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and the poor man few; it is precisely the same as with gold and silver. If however they are worth nothing, the poor inan is usually defrauded the most. I cannot comprehend wherefore paper-money should be an especially useful money to the poor. It is only in return for labor, only for real or personal credit, that either it or gold and silver come into his possession. In many parts of Germany, and in France where there is no paper-money, business is neither more nor less in the hands of rich capitalists than in England or the United States.
The assertion, that where bank-notes are by law convertible at any moment into specie, there exists full security for their value, is confuted by all experience. No letter of the law has yet been able to prevent excessive issues of paper-money. It is only in momenis of danger that every one hastens to convert his paper into specie, and then the banks are but too often found insolvent.
The measures adopted in New York, of depositing state stocks and countersigning by the comptroller, are certainly better calculated to answer the end than many others; though even here some very serious doubts remain. In the first place, state stocks are also exposed to the danger of sinking in value under unfavorable circumstances; and secondly, it is a very erroneous belief, that as soon as there is a safe pledge in hand, the arnount of its value may be converted into paper and issued without danger or evil consequences. Money is not only a measure, it is also something measured; and in case its quantity is in any way increased or diminished, it becomes a different measure, and changes its value as something measured. If one were suddenly to bring into market a hundred times as much of any necessary article (e. g. corn, potatoes, wine, cloth, or whatever it might be) as had heretofore been required and disposed of, who would purchase these quantities, and how could they retain their former price?. The same holds true of specie and paper-money. The security of the pledges, the existence of an original value represented by paper, produces no alteration in these necessary results; and this is more than sufficiently proved by Law's system and the history of the assignats and mandates. When even the laws permit that each bank may issue at least twice as many notes as it possesses capital, what is it but a purely arbitrary increase of the currency, without any real increase of value, of capital, of labor ?
l'he specie gradually disappears, until a general revulsion puts á fearsul end to careless management and premature rejoicing. Until then, the monopolizing stockholders draw more than double interest, both from the pledged state stocks and the double amount of notes issued.
When, notwithstanding, the dividends are not immoderately high, this proceeds from several circumstances; e. g., excessive competition, heavy taxation by the states that grant the charter, bad management, &c. Perhaps in this increasing unprofitableness may be found the best means of reducing the bank evil.
Similar to this would have been the operation of the SubTreasury law, which was vehemently opposed, then adopted, and soon after abolished in its most essential particulars. Among the principal complaints against the national bank was this, that the public moneys were deposited in it without interest, whereby an unfair and immense advantage accrued to the stockholders ; while the country which made this enormous sacrifice was not even furnished with the requisite security. Although the average amount of the moneys in deposit may not have reached, as some assert, fifteen millions,*_ let us suppose it did not exceed five millions,--still the gain to the bank in the way of interest was uncominonly great, and was by no means counterbalanced by the duties and payments which it assumed. It is certain that Jackson's victory over the institution, complained of and attacked by him on so many grounds, was decided the moment he withdrew from it the use of the public moneys. As he thereupon intrusted these moneys to the several state banks selected by him, these laiter gained as much as the national bank lost; but the country lost ihe interest as before, and gained nothing in respect to the security of the deposited money. It is true, that none of the single banks could hereafter acquire the power and influence of the national bank; but these new facilities seduced them very frequently into rash speculations and indiscreet issues of bank-notes.
The design of the Sub-Treasury Bill was to release the finances of the Union and the great amount of surplus revenue on hand from all connexion with the banks, and to establish a treasury with officers for its management such as has long existed in almost all the states. Against this plan a most violent outcry was raised; and it was found that the interests of the many single banks which would lose in consequence, were advocated with still greater vehemence and energy than those of the conquered national bank had been. This system, it was exclaimed, will totally subvert all the state banks, will place the purse and the sword in the president's hands, will destroy all security for the public moneys, commit them to the keeping of dishonest officials, form a new central bank—and that too of the worst kind, and throw difficulties in the way of transmitting funds and rendering accounts. The scheme too is against all our usages and all our habits. It locks up the revenue under bolts and bars, from the time of collection to the time of disbursement. Government separates itself, not from the banks, merely, but from the community. It withdraws its care, it denies its protection, it renounces its own high duties, and with cold and heartless egoism abandons the suffering people to their unhappy fate. It is a law for the times of the feudal system; or a law for the heads and governors of the piratical states of Barbary. It is a measure fit for times when there is no security in law, no value in commerce, no active industry among mankind, &c.*
* Webster, iii. 303.
