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and Silver deposited. In the meantime, the discovery of America, in

) creased greatly the foreign commerce of Europe ; Cadiz, Lisbon, London, came to be great marts of trade. At last, Banks were chartered, with the exclusive privilege of issuing their own promises to pay, and the bills containing those promises, were called Paper Money.

Paper Money became, in a short time, an instrument of immense power for extending commerce, manufactures, and civilization. It actually invaded, revolutionized, and controlled the mercantile transactions, and the political relations of the whole world; the extent of its effects will appear incredible, if we compare with proper discrimination what has taken place since the last 100 years, to what would have been the probable situation of things, if gold and silver had continued to be the only token of value, that is, the only means for effecting purchases, exchanges, and barter, generally. But there is a great drawback to the important results that have been obtained ; immense national debts and periodical revulsions in prices, producing bankruptcy, ruin, and misery, on a great scale, are the concomitants of Paper Money, such as it has been regulated to this day. All the plans that have been tried to give it stability, have failed, and the reason why, is, that the system is based upon a radical error. Said radical error consists in having made Paper Money the representative of gold and silver. This is a fiction, that has the effect of reality, only so long as confidence exists. The moment that a demand for

specie is sustained for a few millions, panic and ruin are the inevitable result, and the reason is obvious. We have, by instance, in the United States, about $80,000,000 of Gold and Silver coin: out of that amount, the Banks have about $30,000,000, and the amount of Paper Currency issued thereupon, is very likely as high as $150,000,000, and there is, besides, an immense amount of floating capital, in the shape of deposits and vouchers, payable on demand, so that the aggregate total thereof, cannot be much less than five dollars of paper, payable on demand, for every one dollar of specie in the country. The consequences of having an estab lished monetary system, composed of such elements, are the following: First, that an attempt to return to a pure metallic currency, is obviously impossible. Second, that so long as Paper Money is made to promise to be the representative of gold and silver, so long we will be exposed to the evils above described : that is, that a demand of six or seven millions of Specie to settle balances in our foreign commerce, will invariably unsettle and paralize the immense interior trade, and the extensive transactions of this wealthy country.

The aggregate amount of the products of a country, constitute its real wealth.— According to this uncontrovertible definition of wealth, there is no country on the face of the earth so rich as the United States, and yet the sudden exportation of a few millions of dollars in gold and silver coin, will disorder the currency and create panic and revulsions, which will be felt all over the various States of the Union. When we take into consideration that the amount of coin exported is insignificant, as compared with the immense available wealth of the country, the fact of such a ruinous result will strike the investigating mind with a conviction that there is something wrong in our monetary system—that it is not in harmony with the state of society as it now exists.



Well, the purport of the preceding remarks and explanations, has been to ascertain what it was, that is wrong, and the drift of the argumentative part thereof has been intended, moreover, not only to show that Paper Money has been to this day, a mere fiction, based upon a radicaliy erroneous principle, but also, to prepare and enable the reader to conceive how Paper Money can be made a substantial truth. Make Paper Money the direct representative of property, and this true and sound principle will give the means of establishing a monetary system, whereof the basis will never fail. Let that system be established by law, with such plain and easily understood restrictions that will command the confidence of the community as to the scrupulous fulfilment of the fundamental rule, which ought to be the basis thereof, viz That the property hypothecated be ample security to the bill-holder, and that it be of such a description, as to be divisible in fractional parts, so as to be made readily available, whenever necessary,--and the important question is solved

and Silver become merely merchandise, and any quantity thereof might be exported without disturbing in the least the currency of the country. We would thereby become truly independent—and our immense inland commercial transactions would be no longer under the inAuence of the fluctuations which are inseparable from mercantile operations with foreign countries.

