Ashtabula telegraph. (Ashtabula, Ohio) 1874-1880, 1875-10-08
Historr RsneaEng Itself.


Professor ". G. Sumner, of Yale College, in
his "History of American Currency" presents
vividly the effects ofan expansion ofpaper cur
rency as it has occurred at various periods in
our past history. Referring to the period and
experience from 1850 to 1850, he says:
The outlook in 1850, with abundant emigra-
tion q new empire arising on the Pacific, the
prospect of becoming the granery as well as
the cotton-feld of the world, ship building in
creasing year by year, and no cloud of war or
political disturbance visible, was very 1atter-
ing. The only hindrances to a speedy realiza-
tion of these golden dreams were want of
capital and want of technical and scientific
training. Railroad building at the West must,
in the nature of things, outstrip the settlement
of the region. 1t is the chief form in which
capital is applied to the settlement of the
country, but evidently it is a case in which the
returns from the investment cannot be imme-
diate, and in every such case in which the SUD-
ply goes ahead of the demand there is especial
need of care, foresight and Judgment.
For the supply of capital there was recourse
naturally to the older countries. The injury
done to American credit in 1887 40 had hardly
vet been healed. but in 1854 it was estimated
by the Secretary of the Treasury, on reports
called for by him. that there were 200 ,0O0. 900
dollars worth of State, railway, and other
bonds and bank stock held abroad. In 1887
the amount of English capital invested ferc
was estimated at 400, ,000, 900. While naturally
turning to the older countries for supplies of
capital, there has always been a certain pref
udice here against foreign investors. Our dAor-
eign Indebtedness" has been a cause of serious
and sincere anxiety to many, but the more we
can borrow, so long as we know how to invest
it productivity, the better, and our credit-our
power to borrow abroGd-is the possession
which it is most essential for US to preserve
intact.
CAPITAL AND CURRENCY.
Our other resource when Strengthened for
capital, the one to which we had betaken our
selves before, was now also employed-a null
tiplicatioa of the paper representatives of cap
ital Capital is that portion which at any
given time is available for new production.
This will be certain amount of titled land,
houses, buildings, stock, tools, food, clothing,
roads, bridges, etc., etc., which have been
made and are ready for use in producing,
transporting, and exchanging new products.
These things are all the product of labor, and
require time for their production. Nothing
but labor spent upon them can produce others,
and time is required for this labor to issue in
new and increased possessions. Currency only
serves to distribute this capital into the proper
hands for its most efficient application to new
production Banks, it must be repeated, only
facilitate the transfer of capital frsm hands
where it is idle, or is distributed in too small
quantities. into hands by which it will be use
fully employed, being collected in the neces-
sary amounts. Currency, therefore, is not
capital, any more than ships are freight: it is
only a labor-saving machine for making easy
transfers. Banks do not create wealth; they
only facilitate its creation by distributing cap
ital in the most advantageous manner. If,
therefore, currency is multiplied, it is a de-
lusien to suppose that capital is multiplied,
or, if +" money is plenty" by artificial increase
of its representatives, it is only like increasing
the number of tickets which give claim on a
specific stock of goods the ticket-holders
would be deceived, and could, in the end, only
get proportional dividend out of the stock.
If banks not only lend capital, but also lend
GO coined credit" some time or other liquida-
ton must come; there must be an effort to
touch the capital which the notes pretend to
convey. Then it is found that they represent
nothing; then "credit breaks down, :" and
there must be a settlement, a liquidation,
and q new start. We do not get
away from the facts at all. The real amount
of capital which we possess is divided up, and
we have to make up our minds that we possess
only so or rs per cent. of what we thought we
possessed. We put smaller figures for every
thing, and reconcile ourselves to smaller hopes,
but the experience is soon forgotten, and the
old process of initiation and delusion begins
again.
Some have wondered that we 90 on in this
way, with grand crisis only once in twenty
years, while the Oldest and most prudent na-
tions have one every ten years. The explana-
ton, no doubt, is, that the future which we
discount SO freely honors our drafts on it. Six
months restraint aYails to set US right, and
our credit creations, as anticipations Of the fu-
ture product of labor, become solidiied. So
long as we understand that We have antici-
pated future production, and must apply that
production to make good the anticipations, We
run on without very great risk; but whenever
we lose our head in the intoxication of our own
look on the credit anticipations,
which are only fictitious capital, as if they
were real, use them as already earned, build
other credit expansions upon them, do away
with our value money and export it to pur-
chase articles of luxurious consumption, then
we bring convulsion and downfall.
The mistake is then realized, the lesson is
taken to heart for a little while, but new
generation grows up which forgets or never
knew the old experience, and the mistake is
repeated. The relations of trade are often
spoken of as a machine, and such indeed they
ought to be-a complex machine, with parts
20 regulated that 1t can go on at any speed and
for any length of time, without danger of any
thing more than an occasional or temporary
but this reckless, although skill
ul, extension of groundless credit is more like
.he performance of the juggler who keeps first
,hree, then four, then five, and so on, balls
n the air at once. If he goes on continually
Increasing the number, it is physically certain
hat he will sooner or later miss one of them,
md the whole will fall to the ground in con-
.asion.