True American. [volume] (Steubenville [Ohio]) 1855-1861, 1857-12-16
z Raglan, Editor and Proprietor.

cient regulator of paper currency-the
only one which can guard the public
against over issues and bank suspensions.
AS collateral and eventual security, it is
doubtless wise. and in all cases ought to be
required, that banks shall hold an amount
of United States or State securities, equal
to their notes in circulation, and pledged
for their redemption. This, however, fur.
nishes no adequate security against over
issues. On the contrary, it may be perver-
ted to initiate the currency Indeed, 1t is
possible by this means to convert all the
debts of the United States and State gov.
ernments into bank notes, without refer,
encc to the specie required to redeem them.
However valuable these securities may be
in themselves, they cannot be converted
into gold and silver at the moment of pres
sure, as our experience teaches, in su6i-
cient time to prevent bank suspensions and
the depreciation of bank notes. Ia Eng.
land, which is to q considerable extent
paper money country, though vastly be-
hind our own in this respect, it was deem
ed advisable, anterior to the act of Paria-
ment of 1844, which wisely separated the
issue of notes from the banking depart
ment, for tho Bank of England always to
keep on hand gold and silver equal to one
third of its combined circulation and de.
posits. If this proportion was no more
than sufficient to secure the convertibility
of its notes, with the whole of Great B,i-
tain, and to some extent the continent cf
Europe, as field for its circulation, ren
dering it almost impossible that sudden
and immediate run to dangerous amount
should be made upon it, the same proper.
tion would certainly be insufficient under
our banking system. Each of our four.
teen hundred banks has but limited cir.
cumfercnce for its circulation, and in the
course of very few days the depositors
and note holders might demand from such
a bank sufficient amount in specie to
compel it to suspend, even although it had
coin in its vaults equal to one third of its
immediate liabilities. And yet am not
aware, with the exception If the banks of
Louisiana, that any State bank throughout
he Union has been required by its charter
to keep this or any proportion of gold and
silver compared with the amount of its
combined circulation and deposits. What
has been the consequence In a recent
report made by the Treasury Department
on the condition of the banks throughout
the different States, according to returns
dated nearest to January, 1857, the ag,
gregate amount of actual specie in their
vaults is S58,349, 1888, of their circulation
S2l4,778,822, and of their deposits $780,
35l, 1852. Thus it appears that these banks
in the aggregate, have considerably less
than one dollar in seven of gold and silver
with their circulation ard de.
posits. 1t was palpable therefore, that the
very first pressure must drive them to sus-
pend, and deprive the people of converti-
BILE currency with all its disastrous conse-.
quenccs. 1t is truly wonderful that they
should have so long continued to preserve
their credit, when demand for the pay,
ment of one seventh of their immediate
liabilities would have driven them into in-
solvency. And this is the condition of the
banks, notwithstanding that four hundred
millions Of gold from California have flowed
in upon US within the last eight years, and
the tide still continues to flow. Indeed,
such has been the extravaganza of bank
credit, that the banks now hOld'a consid-
erable less amount of specie, either in pro-
portion to their capital, or their circulation
and deposits combined, than they did be-
fore the discovery of gold in California;
Whilst in the year lS4S their specie, in
proportion to their capital, was more than
equal to one dollar for four and half,
in 1857 it does not amount to one dollar
for every six dollars and thirty-three cents
of their capital. In the year 1S4S the
specie was equal within very small frac>
tion to one dollar in five of their circula
tion and deposits; in 1857 it is not equal
to one dollar in seven and half of their
circulation and deposits.
From this statementit is easy to account
for our financial history for the last forty
years. 1t has been history Of cxtrava-
CANT expansions in the business of the
country, followed by ruinous contractions.
AT successive intervals the best and most
enterprising men have been tempted to
tkeir ruin by excessive bank loans of mere
paper credit, exciting them to extravagant
impOrtations of foreign goods, wild specu-
lations, aud ruiuous and demoralizing stock
gambling. When the crisis arrives, as ar
rive it must, the banks can extend no
relief to the people. In a vain struggle 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 insol-
vency. ....
It is this paper system Of extravagant
expansion, raising the nominal price of
every article far beyond its real value, when
compared with the cost Of similar articles
in countries whose circulation is wisely
regulated, which has prevented us from
competing in our own market with foreign
manufacturers, has produced extravagant
importations, and has counteracted the Of