Nashville union and American. [volume] (Nashville, Tenn.) 1853-1862, 1857-10-27
From HEafs Merchants Magazine.
BANKS AND CURRENCY.
Continued. I

EFFECTS OF MIXED CURRENCY.
In our last chapter we commenced an examination
into the nature and effects of a mixed currency We
now continue and conclude the subject.
III. 4 H7iTed currency causes great fluctuations ~
the interest Of money, and much enhances aUsrGg,
rate.
This must follow as a consequence of what we
have before shown. If it so stimulates demand at
time, and parayzes it at another it would nat
uray follow that the rate Of interest would be equal
ly fuctuaing and practically, we find that it has
always been so whenever such currency has exist
ed Every person familiar with the business of this
country for the last forty years, know thai
there have been occasional periods within that time
when money, in the great marts Of trade was worth
no more than 5per cent per snnum, and drug that;
on the other hand, there have been corresponding
periods when money, to all who must raIse it al
tbs market price, would cost Is per cent and up
wards; and hat between these extremes be rate
Of interest has been constantly vibrating. Now,
this is the legitimate consequence of a mixed cur
rency. If it does cause a vast extension Of credit
il must cause great demand for money TO meet
those credits; and the demand for money TO pay
debis is an imperative demand and cannot be Dost-
poned. man is seldom, if ever, in immediate dis
tress for money with which to purchase merchan-
disc but he is often for money 10 meet his notes
at the bank. he would never think OF paying 2
per cent per month for money to buy goods with
but will often pay that for the means OF sustaining
Il
tends the whole credit system, as it alternately
makes money very plenty and very scarce, OF
necessity cause corresponding fluctuations in the
rate Of interest, and, average, greatly increase
IT. But the of interest is not only thus Coninu
ally varying, but is, 10 fact, describing a cycle
Starting at Zero, the low point we have here inui
Gated per cent-t rises by irregular steps till il
has attained the highest point of which it is suscep
bic; then descends the original point of depart
ure. Like the currency it represents, it is never
for long time stationary, never natural. The ca
prices and interests of those who manufacture credit
money cause its extraordinary RISE and the laws of
trade at length come in 10 force its return to the
natural rate (which, in the United States may be
assumed to be per cent? but the excess of the ad-
vance that has been created, by its reaction bring
the rate down to something less than the natural
point. But 1t never long remains there. Money
soon becomes worth the legal rate, and will continue
to command that rate, MORE according to the de-
mand.
The cycle usually requires period of about seven
years for its completion, but disturbing causes may
accelerate or retard monetary revolution; so that
no person. however shrewd, can tell when the diff
1ereut points will be attained The general result
Is certain, the time of its occurrence contingent.
Without protesting absolute accuracy, We give the
following as an approximation: