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to the community a cheaper article of exchange. The extent of the benefit is easily estimated.
“If the whole of the metallic circulating medium were exchanged for paper, we should have the benefit of the interest of this whole amount. If twenty millions of specie were wanted to carry on the exchanges of this country, and the whole were exchanged for paper, we should be benefitted to the amount of the annual interest of twenty millions,
or, at six per cent., of one million two hundred thousand per annum.
If three.fourths of it were sent away, our bene. fit would be equal to nine hundred thousand dollars per annum. This is the whole pecuniary advantage of a paper currency over a metallic.
It consists in substituting a cheaper, for a dearer circu. lating medium. And, our advantage, supposing the cheaper to be equally good, is precisely equal to the interest of the difference.”_ p. 291.
paper circulation is more economical ; for the material is cheaper, the wear and tear less expensive than that of gold and silver, and it allows a considerable portion of specie to be exchanged for other capital. It is more convenient, is less liable to robbery, and more easily identified if stolen : on the other hand, it is especially liable to forgery, fraud, and fluctuation. Forgery or fraud can of course never take place but through design, fluctuation may arise on the part of the banks either from want of skill or foresight, or from want of integrity. But the “disadvantages of fluctuation, both from unskilfulness and from fraud, do not belong exclusively to banks, but are liable to exist under any circumstances, in which money is loaned and borrowed.” When, however, such a state of things exists, the blame is always laid upon the banks. Again, in time of scarcity, the banks are censured because they will not loan more money
" A bank,” says Dr. Wayland, “if it be honest, and mean to pay its debts, has its limit, beyond which it cannot safely pass as truly as an individual. When it has arrived at this limit, its loans must
A merchant, who has involved himself in large transactions, expecting that he could borrow as much as he chose, is now disappointed, because his expectations are not realised. But what rea. son has he to complain? The bank never proniised to lend him, when it had nothing to lend; nor to ruin itself, for the sake of saving him from the consequences of his own headlong improvidence; especially, when by doing this, it must involve, not only itself, but him also in ruin. 'The bank was no party to his engagements; it derives do benefit from them, and it is under no obligation to enable him to ful. fil them. The only remedy for these evils manifestly is, for both parties to be willing to grow rich more slowly, and thus to assume less formidable risks. When a whole community has run into trans.
actions beyond its means, and has become embarrassed, there is very little gained by the abuse of banks and of bank directors.” p. 307.
When a community have chosen a paper instead of a metallic currency, the government should take such means as will be likely to give all reasonable security to the currency, and to diminish fluctuation. Fluctuation will always be less when the proportion of specie to paper is great, and vice versa. Hence the proportion of specie should be too large to be affected by any thing but large and long-continued exportations of the precious metals. This can be effected by prohibiting the issue of small bills. Further, an exact account should be kept of the amount of specie imported and exported, and made public at short periods. This would enable the banks to regulate matters so as to prevent any extensive evil. The author thinks the government has no right to interfere with the currency for any other purposes than those above specified.
“If it do interfere," he remarks, " such interference is manifest usurpation. It has, for instance, no right to interfere with the cur. rency, because the people import too much, or because they import too little, because they buy too much land, or because they buy too little land, because they over-trade, or because they under-trade. Its power was conferred for no such purpose, and to use it for such purpose, is usurpation. To all such interference, the proper answer to be given by the individual to the government, is, that all this is none of your business.
“Nor is the principle, in this case, at all affected by the patriot. ism from which such interference proceeds, or the paternal solici. tude by which it may have been dictated. The parental authority and the parental responsibility cease, when the child has become of age. And whoever may assume to be the Father of his country, it surely is not too much to claim for the people of these United States, that they have at least attained to the period of majority." p. 312.
Our author thinks it is far better that banks should be connected by some institution like the late United States Bank, rather than isolated institutions. In regard to the number of banks, he says, “Let all banking be governed by principles that shall insure the safety of the community, and then let banks be multiplied at will. If they yield more than the usual profits of capital, they will be increased until their profit is reduced to that of other business; if they yield less, they will be diminished until they merely supply the wants of the community.”
The subject of Population, which has formed so fruitful a theme of disputation among political economists, is noticed by our author only incidentally. He makes no reference to VOL. 1.NO. II.
Malthus or his opponents; it is plain, however, that he utterly, and somewhat indignantly, rejects his theory.
“ Population,” he remarks, “always follows capital. It increases, as capital increases; is stationary, when capital is stationary; and decreases, when capital decreases. And hence, there seems no need of any other means to prevent the too rapid increase of po. pulation, than to secure a correspondent increase of capital, by which that population may be supported." p. 340.
“If the capital which a bountiful Creator bas provided for the sus. tenance of man, be dissipated in wars, bis creatures must perish for the want of it. Nor do we need any abstruse theories of popula. tion, to enable us to ascertain in what manner this excess of popu. lation may be prevented. Let nations cultivate the arts of peace. Let them reduce the unnecessary expenses of governments. Let them abolish those restrictions which fetter and dispirit industry, by diminishing the inducements to labour. Let them foster the means by which the productiveness of labour may be increased, and the annual gifts of the Creator will so accumulate, that the means will be provided for the support of all the human beings which are an. nually brought into the world. As soon as this accumulation bears a suitable ratio to the number of inhabitants, we shall hear no more of the evils of excess of population. It is vain to throw away the food of a million of people in a single day, and then be astonished that a million of people are starving for the want of it.” p. 343, 344.
