5626. NATIONAL CURRENCY, Circulating medium.—
If I have used any expression
restraining the emissions of treasury
notes to a sufficient medium, * * * I
have done it inadvertently, and under the
impression then possessing me, that the war
would be very short. A sufficient medium
would not, on the principles of any writer,
exceed thirty millions of dollars, and of those
of some not ten millions. Our experience has
proved it may be run up to two or three
hundred millions, without more than doubling
what would be the prices of things under
a sufficient medium, or say a metallic one,
which would always keep itself at the sufficient
point; and, if they rise to this term,
and the descent from it be gradual, it would
not produce sensible revolutions in private
fortunes. I shall be able to explain my views
more definitely by the use of numbers. Suppose
we require, to carry on the war, an annual
loan of twenty millions, then I propose
that, in the first year, you shall lay a
tax of two millions, and emit twenty millions
of treasury notes, of a size proper for circulation,
and bearing no interest, to the redemption
of which the proceeds of that tax
shall be inviolably pledged and applied, by recalling
annually their amount of the identical
bills funded on them. The second year, lay
another tax of two millions, and emit twenty
millions more. The third year the same, and
so on, until you have reached the maximum
of taxes which ought to be imposed. Let me
suppose this maximum to be one dollar a
head, or ten millions of dollars, merely as an
exemplification more familiar than would be
the algebraical symbols x or y. You would
reach this in five years. The sixth year, then,
still emit twenty millions of treasury notes,
and continue all the taxes two years longer.
The seventh year, twenty millions more, and
continue the whole taxes another two years;
and so on. Observe, that although you emit
twenty millions of dollars a year, you call in
ten millions, and, consequently, add but ten
millions annually to the circulation. It would
be in thirty years, then, primâ facie, that
you would reach the present circulation of
three hundred millions, or the ultimate term
to which we might venture. But observe,
also, that in that time we shall have become
thirty millions of people, to whom three
hundred millions of dollars would be no more
than one hundred millions to us now; which
sum would probably not have raised prices
more than fifty per cent. on what may be
deemed the standard, or metallic prices. This
increased population and consumption, while
it would be increasing the proceeds of the
redemption tax, and lessening the balance annually
thrown into circulation, would also
absorb, without saturation, more of the surplus
medium, and enable us to push the same
process to a much higher term, to one which
we might safely call indefinite, because extending
so far beyond the limits, either in
time or expense, of any supposable war. All
we should have to do would be, when the war
should be ended, to leave the gradual extinction
of these notes to the operation of the
taxes pledged for their redemption; not to
suffer a dollar of paper to be emitted either
by public or private authority, but let the
metallic medium flow back into the channels
of circulation, and occupy them until another
war should oblige us to recur, for its support,
to the same resource, and the same process,
on the circulating medium.—
To President Madison. Washington ed. vi, 392.
Ford ed., ix, 489.
(M.
Oct. 1814)
