THE FINANCIAL REGISTER

OF THE

UNITED STATES.

DEVOTED CHIEFLY TO FINANCE AND CURRENCY, AND TO BANKING AND COMMERCIAL STATISTICS.

"It is the interest of every country that the standard of its money, once settled, should be inviolably and immutably kept to perpetuity. For whenever that is altered, upon whatever pretence soever, the public will lose by it. "Men in their bargains contract, not for denominations or sounds, but for the intrinsic value."-Locke on Money.

Vol. I.

WEDNESDAY, SEPTEMBER 27, 1837.

From the National Gazette of April 15, 1837.

No. 7.

THE CONSTITUTIONAL CURRENCY. the United States the scape-goat for all Gen

NO. III.

These vain attempts to make the Bank of eral Jackson's folly in meddling with things he did not understand, merit a particular examination.

In the articles under this head recently published the present writer has shown that That the Bank of the United States exGeneral Jackson greatly deceived himself in tended her loans and discounts between the supposing that any of the "humble efforts" months of November, 1834, and July, 1835, which he had made during his administration as asserted by the writer in the Globe, to the had contributed in the slightest degree to re- amount of near twenty millions of dollars, store "the constitutional currency of gold will not be disputed. An expansion of the and silver." So clearly and irrefutably was loans of that bank has always taken place at this fact proved by documentary evidence the time of the year referred to, with the exfurnished by the treasury department, and ception of the season previous to the one menother authorities, that neither the Washing- tioned. The cotton crop of the South beginton Globe nor any other "constitutional cur-ning to come into market at New Orleans, rency" paper has ventured to utter a single Mobile, and other cities, in the month of syllable in reply. A writer, however, in the October, and continuing to come in until the Globe of the 1st of April, whose production following summer, a large share of the ope(signed Z.) is recommended by the editor on rations of the Bank of the United States, the ground of its author's having access to through its branches at those places has been authentic sources, insists that the present to purchase the bills of exchange drawn on Euevils, which I have traced to and have con-rope or the northern cities by the merchants clusively fixed upon the measures of General who have shipped cotton. By the purchase Jackson, are mainly to be ascribed to the of these bills, payable in the notes of the course pursued by the Bank of the United bank, the merchants of the South have been States in having extended her loans near enabled to pay the planters of Louisiana, Mistwenty millions of dollars between November, sissippi, Alabama, Tennessee, and other states, 1834, when the country had just recovered for their cotton; who in turn have been enfrom the panic occasioned by the removal of abled to pay their debts to the country merthe deposites, and July, 1835. He says-chants; and these last again, to the merchants "these dangerous and sudden additions of in New York and Philadelphia. In performnear fifty per cent. within the short period of ing this particular function, the notes of the only eight months, to both discounts and is- bank have in reality been nothing but duplisues, tempted and stimulated the community to cate bills of exchange, absolutely representover-trading, over-banking, and other specula-ing a certain quantity of cotton, taking the tions of a character the wildest and most ruin-place of the original bills which the shippers ous." The editor of the Globe also, in his of the cotton had drawn, and possessing this paper of 7th April, gives a comparative state-advantage over the latter, that being of uniment of the aggregate discounts and circula-versal credit and negotiable without endorsetion of all the banks for the years 1835 and ment, they could be applied to the payment 1836, together with the amount of foreign of every amount of debt, great or small. They imports and sales of lands for those two years, and follows them by these remarks:

"The influence of the United States Bank, and the ruinous excesses in over-trading and speculation, caused by its large and sudden expansion in 1834-5, are manifest from the above."

were therefore preferred to any other form of bills to which a sale of cotton could give rise; and if they did not get back to the bank in Philadelphia as soon as the bills for the purchase of which they were issued, it was because they had to traverse a more circuitous

route.

sponsible for the mischief which had resulted from his measures. Let us examine these positions which appear to be so plausible.

Had General Jackson entertained constitu tional objections against a national bank, as many of the southern people do, involving a sense of conscientious obligation, no one would have been justified in condemning him for his refusal to sign a bank charter. But it so hap pens that he had no such conscientious objec tions against a bank, as is evident from the following passage extracted from his veto message of 10th of July, 1832.