These vehement denunciations are factious and exaggerated. The sword and the purse have indeed been transferred to the president; but he cannot draw the former from its sheath, or take a dollar from the latter, without the consent of Congress. If he, who could formerly intrust the public treasure to the banks as he pleased without demanding interest therefor, must henceforth deposit them in the treasury of state, it is plain that his power and influence are hereby diminished instead of increased. Moreover, all actual disbursements now as before require an appropriation by Congress, and suitable provision could easily be devised for the concurrence of the Senate in the appointment of treasury officers. That the public moneys are less safe in the treasury and in the custody of responsible officers, than they were in the hands of irresponsible banks (where so much was lost), is an unproved assertion; in those countries too where the state treasury has nothing to do with banks, funds are transmitted and accounts rendered without difficulty. Lastly, that it is an innovation on old customs, is not an absolute fault; nay, it should rather be made a subject of commendation, if it turn out to be a plan of utility in place of one that was of no value. Hence all resolves itself at last into the question, whether the banks have a right to use the public moneys in the interval between collection and disbursement, either interest-free or under advantageous terms; and whether the government is bound to let this practice continue.
After the repeal of the Sub-Treasury law, President Tyler proposed that, instead of treasury notes bearing interest, there should be issued fifteen millions of dollars (about a third of the yearly revenue) in paper not bearing interest, that this should be receivable in all the public offices, and that provision should be made to insure its convertibility into specie at pleasure. The sum was to be not so large as to create danger; but still large enough to regulate the transactions of the banks, and to operate advantageously as a general medium of circulation. In the execution of this plan no additional power was to be conferred on the president, nor was there any question of a dubious banking institution. This proposition was at first favorably regarded, then neglected, and finally cast aside,-partly, no doubt, because it neither favored nor engaged in its behalf any private interests.
* Clay, ii. 324. Webster, iii. 222, 265. Phelps on the Tariff, p. 14. f Calhoun, Life, p. 50.
The great similarity of the new English bank law introduced by Sir Robert Peel* to President Tyler's proposition, will probably direct attention to the latter anew, and lead to improvements. There is certainly but little hope of seeing the American banking institutions placed on a perfectly sound footing: for people are accustomed to violations and evasions of the letter and spirit of the Constitution with respect to the currency; and Congress will not be able to govern the twenty-six states, nor the twenty-six states their eight hundred banks. Yet intelligent and impartial men, guided by science and experience, have plainly enough indicated the course which should be pursued for the gradual cure of these evils, the greatest of all next to slavery.f I heartily hope therefore that the following declaration of two experienced Americans may not prove correct. They say: The subject of currency is now hopelessly overwhelmed in the cant and ferocity of party politics. A man might as well go to Constantinople to preach Christianity,as to get up here and preach against the banks !i
TAXATION AND FINANCES.
Revenue and Expenditure-Internal Improvements - Surplus Revenue-Single
States-Europe and America-Indebtedness of the States—Repudiation–Taxation of Single States.
In all countries of great extent we find revenues and expenditures of the general government, and revenues and expenditures of the several provinces. But nowhere is the distinction, the contrast between them, so decided as in America.
The general government has only two great sources of revenue -the import duties and the sales of public lands. In return
* This law is also aimed at the gradual suppression of all the paper-money of private banks. See § 910.
† Specie, like other articles of commerce, goes where it is sought and used. Yet in the year 1838 alone, money to the amount of 17 millions of dollars was imported; and if in 1814 the specie amounted to only two dollars a head, it had arisen in 1837 to five dollars. American Almanac, 1841, p. 123. Report of the Treasury, 1838, pp. 14, 43, 51.
| North American Review, No. cxxv. 501. Gouge's History of Paper Money, p. 80, quoting Randolph.
for these, all internal taxes were abolished as early as 1802, under Jefferson's administration; and it was only during the war with France and England that they were laid again for a while on iron, hats, paper, leather, watches, sugar, &c., and temporarily also on villas and slaves. *
Consequently there are now in the United States no general taxes whatever; no land-tax; no excise, or tax on internal consumption; and, excepting the officers of the customs, no taxofficers belonging to the general government; no system of exclusion between the several states, and no provincial taxation which extends or operates beyond its own boundaries. And herein the financial system of the United States is distinguished from every other.
Furthermore, there is scarcely any where exhibited such a fluctuation, such a rapid rise and fall in revenues and expenditures; and this doubtless is owing to the alterations in the tariff, the change from specie to paper payments, immigrations, the embarrassments of the banks and the currency, depressions in trade and over-speculation, &c. In consequence of its wealth, the government became extravagant; and in consequence of its distress, it was obliged to resort to many objectionable expedients.
Even in the United States, the most peaceful and secure of all confederacies, an immense burden was created by its wars and the debts that arose out of them. The latter however were paid off as early as 1835;t and in 1839, there was a surplus in the treasury of 34,866,000 dollars. This surplus, it was maintained
* Warden, iïi. 389.
22,235,000 direct taxes.
12,736,000 the post-office...
1,091,000 sales of public lands..
40,627,000 loans and treasury-notes
156,181,000 dividends and bank proceeds. 11,052,000 miscellaneous
Total in round figures $844,262,000 The expenditures were: for the civil list.