New-York tribune., 1875-07-13


loch get any credit for the rising
prices of real estate and pig-irOn1 Were the
conractionists praised for causing 80 many
new railroads to be built and providing 1or
clergymen and farmers better investment
than United States bOndsf This, we would
impress on our readers, is most Important
question. Mr.. McCulloch contracted the cur
rency, the little it was contracted, IN looo
and 1867. From toward the close OF 1867 10
the end of 1874 the currency was not con-
tracted at all. but considerably increased in
all its divisions. If Mr.. McCulloch's cOntrac-
ton produced the commercial crisis OF 1919
and the subsequent distress, 1t must also nave
produced the flush times of 1871 and Io|Z.
The truth is that it produced neither.
Onr own theory of the connection or the
currency with the speculations OF 1S65-|3 ana
the present collapse is briefly as follows: For
sixty wears banks have been established In
this country and have played an important
part in the operations of buying and selling.
In 1850, at the close of the year. the money
Of fine country consisted of certainly not more
than 500, 100000 of specie outside OF
bank vaults. This %1O0.OOO,OOO was supple
mented by $200,O00,OOO of notes issued py
the banks. The banks were 1,GOo Ill NUMBER,
had paid up capital of $43O,OOo,ooo, ana
their loans and discounts amounted to Ts3o'-
OOO, 900, including 74,OOOoOO IN various
stocks and securities, and $59,OO0,OOO dhe
from banks. With this machinery and the aid
of the ordinary forms of credit, such as book
debts, bank checks, promissory notes, NC, the
business of the country was smoOthy con-
ducted Comparing the state OF the banks IN
1868 with their condition in 1860 and making
allowance for the Southern banks and state
banks not included in the National system
we find the banks not materially changcu Ill
ca,ital loans and discounts. Bu, III one respect
there was an important change. The reserve III
1865, after deducting an amount equal ID
onc-sixth Of the dcposits-thc proportion held
in 1S6O-lcft the banks $50,OOO,0OO to he
used in expanding loans and discounts ana
aiding business and speculation. Between
October. 1865, and October, 1867. the bank
note circulation increased from $171 100000
to $293, 800, 900, which more than ncutralzcd
Mr. McCulloch's contraction. From October,
1865. to October, 1872, the following changes
took place in the principal items OF the Dai-
ance sheet of the National banks:
Private loans and dis 1869 i~7|.
counts sis7l7O,O00 $s77,l9s,000
United States bonds &C.. 427,13lO 600 4o''oo'ooo
Loans to banks and
hnb.rs 1o737aOOO I2s.1aI 900
a,o, 1gOioOOO 23.533 900
Paper money and specie 22i5oSooo if''l'oooo
Circulation. .......-...... lfl,3-Zooo "'''f''"''
Individual de;Osits..... 5Oo."llooo ol3'-'oooo
United States deposits. IS,l'oooo l-'4I SooV
Due to banEs............ lH,2oo'Ooo itt'o"oo'o
Cauit,l maid In ....... 393,1570OO 4To,620OO0
The above table shows that the banks took
up the business of imitation when the Govern
ment dropped it; that they increased Their
loans and discounts 50 per cent, 1T the same
time diminishing their cash reserve more than
one-third. and also diminishing their |. >.
bonds. while increasing their liabilities to de-
positors and nearly doubling their circulation.
Why did these things happen Not because
Of contraction, but because there was no con-
traction. At the close of 1860 the banks were
unusually stong holding one-SiXth of the
amount of their liabilities in spcci,. in 1850
they held $50, 900, 900 more than 0nc-siXtl
of their liabilities in paper money and specie.
This was the first effect of inliatlon. Inc
banks, though not yet much expanded, COM
paratively speaking, were i'll condition to cX-
pand. The country had swallowed the liquor,
but it had not as yet taken effect. In
1872 the banks held S31,OOO,OOO y less
than reserve of onc-Sixth their lia-
bilities, and in 1878 they collapsed. What.
we repeat, had the bulli0nists, or had contrac-
ton to do with the career of the banks' The
Governments enormous issues of incOnvertible
paper during the war stuffed the banks full of
money which for the time being they could
not lend. When the war was over and con-
fidcncc began to be restored, Mr.. McCullOch
wished to withdraw the idle money. He was
not permitted to do it. Speculation revived
and ran its career, powerfully aided by the
banks. Initiation accomplished its perfect work,
and left its victims on their backs. That, III
short, is our theory. The sole complaint
Mr.. Kelley can make is that Congress did not
keep on Initiating the currency, which would
only have made the final and inevitable col
lapse the more destructive.
THE REG 1TT1.
There is not much to be said for the style