Preble County Democrat. [volume] (Eaton, Ohio) 1857-1859, 1857-12-17

1
rency-the only one which can guar
, the public against over-issues and ban
suspensions. AS collateral and even
full security, it is doubtless wise, and i
all cases ought to be required, tn:
e banks shall hold an amount of Unite
States or State securities eq ual to the
notes in circulation, and pledged fc
their redemption. This, however, ful
E nishes no adequate security against o1
er-issues. On the contrary, it may b
perverted to initiate the currency. In
deed, it is possible, by this means, t
convert all the debts. of the UniteS
Estates and State. Govern ment into banl
notes; without reference to the speci
required to redeem them.
However valuable these securitie
may be in themselves. theyc annot b
converted into gold and silver a
the moment of pressure, as our expert
ence teaches, in sufficient time to pre-
vent bank suspensions and the depreci
alton of bank notes. In England
which is to considerable extent pa
per money country, though vastly be
hind our own in this respect, it was
deemed advisable, anterior to the act OF
Parliament of 1874, which wisely sepa-
rated the issue of notes from the bank
ing department of the Bank of England
always to keep on hand gold and silve,
equal to one third of its combined cir.
culation and deposits.
If this proportion was no more than
sufficient to secure the convertibility ot
its notes, with the whole OF Great Bri
tain, and to some extent the continent
of Europe as field for its circulation
rendering it almost impossible that a
sudden and immediate run to a danger
ous amount should be made upon it.
the same proportion would certainly be
insufficient under the banking system.
Each Of our fourteen hundred banks
has but limited circumference for its
circulation, and in the course of very
few days the depositors and the note
holders might demand from such bank
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-
ccption 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 and
silver compared with the amount of its
combined circulation and dcposites.-
What has been the consequence? In
recent report made by the Treasury De
partment on the constitution of banks
throughout the different States, accord
ing to returns dated nearest to January,
1857, the aggregate amount Of actual
specie in their vaults is S5S,3 ,3l9 ,S3S, of
their circulation SPLITS, ,S22, and Of
appears that these banks in the aggre-
gate have considerably less than one
dollar in seven Of gold and silre' com
pared with their circulation and dcpos-
ties.
1t was palpab!e, therefore, that the
very first pressure must drive them to
suspension, and deprive the people of n
convertible currency with all its disas-
trous consequences. 1t is truly won
derful that they should have 50 long
continued to preserve their credit, with
Il demand for the payment of one -sev-
enth of their Immediate liabilities would
have driven them into insolvency. And
this is the condition of the banks, not
withstandimg that four hundred millions
of gold from California have flowed in
upon US within the last eight ears, and
the tide still continues to flow. Indeed,
such has been the extravaganza of bank
credits that the banks now hold a con-
siderably. less amount of spccie-either
in proportion to their capital or to their
circulation and deposits combined
than they did before the discovery of
gold in California.
While in the year 1913 their specie
in proportion to their capital was more
than equal to one dollar for four and a
half, in 1857 it does 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
a very small fraction, to one dollar in
five of their circulation and deposits; in
1857 it is not equal to one dollar in sew
en- and half of their circulation and
deposits.
From this statement it is easy to ac-
count for our financial history for the
last forty years. 1t has been history
of extravagant expansions in the bust
ness of the country, followed by ruin
Gus con;ractions. At successive inter
walls the best and most enttrprising men
have been tempted to their ruin by ex
cessive bank loans of mere paper credit,
exciting them to extravagant importa
tions 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 a vain strug-
gle 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 assis-
tance is most needed, they and their
debtors together sink into insolvency.
1t is this paper system of extravagant
expansion-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 egulated-which has prevent
ed us from competing in our own mark
cts with foreign manufacturers-has
produced extravagant Importation, and
has counteracted the effect of the large
incidental protection afforded to our do