The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1867-03-19
CONTRACTION AND RESUMPTION.

CONTRACTION AND RESUMPTION.
Letter from a Wall street Broker co tho
Secretary Of tho Treasury.
New YORK, March Q, 1851.
Hon. HuGH McCuLLocH, Secretary Of the Treasury
Since the assembling Of Congress in December last
feeling OF depression has weighed upon the people Of
this country owing principally to the uncertainty
which existed a. 70 the action Of that body Business
has tagged and the industries OF the country have been
comparatively at stand STILL
Upon the adjournment every one breathed more freely
preparations for general business were commenced and
return Of prosperity looked for, the people be-
evng that no further contraction Of the currency would
be made at present But the efforts Of our merchants to
rise from their PROSTATE condition have been suddenly
checked. and business is once moro parayzed and do
moralzed BY your last monthly statement Of the pub
lie debt showing contraction Of Ave million dollars In
legal tenders and two millions in compounds thus re-
vssing what there good reason 70 believe would DO
your policy, ct leaE for the present
am convinced that after the heavy Losses sustained
By the business firms through the entire country. IL
ould require bus little further pressure TO cause very
many Of Thorn 70 become bankrupt
The lack OF business, with enormous expenses is
rendering commerce comparatively unproducuve; and
what Is now wanted II encouragement from you. a.
Minister OF Finance the dsspseated and wide
spread disrust and thus enable merchants TO
from their totterng condition. By giving
that you would Al leas. for the present. suspend
traction, you would aid that most desirable result
and at the came time benefit the government by In
creased revenue, which otherwise must materially
diminish will not now stay TO inquire whether
traction Ii Q necessary 10 the resumption OF
that Of e. the
Although with OF gold equal 70 twenty seven
half per cent Of the whole circulation OF United
notes. and gold notes. would appear that SO far
as respects the ratio OF coin to the demand liabilities OF
tho government the Treasury Is already In situation
to commence specie payments; any curtament Of the
circulation being therefore supererogatory as means TO
resumption.
war the banks usually held average only seven
teen and half per cent Of specie TO their combined
deposits and circulation; and that the national banks
per cent Of legal tenders; although from the fact
OF the depositors and noehoders Of the banks being
always situated in the locality Of the bank there Is
than in that Of the Treasury which, while its notes
scattered all over the country has but one designated
place for their redemption. WHILE therefore, there
conceivable circumstances under which contraction
might be proper step preparatory to resumption as for
in OF the circulation being much larger
than is and the reserve much less yet with the exist
ing ratio of coin TO circulation and with the fact that
the supply OF gold in the country now sugmentng Of
the ratio OF fifty million dollars per annum, 1t would
obvious that the further contraction Of the CUE
rency cannot be demanded step essential 70 resump
recncaon Of the existing arrangement Of the values OF
commodities and securities. So far the currency Is
deprecated In value IL necessates advance OF pces
but in no other way can be said to affect values and
contraction is not necessary to resumption OF specie pay
ments cannot be necessary 70 the reduction Of prces
allowing for much OF the advance In prices ID
due to the premium on gold, the remainder must be &C
counted for BY the arrangement Of the ordinary relations
OF supply and demand consequent upon the war;
Neither OF which controlling influences swayed from
their normal direction simply by the volume OF the Cir
cuatior All that can be expected from the government
In ha vcfr twin fa
possible the old monetary Standard and as for the
rest the pressure OF taxation and Of high prices upon
ton extent which will ultimately reduce values to
q natural level One OF the most important requisites 70
decline IN e 2!
with cheapness 1t IT, however, the misfortune Of the
policy Of contraction that It directly tends TO discourage
production An arbitrary withdrawal OF part Of the cir
cuating medium limits the facilities for making ex-
changes and consequently embarrasses the producer
now s. according 10 nxed sxtraneous rule has very
direct tendency 70 produce limitation OF credits eg
mate - we'll a. other Bankers ana lenders generally
money market and are therefore led TO call IN loans
and keep large portion Of their funds Idle. In
only Is there lost community the use OF
rsncy actually RETIRED but also OF that portion kept idle
OF about eighteen millions OF grsenbecs during the last
three months Of 1855 produced succession OF small
zion Of business NOT so much from tue loss Of that
amount OF circulation but from the fact that this depe
ton OF the vital current OF commerce begat general
alarm, and caused . sudden disturbance OF the whole
machinery q credit It surely needs argument TO
show that the direct tendency Of such operations must
be TO limit the productive operations Of the country
and consequently to aggravae the prevailing derange.
mepts Of commerce
II Il argued IN favor Of contraction that Il will aid In
extent this true. Such the immediate effect OF
the three months contraction just alluded to- but IT.
tail production Is very clear such fall IN prices
will only DO temporary; for with moro limited sup.
ply OF commodities prices will necessarily up
ward; nor can the temporary decline itself be con-
sdered wholesome, inasmuch as being the result Of q
compulsory realization involves losses 70 producers
which we have 70 depend for improved supply OF
commodities The reduction Of values he brought
money market; il mus, rather be retarded BY such
means The only remedy must be found in the unfet-
which Sy The supply Will a,mlDsh Urcss
am far from maintaining, absolute proposition,
that the business Of the country could not be conducted
properly and conveniently with less than hundred
millions OF currency For as individual notes
and checks play most important part in the larger
Of wholesale trade. II Is evident thai any
caused by tho withdrawal Of government currency might
be ned By freer use Of individual credits But unior-
bic In the present deranged condition OF business, and
contraction Itself contributes toward the mpossibsy.
There Is 90 much unsoundness in business, and NOR
chants arc losing generally upon their operations,
that is impossible there should be any expansion OF
credits compensate the withdrawal OF currency
on the contrary contraction Of the currency BIZ pro-
ducing general uneasiness, begets contraction Of
individual credits While, therefore, under healthy
and prosperous condition Of affairs the volume Of the
circulation might be curaied with the certainty OF the
substitution Of other forms OF currency without very
dangerous results Jet In the present condition OF things
such substitution cannot be counted upon, and hence
the extreme danger OF present contraction. Even allow
ing then that 1t may DO desirable TO curiail the
amount Of national circulation yet II must be allowed
that this Is not tho time when such course should be
und raken There DO question that the enforce.
men Of contraction would interfere with speculation;
but rather by changing its than by limiting It's
amount; Increasing the number OF bear operators but
by means diminishing the volume OF operations II
must however be remembered that not oil speculation
Is idle and useless 49,
There is much legitimate speculation the effect Of