Weekly national intelligencer. [volume] (Washington [D.C.]) 1841-1869, 1847-09-11
NEV YORK CORRE SIP ONDENCE.
New YORK, SEPTEMBER 2, ls47.

New YORK, SEPTEMBER 2, ls47.
MONEY AND BASKING.-The merchants Magazine" fol
September just published contains the second part of the
able article Banking by Henry G. CAREY, of New Jer-
sey. Mr. Carey is son of the late Mathew Carey of Phi
adepha whose practical and philosophical mind made Itself
somewhat widely felt his day throughout the country and
whose clear and vigorous intellect to be largely
scented in the son. make pretensons a knowledge Of
banking, but this article of Mr. Careys, the first part OF
which appeared in the August number of the Merchants
Magazine, is marked with ability, research and cearness
appear be highly worthy of the attention OF
Legislators and bankers and indeed Of all intelligent readers
The the two numbers of the Magazine makes some
twenty pages in which he examines the operations
of the Bank of England for fifteen years past and
the banking systems in this country to illustrate and prove
the superiority of his iavorite theory of free banking
His doctrine is that the system OF banking which is most
free from legal restrictions and regulations is the best the
safest, and the stable that banks harmless
shops" and il left to themselves would be suhect
precisely the laws, accommodating the public in the
best possible Manner with the least expense and the greatest
advantage And he certainly makes strong and plau-
sibe case.
The only perfectly system of banking the world he
says is that the State of Rhode Island and under
other system and in other place in the world have there
been proporionay few bank failures, little uctuaton
in the money MARKET great security and universal
nence the public, and in the long much actual pro-
fit The bankers themselves. The free system Of Rhode
Island presents the following facts From 1910 to ls47,
bracng the war, the great revulson of 49, to lSl9 the
disturbances of 1926 SO, and 80, during which period the
banks have gradually grown to the number of sixty ve-a
space of hityse yearshere have been but aure
amounting in the whole to less than fifty thousand dollars
The close restriction system Of England gives, the
other band the following tFrom 1889 to ls43 both in
elusive Give years. period of profound peace, eghytwo
private bankers became bankrupt of whom forty paid
dvaed, twelve paid under 25 per cent twelve under so
per cent? three under rs per cent? under leo per cent?
leaving seven yet unascerained."
Rhode Island with population of about one hundred
thousand has five banks, with capitals varying from
twenty to fifty thousand dollars, and the combined capital
above ten millions. Every village has its shoeshop, its
smh-shop, and its moneyshop Every has at hand
little saving fund bank, owned generally by people like
hmsef-men who work-and in this bank he deposes his
little savings buying first share and then another until
at length he is enabled TO buy little farm, open shop
commence manufacturing his account, when he sells
out to some OF his neighbours who is following in the
course The bank derives from the OF its depoes
and from its circulation sufficient profit TO pay its expenses
and because, when the trade in money is Free the
quantity of idle capital remaining in the form of money!
whether real imaginary, will always be SMALL will be
the quantity of circulation required In part of the world
the proportion which coin and bear the amount of
ade small in New England, yet in do there exist
such perfect facilities for furnishing circulation In no part
does the individual banker little suffer in none does the
bank trade much upon capital and little upon credit in
none, consequently are banks steady and so SAFE
In England the state of things is directly the reverse Re-
stcons throw the trade the hands of the ew and banks
trade credit rather than nj ha
sought be obtained by aid of the several bank restriction
directly the of what has been described as ex
istng Rhode Island. They prohibit the formation of new
associations for the opening of Shops which the
capital dsengaged meet the of labor that need its
aid while they maintain in full force all the previously exist
ing penalties and liabilities, and thus tend increase the
quantity of capital idle in the form of deposes to increase
the Of the banks to overade and produce specu
aon, result the destruction of their customers and
themselves"
These of the grounds taken by Mr. Carey and
Of the facts he adduces support of his theory He
traces the troubles in the money MARKET the commissions and
pans that often occur the fact that the Bank of Eng
land is allowed to trade upon the deposites which individuals
and capitalists have placed in her vaults saekeepng
The time that the of these funds are the mar
ket seeking investments for the capital Thus when
the of the capital have purchased and the bank also
has purchased the strength of the capital and both
called upon pay both relying upon the fund.- one
the other must short Hence panic and CONFUSION
follow and prices of merchandise and securities which had
been forced unnauray high by the double of capital
depressed unnatualy low for the of capital
The remedy for all the troubles in the money market and
in banking according to the theory of Mr. Carey, very
simple and very easy and the subject is of such deep
and universal interest the whole civilized world that any
ray of light upon should be gladly received and widely diff
fused 1t is almost painful witness the anxiety with which
business people watch every arrival from England ascertain
the state of the money market and its effect prices Even
now, while am writing, the Boston brings us
few days later news announcing increased panic the En-
gsh money market and consequent heavy failures which
feared may react severely upon this country If all this
trouble be avoided by simple change in the operations
of the Bank of England, is most desirable such change
should be made.
HERMITAGE INSTITUTE