A certain class of Paper Money has been issued for the last nine years, by some Banks in this State, which might, by law, be made a direct representative of property, and yet, no one appears to suspect the immense advantages that would accrue to the whole community by making such kind of paper money the legal currency of this State. The 2nd and 3d Sections of an “An Act to auihorise the business of Banking,” (passed April 18, 1838,) contain, actually, the inception of the system of Paper Joney, which has been ascertained from the above disquisition to be based upon the true principle. That system cannot, however, be legalized in all its bearing by our Legislature, because the Constitution of the United States prohibits the States from coining money, and from making anything but Gold and Silver coin a tender in payment of debts. But our Legislature could carry the obvious intent of the 2nd and 3d Sections, by a few clear and provident provisions that would secure the religious fulfilment of the fundamental rule above laid down, namely : “ That the property hypothecated be ample security to the bill-holder, and that it be of such a description as to be divisible in fractional parts, and made readily available whenever wanted;” and, if the Free Banking Law were amended, according to the draft that is alluded to, pages 17 and 18, the advantages that would accrue therefrom, to this State, and to the community at large, would soon become apparent; for, although the Bills of the Free Banks would continue to be exigible to be paid in Specie, yet the fact of their being wholly secured, (with ample margin,) by New York State Stock, would greatly diminish the want of Specie for Banking purposes, and its exportation to settle foreign balances would not be felt, by any means, to the extent that it is now, and, in proportion as the number of the existing Safety Fund Banks would decrease, the advantage of this Free Banking System would become still more manifest, so that other States would, probably, enact free Banking Laws, under the same system, and if a great majority of the States were to do so, there would be no difficulty in obtaining an amendment to the Constitution of the United States, to the effect of allowing the States to issue Paper Money by mak ing it a direct representative of property, according to the fundamental rule above explained. The various sovereign States of this confederacy, would'then have a legal right to coin money out of paper, and this application of inherent right of sovereignty which they ought not to have given up, would, altogether, shelter their currency from the fluctuations consequent to the issue of Paper Money which promises to be a representative of Gold and Silver. On the other hand, the General Government would continue to receive and pay out its dues in Gold and Silver coin, which fact would have a tendency to keep in the country a large amount of Specie. Said Specie would be used, mainly for paying government dues, and for small change, it would be, therefore, a mere mercantile commodity, and it might increase or diminish without any material inconvenience.

The system of Paper Money restricted as herein advocated, might be introduced in France, England, &c., with great advantage; there would be, however, considerable danger that the central government power of those countries would, in times of financial embarrassment, increase the amount of issues, or else, that the public debt might be repudiated, &c.; and the feature pointed out in the last paragraph, as to the complete independence of our General Government, in regard to finances, renders the system of coining money out of paper one of peculiar fitness to constitute the monetary system of this confederacy of sovereign States, as the action of our General Government would be limited to that of a wholesome Financial REGULATOR.

In conclusion, the writer of this 5 essay” is well aware of the difficulties that the adoption of the true system of paper money will have to contend with—nothing is more difficult to eradicate than error, when it has got rooted into the habits of nations. He believes, nevertheless, that the community would soon understand the great advantage of this system, and that it would soon appreciate its safety and have full confidence therein, if the Legislature would regulate it, once for all, understandingly. This is, indeed, the greatest difficulty to overcome, as a majority of our legislators appear to be bent upon making laws that require revising once or twice every year. The hopes of the undersigned are not, therefore, very sanguine as regards the overcoming of said main difficulty, but being firmly convinced that the system herein advocated, is based upon substantial truth, he considers it his duty to the community to give it publicity.

The extracts undernea:h, contain views on the subject of paper money which have struck me as being somewhat congenial with my own. The reader will remark, by referring to the original, that the translation is not literal; many of the French sentences appearing to be vague and indefinite, it has been attempted to make them precise, in a practical point of view.

At the present time, when the financial situation of France appears to be analogous to that described by Mr. Lamartine, the views of that distinguished statesman on paper money, may have considerable importance.


But although the financial situation of the French Republic appears at first blush to be nearly the same, there is in fact a very material differ

A system of paper money might yet be devised, that would, in time, and with proper republican reform in her expenditures, extricate her finances from its difficulties, and enable her to pay the interest of her immense debt, and create, besides, a sinking fund to decrease it.


Extracts from the History of the Girondins, by Lamartine, pages 81 and 82. “Operatives were without work, and rich people, to escape spoliation, assumed the appearance of poverty. The nobility and the clergy bad either carried away or buried underground an immense amount of gold and silver coin, and thereby left the people without these convenient tokens of value to facilitate exchange and barter: they were in fact almost bereft of a circulating medium to compensate work and to promote industry.”

"In order to make up for the scarcity of gold and silver, the Assemblee Constituante had created a kind of paper money, generally known under the appellation of Assignats, trust and confidence were to be the basis of that paper money, and it would have had the same effect as metallic money if the people had been willing to comprehend its principle and to adopt it. It would have given activity to industry, paid the taxes, represented the price of land, and that of property. Money, whatever some economists may say to the contrary, has no other value, in a general sense, than that which is given to it by force of the law, or by the general agreement which creates it, and the confidence and the credit which thereby attaches to it, is a matter of course; but in order to ensure this last point, the relative proportion between things and property bought, and the token agreed upon to purchase them ought not to be suddenly and arbitrarily exchanged by any reckless increase of said monetary token, and whenever that proportion is well known to be a substantial truth, the real price of property will settle down, and be firmly established, according to said proportion.”

