Glasgow weekly times. (Glasgow, Mo.) 1848-1861, 1857-12-24

currency, instead Of coin, for the country,
the first duty which these banks owe to the
public is 10 keep in their vaults sufficient
amount of gold and silver to insure the con-
vertibiity Of their notes into coin at all
times and under all circumstances. No
bank ought ever TO be chartered without
such restrictions on its business as to secure
this result. All other restrictions are COM
paratively vain. This is the only true
touchstone, the only efficient regulator of
paper curLency-the only ore which can
guard the public against over-issues and
bank suspensions. As collateral and
eventual security it is doubtless wise and in
all cases ought 10 be required. that banks
shall hold an amount Of United States or
State securities equal to their notes in cir
culation, and pledged for their redemption.
This, however, furnishes no adequate Sc
curity against over-ssues. On the contra
ry, it may be perverted 10 initiate the cur
rency. Indeed. it is ro>Nipie by This means
TO convert all tie debts Of tie Uui.rd States
and State governments into bank notes,
without reference 10 the specie required to
redeem. However valuable these securi.
ties may be in themselves, they cannot be
converted into gold and silver at the mo-
ment of pressure, as our experience teaches,
in sufficient time 10 prevent bank suspen-
sions and the depreciation of bank notes.
In England which is to considerable ex-
tent paper money country, though vastly
behind our own in this respect, it was
deemed advisable, anterior 10 the act of
Parliament of 1914, which wisely separated
the issue OF notes from the banking depart
ment, for the Bank of England always to
keep on hand gold and silver equal to one
third of lis combined circulation and depos-
ties, If this proportion was no more than
sufficient to secure the convertibility of its
notes, with the whole of Great Britain, and
TO some extent the continent Of Europe, as
field for its circulation, rendering it al
most impossible that sudden and immedi.
ate run TO dangerous amount should be
made upon it, the same proportion would
certainly be insufficient under our banking
system.
Each Of our fourteen hundred banks has
but limited circumference for its circula-
tion, and in the course of very few days
the depositors and note-holders might de-
mand from such bank a sufficient amount
in specie to compel it 10 suspend, even
though it had coin in its vaults equal to one
third of its immediate liabilities. And yet
| am not aware, with the exception Of the
banks of Louisiana, that any State bank
throughout the Union has been required by
its charter 10 keep this or any other pro-
portion Of gold and silver compared with
the amount Of its combined circulation and
deposites. What has been the consequence?
In recent report made by the Treasury
Department on the condition Of the banks
throughout the different States, according
to returns dated nearest to January, 1857,
the aggregate amount of actual specie in
their vaults is $5s, ,349 1888, of their circu-
lation 1914, ,77S, ,s32, and of their deposi,es
$23O,35l 1852. Thus it appeaas that these
banks in the aggregate have considerably
less than one dollar in seven of gold and
silver compared with their circulation and
deposites. 1t was palpable, therefore, that
the very first pressure must drive them 10
suspension, and derive the people of con-
vertible currency with all its disastrous
consequences. 1t is truly wonderful that
they should have SO long continued to pre-.
serve their credit, when a demand for the
payment Of one e-seventh Of their immediate
liabilities would have driven them into in
solvency, 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 continues to flow.
Indeed, such was the extravaganza of
bank credits that the banks now hold
considerable less amount of specie, either
in proportion TO their capital or to their cir
culaton and deposites combined, thar they
did beiore the discovery OF gold in Caliior-
MIA. Whilst in the year lS4S their specie
In proportion 10 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 lS4S the specie
was equal within very small fraction to
one dollar in FIVE of their circulation and
depositesI in 1857 it is not equal to one dol
lar IN seven and half Of their circulation
and depositss.
From this statement it is easy TO account
for our financial history for the last forty
.ao.. II h,. haap historv Of avtraya.