The daily union. [volume] (Washington [D.C.]) 1845-1857, 1848-02-15
(CONCLUSIOE,)

Circulating medium, when In the form OF bank notes
and bank "deposltes," is circulating capital. but
cuating debt On every occasion, hitherto, in which
government has negotiated loans bank medium it has
led to trouble in the money market; because has there
by caused the amount OF (pape circulating medium to
bear no longer just proportion TO the circulating capital
of the country especially that part OF it which consists
OF gold and silver coin So long as the banks confne
their credit operationshat is such based on de-
poses and circuaton-to discounts of business paper
long they safe The they ISSUE and the in
scrptions of credit they grant their books commonly
called "deposes" then represent business paper in their
portfolios which business paper Isl in It's turn the repre-
sentative of real values in the warehouses of the mer
chants By the sale OF his goods, the merchant is able
redeem the paper he has given the banks and thus
enable the bank to pay the it has issued and make
good the credit 1t has granted in the form of depostes
Thus the circle OF commercial credit is completed and
sustained
But let banks, in addition to making issues TO supply
the wants of commerce. make additional issues to supply
the wants OF government and the due proportion between
currency and commodities is no longer preserved There
is increase of circulating medium, without cores
pondng increase of circulating capital For time, this
produces appearance OF increased prosperity Prices
being out proportion the things to be circulated by
it, returns in such quantities to those that issued it. "a 10
force them press severely on their customers and real
adversely follows apparent prosperity
Such the effects of unduly increasing circulating
medium, when that medium consists, of circulating
capital, but of circulating debt.
To this evil the community exposed every time
government wished TO borrow any large amount so long
as the connexon of bank and State lasted but from this
we are happily delivered The negotiation of the
proposed loan will not produce bank expansion to be
followed by violent contraction Government is by
law wisely prohibited from borrowing bank medium.
But will government, borrowing sixteen millions in
gold and silver, produce in present artificial state of
currency and of credit evil of opposite nature
namely, scarcity of circulating medium We think it
will not and for the following reasons
1st. The fund from which government is to borrow,
consists not solely of the specie the vaults of the New
York banks and those of few other Cities but of all
the specie in the country amounting, the smallest cal
culation, to one hundred millions
cd. Government will require such sum as wants in
small amouns-say two or three millions month
Sd. The specie which government borrows it will not
hoard, but will pay out again nearly fast as re-
ceives it, in exchange for labor and its products
18th. The circulating medium will not be diminished by
part of this specie being drawn from the vaults of the
banks The only effect of this will be- that one kind of
circulating medium-namely, gold and silver con-will
take the place of a~other kind-namely, bank book
credits Great part of the specie in the vaults of the
banks is not, long it there acve circulating me-
dunn reserved stock, used to sustain the credit of
paper medium.
Epp, l.. 4 4
enable them pay the balances due to one another and
this is the chief use of SPECIE in present artificial
system OF things except when the banks themselves by
their own issues, create demand for expectation
9th The specie drawn from the banks will after per-
forming short circulation, return to them again
7th The balance of trade is in favor domestic ex-
changes regular and the prospect of things in Europe
is favorable.
All the banks have to while this operation going on
is to coHne their credit dealings good business paper of
short dates They will thereby currency to bear
just proportion to commodities, and there will be no
pressure either them on the community
! There times, admit, when a loan of sixteen
millions TO government, ring as is the amount when
compared with the loanable wealth of the nation might
serious embarrassment Had there been, for ex-
ample an additional demand by government for the tenn
porary Of only few millions of specie in November
last when the demand from Europe was operating with
most intensity the two demands acting together would
have produced bank contraction. But the de-
mand from Europe has now abated, after having COM
PEELED our banks 80 to reduce their accommodations as TO
bring them into safe and solid state, compared with
what they in August last.
Some will, perhaps, say, that what is here advanced
would be true enough provided government were nego
tating loan for domestic purposes only. The act of
taking two or three millions, even four or five millions
month from the reserved stock the banks-hat stock
consisting of forty fifty million.-could do no harm
The specie, after being exchanged for labor and lis
products would return to the banks in the form of de.
poses But part of this specie wanted for foreign pur-
poses and its expectation will be, SO far as this country
is concerned, actual consumption.
To this reply. that the probability is that by the
proper use of bills OF exchange the necessi.
y of additional exports of specie may, great measure
be avoided By this nothing ese the cost of transport
ing specie will be saved Nor does necessarily follow
aver that thereby the export OF specie to Eng.
land will be increased, just much the export to
Mexico will be diminished The amount of specie.to be
exported to Europe de pends the rate of exchange II
exchanges continue in favor the governmental bills
sold in Mexico will be used by English merchants in
paying debts due to this country.
But suppose part OF the specie should go to Mexico II