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Treasury Circular.

[Jan. 9, 1837.

Allow me, in conclusion, to suggest remedies for the cord at those very seasons when union will be most ne. evils complained of under the Treasury order, (sup- cessary to our safety, and when, but for some such adposing them to exist in all the magnitude contended for verse incident, it would be most certain to exist. Your on the other side;) remedies which, in my humble judg-public lands, as your preserved treasure, have this ad. ment, Congress is bound to apply upon other considera. ditional advantage, that they are daily increasing in val. tions than their mere effect upon the currency of the ue; when you sell one portion, what remains is worth country. The remedies to which I allude are confining nearly as much as the whole before that portion was the sales of the public lands to actual settlers, and re taken off. The expectation of such increase is doubt. ducing the revenue by customs to the actual wants of less the inducement with the speculator to stretch forth the Government. The public lands constitute for us, in his hand with monopolizing sweep over all that you a triple sense, a vast fund of national wealth. They offer for sale. Not so with your deposite with the present, in the first place, a wide field in which our mulii. States. It is a caput mortuum, without any possibility plying population is to find space to spread itself out; of increase, and for the principal of which there is but and the very wideness of this field, according to the ob. faint hope of return, while the very proposal to reclaim servations of philosophers and political economists, in. it may rend your Union asunder. But justice and creases the ratio in which this population will multiply. good faith require that your public lands should be so Our strength as a nation is therefore daily increasing husbanded. They were either the voluntary donations tbrough their instrumentality, our human materiel (so to of the old States, avowevily for the first and the last ob. speak) for fleets and armies becoming more abundant, jects in which I have spoken of them as a fund of nationand produc:ive labor more vast in its amount. In the al wealth, to wit: as a field for population, and a comsecond place, their products will furnish sustenance to mon stock, out of which the debts of the nation should all this multiplying national power, and leave an excess be paid; or they have been acquired by the united blood to be exchanged for the valuable products of other and treasure of the whole nation, and ought, therefore, climes and soils. Lastly, their fee simple interest is con. to be used for the general good. But if ihey are to be vertible into money, whenever required to supply the brought into market now, in unmeasured quantities, demands which may from time to time arise upon our while the nation is oppressed with noney, we shall be Treasury. These ihree useful and important objects acting like the young profligate who disposes of his can only be duly accomplished by confining the sales of paternal domain, that he may profusely scalier the prothe land to the wanis of actual selllers. It is true, by duct to the winds, or that he may tempt the cupidity of throwing them into the market alike for the actual set. | sharpers. Pursuing this policy, we shall in the end find tler and the speculator, there will be a larger immediate ourselves in the siiuation of King Lear, who, having influx of money into the Treasury. But does good poli. divided his all among bis children, and becoming de. cy call for such an influx? Is not your national Treas. pendent upon their benevolence, was left to perish in ury, so far srom requiring such an influx, diseased with the helplessness of senility; or spurred on by our actual plethora? And have not gentlemen, to relieve it, urged necessities, which will then have no other source of sup. on by the necessity of the case, either real or supposed, ply, like the fabled progenitor of the gods, the General voted at the last session of Congress for a law, acknowl. Government will become the devourer of her own chiledged by all to be dangerous in precedent, inexpedient dren, and the most glorious and extensive family circle as a general principle, and approaching, if not surpassing, this earth has ever witnessed be broken and desiroyed. the very confines of the constitution? The fear of na I trust, however, that we shall be saved from the destitional corruption, the ruin of so many prosperous States, nies both of Lear and of Saturn; and that, confining our. a ruin which prosperous States have most reason to selves in the sales of public lands to the actual wants of dread, has sanctified in the eyes of many a sterling pa settlers, the payment for them in specie will either triot that measure called the deposite law, upon which cease to be felt as a grievance, or become unnecessary he would have otherwise looked with hurror and dis- for the security of the revenue; and a reduction of the may. But in your public lands you may liold an un tariff being connected with this measure, we shall be re, counted treasuje, without the apprehension of any such lieved from all the evils of an overflowing Treasury. consequence. Your forest.covered wilds, still in the I have thus glanced at the various considerations prepossession of the deer and the buffalo, would lie secure senting themselves to my mind on this exciting and imuntil your necessities called for their use, ard, unlike portant question. Some of them apply as well to the your gold and silver, no eye would be fascinated by their substitute as to the original resolutions, though with gliller, no ear seduced by their musical ring. But mitigated force. I have offered them to the Senate when war or any other great national exigercy calls for with great diffidence, conscious that I am in my mere an extraordinary supply of treasure, here is a fund con noviciate in matters of national legislation. In conclu. vertible hy sale into cash, or the substantial security for sion, I would add, that those who have attempted to show a loan; they would be sufficient to repay, without resort The evils produced by the Treasury order have fallen ing to taxation-a measure always odious to a free peo. very far short of proving the existence of those evils, or, ple. Your deposites with the States, if otherwise un. at least, of connecting them with it as their cause; and objectionable, will never answer a similar purpose. some of them have, as I think, almost abandoned the The very seasons when the General Government shall position as untenable. They cannot, therefore, with find herself most straitened, the states themselves will any propriety, ask ils rec'sion upon the mere supposibe laboring under a like pressure. Already you find tiun ibai evils exist, and that the Treasury order is the many of them disposed to treat the deposite as a gift; cause. I have listened athentively to this discussion, and what will they say when, in the unseasonable mo with a sincere desire for instruction, and the result has ment of national calamity, it is demanded of them as a been 10 rivet my approbation of the executive course; debt? Will you not find them, like the States under and while I shall vote for the amendmen', as less obthe old confederacy, refusing or neglecting the contri. noxious, I could with equal satisfaction have recorded bution of their quotas? This will unquestionably be the my direct negative upon the original resolutions. case with many; while others, having honorably com When Mr. STRANGE had concluded, plied with their engagements, being more fortunate or Mr. WEBSTER said: I will take this occasion, as more willing than the rest, will begin to murmur if their probably no more fitone may occur, to say a few words sister Stales are not compelled to do likewise; and thus in consequence of the reference which has so frequently will these deposites become the subjects of dangerous dis. I been made, during the course of this debate, to the in

