Staunton spectator. [volume] (Staunton, Va.) 1849-1896, 1857-12-16

nearest 10 January, 1901, tne aggregate auouut
of actual specie in their vaults is 5S349, OF
their circulation $214, IT'S, 1922, and OF their de-
posites $230, 1861 ,S52. Thus itappears that these
banks in the aggregate have considerably less
than one dollar in seven of gold and silver com
pared with their circulation and deposites. 1t
was palpable, therefore, that tue very first pres
sure must drive them to suspension, and deprive
the people of q convertible currency with all Its
disastrous consequences. 1t Is truly wonderful
that they should have so long continued to pre-
serve their credit, when demand for the pay
lnent of one-seventh of their immediate labili-
ties would have driven them into insolvency.
And this is the condition of the banks, Dotwith-
standing 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
credits that the banks now hold considerably
less amount ofspece either in proportion to their
capital or to their circulation and deposites COM
bined, than they did before the discovery of gold
in California. Whilst in the year 1S4S their spe-
Gle in proportion to their capital was more than
equal to one dollar for four and half in 1867 it
does not amount to one dollar for every six dol
lars and. .thrty-three cents of their capital. In
the year 1S4S the specie was equal within very
small fraction to one dollar in five of their circu
lation and deposites; in 1857 it is not equal to
one dollar in seven and a half of their circulation
and deposites
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
contractions. At successive intervals the best
and most enterprising men have been tempted to
IL hop l. LIAM ~
credit, exciting them to extravagant importations
of foreign goods, wild speculations and ruinous
and demoralizing stock gambling. When the
crisis arrives as arrive it must, the banks can
extend no relief to the people. In vain strug-
gle to redeem their liabilities in specie they are
compelled to contract their loans and their is
sues; and at last, in the hour OF distress, when
their assistance is most needed, they and their
debtors together siLk into insolvency.
1t is this paper system of extravagant expan
sion, raising the nominal price of every article
far beyond its real value, when compared with
the cost of similar articles in countries whose cir
culation is wisely regulated, which has prevented
US from competing in our own markets with for
eigu manufactures, has produced eXtravagant
importations, and has counteracted the effect Of
the large incidental protection afforded to our
domestic manufactures by the present revenue
tariff But for this the branches of our manu-
features composed of raw materials, the produc
ton of our own country-such as cotton, iron,
and wooden fabrics-would not only have ac-
Quired almost exclusive possession OF the home
market but would have created for themselves
foreign market thoughout the world.
Deplorabe, however, as may be our present
financial condition, we may yet indulge in bright
hopes for the future. No other nation has ever
existed which could have endured such violent
expansions and contractions of paper credits
without lasting injury; yet the buoyancy of
youth, the energies of our population, and the
spirit which never quails before difficulties, will
enable US soon to recover from our present finan-
eial embarrassment, and may even occasion US
speedily to forget the lesson which they have
taught.
In the meantime, it is the duty of the govern
ment, by all proper means within its power, to
aid in alleviating the sufferngs of the people oc
oasioned by the suspension of the banks, and to
provide against recurrence of the same calam
ity. Unfortunately, in either aspect of the case
it can do but little. Thanks to the independent
treasury, the government has not suspended pay
ment, as it was compelled to do by the failure of
the banks in 1887. 1t will continue to discharge
its liabilities to the people in gold and silver
Its disbursements in coin will pass into circula-
ton, and materially assist in restoring a sound
currency. From its high credit, should we be
compelled to make temporary loan, it can be
effected on advantageous terms. This, however,
shall, if possible, be avoided; but, if not, then
the amount shall be limited to the lowest prac-
ticable sum.
have, therefore, determined that whilst no
useful governmental works already in progress
shall be suspended, new works, not already COM
menced, will be postponed, if this can be done
without injury to the country. Those necessary
for its defence shall proceed as though there had
been no crisis in monetary affairs.
But the federal government cannot do much
to provide against recurrence of existing evils.
Even if insurmountable constitutional objections
did not exist against the creation of 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 a bank could not, if it
would regulate the issues and credits of four
teen hundred State banks in such manner as to
prevent the ruinous expansions and contractions
in our currency which afflicted the country
throughout the existence OF the late bank, or Sc
cure US against future suspensions. In 1926 an
effort was made by the Bank of England to cur
tail the issues of the country banks under the
most favorable circumstances. The paper cur
rency had been expanded to o ruinous extent,
and the Bank put forth all its power to contract
it in order to reduce prices and restore the equ-
hbrum of the foreign exchanges 1t according
ly commenced a system OF curtaillnent of its
loans and issues, in the vain hope that the joint
stock and private banks of the kingdom would
be compelled to follow its example. 1t found,
however, that as it contracted they expanded,
and at the end eft the process, to employ the Ian
guage of very high official authority, "what-
ever reduction of the paper circulation was eff
fected by the Bank of England Gin 1920 was
more than made up by the issues of the country
banks"
But Bank of the United States would not, if
it could restrain the issues and loans of the State
banks, because its duty as regulator of the cur
rency must often be in direct conflict with the
immediate interest of its stockholders. If we
expect one agent to restrain or control another
their interests must, at least in some degree, be
antagonistie. But the directors of Bank of the
United States would feel the same interest and
the same inclination with the directors of the
State banks to expand the currency, to accom-
modate their favorites and friends with loans,
and to declare large dividends. Such has been
our experience in regard to the last bank.
After all, wo must mainly rely upon the pa
triotism and wisdom of the States for the pre-
ventiou and redress of the evil. If they will af-
ford US real specie basis for our paper circula-
ton by increasing the denomination of bank
notes, first to twenty and afterwards to fifty dol
lars; if they will require that the banks shall at
times keep on hand at least one dollar of gold
aud silver for every three dollars of their circu
lation and deposits; and if they will provide by
a self-exeouting enactment, which nothing can
arrest, that the moment they suspend they shall
90 into liquidation, l believe that such provis-
ions, with weekly publication by each bank of
a statement of its condition, would go far to Sc