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LECTURE DBLIVIRID AT THI MECHMICS' INSTITUTE, TORONTO, Exposing the swindling nature < f Vne present Banking System, and shewing how most of the laiJ -•. s that occur are caused by that system ; shewing also how r inconvertible or Domestic Currency would protect and stimulavi i,ho Industry of the Country; how unjust and monstrously exj t;'.'sjvc for raising Revenue the Tariff System is, compared with Direct Taxation ; and how the Country can at once be relieved oIl the greater portion oi' its Public Debt. To- the above has been a' • Vd some further remarks on Bank-debt as currency, as well as a definition oi Protection. BY WALTER ARNOLD, ESQ., "The functions of money are so interwoven with the affairs of men that its stability and uniformity of value are almost as essential to their prosperity as is the establishment and maintenance of the right of property itselC — Opotkc's Foi.. £o. ^ T03R0NT0 = BLACKBURN*S CITY STEAM PRESS, YONQE STREET. 1862. 1 PRICK, TWBNTY-ITVB CENTS. ■ •1' «f*>l t H MONEY & BANKING: A. LECTURE ^ ¥ DELIVERED AT THB MECHANICS' INSTITUTE, TOEONTO, Exposing the swindling nature of the present Banking System, and shewing how nrjost of the lailures that ocfur are caused by that system ; shewin<: al.so how an Inconvertible or Domestic Currency could protect and stimulate the Industry of the Country; how unjust and monstrously expensive for raising Revenue the Tariff System is, compared with Direct Taxation, and how the country can at once be relieved of the greater portion oiits Public Debt. To the above has been added some further remarks on Bank-debt as currency, as well as a dcliniticm of Protection. BY WALTER ARNOLD, ESQ., BARRISTER-AT-LAW. •'The fanctions of money are fo interwoven with the affairs of mon that its ■tability and uniformity of vuluo aro almost as essential to their prot^pcrity aH !■ tho eHtablisLment and maiutinance of tho right of property itdtlf.'*— OrDYKi'ii roft. Ec. T0Pt03Sr TO : BLACKBURN'S CITY STEAM PRESS, YONGE STREET. 1861. MONEY AND BANKING. i Gentlemen : — Monetary science has been rendered complicated by reason of the confused notions of writers on the subject. Its principles are few and simple, and, I trust, I shall be able so to present them, that you will readily comprehend them. When you do so, I may safely reckon on your assistance to overthrow the present Banking System ; than which a better system could not be devised to retard tlia material and social progress of the country. I shall first distinguish between the resources and the wealth of a country. I will then explain what is Currency ; what is Money ; and what is the Measure of Value. I will shew how the Measure of Value can be affected ; and how it ia affected by the present Banking system. I will then explain the meaning of Capital, to prove the fallacy of the theory in currency termed Lawism. When you thoroug;hly under- stand these several matters, you will b: familiar with th« fundamental principles of monetary science, and by them can test the soundness or fallacy of any currency scheme presented to your notice. The Resources of a country are all those objects which, taken by themselves, are not wealth, but which are capabU of being applied to the production of wealth. They com- prehend, in the first instance, the objects upon which indus- try may be usefully employed ; such as fertile soils, minerals, forests, &c. ; secondly, the fund of industry which may b« employed upon them ; and, thirdly, the power which put« i / if MONKT AND BANKWa. If None of these, been bestowed ^n^^^ J^^^^t the end itselt. a means to an end, and no . industry in motion ; but wl.at The use of money is to foUndu^t^ ^^^^ ^ . r. ? Before defining it ^ ^^^ ^^^ ^^^^ce persons, is money? 1^01^^ .,, annnose there Dc ^\ ._/.^ i> Z9 Before defining it ^ ^^^ \^ ^^^^ce persons, money? l^et _ ^here be ^^ J^^, b, of currency. ^^^ Y -n C; \ performs sci^ce. ll's but ^vishes for B s. vv "^ ^^^y accepts it. .• nt once shews the nature of a ivinr^r is a currency. ^ ^^ ' « ^h'^n the evidence oi services l>ii^'"p. °f L, ^uioh can at any *""^, S," !,s/era6!c ^^IS SfeS down tl^^^^^;-^i^^^^^^^ i \ CSC, Lion n of tints 13, or perly athcr y \VAS I only ieunin{^ )erson?, for 1^, jVcn or ct woul(^ C wi^ntfl t\ian fot jccpts it^ id so tlu3 ass ft'oin of it ^^^® kture of a terence ot [ever means silver, or levidenoe of \ivalent bas demanded. i^ransferaUc , transferable arrency naay lUng elsQ. MONEY AND BANKINQ. Q Wlicn a pcr-on recoivca an oblij^ation oxprcarvd by u nitiluUic currency, he is able to conunand the ser\iced not only of tlic original debtor, but jdso tlioso of the wlidle industrious CDinmuiiity. 'I'lie general consent of Iho wliole u'ltion, or ol' any nund)cr of nations, to receive tiie metallic currency in return ibr services, docs not in any way alter its nuiun', nor could it liavo any value beyond those coun- tries. Consequently it would perforni the sanio I'unctionsi as the paper currency ubovo mentioned, but it would have a much wider circulation. There is clearly no difTercnco in principle between a metallic and a paper currency, only one depends on a luichr h(tsiis of credit, than tlw other. A metallic currency is subject to its own peculiar disadvantages, because by its constant wear and tear, as it passes from hand to hand, it suffers considerably by abrasion, not to mention any bad practices that may be resorted to to lessen its weight ; and as the quantity or weight of the metal represents the amount of the services the owner may command, as the metal decreases in weight, so does the amount of the service it represents and can command gradually and correspondingly diminish. Paper is not subject to this intrinsic deprecia- tion, so that if it were possible to have a paper currency based upon the same credit, and which would be as gemrally received as the metallic currency, it would be a preferable form. The amount of currency in a country is the aggre- gate amount of it belonging to every individual. Now whatever represents the amount of debt due to any individ- ual, in whatever form that debt bo recorded, whether metal or paper, or whether it exists simply as a debt, is the amount of the currency belonging to him. Whatever, therefore, confers the power of demanding services, or professes to confer the power of demanding them, is the currency or circulating ui' dium of any single person ; and includes not only the current money of the realm, but whatever represents or dis- places it. Adopting this definition we may enumerate the different species of currency as follows ; 1. Coined money. Gold, silver and copper. \ I i. « • cluAin'' cheques. 5. I'rivatc debts. LS. 1 'a dearly a P"'','"" "^ ; ..S, iu iU s^'>»« 1""'^;! Ulcut con- be considered ^« "'"V,,„u.o l>e «»",'! .""Axchuu;:", V^T vort tUem into a cl'"l^ ^' j j^ in »" f'^^P';^'' 're nothing Xctobeuveronde uud,a,_^^ « r\'"p" ""''"'" ''^^"C » bank note. B*' „f the b»"\^- f fdniit that bank more, but P'"X ^icv ever besilatod to »«' „o„„iiy ; 0" *"'""''• rthUytrl of the eurreneyrf « j^ i,,„es. notes are essontuiUy P ^^^ r»»*"''"",V („ fceurer on But banks have also ^^^^ «"[%'' most corumoidy demunc?, tboui^b as tW , These bdl« »J« ^"^^ ^,y differ r^-^'ttb n™eof*,i«es,andtbey r I i PtombiUs of exchange. _ y ^Wch L great and i">P-.an* J.H.n ^oftb^,^ .ted. . The attention ot sv ^ ^ exclusively oi ^re, L.er n.rm.cv ba been a .