Jan. 10, 1837.)

Treasury Circular.


troduction by myself of the joint resolution of 1816 into ready said, was to bring the practice back to that stand. the other House of Congress, and to my observations ard; and on introducing the resolution, I had no other or then made on that measure. I said nothing on that oc further view. By recurrence to the resolution, as oricasion without deliberation; nothing which I do not ginally introducel, it will be seen that it did not con. now embrace as sound policy; nothing which, as I sup- template any enlargement of the means of payment. It posa, is in the least degree inconsistent with the princi- did not embrace the notes of State banks at all. It con. ples which I at this time maintain; and I repel, as wholly fined all payments to coin, Treasury notes, and notes of unfounded, any intimation that any thing like incongrui. the Bank of the United States. But this was esteemed ty or inconsistency is to be found in the sentiments and too strict and severe; the House of Representatives felt opinions delivered by me on the two occasions. No a disposition to legalize the receipt of the notes of spe. such inconsistency, indeed, has been, so far as I know, cie-paying Slate banks; and to meet this feeling, ibe directly charged; but the repeated quotation of my for resolution was amended and enlarged, so as to embrace mer remarks mighit lead to the inference that such incon- the notes of specie-paying banks. The resolution, as sistency was intended to be intimated. The resolution thus amended, embraced two objects, both clear and of 1816 was accompanied, as originally introduced by distinct: first, to compel the Treasury to confine its reme, with an introductory resolution, in the form of a ceipts to such sorts of money as were authorized and preamble, setting forth the reasons on which the pro- sanctioned by law; second, to increase the number of posed measure was founded. The operations of the those sorts, or to enlarge the legal means of payment, Treasury bad at that time become greatly deranged by by making it lawful to receive the notes or specie-paythe war. The duties at the custom-houses were re- ing banks, payable and paiil on demand. Both these ceived, in many places, in the paper of non-specie-pay- objects were accomplished by the resolution, which, as ing banks; and, as there was a great variety and differ- amended, passed both Houses, and became the law of ence in the value of the notes of those banks, there was, the land. of consequence, a real difference in the amount of duties Now, sir, the question is not whether s'ich a legalizing paid in different ports. In some cities the discount upon of bank notes was sase or dangerous, wise or unwise. ibose notes, to bring them to the value of legal coin, Congress saw fit, in fact, to sanction their reception, and was five per cent. on their nominal value; in other that is enough. From that moment it became the legal places ten per cent., and in some, indeed, as high as right of every deblor, and every purchaser of land, to twenly per cent. That was the fact in this city. In the pay in those notes. And, sir, ali i said then, I say now, years 1814 and 1815, bills on Boston could often not be } viz: that it is a subject to be provided for, and which had here under a premiumf of twenty per cent.; since always bas been provided for, by law; that it has been, all the paper of the Boston banks was equal to specie, is, and ought to be, above the reach of executive discreand the paper here depreciated to the extent stated, tion; that, by the law, as it stood before 1816, notes of This was all in the course of things, as some banks bad State banks were not receivable; that, by the law of suspended specie payments and others had not; and as 1816, they were made receivable, and put on the same the duties at the custom-bouse were received in the pa- | ground with coins, notes of the Bank of the United per chiefly of the local banks, the result was, in effect, States, and Treasury notes. And what is the ground I a different rate of duties in different places, in plain vio now stand on? Simply this: that this is a matter of law, Jation of the constitution and of all justice. And this dif- and not of discretion; that the Secretary has no more ference was great enough to turn the whole commerce right, now, to strike any thing out of the law that is in of the country from the Northern to the Southern States. it, than he hall, before 1816, to put any thing into the

