The daily dispatch. [volume] (Richmond [Va.]) 1850-1884, 1873-12-06
How Paper Money Gets Aaoat,

subject Of the currency. il Is comprehensive
in its bearing, and affects vitality the chafac'
ter Of paper money.
1s, Under the old system Of banking,
banks were incorporated with the power 10
make naper money and utter the same, ana
70 discount notes and receive deposits OIL
mosev. There were limits prescribed as 10
the proportion of specie they should keep I'D
their vaults to the paper they put out The
bank.notes which they printed were sent out
through loans they made to the people.
I'd. The present system takes away the
power TO print paper money from banking
corporations, and retains it exclusively III
the hands of the Federal Goverrment-s.e e,
Congress taxed State banks out of exist
auce, and compelled National banks to use
no paper money but that provided b. the
National Government.
In order to get that paper money tue banks
are compelled TO deposit United States BONDS
with The Government rs security iof ING
notes handed TO them. These notes Inc
banks put atloat by lending them to the
people.
Now. thea, we see how notes get into the
hands of the people. lie: us contrast the
systems:
The old left to the incorporated banks the
manufacture of notes aud the issuing OF the
same. The restrictions placed upon the pllVl-
,,re were Insufficient and not enforced.
To be sure, there were State directors ana
annually Legislative committees TO pry INTO
the vaults Of the banks but the directors
were BY force Of circumstances allied VIII
the banks, and the examinations of the
banks by legislative committees were pretty
much like examinations OF railways by com.
mlttees-mcrely Il pleasure affair, winding III
in tiuc dinner. The gains OF the banks
were through loans, and 10 increase them
they only had TO print more paper; ana Tue
restrictions upon the exercise Of this cA-
tremcy important power were very shack
linz. Wien this imitation brought on runs
upon the banks, suspension was their easy
way Of escape.
1t is not surprising To Us all now that
PAPER printed and uttered in this way was
discredited little way from home, and that
the paper issued by the banks of few States
would pass at par in other States. SO loose
was the system that banks were started with.
out means that printed and uttered money
without stint, and after flooding their local..
ties with their promises TO pay exploded,
and left their paper, never to be redeemed, Il
clear loss to the community.
1t is not to he wondered at that under Il
system 50 loose number OF private banks
uttered promises to pay and exploded. We
remember noted cases in the LATHAM and
GALLAHug banks, aud the bank OF SLLDEN.
WITuERs Il Co., and legion Of others,
large portion Of whose issucs were finally
lost to the holders.
The reader will wonder bow such cur
rency got atloat. We have said that it wa.
put forth in loans; but it is easy to under
stand that paper SO liable to suspicion could
not yet out in a very proper way. Banks
eager TO send out notes lowered their stand
ard Of soivcncy Of borrowers, and some, i'll
lending, made discount upon their notes.
They were chiefly private bankers, who took
CT six, and twelve, and fifteen per cent. i'll
passing their notes to manufacturing agents
to be paid out 10 hands.
The proportion Of inSo'vcnt. greatly III
creased under this system, and the stand
luS of banks aud their notes was greatly
lowered. 1t is needless to recount how
commerce was veXcd and frelted, and how
the people suffered. This was the way OF
aaJlatton-oi banking without mcans-and
ol putting money into the hands OF the un-
trustworthy and Irresponsible.
The aeU system requires that no bank.
note shall be issued until its value has been
deposited in the proper department OF the
Federal Government. Therefore the bank
that issues the note SO protected under
stands its responsibility too we'll to put itself
in jeopardy by loaniug to persons Of doubt.
iul responsibility. The very character of
the note tends TO protect the country from
loose aud merely speculative transactions.
Again: Observe the difference between
the two systems in another respect. The
Oh gave power TO print money and utter ii;
the ne.0 not only gives 10 such power TO the
banks, but makes them pay United States
bonds, dollar tor dollar, for the paper money
issued TO them.
Tie old tner,tdbly Cpencd the sray to inf0-
ion. The ne'o closes ii up. The paper money
under the new system is a representative of
absolute wealth, Of gains held by those who
u ter it. 1t does not even nomiually increase
wealth. 1t is, indeed, true promise 10 pay
what is held for its redemption. Nor will
the paper be procured in quantity beyond
the demand of business. Those who pro-
cure it know too well that it costs them its
full value to force it out upon the country
through any irregular and dangerous system.
They will not obtain more than can be in Il
legitimate and solvent trade absorbed.
The acay paper money gets into the hands
of tue people is therefore the main point in
fixing its sorcncy. We cannot see how
what is called imitation eau we'll take place
under the new system Of currency the coun-
try now has.