Now, for the writer in the Globe to pre- There was one ground, however, upon tend that such an operation as this occasioned which the writer of these articles did expect the other banks to extend their loans one hun-to have seen a direct defence of General dred and sixty-four millions of dollars, which Jackson attempted. He thought it probable was the supposed amount of their total aug- that some of the advocates of "the constitumentation between the 1st of January, 1835, tional currency," would have ventured the and 1st of January, 1837, betrays the same position, that the old gentleman was not to want of acquaintance with the principles of blame for the consequences flowing from the currency as that which has been so signally acts of twenty-eight state and territorial godisplayed by General Jackson in the course vernments-that the creation of 357 new of his "humble efforts." The short time banks and an augmentation of bank loans to those notes remained on the road in their the amount of 390 millions of dollars in seven rapid flight back to the bank at Philadelphia, years was an affair over which he had no scarcely permitted them to form any part of control, and that consequently he was not rethe currency; and their influence in exciting the spirit of speculation and over-trading could have been no greater than that which an equal number of bills of lading for cotton deliverable at the north or in Europe could have created, had they been circulated instead of the bank notes. The "constitutional currency" writers must be hard pressed, indeed, to be obliged to resort to such flimsy arguments as this to defend the folly of their "revered" financier. Is not the writer in the Globe aware that between the 1st of January, 1830, and the 1st of January, 1835, according to the secretary of the treasury's report, "That a bank of the United States, compe there were two hundred and thirty-eight new tent to all duties which may be required by banks created by General Jackson's "humble the government, might be so organised as not efforts," which could not possibly have been to infringe on our own delegated powers, or produced by an expansion only commenced the reserved rights of the states, I do not entwo months before the latter date? Is he tertain a doubt. Had the executive been called aware that during the year 1835, when he upon to furnish the project of such an instituascribes such an awful spirit of speculation, tion, the duty would have been cheerfully overtrading, and over-banking to the aug-performed. In the absence of such a call, it mentation of the loans of the bank, that there is obviously proper that he should confine were only nine new banks created? And is he aware, that during the year 1835 the bank closed most of her branches and reduced her loans; and that in the year 1836, when the influence of her operations could have been no other than to diminish the spirit of speculation, there were one hundred and ten more new banks created? It is all folly to attempt to make the Bank of the United States bear the odium of General Jackson's blunders. The public may be deceived for a time by partial and discoloured statements, but in the end the truth must appear.*

himself to pointing out those prominent fea tures in the act presented, which in his opinion, make it incompatible with the constitution and sound policy."

His objections, thus it appears, were not against a bank, but against what the Globe calls Biddle's bank, and hence no defence can be raised for him on the ground of constitu tional scruples as to the power of congress over the subject. He acknowledges that if congress had paid that deference to his finan cial skill to which he thought it entitled, he would with pleasure have furnished a project, and it is highly probable that had the bank and congress consented that the executive should have been empowered to choose the July, 1833, before the removal of the deposites, president of the bank, the charter such as it,

*It is worthy of remark that the loans of the bank according to the statement of this writer, were as

follows:

about

$63,300,000
45,754,201

was,

would not have been found so inconsist65,197,692 ent with sound policy or with the constitution, as it was represented in the veto.

November, 1834, July, 1835, It thus appears that these "dangerous and sudden additions" to the currency, to which the Globe and its contributors seem to ascribe such disastrous consequences, were nothing but placing the business of the bank in "statu quo ante," the loans of the bank in

July, 1835, not being two millions of dollars more than they were in July, 1833, at a period when no body complained of an excess of currency.