^^^^^^^ '"^n anpVicable to ^notes ; >vhereas aU *« ^^^,^^ ^^ "^P^^:" Clinch a bank ^itb a small ch. n!,e u i,on whatever ^^^^^^ many 01 us \nyj >! To an equal amount.. ^^^s . and MONKT ASD BANKING. Vs. ,s i« irt to r c'lr- con- ^ ,pay- cntto bearer t bank untry •, issues. utrer on they 01 )mmot\\y ray differ ^cy ^^^«^ ^preciatea. IS on the .a tobanK t^otes ate, ppWcaUe to aiinot, with Xf it vjisnes customer so r his cheq^nes .s notes ; a^^ London ban]c fcBOsit receipts, About seventy yoarM a;:o, they dn)pp«Ml i\\o practic*) of issuini^ not«\s dirvctlv tliotusclvos, and adopttd one which was far rnoro so(3ure for tluMn^olvos. 'I \wy lmvcj each of their ciistonKTS a book nmtiiininir a nuinhor of f)l.ink accvp- t.'inccs, which ho iniuht fill up and issue at his convciiicuco, and thoso were <*all(Nl cheques. This system prcv.'.ils ni present, and is tlie very foundation of London linikin^'. " VVhat(!Vcr effects tlie issuinij of bank notes has n|UMi :>|k'cu- tors or i>rices, or in drivinu^old out ol' circulati«»n, isc(|u:illy effectually done )jy choijucs and the inevitable tendency <'!' tk perfect Imnklncf .s^slaa is to drlce gold out of « f,^'' acgtee ot The material .s o^J ^^^^ ^,,, '^'^Ifpwi? -gu^f »":> only, »r-'=^'? ',r ril «ill »'1"I'*' "rthc « atrial of it con^ civilization that Uiey ^cnt .*c iii' -^ as gold this most P«*?^JXli Vas an w^'^^'" ^^^vcliase of au ristsofBomctV.u,g«li^, civcumstance Aej"^^,, ,„a pat- and silver. ^''T •„ is of a mixed cw ^ ^^le avticle ^vith a ^^W <=« ^^ ^^^^.e both "^.^^^tufcrarion and takes somewl at ot ^^ .^ ^'^'^'""l" ,itio of money. « . that It MS umv ^.^^^ na*''""^- V, ,«oneY in a <'°""*7i:»«r is little When theve is ™"* Cligh; ^^en *e« J .^ ^ of \roperty and sen, COS the amoun of «o ,^^.^^ prices are io^ Jates the price of proper y couutry thai r^ou MONET AND BANKING. 9 ions \iave aiitry b. 1» ve tVio jrce. It 18 MTvee 01 olations, I it con- h as gold tse of an and Vf A a sale. and It ation loney ra nsferable stingnisliea lape. transactions ,^ of mo^^^y' [ directly as acit assuinp- ^ve equal to that tlurd J, x^liicli every and decided .^ongciviU^^^ rv tbe py^ces V « i^ little there is » of money \n a y and services, and thus it is that money hecomes the Measure of Value. It is essential to the character of whatever is used as money that it be liable as little as possible to fluctuation in quantity. The reason is obvious. He who contracted debts when money bore one ratio to products would pay them when it bore another ratio ; and hence, though he might pay the same nominal amount, yet he might pay twice as much in value as he had promised. So also, he who loaned money, while it bore one ratio, and received his payments while it was at another, though he might receive the same nominal amount, might not receive half the amount in value which he loaned. And hence all civilized nations have denied to governments for the purpose of making more money, the right of altering, or in any manner interfering with the right or purity of coin, for the reason tliat this causes a variation in the quantity of money, and thus inter- feres with private contracts. Were tampering with the coin allowed, it is evident that credit must be at an end, because whatever a contract might mean to-day, no one could possibly predict what it would mean to-morrow. Hence, all fluctuation in the ([uantity of any substance, renders it by the amount of that fluctuation, unfit for the purposes of money. Now these remarks apply to anything which may be used as money. They apply to silver and gold; if these sub- stances were liable to great fluctuations in quantity we should be obliged to abandon them and find something better ; and it is the same with paper, if it were used for money purposes ; by as much as it is liable to sudden or to great fluctuations in quantity, by so much is it disservice- able for the purposes of money. In order to accomplish a given number of exchanges in a community, a certain amount of money is necessary, and no ; more than this is necessary for this purpose. If to accomplish the exchanges of a community at a giventime, one thousand ounces of silver are necessary, and twice the quantity be introduced, to accomplish the exchanges the value of the Vhole will remain the same, though the quantity varies, and V A^ ^^ relation to that is, the ^»'»« f ^XJfor ahat formerly, we -a::^---ther.roa— ^^^^^^^^^^ to g^-eat «««'— jtpe^dB very ™«ch «n *e '^-^ ofpaperincircu^at'on v niay.vary m »' ^^^„ its issuers. Hence «^ 1 j j^e whole is not alt«[^* /^^eh amount, and as the v^loe o ^^^^^^ ^^^ „''^ Iv he worth twenty-fi^er ^^ ^^^^ ^ame words wr ^ J^^^ month ago. ^^ '""=',, „j w the same name, yt--^ ^jj._ *r^;;aS; HatdtohLwho reef-;*. ^ -oV> t nUhi:7S>m ^'^ilt^^^f jXoK- a* .-^°S three months ago, a t^'»f %itv,o„t any change m the sup Tncl dollars must he paid in tuU. ^^^ ^ The paper —cy under the presen^^^^ ^ 'xuan- Sup^se that at ^gX^^^^^^^ Bpecie to paj <"' ' precious metals. productiveness ol j Let »ow from any cause whatever, P \ HONET AND BANKING. 11 tion ^ ive five ne thou- he case, in other e slio^^ ICC of Hs possibility not liable te quantity interest ot iluiost any red by tbo lue of each liar may be lan it was a written npon yet it means a very dif- He bought, ,t ten dollars rQ in the sup- ;tosellitfo' fortenthous- labor be greatly increased, so that a much larojer amount of products is brought into market. If the amount of money re- mains the same, while the amount of products is increased, the value of money will rise, that is, every thing will be cheap. As fioonas products become cheap, every one is anxious to buy, for when an article is low in any country then is the time to export it with advantage ; and this prospect will induce men to borrow to export, in the expectation that the profit will enable them to realize far more than the interest they have paid for borrowed capital. At such a time every one is desirous of borrowing ; and banks thinking they can profit- ably employ their funds, loan to the utmost extent of their power, instigated by their own interests, and by the universal wish of the public. Now in such a state of things it is not to be supposed that the Directors of Banks are endowed with greater prudence than other men, or that they are not as likely to be influenc- ed by the hope of large dividends. The example of one Stimulates the others, the risk that one institution runs, another will be willing to run. A bank will scarcely be willing to make a dividend of six per cent, whilst its neigh- cur is making eight. And when all the Banks in the country are animated by these principles, it is evident , that a very large amount of loans must be effected ; that dns system ia is,"a very large amount of paper currency, in ledger creiits and hank notes, must be created. But just as fast as beyond the necessary amount, the quantity is increased, the value of each portion diminishes, and thus prices rise ; that is, money becomes abundant, and a dollar will purchase 110 more than it would when products were scarce. Thus, and the man- |]^g amount of circulating medium becomes very great, and Money is cheajper than any other article in the market. ilating mcditt^ rpj^^ cheapest article in the market will always be exported ; he necessities oi ^ ^j^jg jg ^^^ money, money will be exported, and as the iper, is perfectly |jUjg ^^^.^ -^qj-^Ii nothing abroad, they will be collected and sent 3anks, sufficient j^^^ ^y^^ hanks for redemption. The banks then find them- ,n demand in the g^ygg ijahle to pay in specie a vastly greater amount than Ufcy were liable to pay a short time ago and the demand for productiveness ol rapi of 11 M *"* • A,neer of stopping Thev are of course md^irdin.ini*«S pV«»»' ''lath loaning no n>ore and r^q ^^^ ^^^^^ toir loans, »»•■ ''' ' Hence, ^^^ti, lir sales, are caUed rf those y,^o o^« *X" ty «e» VV^ andts the banks "4h the i^»Pf f^the ?s»lesare e^^t . U The debtors -' 'pon to V^y ^**:!' f^ "'-^ ^'^l^''^ V tSr debts sooner "»d Xse to loan ^^^^ %<,„ttired to pay thei^ ^^^ -xf the banks are i^ I ^eans ot ma""^ Vianks and ^ In they expected and *e « „ „ the ban. p *MS are curtai ed. The ^^^ ^^.