it might not be paid on its presentation, but that the equivalent therefor had been provided by the drawer on its return, not in merchandise but in securities? Bills are used in foreign trade to serve as money. They will not be purchased if they will not serve as such. To remit one that might not be paid might involve a loss far greater than its amount. The operations of commerce and trade can no more than those relating to real property be carried on by instruments severed from their proper constituents. The purchaser wants the specific thing contracted for, not some other which may have no relation to it. To require drawers of bills to put up securities for their payment, in addition to the merchandise represented by them, would be to abridge commerce, between nations or countries widely separated, to one-tenth its present proportions. Purchasers would be the last to require such deposits, as they would very properly infer that, to make them, drawers had been compelled to divert some portion of that which should provide for their bills. So with the notes of Banks. These represent their bills. By means of the former, their holder can obtain the proportion of merchandise for which they call. He does not want an interest in securities locked up in Washington; but that which he can eat, drink, and wear. So far as the bills discounted do not represent merchandise, the Banks must make up the deficit in coin. All safety-fund Banks are constantly liable to make issues which do not represent capital, as a means of supplying the place of that with which they parted in order to purchase their securities. They are taught to regard the notes delivered to them with so much ceremony and formality, as money to be used in any way they choose. Not the first attribute of money has been given to them. It can only be given by their being made to represent, in the discount of bills, merchandise which will be certain to retire them in its purchase for consumption. It is impossible sufficiently to impress this fact upon the issuers of a currency created by safety-fund Banks. Hence the constant disturbance and disasters arising from their operations. The issuers of a currency without any special provision for its redemption are not liable to similar temptations and mistakes. They see that the only way in which they can secure circulation for their issues, and bring them back without loss to themselves, is to base them upon capital that must soon be taken for con

sumption. An unsecured currency, therefore, is much more uniform in amount and value than a secured one, and consequently far preferable. The losses of the holders of the unsecured notes of the New England Banks during the continuance of the Suffolk system did not, in ratio to their amount, equal one-tenth those of the holders of the notes of the New York safety-fund Banks. Under the former, from its efficiency in enforcing constant redemptions, it was hardly possible that any Bank should become so embarrassed as not to be able to provide for its liabilities out of its means. If these were not sufficient, the stockholders of the Banks were liable to an amount equal to that of the shares held by them. No safetyfund system assumes to provide security for deposits, which are currency equally with notes, and by means of which Banks are much more liable to become embarrassed than by means of their notes. The principle of security, if it be worth any thing, and if it would produce its proper results, should apply to both kinds of currency. It is not, however, either from notes or deposits that the greater part of the losses incident to banking operations arise. The Bank of England has paid specie on all its liabilities for fifty years past; yet its action may have been instrumental in promoting enormous inflations, to be followed by excessive contractions, in consequence of which losses have been caused equalling many times its own circulation. The moment the issues of a Bank cease to represent merchandise speedily to enter into consumption, it is exerting a disturbing influence on affairs, in ratio to the extent of its operations. If the ordinary instruments of distribution were suddenly destroyed, the loss that would be caused would exceed tenfold their value. If these be the notes and credits of Banks, a great inflation and subsequent contraction of them will often result in losses many times greater than the whole circulation issued. It is in this way that nine-tenths of all the losses incident to or caused by Banks arise. The chief care, consequently, in their administration, and in legislating in reference to them, is to guard, not so much against losses occasioned by their inability to meet their obligations, as against the disastrous influence they may exert over prices, and over production and trade. They may be instruments of immense mischief at the same time that they possess means amply sufficient to discharge all their liabilities. The remedy

can come only from systems of redemption which shall immediately return upon all the Banks every issue that is not employed in the distribution of its proper constituents. So far as the public is concerned, a note issued by a Bank, based upon an United States bond, produces precisely the same effect as a note issued in the discount of a fictitious bill. It serves not as the instrument of distribution for a corresponding amount of merchandise, but as one for the consumption of an equal amount of accumulated capital. As capital so symbolized is not, as a rule, made the basis of reproduction, there has been an excess of expenditure equal to its amount, with a contraction usually far more excessive than was the inflation.

A safety-fund system, in whatever light viewed, is radically vicious. It is impossible that it should be established throughout the United States, and at the same time provide a currency that will not be either deficient in amount, or inconvertible and depreciated. Our present national system would never have been established, had Mr. Chase possessed a competent knowledge of the laws and functions of money. His great theme was a "credit circulation,"—a circulation sustained by faith, not by works. When any one took a note of a Bank created by his system, he was told to look confidingly toward Washington, and believe that locked up in the vaults of the Treasury was a security which possessed a value in coin equal to all the notes the Bank might issue. Suppose the holder did not want a government security, but food. Could he avail himself of the former, he would still have to convert it into money, which could only be effected at an expense and loss of time, involving a loss of interest, equalling perhaps twothirds the value of his note. At one time, since the safetyfund notes have been issued, they were worth, in coin, only about one-third of their nominal value. It is little consolation to be told that Mr. Chase was as wise as his time. The misfortune is that he was as reckless and unscrupulous as he was ignorant. He could not rest till he had hopelessly involved the whole country in the meshes of paper money. His first achievement was the establishment of an inconvertible currency of United States notes. Upon this superstructure he erected his safety-fund system. But for one, he could not have established the other. By means of the former, the

Banks were practically relieved of all responsibility, so far as concerned their note circulation. In consideration of taking away their means, he provided that they should never need them. The only way, consequently, in which they can provide for their liabilities is by the return to them of their means. To insist upon the continuance of his system, is to insist upon continued suspension. The Banks of such States as Iowa and Minnesota cannot be permanent lenders to government, at 6 per cent, to an amount equalling their entire capital, and have any thing left to be loaned to the public. The idea is prepos terous. It will appear so to every one who has emancipated himself from the idea that money is a fiction, not a substance; or that its value in exchange depends upon its amount, not upon any provision by merchandise or coin for its retirement.

means.

By allowing Banks to reclaim their bonds, and to issue notes for the future without any further provision for them but their capital and bills, they would, for the first time since they went into operation, be in a position in which they could resume. They would then eagerly avail themselves of the opportunity, as absolutely necessary to the preservation of their All of them must see, by this time, that every day passed without resumption is seriously impairing their value. Every day is the number of their bad debts increasing. Under the present system, time alone is wanting to complete their ruin. The great majority of them are now indifferent or opposed to any change, only for the reason that they see no way out of their present condition. Let it be known that they can get back their securities, become State organizations, or issue notes as National Banks without any deposit therefor, and the great majority will earnestly set their face toward resumption. Until they move, the most effective step in this direction will remain to be taken. The national system should be got rid of as fast as possible. The greater part of the currency is always to be furnished by local institutions, and all such should be under local supervision and control. The work of the central government, as far as the currency is concerned, should be at an end when it has created an United States Bank.

It is easy to point out, even to demonstrate the way. Will those see and follow it who are charged with the work? Here

lies the real difficulty. Mr. Sherman, now at the head of the Treasury Department, sees in it nothing but a ceremony. He has only to "salute the flag," and the thing is done :

"Nor are we to decide whether our paper money shall be issued directly by the government or by Banks created by the government; nor whether at a future time the legal-tender quality of United States notes shall continue. I am one of those who believe that a United States note issued directly by the government, and convertible on demand into gold coin, or a government bond equal in value to gold, is the best currency we can adopt; that it is to be the currency of the future, not only in the United States, but in Great Britain as well; and that such a currency might properly continue to be a legal tender, except when coin is specifically stipulated for.

"In my judgment, the real solution of specie resumption will thus come through the voluntary act of National Banks, each acting for itself, under the general direction of the law, precisely as the Bank of England, the Bank of France, and the New York Banks brought about and maintained resumption. I have never regarded with solicitude the amount of United States notes outstanding, for, as I will show, they can be easily maintained at par in gold; but the agency of the Banks in securing resumption, and the effect of resumption upon their customers, were matters of solicitude. This I no longer doubt or fear. The whole problem consists in a partial and limited transfer of capital, now invested by National Banks in United States bonds, to individuals. The high price of these bonds, and the idle capital that seeks investment in them, will enable each Bank to strengthen itself by a sale of bonds, without in the least impairing its ability to discount or loan, and, in fact, to increase its power to do so; and the bonds will be absorbed by the increasing demand for such securities. Strong Banks in cities do not need the currency, for their currency is certified checks. Their currency is largely held by them; or, if in circulation, it can be retired and cancelled without impairing in the least their ability to loan or discount. The Bank currency being thus diminished, as the time for resumption approaches, the United States notes, supported by a gold reserve and the power of the Secretary to sell bonds, will easily be maintained at the gold standard, and the problem is solved.

"This partial contraction of Bank currency will unlock and dissipate a greater contraction which has gone on since the panic, and will go on until the public mind rests assured that the day of resumption is not only promised, but rendered certain by the course of events. An increase of currency will follow resumption. Great masses of notes now lie idle in bank-vaults and in the Treasury, and are hoarded in homesteads all over the land. There is deposited in the Treasury, without interest and belonging to Banks, $31,005,000, represented by currency certificates. There are now in the vaults of the National Banks $73,626,100 United States notes and frac