The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1858-01-24

the deposits in account.
II is easier TO understand the complaints made IN
the message of the too great disproporton between
the specie and the bills and deposits, for on one side
may be perceived what could be required from the
bank and on the other what the bank has dsposable
at the time of crisis.
While this is not, however, a very exact estima-
ton, for the bank has not only its specie to
meet its liabilities, it has its stock Capital
sociaD and the cOllaterals which 1t has received.
If is acrculating bank it can represent both with
The only thing Is to examine the proportion existing
between the specie and the bills in circulation. II
that circulation il too extensive-that ls TO say II
the specie is too small in proportion with the bills IN
crcuatonit is evident that the bank has only specie
to face its liabilities. On the other hand it can
always issue bills and pay off the deposits in that
way 1t is consequently inaccurate 10 say that IL
has only its specie to face both its circulation and its
repeats it-that the crisis was created in the
United States by the excess of paper currency.
This is a mistake. We are not acquainted witch the
situation of all the banks of the Union, but have the
statement of the banks OF the State OF New York,
where the crisis first exploded, and which has suf,
ered the most from it. The following was the pro-
portion of SPECIE with the circulation, in the banks
of New York at three different periodsin 1852, in
1856, and in the month of September Of the present
year, at the beginning Of the crisis:-
June, 1852. June, 1856. Sept, 1857.
Specie. 49, aO4 900 ls,5lo,ooo 14,a2looo
Thus, it is not at the moment of the crisis
that we find the greatest difference tecdTtl
between the circulation and the specie, and
at that very moment the amount of specie
represented more than half the amount of
the bills which is far beyond the proportion which
is considered necessary Therefore it is not the ex-
cess of paper currency which has caused the crisis
in the United States as the message says. The cir
culation of the bills not increased either in pro-
portion TO its absolute amount for there We're only
twenty-seven millions for so important State as
that OF New York; nor in proportion to its specie,
for it was not even twice as much.
We would here state pdssdnt, in relation to the
false ideas in circulation about the paper money,
that there is never an undue increase in the circula
BILE into specie. II is impossible for the banks
to put into circulation more than the public
is willing to receive, and the public does not receive
more than it wants-that is to say, than what is ne
cessary to the circulation. Therefore il may have
been noticed that whenever crisis occurs the circu
lation of bank bills under the influence Of the
vertibility into specie, tends rather to diminish
than to extend, which provokes chimericai minds
and induces them to demand the forced circulation
that is to say the overthrow OF that salutary OBJ
stacle which prevents the abuse of paper money
and incnrs the perous chances which that abuse III
vtes. If the banks Of the United States have been
the cause of frghtful crisis if they deserved the
legitimate discredt which has fallen upon them it
is not becanse of their issuing too much paper cur.
rency, but they have comWtted another capital
fault; they have misused tn resources which they
entrusted to them. The capital in the hands Of the
banks is chiefly floating capital, that is to say
capital which can only receive temporary invest
ment that ought always to be easily convertible into
cash. II represents the amount Of articles OF con-
sumption to be used by the workingman who has to
reproduce them in return, when surplus must re-
MAN, that is to say profit constituting the saving;
it is that profit or saving above the ordinary ex-
penses which forms the disposabe capital that can
be employed in improving that portion Of the CAPT
tai which consists of real estate.
But If, on the contrary, going beyond the savings
one wthdraws more or less, from the foating capl-
tai to form fixed capital of it, that is to say to put
in the form of real estate the power of reproducing
articles of general consumption IL reduced the afti
cles become dearer, and in proportion as they be-
come dearer the capital TO produce them IL more
looked for and acquires consequently q greater
This is the first result But here is second. The
conversion Of floating capital into fixed capital
creates a new source OF labor more or less
fruitful, and the workingmen engaged in it
become themselves consumers. OF articles
which their labor does not reproduce, so that the
power of reproducing the articles OF consumption
has been lessened, while the demand for them has
been increased. What then Occursf 1t becomes
necessary TO have to importation TO furnish
the surplus and this importation is 20 much the more
important as the prices are higher IL would all be
perfectly well II one had other produce TO export in
my-that produce is exchanged for produce-wouh
be put in practice with general satisfaction;
but here.this is not the case. There Is no pro
duce t6export in exchange; the internal production
has lessened in consequence Of the bad use
of the capital exchange becomes unfavorable;
all the specie leaves the country and one Is obliged
20 pay with his capital what he cannot pay with his
income. II is thus that the United States have be-
come indebted for more than two thousand five
hundred millions of francs to Europe. and that a
great part Of their public stocks have gone into
foreign hands. What IL particularly to be deplored
in q similar situation that II creates &tious
prosperity; in fact how many public workefbere
are how much more labor there Isl salaries increase,
and in proportion they rise the articles of con-
sumption grow dearer Then people desire TO pro
duce and import more; they believe in infinite re
sources-they simply take failasy for reality. This
supports itself as long as the artificial basis
upon which everything rests, does not fall dowu-as
long as credit Is found at home and abroad. But
some day IL happens that grain of sand slips under
the wheel Of the badly managed machine when
everything IL stopped there Is no more work for the
laboreB, because there IL no capital 10 pay them;
the stores have considerable stock Of goods which
they are unable to sell; and the value Of many Of
those enterprises for which the floating capital of
the country has been sacrificed, and for which the
country Is in debt abroad, undergoes considerable
depreciation. Then the catastrophe occurs, and the
failures are counted by hundreds. Is II because
Of the abuse of the paper currency Not at all; the
paper currency has not increased In the slightest de-
gree, as we have illustrated; but credit has been
greatly abused which Is quite different
Let us suppose the annual savings of the United
States 10 be from zoo TO 200 millions, which, IN
good financial organization, would simply be the
amount yearly 10 he usefnlly employed for enter
prises which would convert the capital into real
estate Let us suppose that instead of that 500 or
900 millions have been used for such work; the
difference has necessarily been taken from the float
ing capital which is employed IN the reprodac-
ton of articles of consumption. What will be the
RESULT II the country requires the same
amount of those articles, II will have 10 demand
arg share abroad by means OF credit and will be-
.ab mr. In IN IN
o serious inconvenience 10 have invested part OF
its capital in enterprises having long 10 run even II
they were productive In future. What must happen
IL al those enterprises are not productive-t the
multitude OF chirnercal schemes which absorb use
lessy, more or less captsll Then there Is damage
both Sides at first because the capital thus With.
drawn is wasted for the present and the future, and
because its only use has been 20 favor foolish
speculations, 50 support the Illusion Of
factitious nrosneritx which the lead blow