Laws regulating the rate of interest, our author regards as injurious to the prosperity of a country :
"1. Such laws violate the right of property. A man has the same right to the market price of his capital, in money, as he has to the market price of his house, his horse, his ship, or any other of his possessions.
“2. The real price of capital cannot be fixed by law, any more than the real price of flour, or iron, or any other commodity. There is, therefore, no more reason for assigning to it a fixed value, than there is of assigning a fixed value to any other commodity,
"2. The price of capital, or money, is really more variable than that of any other commodity. Most other commodities have but one source of variation, namely, use or profit. But capital, in the form of money, is liable to two sources of variation, risk and use. These yary, at different times, in different investments, and with different individuals. There is, therefore, less reason why the price of money should be fixed by law, than why the price of any thing else should be so fixed.
“4. These laws, instead of preventing, give rise to great and disastrous fluctuations in the price of money.
"Suppose that, to.day, money is worth, in the ordinary operations of business, ten per cent., and it is worth six per cent. in loan. A man will as soon loan, as employ it in business, if he have more than he wishes to use. There will then be a fair supply of money in the market. But let the profits of capital rise, so that, in the ordinary operations of business, capital is worth twenty per cent. If, now, the rate of interest rose with this increased rate of profit, the same individuals would be as willing to loan as before; and thus, the supply following the demand, there would arise no peculiar scarcity. The high rate of interest would also attract capital from abroad; and thus, in a very short time, it would, in this particular place, be brought to the general level.
“ But, suppose that six per cent. were the highest legal rate of in. terest, and that he who loaned at a higher rate, was liable to lose both his principal and interest, and also his mercantile character. In this case, as soon as the profit of capital in business rose to fif. teen or twenty per cent., no one, who could thus employ it, would loan it at six per cent. Hence, as soon as it thus rose, the supply would be immediately diminished; and this would, of course, cause a greater rise of interest. Those who, from honour or conscience, obeyed the laws, would withdraw from the market, and employ their capital in some other way; and no one would loan, but those who were willing to risk the consequences of detection. These, having the money market in their own hands, will, of course, charge for the use and for the risk of detection ; and, hence, the price, in a few days, may become doubled or trebled. And, at the same time, although the real value of money may be fifteen or twenty per cent.; yet, because the legal price is six per cent., there is no inducement for capital to come in from abroad, to supply the demand.
Hence, the change in the money market has, by reason of this law, no ten. dency whatever to regulate itself.
“ Hence, I believe all enactments establishing a legal rate of in. terest, are injurious and unwise. The only enactment of any value would be, one which should define the usual rate, when nothing was said on the subject in the contract. The use of this would be, to prevent disputes. This is always an advantage to both parties. p. 373, 374.
In regard to the modes of providing for the public expenditures, we perceive that the author is in favour of direct rather than indirect taxes. An indirect tax, that is, a tax laid on articles of consumption is, he admits, more conveniently collected, or more willingly paid, but is more liable to injustice. Further, indirect taxes do not impose the public burden, in any manner in proportion to the share which the individual receives of public protection. The consumer pays the tax. He pays, therefore, according to the amount which he consumes, not according to the benefit he receives from the government. Hence a man possessed of a million may pay no more than a daily labourer. Direct taxation is more in harmony with the genius of representative government. The people ought to know what they pay, and how much, and how it is expended. In the author's opinion, the common argument in favour of indirect taxation—that the people do not feel it, is one of the strongest arguments against it. The more they feel it, and the more jealously they watch over its expenditure, the better for them and for their rulers. He is also inclined to think that the rich should be taxed at a higher rate than the poor, inasmuch as men should be taxed in proportion to the benefit they receive from a government. The poor man's clothes, bedding, cow and pig, should be exempted from taxation; and the necessaries of life, if taxed at all, should be taxed at the lowest rates. Articles of luxury and ostentation should bear the heaviest burden.
A surplus revenue he regards as "a public nuisance :"
“ It gives to the government a control over the monetary affairs of the country, at the best dangerous; and a control which is very liable to be exerted for the promotion of party purposes. It hence gives an additional, an unnecessary, and a dangerous power to a majority, and gives them the means of perpetuating that power, indefinitely. It is taking productive capital from the hands of the owners, and vesting it in hands where there is every temptation to spend it uselessly, if not viciously. The world has never yet seen a government so pure, that it would not become corrupt if a surplus revenue were permanently placed at its disposal.” p. 451.
We have thus glanced at some of the prominent doctrines contained in the work before us, and we conclude by recommending the book, and the subject of which it treats, to the attentive study of all who wish to have distinct views of matters likely to be continually agitated in a country like ours, and in regard to which they have important duties to discharge as individuals and members of the community.
Art. VIII.— The Young Lady's Friend. By a Lady.
Boston: American Stationers' Company. 1836. 12mo. pp. 432.
• We ask particular attention to our remarks on this book, because, after praising it a little in general terms, and noticing some things particularly good, we intend to find a great deal