^ of c ^^^^^^ ^^^ ^«*r^tXin^«^. *« -«i ri-« -^^r - Biedium 18 °V;"„ ,, as men -wiU sou £„» ne price of g«»*« ""'lose their credit W ^^,<, ^ame ^^" Lees, rather than ^^ and the l)a«ks ^^^^^^^^^ ^j, t cessity presses his ne Andthns, m a » ^^^^^a, and |>' necessity P/"!^^;*^'' medium is gref J «' ^^ ^..^ a short "l"'^ amount of «''«7*'",^ 50 per cent. «'«{« 7"unces of sttver obliged to stop p^y^ a\tors. But **;!^/ „ment to 1) ft, „ tbeS effects to thai « ^^ ^^^„ "".Its These bemQ^.f laany others, v^ho ^« \^^„ own oebts^„^i„ to the fav^tl ^eWed from *"».[« y^^,, foUure ioa'l^^-^^j,^ o„e dartjlte v toappoint^* also t.mj^ becomes genera • ^„^.^^^ ure of others, and the P ^ ^s *«'« "^' ,eds, and no^4, t„3this»ci'A>*°»^ ,f „.ercantilc «f * '^^ of the beatie^ij^, ^ universal «asn ^^^^^ ^fV^if ' """"S MONEY AND BANKING. 18 r payment 'borrowed are called ; the l)aTili9 'be debtors .\)ts sootier those pay- 3 batvVs and )f circulating ticreases, the 3r and lov^^t nan from ne- .,om the same 3W months the to his creditors, this being done his need of money is over and by so much diminishes the demand. His property is sold at any price it will bring, this depressing still more rapidly the price of goods and raising the comparative value of money will c:iuse specie to be rapidly imported. As soon as these causes have had time to operate, that is diminislied demand and increased supply, the eiiuilibirum is restored and credit is established on its ordinary basis. Here you have an exemplification of the workings of tlie present banking system and as a Mixed Currency, that is, a mixture of specie and bank-p:iper, forms the measure of value in every country in wliich it circulates, as truly as n specie currency, you see by these expansions and contrac- tions of the banks how the measure of value must necessarily be affected. The error and pernicious principle of our })anking system may be rendered still plainer by the following illustration. There is one Koh-i-noor diamond in the world and oidy one. What if we create a corporation to deal in Koh-i-noor minished, and It was a sljort ances of silver of wheat, pays ^_^ |f of wheat, diamonds, the one being put iii for capital with authority to he pays ^ r issue ten dilferent promises to deliver the diamond on deniMud. |Jo long as the diamond remains on deposit, and people are lUiiisfied that th(-y can get it by presenting the certificito of creat that those ^i^jj,^ tlie cortilicate may pass and command an e(juivalent 'd capital^ cannot ^^ cotiimodities ; and the }«rouiise to pay the diamond can ents. 'T^ey f^^ ^ readily discharged. (>r more properly evaded, by presenting ruT)ts and assign i^other promise agahist it of the same sort. All these pro- were debtors t| ||ttses make good '' deposits." A checks upon the corporation mym^nt to Cj^C a diamond and is paid in its promise. The "Gruid ,. Ibese ^®^^ €infidence " of tlie public will thus make the conuiiunity . . "ration, who would then obtain the diamond, or tlicir certificate for it, if tlu y liad loaned the certificate instead of the diamond itself. This is all that we need or anybody needss that if we buy or borrow from the bank, we want the thing we buy or borrow as IVoni an individual ; and if we take a certificate or a credit troui it, the Bank must hold the tliinu* until the roturii of the certificate or presentation of our check as oui"s, imd sulij'ct to our order, precisely as a wharfinger would hold wheat or beef on storage, as the property of the buyer after he sold it ; the certificate would pass fifty times from hand to hand without embarrassing any body. As it is the ])anks ple(l':e the same coin several times and when called upon it to pay it, they have only promises of debtors to pay the deiuaiKl, then they demand of tlieir debtors a thing they never ionicd and their debtors have only promises from th<^ir dclitors wherewith to resj)ond. Of course there is a dilliiMilty. The banks may screw the thing from their debtors, so long as the debtors can obtain it by any mcrijice of their j)roperty ; but beyond this tliose that they always discount on their deposits, that is to say, on previously existing fviiids, whereas the discount cieates the deposit ; and the only question the banks consider is whether the reserve of coin is sufficient to meet returning liabilities. Thus, Smith purchases goods to the amount of $10,000 and gives his note for tiie same. Smith's ^-reditoi'S gets his note discounted at the bank and have say $10,000, placed to their credit as "money deposited." If the bank transferred that amount of money to their credit, it would be area^ deposit and the transaction would be perfectly legitimate and proper; the bank would transfer and not create a deposit. It would do what it is now supposed to \ij i i it ,. MONBT AND BANKING. a„. namely Ion. P-^t" Atc*^ ^'"^^'''J^ this, but in«crta ".^'"'Xshs customers' ""'f >f.!; ^ Smith sells lo^rtlO 000 placed to Ws .c^<«l' f , "^ discounted ana has 610,000 P^^^ this *-^,, ",,t ofthe deposited. vv t ■■■ j r ^^ created m tne w repeated another «^".0"**„^"J° Here is then ^''O.^" ?^ third seller of ^^''^V^^nUc purchadng po^^^r of 30U currency created, liaM»t,' all f ^^^'^^* . «(l inter- mmm statisticians ot t ic v ^^ .^^ 1 to - 10. So that every aolUi oi property i ver of ''««"7j.|'o '^Qo.OOO as the In estnnaiii»r ..l'r^ ni*ar"-unient 5;^o^,w ? „r,m'ited 00 th< Ei thi cu th( he] pre mil pa] res 8U] s wr i coi I th< 4 I MONEY AND BANKING. IT not do Next, jts them " money e a?;ain or of the .0,000 of T of gold iTid inter- xV\ an un- or paper -^ V minds of , \)iise coin. clearly seen [rrcgate am- r in amount, tlier greatly of property, fccted those, ^ the vohyne ,cr appreciate •Uler that ac- of the ablest in proportion to 25 and m operty as 1 to culates ten ot .ncrease prices, 000,000 as the )crty estimated ,vrency ^A'^hout jperty increases this and he ^i\^ d .vith. Ever> d or hank deht. adds 10 dollars of price to our commodities in the ags^cgato. Assuming the whole sum of our currency to be $30,000,000 and our values level with Europe, so that the commodities we produce the more advantageously go to Europe and those Europeans produce more advantageously come hero in a normal, wholesome traffic ; then let the $5,000,000 of cur- rency be added and it will add $50,000,000 to our prices : our prices being raised will cause increased activity in the imports : and as our commodities have risen in price many that were before exportable cannot now be exported, conse- quently to pay for the imports money has to be exported, and will be exported till our prices are on a level with those of other countries. When these $5,000,000 of currency are bank debt the money leaves the country and debt takes its place. Should $5,000,000, instead of being added, be withdrawn from circulation it throws $50,000,000 of prop- erty on the rest of the currency for circulation. Saunders, in his Observations on the Currency, says, " The panic of 1822 was caused by the Bank reducing its discounts (most likely he means deposits) from £15,000,- 000 to £3,000,000, in order to secure the convertibility of the bank note, and by the contraction of the Bank of England and local notes, from £48,000,000 to £20,000,000 ; thus, in less than three years, reducing the volume of the currency by £34,000,000 ! This was a gold panic, lessening the price of funded and landed properties, the stock of gooda held by the