the increase of the population. But in 1835, twelve millions, and in 1836, over twenty millions, were thus disposed of. At what average price the purchasers from the government either sold, or expected to sell, the land to those who were to buy of them, it were vain to conjecture. But if they anticipated only a tenfold return, which is a very low estimate, it follows that their operations, during the two years, created speculative or fictitious values amounting to 320 millions of dollars. In 1854-5, in consequence of the rapid extension of railroads at the West, and the large grants of land by Congress in aid of these improvements and for military bounties, these speculations have been renewed and extended even to a greater amount than before; and owing to the decline in the value of money, and to the almost incredible amount of the immigration from Europe, it is probable that the expectations of the speculators have been in a great measure fulfilled.

All these immense operations might have been carried on without creating any perceptible increase of the circulation. The government, indeed, sold land only for cash; but then its price was very low, and most of the land was not purchased of it, but received as a gift, in grants for the extension of railroads and in bounties; and the grantees and original purchasers sold again on long credit, receiving their pay in annual instalments distributed over so many years as not to occasion at any one time any pressure upon the loan market. In respect even to the amounts received from the government sales, it may be observed, that, as they fell very far short of the aggregate annual expenditure by the government, they might have been all defrayed or offset by the payments due to public contractors and for military and naval services, without occasion- . ing the transfer of a single dollar in coin or bank-bills. In fact, many payments for land were thus made by drafts upon the Sub-Treasury which had been issued in the ordinary course of government expenditure.

Enough has been said to demonstrate the possibility of speculative purchases being made to any extent, and of prices being consequently enhanced to the highest point which they have ever attained before a commercial crisis, without any perceptible expansion of the currency. Sufficient evidence may be cited to prove, also, not only that this is the possible operation of

the market, but that it has been the actual result. The opinion prevails very generally, both in England and this country, that the amount of the circulation is very much increased when a speculative fever is at its height, and that prices rise only in consequence of this increase; but nothing can be further from the truth. "It may help us to form some judgment on this point," says Mr. Mill, "if we consider the proportion which the utmost increase of bank-notes in a period of speculation bears, I do not say to the whole mass of credit in the country, but to the bills of exchange alone. The average amount of bills in existence at any one time is supposed considerably to exceed a hundred millions sterling. The banknote circulation of Great Britain and Ireland is less than thirtyfive millions, and the increase in speculative periods at most two or three" millions, evidently not enough to raise general prices one per cent, and hardly to produce a perceptible effect upon the price even of any one commodity of large consumption, such as cotton, flour, sugar, tea, or any other that is liable to be affected by speculative movements.

The published returns of the Bank of England, which give the average amount of the circulation for every week in the year, afford curious proof of the correctness of our position. In 1847, there was a monetary crisis in England, which, with one exception, that of 1825, was severer than any that had been experienced since the commencement of the century. There were two periods of stricture or panic in the course of the year, the one occurring towards the end of April, and the other in October, the intervening period being one of comparative quiescence. "The effect of the severe contraction of accommodation," says Mr. Tooke, "was to paralyze nearly all transactions on credit throughout the country." Every description of property, (food only excepted, as the crops had been deficient,) rapidly fell in value to a very great extent. "It would not be easy," remarked Lord Ashburton, "to estimate this depreciation, extending over all merchandise, stocks, rail

*Bills of exchange, it should be observed, perform the same office in England which promissory notes do in this country, their number and amount indicating to some extent, though not entirely, the extent of the purchases that have previously been made upon credit, and the returns from the Stamp-Office making it possible to estimate very nearly the average amount of them in circulation at any one time.

road shares, &c.; it probably would not have been overstated at from ten to twenty per cent; but what was worse, it paralyzed this property in the hands of the possessors, rendering it unavailable towards meeting their engagements, and thus produced, in many cases, pecuniary sacrifices much beyond the mere depreciation of the value of the property itself.” Yet it is a curious fact, that the average amount of the notes of the Bank of England, and of all the banks of issue in the United Kingdom, in the hands of the pnblic, was greater during the stricture than in the intervening period; and was very nearly equal to the average of the circulation in the years 1845 and 1846, when the speculation in railroad stock, which was one of the chief causes of the crisis, was at its height.* Mr. Danson says: "During those months in which the purchases and sales of railway property were most numerous and extensive, while everybody was buying and selling shares, and the current rate of interest was only 2 per cent, that portion of the circulating medium which consisted of Bank of England notes was but slightly, if at all, increased; and it reached its greatest amount when the prices of shares were lowest, when everybody had ceased to speculate, when the number and amount of current transactions were reduced to the lowest point by discredit, and when the current rate of interest for first-class bills had risen from 2 to 4 per cent."

