, 1861-06-25
to the reader to sec how easily Dr.. Smiths
theory is demolished by few simple
figures.
Assume 800 as the exponent ef bank
capital, and; compare the two 1aH8s Of 10
and so per cent Of specie to demand .lia-
bilites-the loan at1ounting to double the
capital. Thus:
800 90 capital.
Ill II "deposIta" and circulatien, inclu.
ding al demand liabilities.
sail II total resources.
. II II specie rescrEe, 10 per cent. Of liabi1i-
ties.
500 % loan, say at the Chicago rate Of lopez
cent. per annum. ................. $40 oc
*10o 90 capital.
200 90 "aeposttsn and circulation, iuclu.
49, ding Ill demand liabilities.
$500 90 total resources.
100 90 epeS1e reserve, 10 per cent. Of lahll-
1ueN

500 90 loan, say at the Chicago rate Of 10
Per cent per annum. 90
Now the truth is, the banks Of our cities
cannot maintain their loans at double the
amount Of their capital, with specie hold
ing Of 10 per cent. Of liabilities, nor even
with 20 per cent, Single institutions some
times reach this ratio Of loan, having
wealthy depositors who require but smau
discounts; aud the banks Of New Orleans
have maintained it al certain periods with
reserve amounting to 40 or As per cent,
Of their Liabilities. As the profits Of bank
ing depend upon the excess Of the loan
over the capital, and not over the specie,
it is therefore obvious that the greater re-
serve is the more profitable The reader
will see at j glance, by the above exam
pies, that Adam Smiths doctrine on this
point is entirely fallacious; for the profit is
alike in both-or would be, If the bank
with the smaller reserve could lend double
the sum of its capital-there being no loss
Of interest in either case. &c..
There ia not in the history Of fmankind q
more wonderful and persistent delusion
than the scheme Of so-called "paper mon
ey." For nearly sixteen centuries it tor
mented the people Of China, keeping the
business Of the empire in confusion, culmi-
mating periodically in general ruin. There,
as here, the idea prevailed that the fault
was in the general management OF b1si-
ness, and not in the currency. NeVerthe-
less the "paper money" was under suspl-
cion and undergoing notifications contin-
ually. The Chinese, according to Kla-
protb, the eastern trsveler and Royal Prus-
sian Professor of Asiatic languages, CON-
menced with . skin currency 119 years be-
fore the Christian era; it was made Of rare
and handsome white deer skins, and called
"value in skins." Then it passed through
various notifications Of paper called re-
spectiycly "1ying money" "convenient
money! tc1itss OF coupons, " Exchanges" !"
securities" conYentionales," "silver OBJ
legations" &C., &c. In the latter half Of
the 18th century, the Mongols made them
;.,.es,,eoa ..a.ho. -, - 49, naao.
o.,-xa,,aw o,11;na ~. sa,r a.,;.,;n- ae.t.1
d -.1~u u:.,
~ +han Far.so5 ~ :o,n+r.- ,r,;,oa h,s;
1ae. ~ e,o11,. r,;ned +,,a,,aa,ra1 Tha1
--ara a~.o1Iod s.,r, a., 49, :, .o7..
ta- 1a1f - 49, 1A,b .oa.,.sz. 1,asa-.oa - ~, 49,
49,. 1... ,-s~,.. ~
@ "0 o4ou5uS ueD wv penp's ~,
er ".lu 'nen pap1t mones " 'a4ae, A1e
'nllng elhperot "no succeeoeu INC hongo4E
uieo " p1tcn u2 tnls ueglaoeo currency
ou' only maoe tne mae1er WORSE IN l4e
ssa :. moulo oi'ng oat oenleis ~ s'rlng y
loeo-'na. u 70 say' II MIS- sa1oe1ess' Ne
emissions emission. haV'ns 0een ,naue' 30 ihs a. cai
NC ases. 'ainea' al.ei 1sf0' ~ tei ulua'eu L
olscreol1' anu emma mas no" oeen rlo o
INT NUISANCE o. nc'lslous currency an'
oi nank1optcy IN EEaoe 1or lour centuries
uhnoas IS now IN conoltlon 70 maze al
enc o1 ner nc'l'lous currency IN tne sam
way. Lei ltseVe1ely alone' lave no1hln{
more 10 10 WIN currency tnat uepenu
'of 1's eAlslenee epon -iAe caprice u pAoh II,
en- winning III Eo!ulne ano Values VIII
every tu1n ol tne't loans' rendering Is LII
posslole 1or the oeptor 10 make even
reasonable guess as to what mny be tn
money value OF his estate, and measure
his means OF payment, month or a wee
alter making contract. ESTABLISH ban