The Madisonian. [volume] (Washington City [i.e. Washington, D.C.]) 1837-1845, 1841-05-07
EXCHANGE AND CURRENCY
LETTER vi.
RICHMOND, 9th App

LLTTkh W.
RICHMOND, 9th April, lS4l.
QuEsrIoN. That causes Bank notes to be under
par?
Answer There are tioo general causes that pro-
duce this resultfrst-lfa bank suspends specie paw
mcnts, although the ability Of the bank may be un-
doubted still Its inability to furnish specie reduces its
notes below the value of coin and second-f the bank
is SO far distant to render the credit Of the ns,i,u
ton doubtful too little known 10 inspire confidence
QUESTION. What causes notes under par 10 eireu-
late?
Bank notes under par will not circulate when there
is sufficient amount Of par currency TO supply the
wants Of trade. Money is the medium between buyer
and seller. II is the creation of necessity The rep
resentative of property.
1.-THE trade Of the country is not supplied with the
best currency its imperious demands will bring into
currency Of less value but if all the channels
trade are filled with the paper of specie paying banks
at fair rate ofnerest there will be no room Tor any
of less value. Thus it may be seen in many sections
the country, when very little money comes in aid of
the trader that they compelled resort to barter
and again individual paper is used in some sections Of
this State, under the name of cash notes-whch means
note given to be paid in money at future day.
Some common medium must be had and public conve-
nence will resort to the best that can be procured
Notes under par therefore, obtain circulation because
they are the best of which the community can obtain
supply TO serve the wants oftrade.
QUESTION. Hov deprecated paper be driven
out Of market?
ANSWER This question is answered in part by the
reply to the last inteirogatory.
Uncurrent money, money below the par of spe-
Gle, will TO circulate when it ceases to advance
| the interest of indv duas who use it.
In conseque of the Of system of Exchange
by which the value Of money different points be
equalized becomes necessary to have larger amount
of kind Of currency compensate for the slow
transmission of funds from section Of the country
to another. The result is, that merchants traders,
and aborers content to take deprecated paper,
because it is much better than medium Of trade.
From this cause you will find distant banks apparent
Iy redeemng their notes at great mart Of trade
While in TRUTH the bank does not redeem its paper at
ALL but makes contract with broker to loan him
certain amount Of its bills, upon condition that he
shall redeem them at certain rate Of discount. The
broker then advertises that the bills Of the bauk will
be redeemed at and one half per cent. This
gives the notes currency among the necesstous and
accordingly the broker will loan out his uncurrent
bills to contractors house builders manufacturers and
others who employ large number of laborers These
bills are then paid out to the aboier and he again pays
them to the butcher, baker, grocer and all others with
whom they trade. These bills after going the rounds
at last fall into the hands of those who need current
funds, and they go to the broker and sell the bills at
the discount he has established, and the broker loans
the bills before Thus, in the absence of sufici.
ent amount of par currency the public are compelled
to submit to this sacrifice of the value of labor.
If system Of Exchange shall be established that
will equalize the value Of funds in every section Of
the country the banks will soon be able to resume
and bank notes will be brought to par, that
they will pass into the banks and Exchange dealers
possession in payment Of notes, and being once in the
hands Of such dealers they will be sent back to the
counter of the banks from whence they issued to be
deemed for current funds
| This is one Of the valuable features of the system,
and according to the laws of trade will operate with
peculiar force now because there is large amount
Of banking capital, that the exchanges are
regulate ed and equalizcd there will be abundance
Of current funds, than the wants of trade will
employ; consequently mono but par funds will be
tolerated at any place.
There two causes that will produce this result.
Ftrsf Inc wnoie banking anu INDIVIDUAL captal VIII
be rendered available and mnde to pass rapidly from
hand to hand throughout this vast Union, in the
channels Of trade thereby enabling dollar to per-
form the service of two under the present want o.
system; and, second if the specie is kept in quiet
state will be the case if no demands made fol
shipment transportation from section Of the
country to another, the banks will be enabled to
large their loans upon specie basis. Thus the
amount Of pal funds in every section Of the country
will be abundant, that there will be no demand fol
any other kind of currency and all deprecated paper
will he driven out of market
Having gone thus far in the examination Of tn.
general principles of Exchange and Currency the
inquiry will below shall these principles be bes
carried out
Question. What kind Of an institution will regulat,
the exchanges, and equaze the currency in the mos
safe and permanent manner
KENTUCKY ELECTIONS.
MEMBERS OF CONGRESS ELECTED.