in the London Gazette alone, and uniVef-
sal gloom was spread over the country Now SIR,
il 50 happens that, although England is banking
country this pressure came on Tifa'ut any oa" eA-
pension There was no addition 10 The bank paper
iii 1909, when prices were at their hei2ht-aho,
strange as il may appear 10 those who can discern
nothing but bank agency in these monetary reyolu-
lions there was The greatest addition 10 e bank paper
in England in 1869 and TO- erer mode IN 50 short
period corresponding precisely with the period oi
the pressure-and make the case still more strik-
ing lei it be remembered that the currency OF The
country was an unconverlible paper medium
Now, here is phenomenon that no one can explain
who keeps his .ye steadily fixed on bankcredn alone
Bui hen reflect that private credit forms much
The largest portion Of credit even in banking coun-
lry and that ther. were causes at work which had
tendency TO increase this, without any increase OF
bank credit the solution OF the difficulty becomes at
once apparent.
Permit me, sir, as il is a matter Of great impor-
tance to the right comprehension OF this subject, to
make few remarks private credit, and the causes
favorable 10 its growth and in the Isl place would
remark in all reasonings about The currency, we
not keep eyes FIRED alone on the mere silver
and gold, and bank paper; but, must never lose
sight Of those other items, bills Of exchange, pri-
vaie promssory notes, bonds, stocks &c. which do,
in fact, perform though sluggshly, the functions Of
a circulating medium. 1t is estimated in Great
Britain, that there generally about fi00 900 600
Of bills of exchange in. circulation, ten times the
amount Of the money, both paper and specie. There
is no calculating the amount OF private bonds, ac
cepances, &c. Now, we readily perceive that these
items, in performing the functions OF circulation
more than make up for their sluggishness by their
immense amount. In some districts, they supplant
the ordinary currency entirely; thus in Lancashire
one Of the most manufacturing counties in England
and where they have occasionally experienced the
heaviest pressures, bills OF exchange constitute the
circulating medium bill on London at months,
is reckoned money payment-bank notes are rare
ly used.
Let us now inquire, for moment, into the nature
OF those causes which have tendency TO bind up
and en rye the superstructure of private paper
Every thing which contributes TO raise prices will
produce this effect. he individual who borrows
money can get ii upon the faith of smaller amount
of property, because OF its rise in price. The farm
er, when he buys land gives his bond instead OF mo-
ney. The retail merchant not only buys goods to
the amount OF his cash but buys largely as poss-
Bile on credit. The exporting merchant gives his
acceptance 10 the planter and the manufacturers the
planter and manufacturer, having cleared their
hands Of their yearly productions, make prepara-
ous on extended scale for the ope