mercantile and trading interests, and agricultural products, to the extent of some £200,000,000." Saimders makes no reference to the reduction of discounts on the part of the other banks of the country, no doubt, this reached a large amount, — adding very much to the above sum of £34,000,000. It is only very lately that English writers on money have discovered that the deposits of banks compose part of its circulation, as much so as the paper I they issue. I believe it was about this time that a person in /- England bought two estates, for one he paid £80^000 I cash ; for the other he gave £70^000, £10,000 down and the 18 MONEY AND BANKING. If I! l;!i ;'|i balance secured by mortixapje over both estates. By a Par- liamentary measure the amount of currency was afterwards so greatly reduced, that it required the sale of both proper- ties to pay off the mortga.ij:e ; and this man and his family were ruined. BeLi;'^arcd by a Pailiament;iry measure, he stated his c:iso and petitioned Parliament for relief, but as you may well conceive, it was impos-jible for them to enter- tain his petition. As respects the United States, the deposits and notes in circulation of the banks after deducting the coin in the banks, on January 1st, 1857 amounted to $410,000,000; on January 1st, 1858, this was reduced $104,000,000 ; on January 1st, 1859, the currency was increased $100,000,- 000, and continued to increase till Lst May following, when a sharp contraction ensued, till by the middle of August $35,000,000 were withdrawn from circulation. How painful it is to contemplate such a state of things. Here is a measure large at one time and small at another. How unjust to a commercial people ! Failures are inevitable ; and a bankruptcy law indispensable. I have not the bank statistics of this country, and if I had I need not detain you with them, for in all probability we should find their expansions and contractions, in proportion to the population, very similar to those of the United States. I will now explain the original meaning of Capital, as it will enable me the better to prove the fiUacy of a theory in currency, which has been termed Lawism, because John Law was the first to write a formal treatise on it, and had the opportunity of carrying it out on the most extensive scale. When a man is bom without hereditary possessions and has no property presented to him, there is but one method by which he can live, that is by personal services, or labor of some description either mental or bodily. When such a person has found some one else who stands in need frc va] is 1 aliL 1 hel only The but for \ does actu.'i cogni Now dities bettci nothi must Bervic all for Bui comnK at the I Saved vices rl vaJent.f |a cent [more tl ?^urcha\ n anyj 1>urchj HONEY AND BANKING. 19 aPar- fwards proper- family lire, he but as ) enter- lotes m in the 00,000 ; 000 ; oil 00,000,- n'" i'l^'l^r,'^ J^ ial to «r.«p .md rota,n Bttbstanco is money. »„,1 ovplusive meaning then oi The primary, S<>n»;""'/",vin.^s of labor and its «ymbo Oamtal, is the accumulated sa^'"^' „ ,„a„ m business ismony. The first meamnsjh;cl «v^^^^^ Thus a eap- attaehes^o the e^pressio^^ ^^{^'e stock of n.ouey at h.s d.s- italist is a person wl>« ^f^V;'°i„„,3 is to brin- .»to»<| mto ™sal to brinfC capital mto a busmts. ^^^^,^ ^^f(^„, j rconeern. ^hcn a nun i -ul_ » ^,^^^, „„ ,,, „ot suffi- oapital t« carry <- ;^y^„%, cient command ot leauy . , .u * « of Money is the aclcnowled.O'l ^y'ttne "p-^'^W^ -* aecSted labor, ^^-"^ Z^:i 'struggle between wants to buy c»»""°'^"'T',. 1 W Sr services, bow mud he requivcs. ^ i • Vi the term Oapital is used, a3 they do no consideration ifv isideraiwu. termed LawisnH) i' The fallacious ^^^'^ ^S ""J? 'A«« i'«i'^'" '"7"*? that Mone;/ represents aynmodties, «n /-^.^^ .^ ^ . S 6c fc««^''V\rw of the present day, and pro XValcnt in the pubUo "'^"/^"ft^se who have studic Sv there are ^^ persons except tn ;e„ee, whe the t ue philosophical pn««;f ^,« Zs infection. No ^ *!w\arenot W y t^^^^^jf ^ f mind of this noac Xdoes not thorou^yP^f^^test knowledge oft a/ a thin quar Law any retail The capiti with purch aJreac Tn tlie tl involv a man portioi a porti money moditi paper c asifKi coin, a result men don ™tary cor Thei is aflforc 'ranee, ssignal onetar^ I J 11 JP MONET AND BANKING. 21 uati- ntity iittcn- otain. I 8omo i tUat then of nymbol business Art a cap- t Uis (lia- oney iv^^o i not s^^" that 19 0^ les this and [\^ between how niucU oinmoditied 1 1 ^^Ulcli tbe ,\)jectunde! o\ it at ally but only Capital, (he accumulation of labor wJiirh has not ytt been given for commodities. Every man who thinks that there is any necessary reUition between the quantity of money in a country and its commodities, Is a Laivist. Take the cane of a private individual. Th there any necessary relation between the quantity ofmonoyho retains and the quantity of commodities he purchases? The quantity of money he has is just ihe (quantity of capital, of services due to him, whi()i ho has not yet parted with for something else. It is the quantity of power of purchasing commodities he has over and above what ho has already expended. In fact a moment's consideration will at once shew that the theory of basing a paper currency on enmmodities, involves the palpable contradiction in terms, T/utt icr <'^"^"°^\,ln depositing Uc parsed '^e'y/J'to tes^o a»y''-!r„f equWaJt value. associations, to issue n„er" seeurit.es ot eq ^ ^ ^^„„ wilh a '■ publie Couipi ,,, or n n r, ^^ ^^^ These securities n-i^^t ^^ „„;„cun.bered Unds ^^^ ^^^^ improved, PW'^»" Vtuained the P™f Iv^nues from them tiiese '■ securities '«"'!" opriate the w'f^'^.ndod from them, and they '"'ii'^\7^\,e notes vjas n.o\^fTri';, a profit as long »^ r Tople B^ *=^^ ''^^ "tnef^ilcV. repre- the comptroller, peoP^« ft^,,, the ""f^^^odigious rash ftom the security .f^^ ^'^"'^'"fhJL during the . sented its valu<'- . '^-^^ ,„orm.>u8 w»f,°' P^Vestern States, to deposit securities, an ^f ^\^„ ^ave very large years 1S34, 'f' /;. .j „{ pape' """TLw York, Boston Vrth their pocVe s luH « vj^^^^^^ f New X ^^^ ^.jj^ orders for Sff^ '""« duly o^^"**?,, i„ ihcse east^ra and PW ''gf' :^^ises iere pay;*^; « ^o their o^n given foi, "'f® 'Ihe western debtors ^, ;„ return fot lities, and when the ^ ^^^ on these p ac « ^^^^ ,^ „ bankers for t'"\";;hants thereto nobody w ^" York or Philadelphia wanted western notes for any pur- pose ; and nobody was disposed to travel several thousand miles to request the cashiers of the Western States to pay their notes, or in those States in which securities had been given to require the comptroller to sell the pledged securi- ties and give them the money produce. Moreover, every one knew that it was in either case impossible to obtain the amount in money ; for there was no currency in which the pledged property, when sold, could have been paid, except bank notes resting on securities or on the mere promise of the banker. In the mean time the usual effects followed, specie disappeared from circulation. The extended paper issues led the Americans to order immense quantities of goods from Europe, and prices being very high from the bloated paper currency, they could send no goods in return to pay for them. For some time they sent over a great quantity of their stock, but this became superabundant, and at last no one in Europe would buy it. It became necessary then for them to pay their debts in specie, but specie there was none. In 1837, all the banks in America without exception, stopped payment. The general suspen- sion began at New York on the 18th of May and spread in every direction. This was the fourth grand experiment of Lawism, pure and unadulterated on the most magnifi- cent scale, and such was the result. All ideas therefore of basing a paper currency upon pro- perty of any description is essentially erroneous ; and can have no other possible termination, if only carried out to their legitimate consequences than what happened in France in 1720, and in America in 1836-9. There is a species of ; property however, which from its being more nearly con- .