markets, are consequently so great, that none will engage in the business but those who are tempted by the prospects of enormous gains, and who do not fear the disgrace of bankruptcy. More houses and ships are needed, for instance, since the construction of them was almost entirely suspended during the war; yet only few are begun, because the cost of iron, lumber, and other materials, is still so great, and it is hoped or feared that they will be cheaper a year hence. The consequence is, that rents are inordinately high, foreign ships monopolize the carrying trade, and carpenters, masons, shipwrights, and other artisans either cannot. find employment, or must submit to work at lower wages. command inordinately high prices, yet only few are printed, not only because the cost of manufacture is very great, but because the price of the book may fall one half before it can be completed. How can any prudent person engage in any large transaction of commerce, - for example, the importation of goods from a distance, the returns from which must be delayed for many months, when he has no means of determining with certainty that prices may not be elevated or depressed 50 per cent within a fortnight?

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By throwing away the common standard of value, we have lost the corrective influence upon our own markets of the general market of the world. An almost prohibitory tariff is needed to check excessive importations, because the risk and cost of home manufacture are so much enhanced. Prices here are no longer adjusted with close reference to their level in other countries, as goods cannot be imported or exported soon enough to take advantage of any great change in their relative values. Trade thus becomes a lot. tery; one can only engage in it blindfold, with a sort of stoical and fatalistic resolution to abide the result, whatever it may be. The question between great wealth and bankruptcy is virtually determined by shutting the eyes and throwing the dice. Though such a mode of transacting business is condemned by every principle of sound morality, there is a strange fascination about it for a certain class of minds. The pleasurable excitement of a game in which property, reputation, and even life, are staked against the chance of a great fortune, will outweigh with many persons all that can be said against it. Recent events go to show that the gam bling spirit has pervaded and corrupted the commercial community

in our large cities to an extent never known before. It is evident that the state of the currency, since the suspension of specie payments in January, 1862, has contributed more than any other single cause to this lamentable result. To this extent, the evil is within the reach of legislation; and any act which will give stability to our markets, by prohibiting the further use of any currency not immediately redeemable in coin, will do more to check it than all the terrors of the penitentiary or the gallows, - even if there should be virtue enough left in the community to apply these latter remedies.

A still heavier discouragement to legitimate commerce results from that uncertainty about the fulfilment of contracts, which is caused by the fluctuating value of the dollar. Good faith in all mercantile transactions appeared so important to the founders of our government, that they inserted a clause in the Constitution of the United States, declaring that no State shall pass any law impairing the obligation of contracts; and the strictness with which this prohibition has been enforced by the courts of law has done more than anything else to establish their reputation for equity, and to create confidence between man and man. But how wide departures from equity are now sanctioned by a custom of eight years' duration, and by the act of Congress which made depreciated paper dollars a legal tender for the payment of any debt, whenever or however contracted, appears from two imaginary cases, like which there have been plenty of real ones, which are supposed by Mr. Newcomb to have occurred in 1864.

Before the suspension of specie payments, "two hundred mechanics each put $100 into a Savings' Bank. The Savings' Bank afterwards loaned this $20,000 to a ship-builder, who employed it in building a ship. He sends the ship to England and sells her for $22,000 in gold, making ten per cent legitimate profit. By every principle of justice, $20,000 of the money belongs to the Savings' Bank. But now the legal-tender clause comes in, and declares the builder relieved from the debt on payment of 20,000 paper dollars. He therefore buys these paper dollars with perhaps $ 8,000 in gold, and keeps the additional $12,000 for his own private use.

"A professional man, dependent entirely on his income for support, insured his life, in order that his family might not be left penniless at his death. The Life Insurance Company loans the

money to Mr. Shoddy, who invests it in manufacturing capital, and, with the rise in gold, finds both his capital and profits apparently increase in a corresponding ratio. When his debt is due, he findɛ that he can sell one half his stock for greenbacks sufficient to pay it, he retaining the other half, though it also rightfully belongs to the Insurance Company." Then the professional man dies, and his widow and children receive from the Company just half the value which it had covenanted to pay them.

And such acts are still declared by Congress and the courts of law not as yet, however, by the Supreme Court of the United States to be legal and equitable proceedings!

