The Hillsdale standard. [volume] (Hillsdale, Mich.) 1851-1909, 1857-12-15
HILLSDALE MICH, TUESDAY, DEC l5 1857

tnc issue OF notes from tue banking depart
ment, for the Bank of England always to
keep on hand gold and silver equal to one
third of its combined circulation and de-
posts. ...r
If this proportion was no moro than suf
ficient to secure the conyertibility of its
notes, with the whole of Great Britain,
and to some extent the continent of Eu-
rope, as field for its circulation, render
ing it almost impossible that sudden and
immediate run to dangerous amount
should be made upon it, the same proper
tion would certainly be insufficient under
our banking system. Each of our four
teen hundred banks has but limited cir
cumference for its circulation, and in the
course OF very few days the depositors
and note-holders might demand from such
bank a sufficient amount in specie TO
compel it TO suspend, even although it had
coin in its vaults equal TO one third of its
immediate liabilities.
And yet | am not aware, with the ex-
ception Of the banks of Louisiana, that
any State bank throughout the Union has
been required by its charter TO keep this
or any other proportion of gold or silver,
compared with the amount Of It's combin-
cd circulation and deposits. What has
been the consequence! In recent report
made by the reasury Department on The
condition Of the banks throughout the diff
ferent States, according to returns dated
nearest TO January, 1857, the aggregate
amounts of actual specie in their vaults is
nf
1882, and Of their deposits, $3.50, $751;
S52. Thus it appears that these banks in
the aggregate have considerably less than
one dollar in seven Of gold and silver COM
pared with their circulation and deposits.
1t was palpable, therefore, that the very
first pressure must drive them to suspen-
sion, and deprive the people of conyerti-
bic currency, with all its disastrous conse-
qucnces. 1t is truly wonderful that they
should have SO long continued to preserve
their credit, when demand for payment
Of one-seventh of their immediate liabili-
tics would have driven them into insolven-
cy. And this is the condition of the banks
Notwithstanding that four hundred millions
of gold from California have flowed in up
on 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 of specie, either in proportion
to their capital or to their circulation and
deposits combined, than they did before
the discovery Of gold in California.
Whilst in the year 1s4s their specie in
proportion to their capital was more than
equal to ono dollar for four and half,
in 1857 it docs not amount to one dollar
for every six dollars and thirty.three cents
Of their capital. In the year 1S4s the
specie was equal within very small frac-
tion to one dollar in five OF their circula-
tion and deposits; in 1857 it is not equal
to one dollar in seven and ba'f Of their
circulation and deposits.
From this statement it is easy to account
for our financial history for tho last forty
years. 1t has been history Of cxtraya-
CANT expansion in the business of the coun
try, followed by runous contractions. At
successive intervals the best aud most en-
tcrprising men have been tempted to their
ruin 10y excessive bank issues of mere pa
per credit exciting them to cxtravagant
impotatons of foreign goods, wild spccula-
tions, and ruinous and demoralizing stock
gambling. When the crisis arrives, and
arrive it must, the banks can extend no re-
lief to the people. In n 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 insoly-
ency.
1t is this paper system of extravagant
expansion raising the nominal prices of
every article far beyond its real value when
compared with the cost of similar articles
in other countries whose circulation is wise
ly regulated, which has prevented us from
competing in our own market with foreign
manufactures, has produced extravagant
importations, and has counteracted the cf-
feet Of the large incidental protection afior-
ded to our domestic manufacture 10y tho
present revenue tariff But for the branch.
es of our manufactures composed Of raw
materials, the production of our own coun-
try, such as cotton iron WOODEN fabrics
would not only have acquired almost cxclu-
sive possession Of the home market, but
would have created for themselves for
eign market throughout the world.
Deplorable, however, as may be our pres
ent financial condition, VIC may yet in
dulge in bright hopes for the future. No
other nation has ever existed could have
endured such violent expansions and con-
fractions of paper credits without lasting
injury yet the buoyancy of youth, the en-
crgies of our population, and the spirit
which never quails before difficulties, will
enable us soon to recover from our present
financial embarassmonts, and may even oc-
casion us speedily to forget the lesson
which they have taught
In the meantime it is tho duty Of the
government, by all the proper means with.
in its power, TO aim in alleviating the suffer
ings Of the people cccasioned by the sus
pension Of the banks, and to provide against
a recurrence Of the same calamity. I'm
fortunately, in either aspect of the case, il
can do but little. Thanks to the indepen
dent treasury. the government has not sus
pended payment, as it was compelled to dc
by the failures Of 1887. 1t will continue
to discharge its liabilities 10 the people il