The Cadiz Democratic sentinel. [volume] (Cadiz, Ohio) 1854-1864, 1857-12-16

wonderful that they should have so long contins
ued to preserve their credit. when demand for
the payment of one-seventh of their immediate
liabilities would have driven them into insolveh-
cy. And this Is the condition Of the banks,
Notwithstanding that four hundred millions Of
gold from California have flowed in upon us
within the last eight years and the tide still con-
tnues to flow. Indeed, such has been the ex-
travagance of banks credits that the banks now
hold a considerable less amount of specie ei her
in proportion to their capital or to their circula
tion and deposits combined, than they did be-
fore the discovery Of gold in California. Whilst
in the year J848 their specie in proportion to
their capital was more than equal to one dollar
for four and half in 1858 it does not amount
to one dollar for every six dollars and thirty
three cents Of their capital. In the year 1848
the specie was equal within very small frac-
tion to one dollar in five oftheir circulation and
deposits; in 1857 it is not equal to one dollar in
seven and a half Of their circulation and depos-
it's
From this statement IL Is easy to account for
our financial history for the last forty years
1t has been history of extravagent expansions
in the business of the country, followed by ru-
inous contractions. Atsuccessive intervals the
best and most enterprising men have been temp
ted to their.ruin by excessive bank loans OF
mere paper crepit, exciting them to extravagant
importetions of foreign goods, wild speculations
and ruinous and demoralEing stock gambling
When the 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 together sink into insolvency.
1t is this paper system Of extrayagant 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
circulation is wisely regulated, which has pre-
vented us from competing in our own markets
with foreign manufactures, has produced ex-
travagant importationS,. and has counteracted
the effect of the large incidental protection af-
forded to our domestic manufactures by the
present revenue tatiif. But for this the branch
es ofmanufactures composed Of raw materials,
the production of our own country-such as
cotton, iron and woolen fabrics-would not on
ly have acquired almost exclusive possession OF
the home market, but would have created for
themselves foreign market throughout the
world.
Deplorable, however, as may be our present
financial condition, 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 that never quails before difficulties will
enable us soon to recover from our present fl
nancial embarrassment and even occasion US to
speedily forget the lesson they have taught
In the meantime it is the duty of the govern
ment by all proper means within its power, to
aid in alternating the sufferings of the people
casioned by the suspension Of the banks, and to
provide against the recurrence Of the same cal
amity Unfortunately, insoither aspect of the
case, it can do but little. Thanks to the indie
pendent treasury, the government has not sus-
pended payment, as it was compelled to do by
| the failure of the banks in 1887 1t will con-
tnue TO discharge its liabilities to the people in
gold and silver. Its disbursements in coin will
pass into circulation and materially assist in re-
storing a sound currency. From its high cred
| it. should we be compelled TO make tempora-
ry 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'practicable sum.
have, therefore, determined that whilst nc
useful government works already in progress
shall be suspended new works notalready COM
menced will DO postponed, if this can be done
without injury to the country. Those necessa-
ry for its defence shall proceed as though there
had been no crisis in our monetary affairs
But the federal government cannot do much tC
provide against recurrence of existing evils
Eyen iflnsurmountabe constitutionable objec.
tions did not exist against the creation OF a ma
tional bank, this would furnish no adequate
preventative security. The history of the last
Bank of the United States abundantly proves
the truth ofthis assertion. Such bank coulc
not, if it would regulate the issues and credits
fourteen hundred State banks in such manner
as to prevent the ruinious expansions and con
fractions in our currency which afflicted the
country throughout the existence of the late
bank, or secure us against future suspensions
In 1929 an effort was made by the Bank OF Eng
land to curtail the issues Of the country banks
under the most favorable circumstances. The
paper currency has been expanded to ruinou:
extent, and the bank put forth all its power tC
contract il norder to reduce prices and restore
the equilibrium of the foreign exchanges. j
accordingly commenced system OF curtailmen
of its loans and issues, in the vain hope that the
Ijoint stock and private banks of the kingdom
wonld be compelled to follow its example. 1
found. however, that as it contracted they ex
panded, and at the end OF the profess to employ
the language of "a very high official authority
"whatever reduction Of the paper circulation
was effected by the bank of England Gin 1925,
was more than made up by the issues Of tn
country banks"
But Bank Of the United States would not
it could restrain the issues and loans of tn
State banks, because its duty as regulator 0
the currency must often be in direct conflic
with the immediate interest of its stockholders
we expect one agent to restrain or control an
other their interests must, at least in some de
gree, be antagonistic But the directors Of
bank of the United States would feel the sam
interest and the same inclination with the direc
tors OF the State banks to expand the currency
to accommodate their avortes and friends witt
loans, and to declare large dividends. Such ha
been our experience in regard to the last bank
After ALL we must mainly rely upon the pat
riotiSm and wisdom of the States for the pre-
yention and redress of the evil. If they will al
ford us real specie basis for our paper circula
ton, by increasing the denomination of ban
notes, first to twenty, and afterwards to fit,
dollars; ifthey will require that the banks shal
at all times keep on hand at least one dollar Q
gold and silver for every three dollars of thei
circulation and deposits; and if they will provid
by elfexecuting enactment, which nothin
T can arrest, that the moment they suspend the.
shall 90 into liquidation, believe that sue
provisions, with weekly publication by eac
4 bank Of a statement ofits condition, would 6
far to secure US against future suspensions Of spe
Gle payments.
, Congress, in my opinion, possesses the powe
+ to pass uniform bankrupt law applicable to Al
banking institutions throughout the Unite
States, and / strongly Recommend its exercise
III; n,,ld ,nakn Il the irravarsihln organic La,