The Ottawa free trader. [volume] (Ottawa, Ill.) 1843-1916, 1857-12-12

the year 1S4S their specie in proportion to
their capital was more than equal to one dol
lar 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 lS4S the specie was equal within a
very small fraction to one dollar IN five OF
their circulation and deposits; in S51 it is
not equal to one dollar in seven and halt
of their circulation and deposits.
From this statement II Is easy to account
for on, financial history for the last 10 years.
1t has been a history Of extravaeant cxpan-
sions in the business Of the country, follow
ed by ruinouS contractionS. At successive
intervals the best and most cnterpr;zinS men
have been tempted to their rum ny excess
i've bank loans of mere paper eae"'' GU
ing them To extravagant importatiOns oil 10
rcicn rools wild spccIlatiOnS, and ruinous
and demornlzins stock gambling. hen
tho crisis arrives. as arrive 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 toSe-
ther sink into insolvency.
1t Is this paper system of extravasant ex-
pansion, raising the nominal price OF every
article far beyond its real value, when com
pared with similar articles in countries
whose circulation is wisely regulated, which
has prevented us from competing IN our own
markets with foreign manufactures, has pro
duccd extravagant importations, and has
counteracted the effect of the large incident
al protection afforded to our domestic manu-
II. tnrII Hut
for this the branches Of our manufactures
composed of raw materials, the production
of our own country-such as cotton, Toh
and wooIIen fabri.s-would not only have
acquired almost exclusive possession OF the
home market, but would have created for
themselves a foreign marke. throughout the
world.
Deplorable, however, as may be our pre-
sent financial condition, we may yet indulge
in bright hopes for the future. No other
nation has ever existed which could have
endured sue: violent expan?ions and con-
fractions Of paper credits without lasting
injury yet the buoyancy Of youth, the en-
ergies Of our population, and the spirit
which never quaiIs before difficulties, will
enable us soon 10 recover from our peesent
financial embarrassment, and may even &C.
casiOn us speedily to forget the lessons
which they have fought.
In the meantime it is the duty Of the go
eminent, by al proper m ans within its
power, to aid in alternating the sutferings of
the people occasioned by the suspension Of
the banks, and TO provide against Il recur-
renee of the same calamity. Unfortunately,
in either aspect of the case, it can do but
little. Thanks TO the independent treasury,
the government ha, no; suspended payment.
as it was compelled to do by the failtre of
the banks in 1897 II will continue to dis
charge its liabilities to the people in gold
and silver. It's disbursements in coin will
pass into circulation, and materially assist in
restoring n sound currency. From its hig h
credit, should we be compelled to make a
temporary loan, il can be effected on advan-
tageOus terms This, however, if possible.
shall be avoided; if not, then the amount
shall be limited to the lowest practical sum.
| have, therefore, determined that whilst
no useful government works already in pro-
greSs shall be suspended new works, not al
ready commenced. will be postponed, if this
can he done without injury 10 the country.
Those necessary for its defence shall pro-
coed as though there had been 10 crisis in our
monetary affairs. -..
But the federal government cannot do
much to provide against a recurrence of ex-
isting evils. Even if surmountable cons;i-
tutional objections did not exist against the
creation of a National Bank. this would
furnish no adequate preventive security.
The history of the last Bank Of the United
States abundantly proves the truth Of this
assertion Such bank could not. if il W ould
regulate the issues and credits Of fourteen
hundred State banks IL such manner as
TO prevent the ruinous expansions and con-
fractions in orr currency 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 circumstan-
ces. Tie paper currency had been expand
ed TO n ru;G-as extent, ard the Bank put
forth az Is power % contract it in order to
reduce price. ar. = store the equilibrium Of
the foreign exchanges. II accordingly com
menced system cf curtaiinrn; Of It's loans
and issues, ia tie y-ia hope that the Joint
stock and private tasts al the kingdom
would be compelled 10 follow its example.
IL found, however that Il. i contracted they
expanded, and L lac end q tho process. to
employ the language of very high official
authority, "Whatcvcr reduction Of the pa
per circulation was effected by the Bank Of
England Tin 1921 was more than made up
by tine issues OF the country banks"
But 4 bank Of the United States would
not, If it could, restrain the issues and loans
Of the State banks, because It's duty as a re-
gulator of the currency must often be in di-
rect conflict with the immediate interests Of
its stockholders. IL we expect one agent TO
II strain or control another, their interests
must, at least IN some degree. be antagonis-
tie. But the directors of a Back of the L.
States would feel the same interest ard the
same Iuelinations with the directors Of the
State banks to expend the currency, TO ac-
{ immediate their favOrites and friends with
loans, and TO declare large dividends. Such
has been our experience in regard TO the last
bank.
Aiter all, we must EIaiTly rely upon the
patriotism and wisdom Of the States for the
prevention and redress Of the evil. If they
will afford u real specie basis for our pa
per circulation, by increasing the dcnomina-
lion Of our bank notes, first to twenty and
afterwards to fifty dollars; If they will re-
luire that the banks shall, at all times, keep
on hand at least one dollar Of gold and sill
yer for every three dollars Of their circula-
ton and dedoslts; and if they will provide,
By n sclf-cxccuting enactment. which no.
thing can arrest, that the moment they sus-
pend they shall 60 into liquidation, l believe
that such provision, with weekly publica-
lion by each bank Of statement of its con-
Hilton. would go far to secure us againts fu-
lure suspensions Of specie payments.
Congress, in my opiOnion, possesses the
bower 20 pass a uniform bankrupt law ap-
plicabl9 to all banking institutions through
but the United States, and strongly recon-
mend its exercise. This would make IL the !
organic law of each banks ex-
ste &C that a suspension of specie payments
hall produce its civil death. The instinct
# sclfpreseryaticn woIld then compel it to !
perform its duties in such a manner as to /
scape the penalty and preserve its life.
The existence Of banks and the circulation
# bank paper are so identified with the ha |
its Of our people, that they cannot at this |