( founded with money in the public ideas, is supposed by many persons, who would repudiate any imputation of being disciples of Law, to be a sound basis for a paper currency. This property is public stock A very prevalent idea is that all banks of issue should give security by purchasing fthe public funds, and then deposit the stock with a govern- Jtaent o£Bcer. What is this but rank Lawism ? I'hc rule ^ykat is good for one is good for all. If the public funds are '-* hos>:y and ba«k.no. MOM"'* ' . n 2^ onrrencY, they must of stock, every other iw ^^^„t,y '' " carrency upon the wtol" t""*^'^ .fnles of tasing » P^fl," identical and not^s. The P^'f^^^ue funds, are abso n^y ^^^e . ^ land and upon t^^^ V^^'^^^^u a "«" >\^C.e i as well in equally vipwu^^'loP; ^.bt, and to /M«e ^ nimn t»yV"° n^l i^s rank an absurdity ^sjo v,^^^ ^^, -S"^-t^:^-o-f?ir""""^ StSX:r"nto.oney.anland^^^^^^ ,Wo, funds be couu ;esmns to an w.qpA on 1- A. •■\ the basing is&ues oi F f lallacious. ^^^ country. BUTpasscd 1 aiiu u MONET AND BANKING. 25 tof one y 0^ caper upon A and ley i» ell ift it Uuii e only :e more ndsand t several based on us is ^^ absolutely ot aU I visui tlicory loditVes, of on ^^^^^ ''' tot loney.is^^f; ,der in pay- ibe agS[«f [' wism, t^^^ ^\\ idescripUon u the country^ joil-, exteusi>e . ftsheries^"' VundofAndu. try, to convert these to the purposes of man, a population of 2,750,000 ; and for the power to set this industry in motion money for the most part fictitious and a measure of value that is continually varying. This fictitious currency and imperfect measure of value, I have shewn, arise from the prevailing banking system j a system, which from its inception, has done nothing but plundered the country ; limited its agriculture and manu- factures ; cramped its trade (interchanges among its people) ; and its commerce (interchanges with foreigners) ; and which causes, it is said, 93 out of every 1 00 who engage in busi- ness, to fail once in their lives. A commercial community like this requires something that will facilitate the transference of debt from one person to another ; and something that will serve, with some degree of permanence, to measure the relative value of different kinds of property and service ; that is, a sound currency, and a Measure of Value of the most perfect kind. The proper regulation of the measure of value is of the highest importance to every member in a community, particularly to business men ; and it ought to be one of the chief functions of Government to make it as perfect as it can possibly be rendered. This can best be effected by having the money in a country, regulated in amount ; valueless out of the country ; and by preventing the circulation of any other currency that would be regarded as money. Eminent writers oti money consider that a specie cur- rency by itself surpasses any other as a sound currency, and as a measure of value ; but with them I cannot concur. It Is true that a specie currency cannot be increased with the •ame facility as a paper currency ; but in consequence of its Importation and exportation as a commodity, and its conver- idon into articles for domestic use, it is liable to considera- te fluctuations in quantity, thereby altering the measure of ttlue and the value of money. By the introduction of niiat should be jealously kept as a medium of exchange into ^nnels from which its nature ought to exclude it ; and by c \4 i '. lilt!.:; I-I 5 mayao wwrwp .^ P^'=« *'alue of services « counlTj °" , .-ever i* ^^ * „.* from *^ * *„^ cominon ^rSi---^-'""" ;,.,poso^e.a^:^*: farmer *? Vat and the manu ^^^^t g fooovatds of rtr The market pnc« o^^,, ,eq>«res lj)00 J^, ^h. for sale. jj. ine ' bushels o^ T„„;n(r more the c\oth *V a ^^^ufacturer J.0«» ^j^ co^^^'^S of their o\oth and *« » f^cturers o^^* J^,^ the ^<>^^fZxy>i^ ^^r^raAor*'^"^ "arf*« ^«1roCts of wheat atw discover the ""* ^j^ none ot tne v <^^X6^^i^; ^)1 frtheir ^y'tli^£\oW is, the fa^^„tet present itsen, on tuevr " _ '^:^« '°* manufectntet MONET AND BANKING. 27 func- never ss and easutc, tiere are •urrency the cur- , firstly, aUe dis- ss in this in those arst being ^ conntry. ;y common b the trade rtisans and ty T^ith the ommunities. . vants of the ;i a bushel, of wrth. rvfv/heat. Au* .embers of tt^'^ er ana »»»«»", tie products of tie country, a^ S^r^Mp ?^ti«'> farmer discontinues improvements, and the manufacturer closes his factory for a season. All this might have been avoided had the circulating medium been one valueless out of the country ; the foreigner not finding any products to exchange for his goods, would never have brought them into the country, the farmer and manufacturer would have exchanged their goods through the circulating medium, would have kept their capital, and been enabled to have proceeded vigorously with their under- takings. I will suppose that the foreigners, who brought the wlieat and cloth, come from a nation whos epeople are of low stand- ing and of few wants : a people contented with a bare subsis- tence, whose consumption is consequently small, and who may always have therefore a considerable surplus for exporta- tion. The foriegners S3eing they can undersell our produc- ers, will bring in products from their country and not want- ing anything but our specie, will undersell the producers in Canada, till by the withdrawal of specie, they increase the value of money so much that our producers are reduced to nearly the level of the prices of the foreigners, the only dif- ference being the cost of transport from the foreign country. In other words, our workmen hitherto have been receiving one dollar a day this supplying them with many comforts. but the foreigners accustomed to live meagrely, arc contented with half a dollar a day, and as the specie currency enables them to introduce their goods into the country, our producers are obliged to place their services in competition with the services of the foreigners, thereby dragging down the position of our producers to a level with that of the foreigners. In 1845 it was estimated at a very low calculation, to avoid exaggeration, that the labor saving machines of England ? were equivalent to every laborer having under him forty t workmen that required neither food nor clothing. Ought not I then abundance to prevail there ? Instead of which, owing to * England's vicious monetary and banking system her laborers J)ut barely subsist. Shall we have a currency in common with ll- MONK AND BANKING. pauper ^aS«' "^ ^ffX raw matenal ? °3 ^y heaviW WCffl^oP'^''*"'*'' t sueh a8 are TTe*-^*^ position ^ainfaetories, ^^f P^sbXe in &«*. ^''llXSXtoses taxing eon^'^rf oUss on a footing^i* the ma ^ ^^ can on a s.a« -V^ar^-^^r^aXt- Postage Stamps, ^^^..^esentati^e, »«"*y;t*^ on letteW promises to ^"^^fj^roWh tie post offiee^ ^ ^^ ti^ese the 8er^\««f ' "i^^t beeome a o»"f fj:^ only in Canada, for stamps, t^«y "^"^l " all snms, but this on.y ivKii «»""*•• ,^^<^- ty making it a legal o^nency, due for as poP»^»T.;TbeWen money and «»SCTe no better keep np *« ^^^^''^Xnld take plaee. ^ ^^^:!%ould be ment of the currency sn ^ ^^ "Xe would depend plan can ^ "^''Ctd ftnctnations in jtB ^^^tlto it- I« > ^t^-'^y '" *rn" 'in tbe ratio com^^^J^be oonU.»y «" i HONEY AND BANKING. 