Year: 1859

TUESDAY MORNING, JANUARY II.
FEDERAL DEPRECIATION OF STATE CREDIT.


At time when we have just seen the federal
debt increased, within the space of - months,
from ''O' up to about 80, 900, it behoovcs
us to enquire as to the effect which this state
of things must produce on the value of State
securities


So long as State credit is worth anything at
all, 10 long as State bonds can be sold at or
above par they are affected but little by the
spcculations of stock gamblers. The value
varies only by the law Of actual bona tide COM
mercisl and financial demand and supply, and
they cannot become, to any serious extent, tho
subject Of fictitious valuation. Some real and
vital necessity for depreciation must occur, be-
fore they can become the instruments Of stock
gambling.


1t is useless, at present. and would perhaps,
at any time, be impossible to enumerate all the
different means by which State bonds are de-
graded from being the medium Of permanent
investment to become the "fancy stock" of
mere spectators, by means Of fictitious fluc-
tuations


1t is sufficient to state, generally, that the
bad faith, OF bad management Of State Go
vernment is the first great cause of the depre-
citation of State credit. Reputation in any
form, whether it consists in incapacity or un-
willingness to meet contracted debts, shaving
State bonds by State authority, or State tax
upon her own bonds in the hands Of State cre-
ditors, must invariably beggar State credit


The next principal cause of the depreciation
| of State bonds, is one without the control Of
the State Government Whenever the de.
mand for actual investment is met by supply
of securities, more easy Of transfer, and de-
pending for redemption on guarantees more ex-
tensive more reliable. better known to the
commercial world than those which = particu-
lar State can offer-the bonds Of that State
must suffer comparative depreciation.


Let us apply this latter rule to the case Of
Virginia bonds With State tax so small that
when properly and equally distributed, it can
lay no sppreciabe burden on the shoulders of
anv class Of citizens, and which, neverthe-
less, produces revenue more than thrice
what is required for tho ordinary admin
istration of government, apart from the
payment Of the interest and principal of a
public debt of no extraordinary amount-a
revenue which more than suffices to cover the
interest and supply the Sinking fund on the
public debt; constitutional provision for
sinking fund, so arranged as to offer the
public creditor permanent investment for
thirty-four years, certain payment at the
end of that time and constantly recurring op-
portunties for redemption before that time in
case the creditor shall so elect; with all these
advantages on her side-Virginia's stock can
suffer nothing from competition with those of
her sister States, or of the numerous industrial,
commercial, financial and municipal corpora
tions of the whole country.


There is but one power in the land which
can render Virginia stock drug in the market;
and that is the financial power Of the General
Government


Virginia bonds depend, for the security Of
redemption, entirely on the one resource of di-
rect taxation within the limits of the State
This is, indeed, all-sufficient except in the
event of great national disasters. Still such
disaster is, at all times, possibility, and enters
into all the calculations Of those great finan-
ciers who determine the value of marketable
securities. We are not without an instance,
near at hand to demonstrate the entire justice
of this state of facts If the Governor Of this
Commonwealth had, twelve months ago, yield
ed to the taunts, clamor and persuasions of
certain class of newspaper writers and would
be financiaist politicians in the State if, in the
midst of the commercial crisis, he had consented
to employ his discretionary constitutional pow
er, by applying stringent coercive measures
to our banking institutions ns-runous csnse-
quences to private fortunes, total depreciation
of every species of property would have ensued,
and the collection of taxes would ut once have
been rendered impossible


Anotherp point is to be considered However
secure and reliable may be the credit of the
State of Virginia, the evidences of such relia-
ability, can never acquire the worldwide repu-
tation which attaches to the operations and
condition of the Federal Treasury. Hence
Virginia bonds can never be so extensively
transferable as are Federal bonds-and this eI-
tended facility of transfer is itself one large
element Of value.


Again, the Federal bonds are not dependent
| on direct taxation for redemption. 1t is well
known to the whole world that they are first
guaranteed by an impost tax on all the imports
of the country source oil revenue, which,
| of itself has ordinarily been found more than
sufficient for all the requirements of expendi-
ture. The Federal credit is further guaranteed
by a basis of real estate comprehending an
empire of territory, at all times liable to be
sold to meet financial requirements Lastly,
it is guaranteed by power Of direct taxation,
extending over the property Of the citizens Of
all the States.


What wonder then, that, under the most Ia
vorablc circumstances, Virginia bonds may at
all times, be brought below par, or even thrown
out of the market altogether by Federal stocks
commanding a premium Of four five, ten or
fifteen per cent?


This is an easy lesson. A child may learn
it. A FEDERAL DEBT IS AND MUST AT ALL
TINES PROVE INJURIOUS TO TnB PUBLIC CREDIT
or THE SEVERAL STATES We call the atten-
ton of our members of Congress to this sig
nificant fact If one hundred millions of dollars
is to be appropriated for Pacific railroad or
for the prospective purchase Of Cuba, for the
establishment of protectorate over Mexico or
for war with any considerable one Of the
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