It was under these circumstances, and at this time, law wbich was not in it. That was my doctrine then; that the resolution of 1816 was introduced by me, with a that is my ductrine now. Where is any inconsistency? sort of preamble, alleging the impropriety, inequality, At that time the Secretary was receiving bank notes and illegality, of this state of things; and what was its contrary to law; now he is refusing bank notes contrary object? Simply to bring back the administration of the to law. I was for correcting the illegal proceeding then, finances to the rule of law. The law was plain. There and I am for correcting the illegal proceeding now. I was no authority, not a particle, for receiving those take back nothing of what I then said not a syllable. I bank notes. There was, in truth, no discretion vested believe now as I did then; and, indeed, I believe more in the Secretary of the Treasury as to what should be firmly, as a man is not likely, as he advances in years and received in payment for duties. All this was se!lled by observation, to grow less anxious on the subject of a plain statute provisions. The difficulty arose from no stable and uniform currency, or less resolute to fix it on deficiency of enactments by Congress. The law made a permanent basis of law. I felt then the necessity of it the duty of the Secretary to receive, in payments to maintaining a legal currency in payment of the dues of the United States, the gold and silver coins of the United the Government; I feel the same viecessity now. At that States, certain foreign coins, and Treasury no'es, and time, something was admitted in payment which was not notes of the Bank of the United States then lalely incor. in the statute; at this time, something is refused which porated; and nothing else. But we had just emerged is in the statute. In both cases the law has been de. from the war. The banks had suspended specie pay- parted from; and in bolli cases I was, and am, for re. ments in consequence of that war; and the Treasury was establishing its authority. said to have acted under an unavoidable necessity, a sort Mr. RIVES having oblained the fioor, of vis major, which could not be resisted. This was the On motion of Mr. GRUNDY, the Senate spent some sole ground on which its conduct was justified or ex. time in executive business, and then adjourned. cused. In the House of Representatives, the introduclory resolution or preamble was, however, stricken out, with my consent, which I readily gave, as it was sup.

TUESDAY, JANUARY 10. posed to imply a reproach on the Secretary of the The following message was received from the PresiTreasury; and I had not the least intention of casting dent of the United States, by Mr. ANDREW Jackson, Jr., any thing like reproach upon that officer, for a practice his secretary: growing out of the absoluie necessi'y of the case, as he | To the Senate of the United States: and others supposed. All, however, agreed that the "Immediately after the passage by the Senate, at a sor. mode of paying duties, then in practice, was not accord. mer session, of the resolution requesting the President to ing to law. The object of the resolution, as I have al consider the expediency of opening negotiations with the


Treasury Circular.

[Jan. 10, 1837.

