693. BANKS, Depreciated Paper of.—[further continued].
The depreciation of bank
paper swells nominal prices, without furnishing
any stable index of value. I will endeavor
briefly to give you an idea of this state of
things by an outline of its
history.
In 1781 we had 1 bank, its capital $1,000,000.
In 1791 we had 6 banks, their capital $13,135,000.
In 1794 we had 17 banks, their capital $18,642,000.
In 1796 we had 24 banks, their capital $20,472,000.
In 1803 we had 34 banks, their capital $29,112,000.
In 1804 we had 66 banks, their amount of
capital not known.
And at this time we have probably one
hundred banks, with capital amounting to
one hundred millions of dollars, on which
they are authorized by law to issue notes to
three times that amount, so that our circulating
medium may now be estimated at from two
to three hundred millions of dollars, on a
population of eight and a half millions. The
banks were able for awhile, to keep this trash
at par with metallic money, or rather to depreciate
the metals to a par with their paper,
by keeping deposits of cash sufficient to exchange
for such of their notes as they were
called on to pay in cash. But the circumstances
of the war draining away all our
specie, all these banks have stopped payment,
but with a promise to resume specie exchanges
whenever circumstances shall produce
a return of the metals. Some of the most
prudent and honest will possibly do this; but
the mass of them never will nor can. Yet,
having no other medium, we take their paper,
of necessity, for purposes of the instant,
but never to lay by us. The government is
now issuing treasury notes for circulation,
bottomed on solid funds, and bearing interest.
The banking confederacy (and the merchants
bound to them by their debts) will endeavor
to crush the credit of these notes; but the
country is eager for them, as something they
can trust to, and so soon as a convenient
quantity of them can get into circulation, the
bank notes die.—
To Jean Baptiste Say. Washington ed. vi, 434.
(M.
March. 1815)
