The Anderson intelligencer. [volume] (Anderson Court House, S.C.) 1860-1914, 1873-10-16
! ! Banks and Banking.

..-.,,4,ay Banks and Banking. a''i
An esteemed friend sends us thefoEowipg
extract, from the annual report OF Col' Thomas
J. Pickens, the Comptroller General of the
State submitted to the, Legislatures tinaelS5&
Our correspondent thinks this article is appi-
cable to the present times and circumstances,
and requests its Republication in our columns
which is readily grantedI: 51 UOH
The banks which were in a state of suspen-
tion at the last session of the Legislature, all
resumed specie payments before the close OF the
fiscal year with apparently less difficulty and
stringency than was anticipated. The past his
tory of the, banking system OF the country
clearly illustrates the fact that these occasional
suspensions of specie payments may be- looked
for as periodical incidents inseparably connec-
ted with the system. As the wrecks of the late
financial tornado which swept with resistless
violence throughout, the comm ercial World, are
still around us, it may not be deemed irrelevant
to- make o few general remarks relative to
system of, banking which, in the opinion Of
many, contributed in great, degree TO its IN IN
tensity. IA comprehensive view of the wide
field Of commercial enterprise and speculation
would leave no doubt that the principal cause
Of the recent financial revulsions, which shock
the commercial world teits centre, and marked
its course with desolating ruin, was. the too
great extension of the credit system through
all tine ramifcations of trade and .speeula-
ton. As credit, the great rival of cash, Is
principally regulated and controlled by the
system of banking which has been adopted ana
inaugurated by the principal commercial ma
tious OF, theoworld, the banks consequently ae-
serye full share of censure for 1.-The violation
of known and acknowledged principles OF trade
and currency, which can never be long dlsre-
parded with impunity There are certain es-
tabtshed laws Of trade and, currency, as nya-
rfahlsS S3r ltheirI IoperaGoasg as the fixed laws,
which regulate the natural world. These laws
have been elaborated from the crucible of pro-
found thought and philosophic observation, by
the ablest political economistslef past times; ;
and. having been confirmed by the experience
of all enlightened nations, serve as signals
along the .{pathways Of commerce ITO guard
against the rocks and shoals upon which thou,
sands are wrecked. The great natural law OF
supply and demand, which usually promotes
a healthy commerce between different countries
in the interchange of commodities mutually
needed is frequently counteracted in its opera
t;oas bv the expansive and elastic currency
furnished by the banks.
When there is a foreign demand for any com
modify and its expectation pays remuneralng
profits, the banks frequently, BY expansion,
furnish the pabulum for a speculative demand,
which causes prices to rise so rapidly at home,
that expectation soon ceases to be profitable,
and importation onEinuing, t.ade as turned
from itssnatdrafs channel, and foreign balances
have to be. met with coin. % ~ thls artlnciai
system, promoted and fostered by q compeution
for bank dividends, thousands engaged IN leglu'
mate trade are ruined, and frequent opportu,ni,-
ties are lost Of adding to the productive weaitn
Of the country. In countries where cne clrcu-
lating medium is not liable to sudden expan:
sions and contractions "from being regulated
by the true principles of currency" where
there is foreign demand for any commodity,
prices in the home market rise so gradually,
that the exporter of it is enabled to realize GER
tain profits. and at the same time contribute to
the national wealth One cause of the varia-
bleness. Of the amount of paper currency IN
circulation. which renders itlsuch an uncertain
standard Of value, is toSbe attributed to ols-
regard of the established principle OF currency;
that a cheaper circulating medium always e2-
nels. one of greater value from conpe1Itlon 81 Ill
with it in the same channels of~trade: mere
is another invariable law Of currency, that
If paper money is withdrawn from circuia-
tion. metallic money will flow in and;hll the
vacuum. 90 ..,
lis erroneous to suppose that convertible
paper currency only displaces the same amount
of gold and Silver, and that two eurrencles'
differing so much in the causes of their Ya!ue,
will produce the same volume OF clrcuiation'
The one has Inherent value, and, as an article
of commerce, when not needed as O. earculatlng
mediu.t, enters largely into the arts and man m
ufactures.i The other, possessing no intrinsic
value, consists of mere promises to- pay some
thing valuable on demand: IA specie currency,
as the representative of the labor and capital
that produced it, can only be increased gradu-
allv by the natural demands of commerce.
-Tipaper currency, which promises toipay on
demand what the banksfreqnently neither have
nor can procure for the time being in the coun-
trv can be suddenly and rapidly expanded
NJ Laws can be enacted which will prevent the
amailntSofspecie displaced By apapsr currency
from flowing out of the country, and seeking a.
market where there is greater demand Tor II.
This natural law of currency has operated 70
such. an extent,in the United States, that the
bank statistics show astriking contrast between
the superstructure Of a paper currency ana lIs
base. Even from the best bank reports IL must
be admitted that specie acts but a sqoordlnaIes
mart in our currency. 1t regulates the issue OF
hank notes to certain extent, and affords a.
subsidiary currency in the retail trade. 1t also
keeps the rate of exchange below! the cost.oi
Shipping specie.to meet foreign demands. but
many assert that our paper currency rests on a
sufficient specie basis, and that convertlblllty
acts as a safe check on over-issues; but, unior-
tunately for the truth of this assertion, there
are frequent instances when specie does not
commence to operate upon the paper currency.
until the evil Of over-expansion has been con-
summated, and the banks are compelled to re-
turn to convertible position, throug n extreme
and suffering IA addso bso TO ne seneav msIt
thau ;n no condition to lend a, helping hand to
the % innocent victims of their speculations, when
tbev e stand stand most in need of it. The truth is,
our enS' paper s currency may be said to be bassd,
oa oos ~ Pnsnec;e but rather on cotton, and the
u of all our exportable commodities added
to our foreign credit produced BY the gh; sale of
bonds, stocks and other securities; lnlS was
demonstrated in the great financial revulsion