Governments of other nations, and particularly with a few remarks to the Senate on this subject, I said what the Governments of Central America and New Granada, I take great pleasure now in repeating, that, in whatever for the purpose of effectually protecting, by equitable different lights the operation of the Treasury circular trealy stipulations with them, such individuals or com may have been viewed, of one thing I was thoroughly panies as might undertake to open a communication be persuaded that the motives which had induced the iween the Atlantic and Pacific oceans, by the construc- high functionary at the head of the Givernment to tion of a ship canal across the isthmus which connects direct the issuing of it were in perfect consonance with North and South America, and of securing forever, hy such thal elevated and patriotic spirit which bad so conspicustipulations, the free and equal right of navigating stich ca- ously marked the whole course of his public life; and nal to all such nations, on the payment of such reasonable that no defect of legality, in my estimation, had been tolls as ought to be established to compensate the capitals shown in the authority under which it was issued. I ists who might engage in such undertaking, and complete added, also, that the measure was properly to be viewed the work, an agent was employed to obtain information in as a temporary one, to continue in operation until the acrespect to the situation and character of the country tion of Congress on the whole subject could be obtain- . through which the line of communication, if established, ed; and that the President himself, as shown by the eviwould necessarily pass, and the state of the projects which dence of his message at the commencement of the seswere understood to be contemplated for opening such sion, attached no importance to its adoption as a permacommunication by a canal or a railroad. The agent re nent rule of policy turned to the United States in September last, and al. One of the leading objects of the Treasury circular, though the information collected by him is not as full as at the tiine it was issued, was to check that tendency could have been desired, yet it is sufficient to show that to extravagant bank issues and bank credits which the probability of an early execution of any of the pro- bas so signally marked the history of the last twelve jects which have been sel on foot for the construction of or eighteen months. But, so far as that object is conthe communication alluded to is not so great as 10 ren. cerncd, the same effect will now be produced in a man. der it expedient to open a negotiation at present with any ner not less certain, though by a process more gradual, foreign Government upon the subject.

and therefore easier and safer to the community, by the ANDREW JACKSON. operation of the deposite act. No one can doubt, Mr. WASHINGTON, January 9, 1837.

President, that one of the chief causes of the receit TREASURY CIRCULAR.

over-action of the banking system in this country is to be

found in the immense sums of public moneys left in the The Senate proceeded to the further consideration of deposite banks, and which have been used and cradled the joint resolution to rescind the Treasury order of upon by them, as an addition of so much to their bankJuly, 1836, &c., together with the substitute offered ing capitals. This is a state of things which has been therefor by Mr. Rives, in the following words:

eminently pernicious in all its bearings. The correction " Resolved, That bereafter all sums of money accruing of so great an evil formed in my mind one of the strongor becoming payable to the United States, whether from est considerations for giving the cordial support I did to customs, public lands, taxes, debts, or otherwise, shall the deposite act of the last session; a measure which, he collected and paid only in the legal currency of the however much misconceived or misrepresented in reUnited States, or in the notes of banks which are paya- gard to its true character, has, in my opinion, conferred ble and paid on demand in the said legal currency, under upon the country a double benefaction of the highest the following restrictions and conditions in regard to value: first, in putting out of the way of the Government such noies: that is, from and after the passage of this res the templation, whose powerful influence we were al. olution, the notes of no bank which shall issue bills or rearly beginning to feel, to useless, extravagant, and annotes of a less denomination than five dollars shall be ti-republican expenditure; and, secondly, in taking from received in payment of the public dues; from and after the deposite banks that gratuitous and artificial increment: the first day of July, 1839, the notes of no bank which of their capitals, which has been a main cause of the unshall issue bills or notes of a less denomination than ten natural distention of our paper currency, and of that indollars shall be receivable; and from and after the first ordinate spirit of speculation which bas prevailed through of July, 1841, the like prohibition shall be extended to the country. In gradually withdrawing, as we now are the notes of all banks issuing bills or nutes of a less de Coing by the act of the last session, these large amounts nomination than twenty dollars: Provided, however, that of the public treasure from the possession of the deposite no notes shall be taken in payment by the collectors or banks, and in avuiding, as, I trust, by a wise and provi. receivers, which the banks in which they are to be de- dent legislation, we shall do, the accumulation of any posited shall not, under the supervision and control of idle surplus in fulure, the Government will take away ihe Secretary of the Treasury, agree to pass to the credit the stimulus which itself has given to the excessive issues of the United States as cash.”

and credits of the banks; and we may then hope that, The question being on the adoption of his substitute, under the salutary control of the laws of trade, they will