29 or the of the ave BO leavUy >08itiftccT iiostVv i vastly vut onb' uriVy i« 1\e gross* cxvstitie; vat ^s\^lf A woula ;or of the L ^ve iTaay ,c former, bter, inau 000 atin^- [itcd States Ic abaiidon- Lous system that direct for munici- 7 it. ^^^' impractica- iue proposed L V the taxes [ie>.s 1 f^l Lial Beforii^ Vlish Oovertj; fo abolish al It is objec>tcd by some that had wo a domestic currency wo could not obtain things from abroad. How do wc now obtain g0(MU and gold from foreign countries ? Only by j^ivinp; somBthin<^ in return. When the present bankintr system inflates the currency and causes expiMiditurc and extravajjjaiice, we exehan*^e our products and pjold for com- modities ; when it contracts, when expenditure receives a great check, wc exchanp^c our products for jj;old only; and thus do wt periodically make and lose our capittil. A Domestic eurrency would keep our capital in the country and merchants in the rate of exchange would have a toll- tale by which U) regulate their imports and exports. Besides we have the example of Buenos Ayres and also df Hayti, where a paper currency exists, and though issued in conformity with no established plan, yet these curreneies do not prevent their carrying on conmierce. In the inte- rior of Hayti people will not take gold when offered them, for they say, it fluctuates in value, which it certainly does, like any other commodity, according to the deuiand and supply of it for exportation. A domestic currency established, there will be no bank )r banks of issue. The borrowing and lending of money •nay be left perfectly free to all ; but when the money itself Iocs not pass between the parties, but a credit or certificate is given in its stead, the money represented by that credit or certificate, must be set apart, until the presentation of the check or return of the certificate. Whoever practices what McLeod considers "The whole Art and Genius of Banking, which consists in forming a sound judgment as .0 how many different parties he may pledge the same iden- ical capital." Whoever does this ! Let him be treated like ny other perpetrator of fraud, and be consigned at once to he safe custody of the District Jailor. The tendencies of the present banking system are cmi- lently demoralizing. By its alternate and ever-recurring Kpansions and contractions, the measure of value is con- [antly vibrating. This unsettles business as well as prices ; m M m g MONET AND BANKINO. J oro them • H excites men's gam- it mates fortunes '''\* ^^^^meskiijs to great extravagance. Mns propensities; and oftentimes leaab ^^^^^4^^^ of Under it people are exceedingly jealo i^io„ may thek eharac Jand teputaUon ^ a toa ^^ ,take toti-oy their prospects f» l*;,i*%he framework of society their interest on the cast ot a «ie, paralwed; it « B^riodically broken up >^^^^l^,C., but that lahort« Xfif -^iV:tfJ^of V^^^tWle and bondage, and must be doomed ^ J «<' ^ ^3oi„tc want. he kept too near a state Ota ^^ ^^_^ It will soon he one of the -^^ * ^ H has; for svstem has been allowed to Fevau ^ ^ ^3 ^o XTsovereigns to tamperwi^i ^^ ^;,,a,e could not he hanking corporations atf!!o"t\iolent measures to prevent retrained from taking the most vi ^^^^^ ^f t^e herecurrenee of such inju^t^- J, J^ ^^^ f, der- banks on money is "^ * ^^^f^u ^^ffer, not knowing bow or stand it, nothing IS said, buta'is , ^^ ^^^ Spanish why tbey do so. So ^eusibte »« ^J^^, i^ftuences of min in South America, ot ™e per ^^^ ^^^j^ jrbLking institution, -f -^^.^n^n^^f a single bank, they will not tbere 'lUow the e. ^^ ^^gy gay. There is always P>enty .0^;"^ ^^ ^ it becomes so scarce few ^U a bank is eBtabUsb^^a^^enomenon has been noticed in can obtain it. i ne s^ r Jamaica. A domestic currency would cau^ tbe^ tf t^roffo": try to "gard each o^-'.^^H^ itl losses that disUnt eigners, and thus ^"ve them j^ g ^^.^^^ ^ h Voyages and management occ^ion ^^ ^^^^ ^^^^^^y ^^ more effeetu'^l protection to the inau y ^^^ ^^^^ ^^. S^U duties, which V^^^J±%,^ which, besides, are ■|l A tr balance increasi 820,00 country annihiJi in the f trader's I assets fa [left to Pi bankrup 5wn, bui )le of d »any ca cn- ce. of aay uake 5iety it is ortTS it tUa IS-, for f as do not ^ prevent a of t^« ^ undet- tr how or "Spauish liences ot are, that g\e baiiK.- Ihey say, scarce few noticed lu THE SUPERIORITy OF MONEY OVER BANK- DEBT IN THE CURRENCY. With money we buy property and pay for it, and the money then remains keeping; the currency whole to main- tain prices and discharge all obligations contracted by ita measure ; with the debt-currency we buy property by trans- ferring a debt ; we pass an order on the bank ; the bank then owes for the property instead of ourselves, and promises to pay money hereafter. I owe $ 1 ,001) to Johnstone, $1 ,000 of money will pay and end the debt, leaving the currency entire. Not having the money I give him an order on the bank. The bank now owes Johnstone what I owed him before ; the debt is not paid. If the bank discharges its debt by an off-set with its creditor, it annihilates so much of the currency. This is simply the contraction of bank- loans ; it is an absolute destruction of the means of paying the obligations it had created in the price of things; the price must fall. This is the important difference between money and debt in the currency. Money remains to sup- port prices and maintain the integrity of obligations, alter paying and ending debt. The debt currency cannot pay and end debt without destroying the sum of the currency. See the wretched effect of this in an illustration. A trader by industry and frugality acquires SI 0,000 clear balance at the credit of his stock account with a certain increase of currency. His assets are $30,000 and he owee $20,000. This is an average position of traders in the country. Now the banks being obliged to pay their debts annihilate so much of this currency, as was really the case in the fall of 1857, that general prices fall one-half The trader's debtors cannot pay, his merchandise falls, and his !assetsfall one-half; he has ^20,000 to pay and only $15,000 Jleft to pay it with. Instead of being worth $10,000 he is now ibankrupt $5,000 without any imprudence or fault of hi« 3wn, but simply by the miserable instability of this prinoi- )le of debt in the currency. The reader no doubt knowi lany cases of this sort occurring in the fall of 1857. On« D i I' m MONET AND BANKINO. How in an insaue asylum. ^^ We .0 w ^^^rrtX S^^« — f^^^S the currency to discbarge the od „ f the Usnre. We cannot «lWcko^ ^^ ^^^ ^ the currency to supply the 'ien'.i ^ j g m effecting tno money is employed m lt^«"V"„,atter how much money rcUges.depending upon;'- f °,^,,,, „,„ ,ave no mean roSu.;inl"aL depend upon prices thathav I ''^^''^' . ..+ for commodities passes For convenience sake ^e paymen for^com tJou-li the medium of f^^^'^/^li ^ot land, public stock ^dollars are demanded. ^. i ,,teof There are other facts of S^'^'^J^sfSn'of the 'currency iJ^t indicates the =^bnoi-ma coi^' «^^;„„ ^^ ,^, „«, Ctn, the PiSt r—S i: s more feet in raising ^r"'^\''"ofii2st than debt any^vhere eke. By ^v rate of interest. .. a charge included for I The sales on credit -e fde mth a^^^^^ . ^ I d MONET AND BANKING. 