The national era. [volume] (Washington [D.C.]) 1847-1860, 1857-10-29
SPECIE AND PAPER MoNEY-A sPECULA.
TON ON THE TIMES.

4
SPECIE AND PAPER MoEEY-A sPECULA
TON ON THE TIMES.
To the Editor Of the Republican:
The times are out of joint. Since 1887
there has been no such pressure in the money
market. Banks won't, cannot, discount.
| IS difficult to collect impossible to borrow
Even rich men, in business, find it hard tc
| raise few hundred dollars, to meet immediate
wants. House after house, and bank after
bank, suspends. What does it al mean? Where
| will it end? What is the cause of it?
| The immediate causes of our financial diff
culties have been good deal discussed, and
are tolerably well understood. The Republic.
can, in recent editorial, explained one of
them very clearly. But the ultimate cause
it is in ours ysiem of government or policy that
produces these alternate expansions and con-
fractions, which have become as certain. and
almost as regular, as the pulsations of the
heart--this is understood clearly by but few.
| propose to discuss this greater question. But
| write for those who are not familiar with the
subject, who never think of it, except in times
like these, and shall avoid therefore technical
language snd argument, and use only the pop.
ular language Of everyday life.
If the city of Springfield produced this year
twice as much Indian corn as it could consume,
while the neighboring towns produced only half
as much as they needed for consumption, what
would be the result2 The surplus of corn
would flow out of Springfield, to supply the
wants of the other towns, and the products or
moneys of those towns would flow into Spring
field in return. If the State of Massachusetts
should produce this year far greater amount
of Indian corn than her inhabitants could con-
sumo, while Vermont and New Hampshire,
New York and Connecticut, were short of that
article, the result would be the same. The
corn of Massachusetts would flow out to Yer
msnt and the other States, and their products
or moneys would flow in in exchange. If the
United States have produced this year, as
hope they have, far more breadstuffs than they
can consume, and it shall happen that England
and France, and other foreign countries. shall
need the article to feed their people, what will
be the resuit2 Obviously, our breadstuffs will
go abroad, to be paid for by silks, kncknack.
cry, or whatever else our people want, bat do
not produce IN quantity sufficient for their
wants These things are so familiar, that
many may think 1t superfuous, even foolish, to
state them. Yet in this very law, operating,
not on corn, but on another article, lies the
chief cause of all our pecuniary difficulties.
Suppose the article superintendent in Spring
held were circulating medium, instead eff corn,
while the neighboring towns, short of that.
abounded in other articles which Springfield
wanted, what would be the result? Precisely
as IN the case of corn-the circulating medium
would How out, the other articles would flow in.
TIL things became equalized, and each town
had its due proportion Of each article. So. if
the United States should produce, or become
possessed OF, an undue proportion or excess of
circulating medium, larger in proportion to the
wants OF Its business than the amounts held bv
other countries In proportion to the wants of
Their business, in obedience to the great law of
demand and supply, applicable as much to cir
culatlng medium as to any other article of
merchandise the money would at once begin
to How abroad, and foreign fabrics or products
TO flow in in exchange.
Precisely this has been the case and herein
lies the root of our difficulties. This country
mas had most redundant and excessive SUP.
ply OF circulating medium-far greater in pro.
poruon to our business wants than any other
country on the globe. Not only have the gold
| mines OF California added immensely to our cir.
cua'ing medium, but every shipload Of gold
| which has tarried with u.s. even for a time. has
added several times its value TO the circulation.
IN the bank notes which have been issued upon
the basis of such parts Of it as have found their
way into the banks.
From the abstract Of the returns of banks in
Massachusetts, made to the last Legislature by
the Secretary of State, it appears that on the
| Ilth day OF October, 1856, the banks of this
| Commonwealth had in their vaults specie 70
the amount of S4,555, 57l4l, while they had
bills IN circulation to the amount of S26. 5443l5
Thus, their circulation exceeded their specie To
the amount of $2l 1888, 1889. Their circula
ton was more than six times their specie. By
the return of the year previous, the specie
was S4,409, 1925, and the circulation was
S23, ll6,O24, the disproportion being about the
same as last year. And it does not appear thai
at any time between, or even before or after
the dates OF their returns, the disproportion be
tween specie and circulation was materially
| less. According to the weekly statements, the
| banks are proportionally stronger in specie
| observation-disclosures having tended to max,
them so. These facts by no means necessaril,
show the banks to be weak, or dangerous t.
bil-holders or depositors, but they do show tha
a small amount of specie may be the basis o
an immense issue of notes for circulation. The
whole excess of circulation over specie is 81
much added to the circulating medium of thc
country. Surprising Massachusetts, to furnish
onehith OF the bank circulation of the Union
here Is over 100000, 900 added to the circula
| ~A Vi 1n0 SOuulryy through the mean
OF the excess of bank notes over the specie il
the vaults of the banks. And if this State fur
nishes only one-tenth of the bank circulation
then S2O0OOO,OOO is thus added to the circula
ton. 1t Is evident at once what a redundanc,
of currency like this, added to the specie in cir
culation, must produce. The high prices prev
alent here, excessive as compared with othe
countries, is evidence of the same fact-a 20
dundsncy of currency. Money has been chean
er here (making other things dearer) than !,
other countries, because the supply has bee,
great in proportion to the demand. What ha
been the effect of this2
We all see, that if it were wheat or cor
which was thus in excess in this country,
would flow abroad, other things coming in i
exchange, until an equilibrium was produced
1t is precisely SO with circulating medium
When in excess in any country, it has ter
dency to flow abroad until an equilibrium
produced. And money has thus tended to 10
abroad, has been rapidly flowing abroad, all tn
while that this redundancy has existed in tn