“Law only, and an honest and provident law, can, therefore, coin money, but it matters not whether law coins money out of metallic fractional parts or out of paper, provided, as stated above, the proportion of the issues of the money, or token agreed upon, and the amount of property hypothecated to represent it, be scrupulously the same, so that the community may have entire confidence in its full value.”

“Bills of exchange are nothing else than paper money issued by an individual without any other security than the signature of the person who creates it, and yet, transactions of the greatest magnitude, which would, otherwise, require a continual transportion of an immense amount of specie or bullion to accomplish, are, thereby, effected with the greatest simplicity. These bills, in most cases, are equal to gold and silver: they are, however, in fact, nothing else than money coined by a sole individual, the confidence of people in said individual imparls the value. No possible doubt can be entertained but what the state government can coin paper money, not only as good, but still more undoubted than that issued by an individual; particularly, when we take into account that the state represents the property and credit of the whole community. But on the other hand the community has been accustomed for ages to the use of gold and silver; the feel, and the weight thereof appeared to them to constitute its value, and it was natural that they could not enterlain confidence in paper money before the truth of the above position had been tested by actual practice; whenever a truth, however self-evident it may be, runs coun. ter to old established notions, the advocacy thereof will be at first mistrusted, and considered as a snare.”

“ Time and experience would, however, have soon demonstrated the fallacy of these old notions, if the fundamental principle which forms the basis of the views above expressed, had been strictly adhered to, but the wants of the revolutionary government were pressing. They increased recklessly, the issue of the Assignats, destroying thereby the proportion which ought scrupulously to have been kepi, between the aggregate amount of these tokens of value and their means of redemption. The experiment, therefore, proved to be a failure.”



New YORK, Jan. 30th, 1848. Mr. M. FILLMORE, Comptroller, Albany.

Sir,—The Legislature, by demanding quarterly reports from banks, intends, no doubt, that the reports will exhibit their true condition. The 3d section of the ait of August 18, 1843, lately amended by another act, passed Dec. 4th, 1847, provides the items for a form of statement which has been drawn up according to such an intention, as appears by the following heading thereof: “Statement showing the true condition of, &c.”—Capital stock banks, whether corporate or under the general banking law, may, in fact, by making their report according to the form of statement aforesaid, exhibit their true condition, but this will not be the case with the individual banks. A report from the individual banker, according to said form, will not show the true condition of his affairs. It is a mere mistification.

According to the printed form of the statement whereby banks are required to make their report, the capital of the bank is set down and reported under the head of liability, this is the proper place to set it down as regards capital stock banks, as said capital is a debt from the bank to various stockholders which have nothing to do with the management of the bank; but when there are no stockholders to render an account to, when the bank is owned by one individual, there is no capital in the sense understood and defined in the general banking law. It is obvious that the whole amount of means which constitute the capital of the individual banker, constitutes altogether his resources; and a correct report of his financial position, (viz: true condition) ought to set down the whole of those means under the head of resources.

The individual banker is not bound by law to keep on hand any specific amount of specie. It has been wisely thought that the risk of forfeiting his security will be sure to command his keen and earnest attention to keep constantly on hand sufficient available means to redeem in specie any amount of his circulating notes which may be presented to his counter; this, with common prudence and foresight, he can easily do by proportioning his issues to his daily available means; but in order that the public might judge of the degree of prudence and foresight exercised by every individual banker, the form of statement intended for the report of individual bankers, ought to be drawn up so as to throw light on the amount and kind of his available means as compared with the amount of his circulation, and the weekly and monthly average redemption of his issues. Thus, by instance, the banker who will keep up a circulation of $95,000, or over, out of, say, $100,000 of circulating notes received by him from the Comptroller, will not command so much confidence, as the one who will only issue $75,000, or less on the same amount, &c.

The statement which you shall find herein enclosed has, by means of erasures, additions, alterations, and remarks, been made to give an idea of what ought to be the form of the statement, according to which it would be

for individual bankers to report. But I intend to draw up one more simple and more to the purpose, which I will forward to you, together with a pamphlet on free banking now under press.


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