Muscatine weekly journal. [volume] (Muscatine, Iowa) 185?-1890, 1857-12-19
MUscATINE IOWA SATURDAY, DECEMBER

It il trnly wonderful that they shoult
have 90 long continued to preserve theil
credit, when demand for the payment O
one seventh Of their immediate liabilities
would have driven them into insolvency.
| And this is the condition of the banks, not
twithstnding that four hundred millions Of
gold from California have flowed in upon vi
within the last eight years, and the tide still
continues to fow. Indeed such has been tht
extravaganza of bank credits that the banks
now hold comfortable less amount Of spe.
Gle, either in proportion to their capital Of
to their circulation and deposits combined
than they did before the discovery Of gold il
California. While in the year l848 theil
specie in proportion to their capital wal
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 l848 the
specie was equal within very small frac.
ton 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 circula-
ton and deposits.
From this statement it is easy to account
for our financial history for the last forty
years. 1t has been history of extravagant
expansions in the business of the country,
followed by ruinous contract ons-at inter-
walls the best and most enterprising men have
been tempted to their ruin by excessive bank
loans of mere paper credit, exciting them to
extravagant importations of foreign goods,
wild speculations and ruinous and demoral-
izing stock gambling.
When the crisis arrives Us arrive it must,
the banks can extend no relief to the peo-
pie: 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 assist
ance is most needed they and their debtors
sink together into insolvency.
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
countries whose circulation is wisely regu
lated, which has prevented us from compe-
ting in our own markets with foreign manu-
facturers, has produced extravagant impor
tations. and has counteracted the effect of
the large incidental protection afford
ed 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 woolen
fabrics would not only have acquired al
most exclusive possession of the home mar
ket, but would have created for themselves
a 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 ma
ii on has ever existed which could have en-
IL 81 md nfr0n
tions of paper credits without lasting injury;
yet the buoyancy Of youth, the energies of our
and the spirit which never quails
before difficulties will enable us soon to re-
cover from our present financial embarrass-
ments, and may even occasion US speedily
to forget the lesson which they have taught.
In the meantime it il the duty OF the Gov
by ali proper means within its pow
er to aid in alternating the suferings Of the
people occasioned by the suspension of the
banks, and to provide agaist the recurrence
of the same calamity. Unfortunately in Ell
ther aspect of the case it can do but very
little.
Thanks to the independent Treasury, the
Government has not suspended payment as
it WAS compelled to by the failure OF the
banks in the year 1887. 1t will continue to
discharge its liabilities to the people in gold
and silver its disbursements in coin will
pass into circulation and materially assist
in restoring Il sound currency From its
high credit, should we be compelled to make
q temporary loan, it can be effected on ad
vantageous terms. This, however, shall, if
possible, be avoided but if not, then the
ticable sum | have, therefore, determined
j ,,&, f,,l xrorly, - |
progress shall be suspended, new works not
,an be done without injury to the country
Those necessary to its defence shall p oceed
IS though there had been no crisis in our
monetary affairs.
But the Federal Government can do much |
% provide against a recurrence Of existing
wi 8. Even if nsurnountable constitution
u obi ,ctions did not exist against the crea-
ion Of national bank, this would furnish
10 adequate preventive security The his
ory Of the last Bank of the United States
proves the truth OF this asser-
ion.
Such bank could not, if it would, regu
ate the issues and credits Of fourteen hun
lred State banks in such q manner as to
prevent the runous expansions ard contrac-
ions in our currency which tlilcted the
,nuntry throughout the existence OF the
ate bank, or secure us against future sns-
tensions. In 1925 an etfNrt was made by
he Bank of England to curtail the issues of
he country banks under the most favorable
The paper currency has
,een expanded to q ruinous extent, and the
Bank put forth all its power to contract it in
rider to reduce prices and restore the eqni-
ibrium of the foreign exchanges. 1t accor-
lingly commenced system of curtaiineEt
If ITS loans and issues. in the vain hope that
lie joint stock and private banks OF the
lingdom would be compelled to f How its
1t found, however, that as 1t con-
racted they expanded, aud at the end of
he process, to employ the language of
very high official authority, whatever re-
iuction of the paper circulation was effected
~ the Bank OF England Tin 1929 was more
han made up by the issues OF the country
)anks.o
But Bank of the United States would
not, if it could, restrain the issues and loans
If the State banks, because its duties as
regulator of the currency must often be in
lirecr conflict with the immediate interest of
It's stockholders. If we expect one agent t"
restrain or control another their interest
must, at least in some degree, be an agonis
tic. But the Directors of Bank OF the
United States would feel the same interest
and she same inclination with the Directors
If tlre State Banks to expand the currency,
10 accommodate 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 on the pat
riotism 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-
tion of bank note first to $40 and after
wards to $50; if they will require that the
banks shall at all times keep on had at least