The Daily state journal. [volume] (Alexandria, Va.) 1868-1874, 1874-02-20
A PAPER ON CURRENCY AND BANK
ING. SUBMITTED BYR w. HUGHES
TO THE COMMITTEE OF THE
HOUSE OF REPRESENTA-
TIyES ON THE SUBJET,
JANUARY 30. 1874
OUR FINANCIAL SITUATION NEW AND
UNEXAMPLED.

UNEXAbIPLED.
The enormous foreign and domestic in
lebtedness of this country; its immeasur-
able and varied resources its advantage
Gus position for trade with the great East
ern and Western population, of the other
its restless population full OF
exaggerated hope and daunt.ess enter
prise; its late civil war, ending in triumph
and confidence, but leaving stupendous
financial results; all produce state of
things, in banking, finance and commerce,
wholly without example; and calculated
to tax the financial craftsmanship of the |
nation to degree altogether unprecedent-
ed. In every way is our situation new
and extraordinary. We have no expe- |
rences to go by in our anomalous situa-
ton and, as natural consequence, the
craftsmanship of the country finds itself
bafiled on the whole subject of finance.
EFFECT HERE OF SHORT CROPS IN
GREAT BRITAIN.
At the close of the late English harvest,
it was found that an extraordinary impor-
tation of grain would be required for
British and Irish consumption. The Eng
fish financiers at once began to prepare for
the unusual demand upon their resources.
The effect in this country was immediate
and almost electric. Our rickety system
of credit, which rested upon the contingent
cy of easy money markets abroad, was
shaken to its foundation. Not even did the
prospect of an immense expectation of
produce give relief. Our whole CONNER
cial and financial system was stricken with
paralysis; and although our material
wealth was greater than ever before, our
financial condition became deplorable in
the extreme.
THE ENGLISH CURTAILMENT CLOSED
OUR AMERICAN BANKS.
The British grain crop was found to be
short by some 100, O00, 900 bushels. The
discovery cut off the demand for our
bonds of all kinds, and put up the rate Of
interest in England. The effect began here
with the great railroad houses of Jay
Cooke & Co., Fisk & Hatch, Henry
Clews & Co., and Howes q Macy; and
threw upon all demand for payments due
abroad. Our banks were driven to the
necessity OF curtailing, IN consequence Of
the run upon their reserves, at the rate Of
a to Lin cities, and 6 to l in the towns.
Then came certified checks, boarding OF
currency, and general suspension and
panic. The common impression is, that the
short crop in England acted merely as an
aggravation Of our pressure. 1t was more,
it was the cause of it.
Our system Of banks is so organized that
the loss of any dollar of their reserUe fund,
from any extraordinary cause, forces o
curtailment of four to six dollars in their
discounts. So that, if any accident o.
trade occurs to draw off few millions o.
their funds, their doors have to bG
slammed against all the borrowers in the
land and their reserves, instead of being
available for the mitigation of money
pressure, become the very means of in
lensifying it. Another vice of the system
is, that their loans are in great part made
on call instead Of on tine paper, so that il
periods Of crisis, pressure is speedily con
verified into panic. Thus it may be, tina
such contingency as short crop of grail
in western Europe, which ought NATURAL,
to strengthen our financial condition, cal
close every bank, and paralyze the bes
Industries in the land.
WHY THE CURRENCY is NECESSARILY
DEPRECATED.
tits not strange that the currency shoul
OC NCpICCiubCos SfCH ditCi oCNVt yCdio v
remorseless contraction. 1t would be mar
velous if it were not.
A promise to pay gold at future tim
is worth less than the face of the note b,
the discount due for the intervening perio
be indefinite, this discount is the more con
siderable from the very uncertainty of tn
failure date of payments. This plain trutl
h., al
cause of the deprecated value of our pape
currency. If 50, then, though contraction
were carried on till but single note wer
left in circulation, that note would be les
than gold in value.
Again; of the predigious mass Of Amer
can debts with which the home and foreig
money markets are loaded, there ar
twenty-five hundred millions of dollars, G
the government debentures Of the Unite
States. All this national debt is payabl
in gold except some three hundred an
fifty to four hundred millions OF paper
which is in the hands of the people a
money. The natural result Of so enormou
supply of debt upon the money mar
kets, would be the depreciation of tn
whole mass. But the credit of the ma
tional government is good; and its promis
to pay gold, as to seventeen hundred am
fifty millions of its bonded debt, overcome
the effect of redundant supply, and put
its bonds upon par with gold. But Their
is no such promise in behalf of the nationa
paper which is in the hands of the peopl
as money. The government makes n
promise to pay gold for this currency
1t even refuses to take it in pay
ment of all dues accruing to itself iron
the people. The law of supply and de
mand, operating upon the redundant sup
ply Of government paper, is concentrated
IN its effect, upon the paper which circu
lates as money; and this currency yield
TO the power of an memorable law of trade
1t would be miracle if it did not.
does so, without reference to the contrac
ton or initiation merely of this part of tn
general mass of government obligations
To be effectual, the contraction should b.
considerable and general enough to affec
the whole mass of government bonds in al
markets, and not confined to the one-sixtl
part circulating as money at home. s.
long as the government has anything lik
twenty-five hundred millions of paper obi
cations outstanding, in markets alread
plethoric with American securities, tina
part of the mass which it does not promis
10 pay in gold, must be deprecated. 1t j
not in the power of contraction to brin,
tins latter sort of paper to the value o
l. ~ A