When the depreciation is considerable, an immediate restoration of the specie standard, even if it were possible, would be inexpedient and unjust. A large sum in gold would be needed to redeem the outstanding circulation; the sudden and considerable fall of prices would distress merchants and producers; and debtors would suffer as much hardship and wrong as creditors did when the value of money was suddenly diminished. The reversion to specie payments, therefore, ought to take place gradually, that it may cause no greater or more sudden alterations of values than those to which the community must be exposed so long as the use of Paper Money is continued. An admirable plan for this purpose was devised by Mr. Ricardo, and adopted by Mr. Peel and the English Parliament in 1819, as a means of providing for the restoration of specie payments by the Bank of England. The Bank was required immediately to redeem its notes in bullion, paying for them at first, however, a price but little in advance of what was then their market value as indicated by the premium on gold, but making a small addition to this price every few months, till the notes should thus finally be brought up to par with specie. This scheme proved so successful, and the disturbance of the markets created by it was so slight, that the Bank of its own accord, with the general assent of the mercantile community, anticipated the period of full resumption, and began almost at once to redeem its notes at par.

In January, 1870, the premium on gold in this country was 20 per cent, so that the value of the paper dollar was a little over 83 cents in coin. At the same time, there were over 100 millions in gold lying idle in the Sub-Treasuries, and probably another 100 millions in the banks and the hands of the people. Congress then

might safely require the Treasury and the banks to redeem in specie all the paper currency that should be offered at the rate of 85 cents for the dollar, and to advance this price 5 cents on the dollar every six months. Full specie payments would thus be restored in eighteen months; and, meanwhile, the value of the currency would be nearly as free from injurious fluctuations as if the resumption were complete and immediate. There could be no sudden or considerable demand for gold, as every one would see that delay in the presentation of the notes would be compensated at the rate of 10 per cent a year. Confidence in trade and stability in the markets would be at once established, since contracts could be made with as full a knowledge of what the value of money would be when the time of settlement came, as if the currency were already convertible into specie at its full nominal value. Neither debtors nor creditors could be harmed as much as they are by the continuance of the present state of things; since the maximum of change in the value of the dollar would be five per cent every six months, which is not half as great as was the fall in gold in less than two months, in the autumn of 1869, or one tenth as great as the fall in the spring of 1865.

CHAPTER XVI.

THE NATIONAL BANKING SYSTEM.

THE law establishing the National Banking system throughout the United States was passed by Congress on the 25th of February, 1863. It may be doubted whether a period in the midst of a terrible civil war, a derangement of all the machinery of commerce, and a general confusion of the finances, is a fit time to try experiments in banking and to revolutionize the whole credit system of the country. An experiment made under such circumstances proves nothing. Whether its immediate results are seemingly favorable or adverse, we can never tell whether they are the proper consequences of the new system, or of the wholly exceptional state of affairs under which it was first put in operation. Besides, such times are not favorable for deliberation, for collecting the

facts and arguments by which it must be judged whether it is expedient even to make the trial. If, indeed, the scheme were only a war measure, intended only to bridge over the pressing difficulties of the hour, and to die a natural death when the termination of hostilities should restore the affairs of the country to their old footing, or place them, at any rate, on something like a permanent basis, this objection would not be valid.

over.

Unluckily for the pretensions of the bill as one of immediate urgency, an entirely novel banking system for the whole United States is an invention which, from its very nature, cannot pass into immediate use. In this case, it had hardly begun to be organized, though already over two years old, when the war was A great war is the very time for making trial of newly invented cannon and iron-clad ships; but it is no more a proper season for experimenting with a new banking system than with a new religion. Yet because introduced at such a period, and pressed, though without any good reason, as a war measure, it was passed almost without debate. The responsibility of the measure rests almost exclusively upon the Secretary of the Treasury, who urged the scheme in three successive annual reports, but in the last one was obliged to confess, that, although nearly ten months had elapsed since the passage of the law, not a dollar of the new currency was yet ready for emission.

The leading features of the law were, the transfer of the whole banking system of the country from the control of the State legislatures to that of Congress, and the issue by the banks, and for their own profit, of 300 millions of dollars of a uniform national currency, secured by pledge, and deposit in the Treasury, of a somewhat larger amount of United States stocks or bonds. Any number of persons, not less than five, may form a banking company, the stocks pledged by them must equal at least one third of their capital, and the total of their circulating notes must not exceed their capital, which must be at least $50,000 in small towns, and at least $100,000 in those of larger size. Each stockholder is personally liable to twice the amount of his shares for the debts of the company. The existing State banks were encouraged to reorganize themselves under the new scheme, and the extinction of their former local currency was insured by the imposition upon it of a prohibitory tax of 10 per cent, to take effect after the