Mr. RIVES said that, in asking the indulgence of the return within those safe, proper, and natural limits which Senate, it was not his design to abuse their patience by the business of the community requires. rearguing the questions which had already been so fully While on this branch of the subject, Mr. President, I and so ably discussed, in relation to the legality or the will make one other observation. However necessary policy of the Treasury circular. It was his wish only to or desirable the contraction of our paper circulation may state, somewhat more at large than he had yet had an op.be, (if it be, indeed, in the large excess which is sup. portunity of doing, the views under the influence of posed by many,) it must be borne in mind that there which he had offered the proposition wbich is now pend no operation more delicate than the reduction of the ing before the Senate, as an amendment to the resolution currency of a country. A decreasing circulating me. of ibe Senator from Ohio, (Mr. Ewing.) lo reference to dium, it is agreed alike by theoretical writers and by the most important objects of the Treasury circular, he enlightened practical men, is precisely that condition in regarded that measure as having clone ils office; and the the moneyed affairs of a community which is the most interests of the country are now much more concerned critical and distressing. It is a transition from high to in the provision we shall make for the future, i han in low prices, from a certain and liberal reward of labor lo any decision we may pronounce upon the past. Whent diminished wages and precarious employment, from had the honor some days ago, said Mr. R , of addressing active and prospering industry to general languor and de

Jan. 10, 1837.)

Treasury Circular.


pression in all the operations of business. It is a change am asked, what is the end I propose, whether I am in to which society always adjusts itself sli,wly and pain- favor of a specie circulation exclusively, and the total fully; and, under the most favorable circumstances, must suppression of bank paper, I answer, No. Even if such he attended with distress---often with extensive ruin. an o'yject were desirable, it is plainly impracticable. In Great caution, therefore, is necessary, lest it be unduly the present state of commercial progress and refinement precipitated in its progress, or harshly aggravated in its throughout the world, it would probably be impracticaeffects. We have, in the history of our own country, ble any where; but in this country, and under our sys. at a period not too remote for the recollection of most of tem of government especially, it is obviously wholly unus, a memorable example of the distressing effects of a allainable. Whether right or wrong, we find twentyrapid reduction of the circulating medium. It is striking- six independent State Legislatures possessed of the ly exhibited, in all its details, in the able report of Mr. I power to create banking corporations. Whatever specuCrawford, then Secretary of the Treasury, on the cur. lative doubts may exist in the minds of some as to the rency, in 1820. It is there shown that the circulation of constitutional validity of this power, the States now the country, in the three years from 1816 to 1819, had actually possess and exercise it, as they have invariably been bronghi down from 110 millions in the former, to done from the foundation of the Government, and there -45 millions in the latter; making the enormous reduction is not the slightest probability that they will ever be di. of 65 millions within that short period! The scene of rested of it. In every sober and practical scheme of wide-spread ruin and distress which ensued is fresh in policy, we must proceed upon the assumption that this the memories of all who witnessed it. I inculcates, at independent Stale power will remain. How, then, can least, the necessity of caution in the action of the Gov. the banking system be suppressed by this Government? ernment on this subject. It is our duty to withdraw Such a notion, if entertained any where, would indeed from the banking operations of the country that artificial be Utopian and visionary. stimulant which the Government itself has administered; My object, then, would be, not the desiruction of the but that being done, a just policy, in general, requires banking system and the total suppression of bank paper, that the concerns of trade should be left to regulate but an efficient regulation of it, and its restriction to safe themselves by their own natural and remedial laws. and proper limits; not the exclusive use of specie as a

Regarding, then, the Treasury circular as having circulating medium, but such a substantial enlargement mainly done its office, we are now called upon to estab- and general diffusion of it in actual circulation, as would lish some permanent and equal rule for the collection of make it the practical currency of common life, the uni. the public revenues. It is a duty which we cannot evade versal medium of ordinary transactions; in short, the if we would. In the joint power which the constitution money of the farmer, the mechanic, the laborer, and invests in Congress, to " lay and collect" taxes, our duty the travlesman; while the merchant should be left in the is read to us in terms too significant to be mistaken. it enjoyment of the faciliti-s of a sound and restricted pais as much a part of the legislative authority to say in per currency for his larger operations. Such a reformwhat manner and hy what rule the collection of the pub ation in the currency as this would, in my opinion, be lic revenue shall be effected, as to say to what amount productive of the most beneficial results. it would give and from sources it shall be raised. Important as such a security to the industrious classes of society for the pro. regulation is at all times, it derives, at the present mo ducts of their labor, against the casualties incident to the ment, a particular interest from its close connexion with

