Worcester daily spy. [volume] (Worcester [Mass.]) 1850-1888, 1857-12-09
ESTER DAILY


such has been the extravaganza of bank cred
its that the banks now hold considerably
less amount of specie, either in proportion TO
their capitol or to their circulation or depos-
its combined, than they did before the discov-
cry of gold in California Whilst in the year
lo4S their specie In proportion to their capi-
tai was more than equal to one dollar for
four and a half, in 1851 it does not a.
mount to one dollar for every six dol
lars and thirty-three cents of their cap
ltai. In the year l84s the specie was e.
quail within very small fraction to one dollar
in five of their circulation and deposits in
1857 it is not equal to one dollar in seven
and half of their circulation and depos-
its.
From this statement it is easy to account
for our financial history for the last forty
years. II has been a history of extravagant
expansions in the business of the country.fo
lowed by ruinous contractons. At success
sive intervals the best and most enterprising
men have been tempted to their ruin by ex-
cessive bank loans of mere credit, exciting
them to extrayagant importations of foreign
goods, wild specuations, and ruinous and de-
moralizing stock gambling. When the crisis
arrives, as arrive it must, the banks can ex-
tend no relief to the people. In vain strug-
gle to redeem their liabilities in specie they
are compelled to contract their loans and their
issues; and at last in the hour of distress,
when their assistance is most needed they
and their debtors together sink into insolven-
cy.
1t is this paper system of extravagant ex-
pansion, raising the nominal price of every
article far beyond its real value, when COM
pared with the cost OF similar articles in
ao,, -
ted, which has prevented us from competing
in our own markets with foreign manufactur-
ers, has produced extravagant importations,
and has counteracted the effect of the large
incidental protection afforded to our domestic
manufactures by the present revenue tariff
But for this the branches of our manufactures
composed of raw materials, the production of
our own country-such as cotton, iron, and
wooden fabrics-would not only have acquir-
ed almost exclusive possession of the home
market, but would have created for them
selves foreign market throughout the
world.
Deplorable, however, as may be our pres
ent financial condition, we may yet indulge in
bright hopes for the future. No other nation
has ever existed which could have endured
such violent expansions and contractions of
paper credits without lasting injury yet the
buoyancy OF youth, the energies of our pop
ulation, and the spirit which never quails be-
fore difficulties, will enable US soon to recov-
ef from our present financial embarrassment,
and may even occasion us speedily to forget
the lesson which they have taught
In the meantime it is the duty of the gov
eminent, by all proper means within its pow
er, to aid in alleyiating the sufferings of the
people occasioned by the suspension of the
banks, and to provide against the recurrence
OF the same calamity. Unfortunately, in Ell
Their aspect of the case, it can do but little.-
Thanks to the Independent Treasury, the gov
eminent has not suspended payment. as it was
compelled to do by the failure of the banks
in 1887, 1t will continue to discharge its labil-
tiles to the people in gold and silver Its dis
bursements in coin will pass into circulation,
and materially assist in restoring soundcur-
reney. From its high credit, should we be
compelled to make q temporary loan, it can
be effected on advantageous terms. This,
however, shall, if possible, be avoided; but
If not, then the amount shall be limited to the
lowest practicable sum.
have, therefore, determined that whilst
no useful government works already in pro-
gress shall be suspended, new works not all
ready commenced, will be postponed, if this
can be done without injury to the country-
Those necessary for its defence shall pros eed
as though there had been no crisis in our
monetary affairs.
But the federal government cannot do much
to provide against recurrence of existing
evils. Even if insurmountable constitutional
objections did not exist against the creation of
q national bank this would furnish no ade-
quate preventive security The history Of
the last Bank of the United States abundant
ly proves the truth of this assertion. Such
bank could not, if it would, regulate the is
sues and credits of fourteen hundred State
banks in such manner as to protect the ru-
inous expansions and contractions in our cur
rency which afflicted the country throughout
the existence of the late bank, or secure us
against future suspensions. In 1926 an effort
was made by the Bank of England to curtail
the issues OF the country banks under the
most favorable circumstances. The paper
currency had been expanded to a ruinous ex-
tent, and the bank put forth all its power to
contract it in order to reduce prices and re-
store the equilibrium of the foreign exchanges
1t accordingly commenced system of cur
tailment Of its loans and issues, in the vain
hope that the joint stock and private banks
of the kingdom would be compelled to follow
its example. 1t found, however, that as it
contracted they expanded, and at the end of
the process, to employ the language of very
high official authority, "whatever reduction Of
the paper currency was effected by the Bank
of England lin 1920 was more than made up
by the issues of the country banks"
But bank of the United States would not,
if it could, restrain the issues and loans of
the State banks, because its duty as regula-
tor OF the currency must often be in direct
conflict with the immediate interest of it's
stockholders. If we expect one agent to re-
strain or,controlin another their interests must.
at least in some degree, be antagonistic.-
But the directors of Bank of the United
States would feel the same interest and the
same inclination with the directors of the
State banks to expend the currency, to accom-
date their favorites and friends with loans,
and to declare large dividends. Such has
been our experience in regard to the last
bank.
After all, we must mainly rely upon the
patriotism and wisdom of the States for the
prevention and redress of the evil. If they
will afford us a real specie basis for our pa
per circulation by increasing the denomina-
ton OF bank notes, first to twenty, and after
wards to fifty dollars if they will require
that the banks shall at all times keep on hand
at least one dollar of gold and silver for eve
ry three dollars of their circulation and de-
posts and if they will provide by self-exe-
cution enactment, which nothing can arrest
that the moment they suspend they shall 90
into liquidation, believe that such provis-
ions, with weekly publication by each bank
of q statement Of its condition, would 20 far
to secure us against future suspensions of