The experience of the United States agrees perfectly with that of England, in proving that the circulation of bank-notes is not perceptibly expanded in periods when commerce is brisk, speculation rife, and the rates of interest are low, in one word, when it is usually said that "money is plenty"; and that it is not restricted, but usually somewhat increased, when a crisis ensues, and the rates of interest are raised to the highest

*The average of the Bank of England circulation for the six weeks ending August 14, 1847, (å period of quiescence,) was £19,600,000; and in the six weeks ending November 20, (a period of panic,) it was £20,900,000. The aggregate bank. note circulation of the United Kingdom for the month ending August 14, amounted to £34,500,000, and in that ending November 6, to £36,700,000. For the four weeks ending April 24, (the first period of panic,) the Bank of England circulation was 21 millions, and that of all the banks of issue was 38.9 millions. The average circulation for 1846, which the currency doctors would call "the year of expansion,” was, for the Bank of England, 21.1 millions; for all the banks, 39.6 millions. See the table appended to Tooke's History of Prices from 1839 to 1847 inclusive, p. 448.

point, and when, on account of the great difficulty of meeting pecuniary engagements, bankruptcy is frequent. It will be generally admitted, that 1853 was a year of the former character, being a period of advancing prices, few failures, general speculation in railroad stocks and other securities, and having all the usual signs of commercial prosperity. The aggregate circulation of all the Massachusetts banks in September of this year was about $21,200,000. The following year, 1854, was of the opposite character, being a time of great financial distress, which steadily increased, till, in December, it amounted to a panic. Now the total circulation of the Boston and the country banks in this unlucky year never fell below 23 millions of dollars; in July, it amounted to 25 millions, and early in December, when the crisis was at its height, it was 24 millions. A period of quiescence began in the spring of 1855, and continued nearly to the close of the year; speculation was repressed, but the rates of interest were low, and it was easy to obtain loans. Yet in April of this year the circulation had fallen off to about 21 millions, and early in September it was less than 23 millions.*

It is not, then, the want of money which occasions distress and bankruptcy in a commercial crisis, or when the rates of interest are very high; for the returns show that the amount of the circulation is usually increased at such periods, though the difference, whether of excess or defect, is too slight to have any perceptible effect upon the markets. But the real cause of the distress is the insufficiency of the disposable capital in the market to meet the sudden increase in the demand for loans, which is occasioned when the time arrives for paying off the excessive purchases on credit that have been made during the fever of a general speculation. The notes of hand and bills of exchange, which were so freely and thoughtlessly given when prices were advancing, and when it was expected that they would advance still higher, must come to maturity, usually in six months or less; and then come the pressure and

* As the law now requires a weekly report from the Boston banks, and a monthly report from the banks out of Boston, to be made on oath to the Secretary of State, and published in the newspapers, we have the means of ascertaining their condition at any period, which formerly was impossible. See American Almanac for 1855 and 1856.

the panic. As it was the unusual amount of these private "promises to pay," and the extravagance of the purchases in which they originated, that first produced the enhancement of prices, so now the demanded fulfilment of them causes prices to recede, and makes speculators eager to sell, and multiplies the applications to banks and usurers for loans. The whole distress is then imputed to "the tightness of the money market," though the amount of money in circulation is just as great as ever, probably greater, and though money has been as passive, or has played as insignificant a part in the matter, as the carts and ships in which the merchandise that was bought on speculation is transported. The speculator who makes an eager appeal to a bank for assistance, does not ask that the circulation, or bank issues, shall be increased for his sake; he does not want coin or bank-notes particularly, but will be entirely satisfied with a check which will suffice to take up his note, and the only effect of which will be to transfer, either at that bank or another, a certain amount of the deposits from the credit of one person to that of another, without adding a dollar to the circulation. Every one knows, that, in a large commercial city, nearly all promissory notes are paid in this manner, or, if bank-notes are used, it is only to be carried across the entry, or across the street, to another bank, without remaining an hour in circulation. In such case, a bank-note for $100 or $1,000 is only a substitute for a check, and is hardly entitled to be called "money"; it is only a ticket for the transfer of credit, and has no effect whatever on prices.

When, in a period of financial pressure, a complaint is made of "the scarcity of money," it means only that capital is wanted on credit, or, in other words, that there is a greater demand for loans than the banks and other dealers in loans can supply. There is always a certain amount of disposable capital in the market, seeking investment in loans. It is accumulated chiefly by savings from income, which are made by persons who are unwilling or unable to manage their capital for themselves by engaging in industrial enterprises, and therefore seek to lend it to others. A considerable portion of this floating fund is accumulated in the banks, making up both their capitals and deposits, and thus constituting far the larger part of what they are able to lend to their customers. Hence it is, that what are