paper system. The laborer, in returning to the bosom the subject of the currency. It is in that connexion that of his family from bis weekly toil, would no longer find all who have participated in this debate have discussed his slumbers broken by the apprehension that the hard the question before the Senate; and it is doubtless in earnings of the week, perbaps the accumulation of long that connexion that the public attention is turned with years of honest industry, might be dissipated in a mom ist anxiety to our decision upon it. I feel, Mr. Presi. ment by the explosion of a bank, or the bursting of some dent, all the magnitude and all the difficulty of this paper bubble. It would give security, to a great exgreat question of the currency. There is none that ient, to the whole body of the community, against those rises bigher in importance, or descends more deeply disastrous fluctuations in the value of property and coninto the interests of society. It "comes home to the tracts, which arise from the ebbs and flows of an unrebusiness and the bosoms of men." It affects alike the stricted paper currency. It would give security to the humblest laborer and the wealthiest capitalist; on it de. banks themselves, by providing them, in the daily interpend the security of property, the stability of contracts, nal circulation of the country, an abundant and accessithe comfort and support of families, and, i will add, in a ble fund for recruiting their resources, whenever they great degree, the public morals; for nothing, in my should be exposed to an extraordinary pressure, opinion, is more calculated to unsettle the moral sense This, sir, is the happy slate of things we might promand habits of a community than the dispositions and ise ourselves from replacing (as it is the aim of the pursuits fostered by the lottery of a fluctuating currency. proposition which I have had the honor to submit to do) In approaching such a subject, I feel all the diffidence all bank bills, under the denomination of twenty dollars, which a just sense of its difficulty and importance prop with a solid circulation of gold and silver. Is there any erly inspires. But, having submitted to the Senale a thing wild, any thing visionary, any thing pernicious, in proposition which, if adopted, would, ! fatter myself, such a system of currency as this? It has the sanction, exert no small influence on this great interest; and as Mr. President, of the profoundest writers on questions the friends of the administration (myself among the of political economy, and has received the practical as. number) bave been accused of entertaining visionary, sent of the wisest nations. I am well aware that it would impracticable, and pernicious notions in regard to a re ill become me to present for the consideration of the form of the currency, I must beg the indulgence of the Senate any scheme which was not thus tested and apSenale while I stale, with as much precision as I may, proved. Of all the writers who have treated and exam. the views of that reform which I entertain, and which ined questions of this character, none possess so high an bave determined the shape of the proposition now under authority as the author of the “Wealth of Nations.” It their consideration.

has been well and justly said that Adam Smith had done In discussing the question of a reform of the currency, for the science of political economy what Bacon and it is necessary to settle our ideas clearly as to two things: Newton had done for physical science, and Sydney and first, the nature and extent of the end to be aimed al; Locke for the science of government and the fundamen. secondly, the means by which it is to be attained. Tri tal principles of civil and political liberty. His work,


Treasury Circular.

(Jan. 10, 1837.

appearing contemporaneously with the American Revo urges the necessity of confining it to commercial accomlution, was deeply imbued with the free spirit and the modation in the larger transactions between dealer and large and vigorous thought which so remarkably distin- dealer. He is in favor of the suppression of all bank guished that great era. He came forth as the zealous notes under five pounds; whereby gold and silver will and powerful champion of free trade, the inflexible op. fill ihe ordinary channels of circulation, and become, in ponent of monopoly and restriction, in all their multiplied fact, the common practical currency of the country. forms, the ardent advocate of every thing that is liberal, But this system does not rest on the authority of Adam generous, and popular, in the institutions of society and Smith alone. Not to mention the illustrious names or the intercourse of nations. No work has ever exercised the policy of other enlightened nations in support of it, so large an influence for good on the policy and destiny it has received the successive sanction of a long line of of nations; and none, I'am sure, considering the stamp the ablest practical statesmen in England. It is a reof liberty as well as wisdom impressed upon it, is bet. markable fact, that the great work of Adam Smith havter entitled to the respect of an assembly of American ing appeared in 1776, the Parliament of Great Britain, legislators. Adam Smith, by a strange mistake, has been in the very next year, passed a law prohibiting all bankheld up, rather opprobriously, as the advocate of a pa. ers from issuing notes under the denomination of five per system--as the founder, in fact, of the paper school! pounds. This continued to be the legislative policy of Sir, there can be no greater mistake than this. While that country till the memorable year of 1797, wben, in he recognised the utility of a judicious system of bank. consequence of the exigencies and embarrassments of ing, in liberating and putting into productire employ that tremendous confict, growing out of the French ment capital which would otherwise remain dead and in- revolution, which desolated and convulsed Europe for active, and the facilities it is calculated to afford to com more than twenty years, the Bank of England, with the merce, he yet insists that the general circulation of the sanction of the Government, suspended specie payments; country should be gold and silver.

