lost to the country; for the truths of political economy are not obvious to all. But no one who is acquainted with the elements of that science, will doubt, that a nation, not having as much capital as it can advantageously employ, may be improved and enriched by foreign capital as well as its own; and the benefit of these seven millions in stimulating the productive industry of the country-in building ships, and wharves, and mills, and manufactories, and steam-boats, is precisely the same as if they were domestic capital, with the single difference of the interest. Ask the owner of a thriving manufactory of woollens in Cincinnati, or of iron in Pittsburg, if he had been assisted in his enterprise by a loan of 10,000, or 20,000 dollars from the Bank of the United States-and he might answer, that, by the use of the money, in a few years, he had, besides paying the interest, realized the sum borrowed. Ask him further whether he would gain more by keeping the money longer, or returning it to the European stockholder, and he would laugh at you, thinking your question conveyed its own answer, as he had not chosen to return the money.

The president's project then of a treasury bank, seems to be liable to all the objections he makes to the present Bank of the United States, in a tenfold degree, as to influence, by adding so enormously to the executive patronage. It offers a far inferior substitute for the safety, and the easy transmission of the revenue; and no substitute at all for much of the accommodation now afforded to commerce, and the large amount of active capital it would throw out of circulation.

In making this comparison, we have had no reference to the former services of the Bank of the United States in restoring the currency of the country to a sound state, or to its power of so preserving it, if the country should be again involved in war. We have contented ourselves with refuting the objections which have been brought forward against that institution, under the sanction of the chief magistrate of the country, and with pointing out to the unprejudiced mind the inconveniences and serious mischiefs attendant on the scheme which has been proposed in its stead. In our last number, we asserted that the resumption of specie payments by the state banks, in 1817, was to be probably attributed to the establishment of the Bank of the United States, and we stated the facts upon which that opinion was founded. It was, then, with some surprise, that we saw the position roundly denied in a quarter (the North American Review) where we have been accustomed to look for just views on all commercial affairs; and the resumption of cash payments imputed to the resolution of congress, forbidding the officers of the government from receiving the notes of any banks which were not redeemable in specie. The question is not one of primary

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importance, yet as it may affect our future policy, and concerns our present justice, we will add a few remarks on the subject. When we see that the measure of the government alluded to was not immediately followed by the desired effect, but that as soon as the Bank of the United States was about to go ration, an arrangement was voluntarily entered into with it by into opethe banks of New-York, Philadelphia, Baltimore, and Virginia, by which they all agreed to resume cash payments at the same time, it seems to afford prima facie evidence, that it is to the Bank of the United States, and not to the legislature, that the resumption is directly attributable. Whether the state banks might not, at some subsequent time, have paid specie, and at what time, must now remain a matter of conjecture; but we think it quite as likely, that the banks, making extraordinary profits as they were, so long as they were not compelled to redeem their notes in specie, would have procured a repeal of the resolution of congress, as that that measure would have operated coercively on them. In some of the states, the resumption of specie payments was discountenanced by the state legislatures; and in Virginia, if we mistake not, after the measure had been enjoined on the banks by the legislature, it afterwards retraced its steps, on the ground, that if they ventured to pay specie, the Bank of the United States, then about to go into operation, would immediately draw every dollar from their vaults. The banks of that state thus had the express sanction of its legislature for continuing the suspension; nor was it until after the meeting of the convention, mentioned in our last number, that they paid specie.

But in what way, it may be asked, could the Bank of the United States have compelled the state banks to resume specie payments, if they had not been so disposed? We answer, by giving the public the option of a better currency than theirs, and presenting an easy and ready standard in every part of the Union, by which the depreciation of their notes would have been manifest. As soon as the paper of the national bank had been put into circulation, it would command, by its convertibility into specie, a preference in the market over the paper of the state banks, and the difference would have been shown by the reduced rate at which the latter would have passed. The public then having such a standard of comparison, could no longer be deceived, and every one would have seen the depreciation, and known the extent of it. What would have been the natural consequence? The paper of the state banks, thus depreciated in the market, would have been bought up by their more prudent and substantial borrowers, and returned to them in discharge of their debts; and thus they would have had no notes in circulation except what was represented by the paper of their most straitened and doubtful customers, nor would any others

have continued to borrow of them. Thus, with a business decreased in amount and impaired in character, they would have found it impossible to make a profit equal to defraying their expenses and yielding a dividend to the stockholders.

All this the state banks distinctly foresaw, and not wishing to be compelled to resume specie payments, by which their profits would be diminished, they generally opposed the establishment of a national bank. But when they found that all opposition had been ineffectual, and that the bank was about to go into operation, and to pay specie, they immediately saw that they must follow the example, or that their gains were at an end-that the public, which took their paper, during the war and immediately after the peace, when there was no other currency, would not continue to take it, when they had the choice of a better-and thus the compact which has been mentioned was formed.

It is said, however, that the depreciated paper of the Baltimore banks would have circulated so long as the government received it at the custom-house, and that it was only after the government decided to receive it no longer, that those banks found themselves compelled to pay specie. But would this measure have been effectual without a national bank? We have already intimated that we thought not. It would have been vehemently attacked in congress and out, and all the states, except perhaps Massachusetts, might have instructed their representatives that the measure was premature, oppressive, and detrimental to the public interests. But after the Bank of the United States went into operation, the question was at an end. The government, whether the resolution of congress had been passed or not, could not with decency have taken, or been asked to take, any more than an individual, depreciated paper for its dues, when there was good paper and specie in circulation; and the Baltimore banks, as well as all others, must have followed suit, or given up the game.