39 med xem- [ and um of Toy its of the use tlae ing the , money means lat have es passes isc of the )Uc stock, xi promise ugh rate of e^cvm-ency the money ■t m raising ' By driving s the deht I except m [e of interest inseparahle [uded in the included foi' pney currency! htics pass oni fav fro^ T^^^f Uof fourM |o that articlesl Wy cost ot^ twenty per cent. This falls on the producers in two ways, it checks their production and sales, and compels them to feed and clothe great numbers without their knowledge and consent. Obviously the evil cannot be removed while debt remains in the currency. There can be no objection to the credit system either in the ordinary traffic of the country, or in bankinii;. Credit hanldng is a very diflferent thing- from debt h(mkiii(/. Banks should employ their credit to obtain money, and then loan it to the best advantage. They should borrow and lend money as individuals borrow and lend money. Debt bankuig ; the system of the Bank of England, costs this country an immense amount of money, and an untold amount of wretch edness in the dissipation of the hard-earned fortunes of worthy and industrious men. It subjects the wealth of the country to all the hazard of a game of chance. The remedy lies in honest unequivocal money banking. Mr. FuUerton is the chief modern authority for the notion so prevalent in England and in this country, that all public financial difficulties spring from overtrading, the banks being perfectly innocent and uninfluential in the mat- ter, — ''The amount of issues," he says, "of the country banks is exclusively regulated by the extent of local dealing and expenditui'c in their respective districts, fluctuating with the fluctuation of production and price, and they ucltlicr can increase their issues beyond the limits which the range of such dealing and expenditure prescribes ; nor diminish them, but at an almost equal certainty of the cm*rcncy being filled up from some other source." If $10,000,000 of gold were thrown upon the Canadian market to-day, in excess of the present supply, it would unquestionably cause an innnediate and material decline in the local value of money here ; there would be much •' local dealing and expenditure ;" prices would rise, and imports Avould be attracted by the high prices until that excess of money could be distributed to an equation of value with other places. It would ultimately find its level of value over the whole com mercial world. MONET AND BANKING. ^ Precisely the same result as to the decline in value and distribution in money would follow the precipitation of the same amount of convertible bank currency upon the market. Let it be known that the banks are prepared to furnish $10,000,000 by discounts in addition to the present local volume of currency, and a ruinously active business would take place in the creation of notes for discount ; competition in prices ; and in imports from other places, to be held at high prices, by means of bank at commodations. There would be plenty of speculation, which would be of no use whatever in approximating goods to the consumer, but only a ruinous tax upon their necessary consumption ; this would con- tinue until the banks were checked in their destructive course. The experience of 1857 and the preceding years, like other periods of great changes in the volume of the currency and value of money, clearly disprove the doctrine of Mr. FuUerton. How was it also in France under the operation of Law's bank from 1716 to 1720 ? There can be no doubt that the local dealing and expenditure kept pace with the operations of the bank ; there was prodigious activity for a while, and a prodigious advance of general prices. Mr. .Fullerton would make the mad speculations of that period the cause of the bank issues, and such has been the ar- gument of all the Bank-paper currency advocates in every commercial revulsion in England and this country. It surely will hot answer, they mistake effect for cause. If Mr. FuUerton's theory were correct the converse would also be true, but does the decline of '' local dealing and ex- penditure " cause the contraction of bank loans ? or is it the contraction of bank loans which causes the decline of the local dealing and expenditure ? When banks deal in money only, there is no need of Uahi- Itties without money in reserve against them. With this re- serve the loans are released from all restraint, and money, like every thing else, may be left to the natural law of supply and demand. shall The all, s| ample fidenc amou capita active empio certifi, dollar, cial d( Jionest before! Oi md the ket. lish ocal ould Ition high Id he JQV iti iino\i3 con- uctive Trency of Mr. eration ) douht iiih the V for a ^ Mr. it period the ar- in every ^ry- It l>se would and ex- is it the le of the of liabi- fch this re- [^ money, of supply MONEY AND BANKING. 41 The following pro /oi-ma account may servo to illustrate this method of bankinir. $1,000,000 proprietors' capital paid in money. 5,000,000 deposits on stipulated terms, or with due notice of withdrawal. 86,000,000 Loan at discount and in exchange dealings, say 7 per cent, per annimi 8-120,000 Contra. Interest on $5,000,000 deposits at 5 per annum $250,000 Loss of interest on $40,000 money in re- serve at 7 per cent 2,800 Rent $1,500 ; salaries $0,000 10,500 Bad debts one-fifth of 1 per cent., say... 12,000 Contingencies 4,700 $280,000 Dividend on proprietors' capital 14 per cent, per annum $140,000 The loan must be ?o averaged as to time, that tlio receipts shall always proceed the demand forpaymentof the deposits. The operation of the Saving Banks, without any capital at all, shew that large deposits may be obtained. With such ample capital as above stated, to protect and give entire con- fidence to depositors, or with less capital deposits of less amount may be maintained at five times the amount of the capital. The loans should be made on commercial paper and active securities so that the money would be constantly employed in the currency, either in money or in checks, or certificates of deposit, with money in reserve, dollar for dollar, against the liabilities. Such reserve would be a spe- cial deposit without interest. This institution would be an honest "money bank," dealing in capital, getting money before loaning it. Our bankers assert that such is the nature of the busi- / 42 HONEY AND BANKING. ness of this country, that expansions and contractions of the currency are necessary. In the fall of the year, they say, the produce cannot be brought out of the country for expor- tation, unless the currency is increased. As soon as the bills drawn for these exports are sold, then a contraction ensues. So much has already been said on the evils of expansions and contractions, I need not dwell on the mis- chievousness of this proceeding. The same end would be attained by banks offering a sufficiently high rate of interest to draw money from sources, where it was lying idle, or where it could not be so profitably employed. It is contended that the establishment of a domestic cur- rency, regulated as proposed, will not prevent expansions and contractions ; that the currency will circulate in other countries and as the amount that will do so will vary, by so much will expansions and contractions take place. I believe though of some value, yet it will be of such uncertain value abroad that this currency will never there enter into circu- lation. I will first suppose that we alone possess a domestic currency, and that other nations continue the use of metals for their money ; the natural relative value of our money may be higher, or may be less than theirs, the value of each depending on its relation to services in the respective countries ; our dollar here may command twice or only half the amount of services that the gold dollar does in other countries. Next, I will suppose that other countries adopt domestic currencies ; the natural relative value of theirs and ours will be almost sure to differ ; besides, did a difference in their natural relative value not exist, we may be certain that the exchanges between the countries would always be caus- ing one money to be more valuable than another. For these reasons we may be assured that this currency abroad will never enter into general circulation, not even near our bord- ers, where the paper of cur banks freely circulates. It is also contended that expansions and contractions will most probably arise by parties combining and withdrawing large sums from circulation to serve purposes of their own. A domestic currency will cause wealth to be so much more fai wi we jea gre cau acti sum ther exer dete] possi prop* regai dam7 Th and n the pjj Its cc debtor and cr conseq The well as are, th( on pub of the ( lent tra: pledges banks i when eve These consume country banking on inter Would gi MONET AND BANKINQ. 