The weekly pioneer and Democrat., 1861-12-20
CONTINUED FROM FIRST PAGE.
perior advantages offered by the loans of
the Union. si
THE PROBLEM OF SUPPLY.

the Union.
THE PROBLEM OF SUPPLY.
To enable the government to obtain the
necessary means for prosecuting the war to
a successful issue, without unnecessary cost,
is problem which must engage the most
careful attention of the legislature.
The Secretary has given to this problem
the best consideration in bis power, and now
begs leave to submit to Congress the result
of his reflections.
The circulation of the banks Of the Uni
ted States on the lst day of January,
1861, was computed to be $2O2, 900, ,767.
Of this circulation $3.50, 100000, in round
numbers, was in States now loyal, inclu-
West Virginia, and $50, 100000 in the re-
bellious States. The whole Of this circula-
ton constitutes loan WITHOUT interest from
the people to the banks, costing them
nothing except the expense of issue and
redemption and the interest on the specie
kept on hand for the latter purpose and
it deserves consideration whether sound
policy does not require that the advan-
tages of this loon be transferred, in part
at least, from the banks, representing only
the interest Of the stockholders, to the
Government, representing the aggregate
interests of the whole people.
1t has been well questioned by the most
eminent statesmen whether currency OF
bank notes, issued by local institutions un.
der State laws, is not, in fact, prohibited by
the National Constitution. Such ennis
sions, certainly, fall within the spirit if not
within the letter of the constitutional pro-
hibition of these emissions of bills of credit
by the States, and of the making by them
of anything except gold and silver coin a
legal tender in payment of debts.
However this may be, it is too clear to
be reasonably disputed that Congress,
under its constitutional power to lay taxes,
to regulate commerce and to regulate the
value of coin, possesses ample authority to
control the credit circulation which enters
so largely into the transactions of COM
merce and affects in so many ways the
value of coin.
In the Judgment of the Secretary, the
time has arrived wheni Congress should ex-
ercise this authority. The value OF the ex-
isting bank-note circulation depends on the
laws of thirty-four states and the character
of some sixteen hundred private corpora
tons. 1t is usually furnished in greatest
proportions by institutions of least actual
capital. Circulation, commonly, is in the
inverse ratio of solvency. Well-founded
Institutions, of large and solid capital, have,
in general, comparatively little circulation;
while weak corporations almost invariably
seek to sustain themselves by obtaining from
the people the largest possible credit in this
form. Under such system, or rather lack
OF system, great fluctuations and heavy losses
in discounts and exchanges are inevitable;
and not unfrequently, through failures of
the issuing Institutions, considerable portions
OF the circulation become suddenly worth
less in the hands of the people. The recent
experience of several states in the valley of
the Mississippi painfully illustrates the JUS
tice OF these observations, and enforces, by
the most cogent practical arguments, the
duty OF protecting commerce and industry
against the recurrence of such disorders.
The Secretary thinks it possible to CONS
bine with this protection provision for
circulation, safe to the community and con-
venient for the government.
Two plans for effecting this object are
suggested. The first contemplates the grad
ual withdrawal from the circulation OF the
notes OF private corporations and for the
issue in their stead of United States notes,
payable in coin on demand, in amounts suffi
cient for the useful ends of representative
currency. The second contempates the
preparation and delivery, to institutions and
associations, of notes prepared for circula'
ton under national direction, and to be Sc
cured as to prompt convertibility into coin
by the pledge of United States bonds and
other needful regulations.
The first OF these plans was partially
adopted at the last session of Congress to
the provision authorizing the Secretary of
Issue United States notes, payable in coin,
to an amount not exceeding fifty millions of
dollars. That provision may be so exten-
ded as to reach the average circulation in
the country, while moderate tax, gradually
augmented, on bank notes will relieve the
national from the competition of local cir
culation.
1t has been already suggested that the sub.
stitution of Irrational forsState currency, upon
this plan, would be equivalent to a loan to
the government without interest, except on
the fund to be kept in coin, and without ex-
pense, except the cost of preparation, issue
"nu ieucAIpliouj WHlle tue people would
gain the advantage of uniform currency,
and relief from considerable burden in the
form OF interest on debt.
These advantages are, doubtless, consider
able; and if scheme can be devised by
which such a circulation will be certainly
and strictly confined to the real needs of the
people, and kept constantly equivalent to
specie by prompt and certain redemption in
com, it will hardly fail OF legislative sanction.
The plan, however, is not without serious
inconvenience and hazards. The tempta-
tion, especially great in times of pressure
and danger to issue notes without adequate
provision for redemption; the ever.present
liability to be called on for redemption be-
yond means, however carefully provided and
managed; the hazard Of panics, precipita-
ting demands for coin, concentrated on q few
points and single fund; the risk Of depre-
ciated, depreciatiDg, and finally worthless pa
per money; the immeasurable evils OF a
dishonored public faith and national bank.
ruptcy all these are possible consequences
of the adoption of a system Of government
circulation.' 1t may be said, and perhaps