But admitting, for the sake of argument, and hence it is that the height of the water that there had existed constitutional objec-in both rivers at any given time is the same. tions against the bank charter, as it was This would even be true if the Schuylkill passed by congress, and that General Jackson were to become shallow by deposites of alluwas acknowledged to be entirely exempt from vion or dirt thrown into it; for, although as censure for the consequences of his opposition much water would not ascend it as before, yet a to its renewal, what claims could he have for level corresponding with that of the Delaware exemption from responsibility for all the dis- would be preserved. Now, suppose that by the astrous consequences resulting from his re-gradual operation of the causes mentioned, the moval of the deposites? These last, I have bed of the Schuylkill should be so raised that proved in former articles, were infinitely where the water used to be twenty feet deep greater in magnitude than those which flowed it was now only ten feet deep, what would be from mere opposition to the bank charter, and thought of the man who should propose to as he was bound by no conscientious obliga- restore the old depth by pumping the water tions of duty to resort to that measure, it is with steam engines out of the Delaware into clear that he could only justify it upon the the Schuylkill; and particularly at a time ground of "sound policy." And now let me when nobody complained that the water was ask the reader, what does he think of the not deep enough for all the purposes of navifinancial skill of the man who with the view gation? There is not a schoolboy in the of establishing a gold and silver currency, land, who could not perceive that the attempt and with the fact before his eyes that his hos- would be eminently stupid; for, although if tility against the Bank of the United States, sufficient power could be applied, it would be had already, prior to October 1833, created possible to raise the water for a time in the 186 new banks, should pursue a course at that Schuylkill above the natural level, it would period the inevitable tendency of which was not stay raised, but would subside by degrees to engender all over the United States a ma- as soon as the forcing pumps ceased to work. nia for creating new banks, to scramble for Nor is there a man in the community, howthe public deposites? And further, let me ask ever limited his knowledge, who, if consulted him, what does he think of the powers of that on the subject, would not say, that the proman's mind, who, after seeing the results per way to restore the old depth of water in of his various "humble efforts" to restore the Schuylkill, would be to remove the sand "the constitutional currency," should say and mud from the bottom, and not to pump with all the self-complacency and self-gratu- water into it, and more particularly would he lation of one who had achieved a signal vic-say this if he saw, that after some pumping tory, "something, I trust, has been done had been tried, its immediate effect had been towards the accomplishment of this most to increase the deposites of sand and mud, desirable object?" It is very certain, that instead of driving them away, and thus deepwhatever credit posterity may give General ening the channel. Jackson for military skill, they will never accuse him of having been a financier.

What is true of water, is true of gold and silver. The streams which have been flowing for centuries from the nrines of Mexico, Peru, Brazil, and other countries, seek their level in all the channels of circulation which are scattered over the face of the commercial world, and, if left undisturbed by the operations of governments, and quack financiers, would find it, sooner or later, with as unEvery body in Philadelphia knows that the erring certainty as water. Each country is great stream of water, which the flood tide sure to receive, in the general distribution, brings from the Delaware Bay, on its passage precisely the quantity which the extent of its upwards, after filling the creeks which lie on population, wealth, and commerce demands, its route, divides itself at the mouth of the under its peculiar circumstances, as to conSchuylkill, part ascending that river, and the fidence and credit. One country where cre rest ascending the river Delaware. The city dits are unknown, may require twice as of Philadelphia, placed between the two rivers, much coin to circulate its commodities and is approached by shipping on two sides, and property, as another of equal wealth and exnobody ever hears of a high tide in the one tent of transactions, where credits in any river at the same time that there is a low tide form are prevalent, and although the ag in the other. This arises from the well-known gregate quantity of the precious metals is law of nature, by which water finds its level, greater in the one country than in the other,

Having thus disposed of the General's financial abortions, I will now show that "the constitutional currency," of which he has so long been in pursuit, is a mere ignis fatuus, a Jack o' lantern, a Will o' the wisp, which is not more easy to catch than one of its prototypes in the bogs of Ireland.