43 y. )r- he on of lis- be rest or cur- iions )tlier [)y so 3lieve value circu- nestic letals loney [ue of jctive ly half other adopt Irs and ■nee in [n that caus- these .d wiU bord- bns ^^^ [rawing Ir own. [h more fairly distributed than it has ever yet been done, that this will be no easy matter to accomplish ; but, suppose that it were accomplished, as it is the duty of the Government to jealously guard the measure of value, as soon as they detect great appreciation in the currency and can trace it to such causes, they should at once be empowered to counteract such action by a further issue of notes ; and when the hoarded sum was released to withdraw the extrM issue, which would then become a public debt. The fear of such a power being exercised, I have very little doubt, would be sufficient to deter the formation of any such combinations. Against the possibility/ of their arising, the only weakness in the scheme proposed, (for to prevent any abuse in the issues I cannot regard as one,) and which can be remedied, we have the damning realities of the present banking system. The employment of bank-debt has the effect of expelling and repelling money which would otherwise be employed in the place of the abnormal, useless, and bewildering bank-debt, Its contraction reduces the money value of the assets of debtors, and does not reduce the sum of their obligations, and creditors gain the property that is lost by debtors, in consequence of the contraction. The measures best calculated to redress these evils, as well as to greatly stimulate the industry of the country are, the establishment of a currency based on public faith, on public laws, regulated in amount, and valueless out of the country, and the no further legalizing the fraudu- lent transactions of banks. A wharfinger or merchant, who pledges the same goods twice, is treated as a swindler ; and banks also ought to be treated as perpetrators of fraud whenever they pledge more than once the same money. These measures would approximate the producer and consumer, it would draw together the population of the country ; and not disperse it as the present monetary and banking systems do. With the removal of all restrictions on interchanges with foreigners, the measures proposed, would give rise to a continuously progressive condition, till 44 Honey and banking. it raised this country from its present condition, to one of great prosperity and wealth. To hasten the advent of such a condition, the Government ahould, to the utmost, promote and diffuse knowledge ; and forward facilities of communication between difi'erent parts of the country ; it need not concern itself with canal or rail- road routes, for merely through traffic or travel's sake, for if these undertakings will pay, they may safely be left to private enterprise, and if they will not, Government should not for the convenience of people beyond our borders enter into such profitless undertakings. No apprehension need be entertained respecting the ability of Government to put treasury notes into circulation. When prepared to issue them, let an act be passed rendering null and void all notes of the banks not presented for payment within three or six months ; making the treasury notes the only legal tender ; enabling banks to redeem their liabilities with them ; and making it criminal to pledge the same money more than once. Then let Government issue its notes, undertaking to receive them and them only in payment of all dues to itself, to any one on receiving value, or to any one on giving security for the amount advanced, and willing to pay interest for the same. .i^'^' i vic< oft the tot] tell Now agre< force yond 0fth( than hands or ma it wou rob th Iti indust to en a thereft possess Goverr broadej man to has giv advanti his nei^ ducts o who wi eel] to w of this may be cessities of the C( them to PROTECTION. Since the currency any one possesses is evidence of ser- vices due to him, it is cvid nt that when he requires some of these servic s to be rendered to him. the arranijenicnt of the price, or the value of tlic service, should be left entirely to the natural agreement of the buyer and seller. Who can tell so well as they what is the real value of the service ? Now, suppose that when the price of the service was so agreed upon and settled between the parties, some artificial force were suddenly put into the power of eitlier of them, be- yond what arose from their natural position, to enable one of them to compel the other to yield up moro of his industry than he ought to do ; such a force suddenly put into the hands of either party, whatever its nature be, whether moral or material, would clearly be unjust in its very nature, and it would be nothing more than a force enabling one party to rob the other. It is the Divine command, that man should live by his industry, and he has been endowed with power and faculties to enable him to fulfil that command. A mm's industry therefore, and the fruits of that industry, are his sacred possession, bestowed upon liim by the Divine Author and Governor of the world. It may therefore be asserted in the broadest possible terms, that it is the natural light of every man to employ his industry and the talents which Providence has given him, in a manner which he considers the most advantageous to himself, as long as it is not to the injury of his neighbor. He has a natural right to exchange the pro- ducts of his own industry, with those of any other person "who will agree to do it, to buy from whom he will, and to Bell to whom he can. Any law which seeks to check the cause of this free exchange is inherently wrong, and though it may be permitted to take something from him for the ne- cessities of the State, a law which seeks to despoil one class of the community of the fruits of their industry and give them to another is an intolerable violation of natural justice. 46 PROTECTION. Now, the primary idea which lies at the foundation of all property is industry ; and if a man takes away any portion of another man's property, it may be considered as so much of his industry. Thus if lie wishes to sell any article to him and purchase gold with It, if he can by any means whatever force him to pay a hi' find ;,:;:c::-ii-j Pri^o, T. J °. ^ 'l''^' «'"' "'0 cost r^; " f»""f ""on of „11 Idea ,vi,3 a voA I^ P' ""^'^ ^ocnwd to tlK.,n\ ''' '''«'" '" 'vo think of\r; '""':i' "no to occur tn ' '! " ^^ '•"'■ m. wo tliinfc „..„•' '"""'■al one to occi.r m I , ^>' '•">'■ Tl,ia surprised '.t :: ','=^T'*^o» was n fashion ."^"^^ ^^'^'cn purpose nf j; / V^ "^^ various timoQ ] '^ century it br.n^h "''■"*''"« state of I',,.],' T''''''' "'ado i„ is'ir «onibi,u ton T "' ««"«i-s-a v"st il ""■*'• ^^ '^as wakinu and tl>.- .*''"'" ''••"' a conmY t, " "'« House plunder the m hi;„ i *''^P'•oJueors in turn Z. ^■'" ''"^ "iorethanaS .•'^"' ""•■''• o'vn benefit T '''™""«'^ '» «>e BuA" «•=-'- -spiraey of allte Soir;^,;^'^^! ' ^0 96, YONQE STREET^;::: — — aiijivET, TORONTO.