The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1848-02-06

.Oae oil the newspapers says tndt new lOIk
has set an example to all the other States upon
banking, and 1t advises them, especially Penn
sylvania, to follow it without delay. Accord
ing to the tree banking law of New York, any
person owning any Of the bonds of the State, for
its debt, may make them the capital of bank,
by depositing them with the comptroller of the
State, as security for the issues of such bank,
and that the comptroller, upon such deposit,
issues, in behalf Of the banker, an equal amount
of bank notes. Thus, State bonds for hundred
thousand dollars, perhaps worth in the market
fifty or seventy five thousand dollars, are secu-
rity for hundred thousand dollars of bank
notes. The newspaper referred to says that
under this law, the whole State debt is taken
from the hands of foreigners, and converted, by
citizens, into security for the paper circulation,
by which process, the interest of the State debt
is kept at home, instead of being sent abroad.
According to this system Of banking one pro-
mise to pay is the only security for another pro-
mise to pay, and this last promise is subst-
tute for coin. And this is called credit! And
it Is recommended as the safest mode of bank
ing! We cannot comprehend the soundness of
that political economy which enables one man
to make his debts substitute for coin, because
he is another mans creditor. 81 will give you
q hundred of my notes" says the banker to the
They are good, because my neighbor owes me
neighbor may fall" replies the farmer, ',and
therefore prefer hundred silver dollars, which
are good with all men. in all times and PLACES,
But the State is my neighbour and will not fail"
estates have failed" replies the farmer. '.and
may again; but coin never fails" We regard as
entirely unsound, the whole system of coming
money, circulating medium, out of debts, espe-
cially when secured merely by other debts.
But this is not the only objection. The debt
OF pennsylvania amounts to forty millions: II
this be made the foundation of free banks, forty
millions will be added to the present circulation.
The present banking capital of the State is
twenty millions, nominally, and the current cir
culatlon founded upon 1t ABOUT ten millions; and
whoever will examine the banks of each STATE,
will find the circulation about one-half of the
nominal capital. The continual return of notes
in payment, and for coin, generally restraints the
circulation to this point ut most: But when a
State stock bank Is, established, the whole
amount of notes is delivered at once to the
banker, who keeps them out while he finds Dor
rowers, while none come in for specie. Thus
the circulation of stock bank will be twice
capital; and thus stock banks are worse than
specie banks in expanding the currency. II
the whele circulation OF Pennsylvania IN coin
and paper, be fifteen millions. and forty millions
were suddenly added, what would become OF
our exports An addition of one hundred and
sixty -slx and two thirds per centum to the cir
culation, would enhance prices beyond its pow
er to export, and fill with imports which would
drain Oft all the coin In circulation and In bank.
All the States owe about one hundred and fifty
millions. 1t they invest hundred millions of
those debts in banking, leaving their corporate
banks as at present, the crises OF 1916, 1927 and
1000, Will NC IcPcdtcuS agriculture, CONuIHcICc
and manufactures will be PROSTATE, and the
country be deluged with foreign manufactures
and foreign wheat, and drained of coin. Fine
policy for Pennsylvania, Indiana, Illinois, and
other great producing States
The same journal says that Indiana, Illinois,
and Michigan want banks, and have no banking
system, and that their debts would furnish
them with sufficient banking capital If these
States, with Wisconsin and Iowa, are wise
unto salvation, they will never allow bank
to be established, nor bank note of another
State to circulate, within their borders They are
exclusively agricultural States, and depend upon
a market abroad. To secure this Market they
should keep the prices of their pro uce moderate
by dear currency; and the dearest currency is
coin. The State debts of the three first amount
to nearly thirty millions. II, they issue thirty
millions Of paper upon their debts, wheat from
the Baltic and Mediterranean will be carried up
the lakes to Detroit and Chicago for a market, as
it was brought to Philadelphia in 1897, when
flour sold for fourteen dollars to the barrel in the
midst of abundance, through an artificial scarcity
produced by bank paper. Then every dollar of
coin would leave these States; they would soon
become impoverished, and their bonds, the Sc
curity of their banks, could not be paid If the
farmers of the great West would secure steady
market, and steady stream of coin for their
produce, they will tolerate no bank paper or
paper circulation.