amicable arrangements must take place; and the creditors in such cases are satisfied to receive what the debtor can pay. But those debtors, residing in States or places where the local currency is most depreciated, who can pay, now begin to think that, because they pay and are paid at home with that currency, they are absolved from the obligation to pay in any other way their creditors who reside in other places or States. It amounts to this: you must receive this depreciated paper at par, or you may institute a suit, and the creditor, who knows the expenses and delays of the law, and who must realize his active debts in order to meet his own engagements, is compelled to submit. In process of time the people generally acquiesce; the banks seem to forget altogether in what consists their primary duty, and under pretence of alleviating the distress consult only their own. convenience. The same feeling at last penetrates into the legislative halls, and the State Legislatures, which at first had appeared disposed to enforce a prompt return of the banks to their duty, yield, and authorize, sometimes even encourage, an almost indefinite continuance of the suspension.

It would be painful to pursue the subject any farther, and to advert to the recklessness, gross neglect, inconceivable mismanagement, amounting to a breach of trust, to the disgraceful and heretofore unheard-of frauds which have occasionally occurred, or to that which is perhaps still worse, the apathy or lenity with which those enormities are viewed.

It may with truth be affirmed that the present situation of the currency of the United States is worse than that of any other country. The value even of the irredeemable paper money of Russia has, during the last forty years, been more uniform, and in its fluctuations the tendency has been to improve and not to deteriorate that value. No hesitation is felt in saying that whatever may be the presumed advantages of a moderate use of a paper currency convertible into specie on demand, to have no issue of paper would be far preferable to the present state of things. The object of this essay is to inquire whether any practicable remedies can be applied to the system.

CAUSES AND INCIDENTS OF THE BANK SUS

PENSIONS.

All active, enterprising, commercial countries are necessarily subject to commercial crises. A series of prosperous years almost necessarily produces overtrading. Those revolutions will be more frequent and greater in proportion to the spirit of enterprise and to the extension or abuse of credit. But however prices may be affected, and whatever may be the evils growing out of the crisis, there will be no violation of contracts, and the standard of value will not be affected, in countries where there is no paper currency. The danger of a suspension of specie payments, which immediately deranges that standard, is necessarily increased in proportion to the amount of issues of paper of that description, and that amount depends, in a great degree, on the denomination of the banknotes permitted to be issued as currency, on the number of the banks of issue, and, in the United States, on the capital invested in bank stock.1

All these dangerous elements are found united in a greater degree in the United States than in any other commercial country. The large field opened for enterprise, the free institutions of the country, and the indomitable energy of the people have produced results astonishing and without parallel in the history of other nations. A wilderness has within forty years been converted into the abode of six millions of civilized and most industrious people. Expensive communications have been opened, superior in extent and importance to those of continental Europe. The American commerce and navigation extend to every quarter of the globe, and are inferior to those of no other country but England. But there are evils which, to a certain extent, appear to be the necessary consequence of a state

1 The capital of the banks is in the United States universally loaned to traders; generally speaking, the European banks and bankers lend only the amount of their circulation and deposits. The capitals of the Bank of England and of the Bank of France are vested in public securities. VOL. III.-26

of high commercial prosperity, and which in America are much increased by the want of a capital proportionate to the extent of commercial and other undertakings.

Overtrading has been the primary cause of the present crisis in America. Abundant proofs of the fact are found in the immoderate use of foreign credit, as well as in the excessive importations, and sales of public lands, in the years 1834-37. Of imports:

During the nine years 1822-1830 the average annual amount

The average annual excess of imports over the exports amounted to four millions during the first nine years; to eighteen millions during the three next ensuing; to thirty-four millions during the four last, and to sixty-one millions in the year 1836 alone.

The average annual sales of public lands, which during the first nine years did not exceed 1,300,000 dollars, and which during the years 1831-35 had reached 4,500,000, amounted in 1835 to seventeen and in 1836 to twenty-five millions. Speculations in unimproved town lots, mines, and every description of rash undertakings increased at the same rate.

The fault, or error, originated with the people themselves. The traders and speculators have attempted to ascribe their disasters altogether to legislative acts; to those of the Administration, or to other collateral causes, which have indeed aggravated the evils, but the effects of some of which have been exaggerated. Still, although it would be improper to abridge the freedom of action which all individuals should be permitted to enjoy, it is certain that the spirit of enterprise did not require any artificial stimulus.

The prodigious increase of State banks was the result of State legislation. From the 1st of January, 1830, to the 1st of January, 1837, three hundred new banks were created, with a capital

of one hundred and forty-five millions of dollars. This increase was undoubtedly due to the eagerness for capital applicable to commercial accommodations or other purposes. It may be ascribed in part to the expiration of the charter of the Bank of the United States, and to the anticipation of that event. It was thought necessary in some places to fill the chasm in capital and commercial accommodations that must follow the dissolution of that institution. The same effect had been produced in the years 1810-16 on the occurrence of the expiration of the charter of the former national bank; and in both cases the increase far exceeded the apprehended loss and the wants of the country.

The great increase of banks took place, accordingly, in the Western States, where capital was most wanted. During the years above mentioned the increase in the banking capital of the North-Western States amounted to near twenty, and that of the South-Western to almost fifty-five, millions of dollars.1

But that increase was far beyond what might have been wanted for useful purposes. Near three-fifths of the foreign merchandise imported into the United States are imported into New York. That city is also the principal place of deposit for the sale of the domestic manufactures of the country; and it is also the centre of all the moneyed transactions of the United States. In the year 1837 the capital of all the banks of that city hardly exceeded twenty millions of dollars; and it was sufficient for all the legitimate operations of commerce. When an unexpected increase of the public deposits enabled and induced those banks to expand their discounts beyond their ordinary rate, that excess excited overtrading, and was applied to extraordinary and dangerous speculations.

In order to obtain or to assist in obtaining the capital wanted for the new banks, for internal improvements, and for some other miscellaneous purposes, debts were incurred by several

1 The designations of the Secretary of the Treasury of the United States are adopted here as convenient for reference. According to these, Ohio, Indiana, Illinois, Michigan, Missouri, and Kentucky are the North-Western, and Tennessee, Alabama, Mississippi, Louisiana, and Arkansas the South-Western, States.

States amounting, from 1830 to 1838, to near one hundred and fifty millions of dollars. The debt contracted by the Atlantic States was almost entirely for internal improvements; no part of it for banking purposes; and it fell little short of sixty millions. That contracted by the North-Western States amounted to about thirty-eight millions, of which thirty-one millions five hundred thousand dollars were for internal improvements, and the residue for banking capital. That incurred by the SouthWestern States was about fifty-two millions, of which more than forty-four millions were for banking capital, and the residue for internal improvements.

The population of the United States by the census of 1840 exceeds seventeen millions, of whom ten millions seven hundred and sixty thousand are in the Atlantic, four millions one hundred and thirty thousand in the North-Western, and two millions two hundred and thirty thousand in the South-Western States.

It may be observed that the reason why so much more capital was applied in the South-Western than in the North-Western States to banking purposes is to be found in the difference of capital wanted for the employment of slave and free labor respectively. The Northern farmer advances no more than twelve months' wages to the laborer he employs. The Southern planter who wishes to increase the product of his land must advance the price of the slave himself, which amounts perhaps to five or six times the net product of his annual labor. The application of banking accommodation to purely agricultural purposes has accordingly been much greater and has been attended with far more fatal effects in the South-Western States than in any other section of the Union. But even the State debts created for internal improvements have co-operated in aggravating the evils under which we now labor. Not only were their proceeds applied to purposes of which the returns were slow and uncertain, but they also supplied the means of paying balances or obtaining credits abroad. Thus, extravagant importations were encouraged, whilst at the same time some of those stocks became objects of speculation at home, in which individuals and banks were involved, and which proved injurious to all the parties