and, at the same time, resorted to an issue of one-pound As the general principles he has laid down on the sub- and two-pound notes. As soon, however, as the war jects of banking and currency continue still to be ap was at an end, and the country was in a situation to ad. pealed to by the enlightened writers who have followed mit of the resumption of specie payments by the bank, him, as affording the soundest exposition of those sub. the enlightened statesmen of England recurred to the jects, whatever modifications of subordinate points may prohibition of all votes under the denomination of five have been made by subsequent inquirers, I will give to pounds. This return to a sound policy, however, was the Senate, and principally in the words of Adam Smith not accomplished, nor has it been maintained, without himself, an outline of his system of currency. After encountering a strenuous and persevering opposition. speaking of the advantages to be expected from a ju. There is something so instructive in the history of this dicious and properly conducted system of banking, he reform of the currency in England, that it deserves to be says expressly that “the commerce and industry of a traced some what more in detail. In 1819, a law was country are not so secure when suspended, as it were, passed directing a complete resumption of specie pay. on the Dædalian wings of paper money, as when they ments by the bank in tbree years, to wit, in 1822; and travel about on the solid ground of gold and silver.” Ile at the same time it was enacted that in two years after, 8afs, therefore, it is the policy of wise Governments to wil, in 1824, all small notes under the denomination "to guard, not only against that'excessive multiplication of five pounds should be prohibited. The first provisof paper money which ruing the very banks which issue ion was carried fully into effect at the designated period; it, but even against that multiplication of it which ena. but, such was the influence of the country bankers, and bles them to fill the greater part of the circulation of the other associated interests, that, before the appointed time country with it." He then proceeds to show that “the for the suppression of the small notes arrived, the latter circulation of every country may be considered as divi- provision was repealed, and the final suppression of the ded into two different branches: the circulation of the small notes was adjourned to 1833, the year of the ex. dealers with one another, and the circulation between piration of the charter of the Bank of England. But the dealers and consumers." His next position is, “that the great commercial convulsion of 1825, which swept paper money may be so regulated :s either to confine it. banks, merchants, farmers, every thing, before it, with self very much to the circulation between the different the destructive fury of a tornadó, soon after occurred, dealers, or to extend itself likewise to a great part of that and forcibly admonished British statesmen of the necessibetween the dealers and consumers." The regulation ty of seeking a remedy-in part, at least-in a more is effected by fixing the denomination of the notes per- solid constitution of their currency. Accordingly, in the mitted to be issued. “It were better," he adds, “ that beginning of 1826, Lord Liverpool and Mr. Robinson, no bank notes were issued in any part of the kingdom the one the first Lord of the Treasury, the other the for a smaller sum than five pounds. Paper money would Chancellor of the Exchequer, introduced and carried a then confine itself to the circulation between the differ- bill providing for the prohibition, after April, 1829, of ent dealers;" and where this is the case, he says, “there all small notes under the denomination of five pounds. is always plenty of gold and silver." “ But where it This law was stoutly and zealously opposed at the time extends itself to a considerable part of the circulation of its enactment, and repeated attempts were subsequent. between dealers and consumers, it banishes gold and ly made to procure its repeal, before the period fixed silver almost entirely from the country." The system for its operation. But these efforts were happily unavail. of Adam Smith, then, resolves itself into this: that the ing; and the doctrine of Adam Smith, in regard to the circulation between dealer and dealer may be of paper, but prohibition of all notes under the denomination of five that the circulation between dealer and consumer should pounds, re-established in 1829, after experiencing the be of the precious metals; that this result ought to be bitter fruits of a temporary departure from it, may now secured by prohibiting the issue of bank notes for a less be considered as the final and settled policy of the British sum than five pounds, and that, if such a restriction be Government. It has received the sanction and support of adopted, there “will always be plenty of gold and sil. her ablest statesmen--of Liverpool, of Peel, of Canning, ver" in circulation, performing all the offices of ex. of Huskisson, of Brougham, of Wellington-all of whom, change in the "ordinary transactions" of society, while upon the fullest experience and consideration, have, from the use of paper would be confined to commercial ope.lime to time, borne their testimony to the value and im. rations of a larger scale. Instead of being the advocate, portance of this essential restriction upon a paper circufar less the founder, of an unrestricted paper system, he | lation.

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