For these reasons we must continue to think, that the claim urged by the friends of the Bank of the United States, that it operated, by its example, a salutary coercion on the state banks in their return to specie payments, is as well established as a question of its character can be, and that the same means by which it proved that remedy for the mischiefs of an unsound currency-its solid capital-unquestionable credit and practical skill in business-would operate, on future occasions, as a preventive of similar mischiefs.

The same distinguished critic differs from the chairman of the committee of ways and means, as to the effect of an increase of money in producing depreciation. The proposition controverted is thus stated by Mr. M'Duffie in the Report.

"No proposition is better established than that the value of money, whether

it consists of specie or paper, is depreciated in exact proportion to the increase of its quantity, in any given state of the demand for it. If, for example, the banks, in 1816, doubled the quantity of the circulating medium by their excessive issues, they produced a general degradation of the entire mass of the currency, including gold and silver, proportioned to the redundancy of the issues, and wholly independent of the relative depreciation of bank paper at different places as compared with specie. The nominal money price of every article was of course one hundred per cent. higher than it would have been, but for the duplication of the quantity of the circulating medium. Money is nothing more nor less than the measure by which the relative value of all articles of merchandise is ascertained. If, when the circulating medium is fifty millions, an article should cost one dollar, it would certainly cost two, if, without any increase of the uses of a circulating medium, its quantity should be increased to one hundred millions. This rise in the price of commodities, or depreciation in the value of money, as compared with them, would not be owing to the want of credit in the bank bills, of which the currency happened to be composed. It would exist, though these bills were of undoubted credit, and convertible into specie at the pleasure of the holder, and would result simply from the redundancy of their quantity. It is important to a just understanding of the subject, that the relative depreciation of bank paper at different places, as compared with specie, should not be confounded with this general depreciation of the entire mass of the circulating medium, including specie."

Although the principle appears to us to be laid down somewhat too broadly by Mr. M'Duffie, as we shall presently state, yet he is supported in his position, to the letter, by Hume, by Mr. Jefferson, and virtually by Adam Smith, if we suppose that from any cause the excess of gold and silver, which causes the depreciation, cannot be exported. They all agree in this, that the amount of money which can circulate, and which does in fact circulate in any country, depends upon the number and value of its exchanges, and that, as its quantity increases, its value diminishes. But Hume and Smith, concurring in this general principle, drew very different inferences from it as to the paper currency of banks. Hume thought that the equilibrium between the money required for the country and that in circulation, was effected by depreciation; while Smith considered, that it was maintained by an exportation of the precious metals in proportion to the increase of paper. And the general principle thus ably supported by authority, was all, no doubt, that Mr. M'Duffie meant to assert. There is then probably no real difference between him and his reviewer in the North American.

We conceive that Mr. M'Duffie, in his application of the principle to our own situation, twelve or fifteen years since, has not greatly overrated the depreciation, if we regard the effect of the increase of money on every species of exchangeable value; but that it was very different with the different kinds. This difference requires explanation; but first, of the general principle itself, which, it seems to us, must be received with some qualification.

The effect of an increase of money is certainly to diminish its

value; but the extent of the diminution is one of those nice problems in political economy which has never been accurately settled. It has not yet been adjusted to a formula which will explain all the facts attending such increase. Although the quantity of money required in a country mainly depends upon the number and value of its purchases in a given time, yet with the same amount of these, much less money may be in circulation at one time than another. There are various expedients and substitutes for supplying a temporary deficiency of currency, which make the quantity of money in a commercial country a variable one, capable of considerable contraction or expansion. The actual money can be more or less aided by credit. A farmer, a horsedealer, a shopkeeper, a mechanic-will all wait with a substantial purchaser for their money, rather than lose the sale of their commodities; and a sudden rise in the price of the staples of the country, such as our own often experience, while it increases the demand for money, proportionally improves the credit of individuals, and fits it as a substitute for cash. Money too may be much more active at one time than another; and when there has been a considerable increase of it, the greater comparative idleness of a part of it, in the strong boxes or pocket-books of individuals, may prevent or lessen its depreciation. These circumstances, and others which might be added, all inappreciable except by approximations, prevent the value of money from either rising or falling, in exact proportion to its increase or decrease in quantity.

To this qualification of the general principle, we would add another. When the money of a country has been considerably increased, and the excess cannot be exported, as was the case with our paper currency during the suspension of cash payments, the depreciation is much greater upon some articles than others. Its effect is least upon those commodities which find a market abroad, because the price there regulates the price here. It is by reason of this irregularity that depreciation is often so disguised as not to be perceptible to all, and that sometimes it is a matter of dispute whether it exists or not; as was the case in England in the controversy between the bullionists and their opponents, concerning the fact of the depreciation of their bank paper during the suspension of cash payments.

But if the increase of the currency has little effect on the prices of some articles, it has the greater on those for the estimation of which there is no such definite standard-as lands, town lots, and houses-and those domestic products which look exclusively to domestic consumption for a market, as butchers' meat, game, &c. All these took a prodigious rise in all parts of the Union, and most men mistaking the effect of a redundancy of money for a real rise of price consequent on our increased