7*

yet the same level is preserved. Were this not and sooner or later, it will reach it. As well the case, the prices of all commodities in the might the General attempt in the case sup country where the supply of coin was greatest, posed, to prevent the equalisation of the wawould rise above those of the other where it ters in the Delaware and Schuylkill, after was least, which would induce the latter to stopping his forcing pumps, as for him to take away gold and silver in exchange for its attempt to prevent the return of the specie productions instead of the dear commodities to Europe, which he has unnecessarily forced of the former, until the level should be re- from her coffers. The direct importations of stored. Indeed, it is by the operations of coin from Mexico, in the regular course of commerce that the level is preserved through- trade, have supplied the increased demand out the world, and when the process is left to occasioned by the prohibition from circulathe mild, gentle, unseen and unfelt power by tion of bank notes of a less denomination which she adjusts the distribution, her ad- than five dollars, enacted by some of the ministration over this vast machinery pro-states; and the production of the gold mines duces no shocks or convulsions.

hear said of him, something very much like what was once said of another projector of impossible feats:

"The king of France, with forty thousand men, Marched up the hill, and then marched down again.”

of the South, will probably supply all the The United States is one of those countries gold pocket-pieces that timid and silly people in which paper credits have for many years may desire to hoard. Mexico, also, will supbeen extensively substituted for the precious ply, without the aid of forcing pumps, all the metals, and there is no doubt that, owing to specie hereafter called for by the real prothis circumstance, the quantity of gold and gress of population, wealth, and commerce, silver in the country has always been less and there would therefore be no sound reason than it would have been, had public confi- why specie brought from Europe should not go dence been more circumscribed. I will not back, even if there was any possible mode of assert that this confidence has been judicious- preventing it. It is true that a perseverance ly exercised. It is sufficient for me to know, in the treasury order, which lays an embargo that a belief in the benefits resulting from on the specie in the west, combined with an the existence of banks, is so universal, that extensive contraction of bank loans, by which no statesman would disregard it in his mea-persons indebted to Europe may fail, or be sures, and particularly when he saw that the rendered unable to command funds for remit. legislatures of all the states and territories, tance, may postpone the period of the transin the face of denunciations of paper money, mission; but come it must, and if General from a high and influential source, had gone Jackson should live a very few years, he will on steadily augmenting their number. The United States, therefore, may be compared with the river Schuylkill. Paper money is the alluvion which, by its gradual deposite, has diminished the depth of the channel, and kept out a large body of water, but still leaving depth enough for navigation. The Dela- Indeed, every body who reads the newspa ware, a larger river than the Schuylkill, may pers knows, that in the latter end of February, be compared to Europe, where the quantity there arrived at Liverpool, from New York, of coin is much greater than in the United in gold, £200,000 sterling, being a little less States. General Jackson is the professor of than one million of dollars, and that a further hydraulics, who wishes to increase the water sum in all probability was arrested at New in the Schuylkill, by the means of forcing York, in the latter end of March, by the pumps located in England and France. He arrangements made with the Bank of the has succeeded for the moment in increasing United States and other institutions, to issue the depth of the water five feet, whilst by the bonds payable in London. But this is not all. operation of the currents created by his own After the completion of this unprofitable acts, the bed of the river has been elevated operation, a true statement of the effects of ten feet. The level of the Schuylkill, there- the general's "humble efforts to restore the fore, has been placed fifteen feet above its constitutional currency," by the forcing proformer level, whilst that of the Delaware has cess, would show, that the people of the been brought down two or three feet perhaps United States had paid the expenses of a below its former level, by the loss of water. double freight, double insurance, and double The process which the country is now under-commissions, and had sustained the loss of all going, is nothing but the water returning to the profit which would have resulted from its natural level, leaving all the people who the employment in foreign commerce of had built wharves and store-houses upon many millions of dollars in specie which General Jackson's unnatural level, ruined, were brought home, with no other result

than that of deranging the currency of this | the bank in contracting its circulation. It was tried country, by which thousands of people will have been ruined, as well as that of England, by which an amount has been lost by the fall of prices of cotton, tobacco, and other Ame-lion. Immediately upon the events referred to taking rican productions, probably equal in amount to the whole sum of specie which was forced into the country to restore "the constitutional currency."

THE CAUSES AND CONSEQUENCES of the Pressure upon the Money Market; with a State-till the autumn of 1833, at which time the bullion in ment of the action of the Bank of England from 1st of October, 1833, to the 27th December, 1836. London, 1837.