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ceeded 80,000,000 dollars. It is understood, that a large addition was made to it, in that year, in several of the states. If it be admitted that such addition amounted to 15,000,000 dollars, the bank capital in operation, in the year 1813, may be stated at 65,000,000 dollars. Allowing to this capital the same amount of specie, circulation, and discounts, as was comparatively, possessed by the banks comprehended in statement D, the estimate will be, specie 28,000,000 dollars, circulation 62,000,000 dollars, and discounts 117,000,000 dollars. In 1815, the bank capital had increased to 88,000,000 dollars; whilst, upon the same principle of calculation, the specie would have been estimated at 16,500,000 dollars, circulation at 99,000,000 dollars, and discounts at 150,000,000 dollars. Applying this principle to the 125,000,000 dollars of bank capital in operation during the year 1819, the specie possessed by all the banks would amount to 21,500,000 dollars, circulation 53,000,000 dollars, and discounts 157,000,000 dollars.
The last results, with the exception of the discounts, very materially differ from those which have been obtained by the mode of calculation previously adopted. They, nevertheless, furnish materials which may be useful in the progress of this enquiry. From them the following deductions may be drawn:
1st. That, in the year 1813, the circulation of bank notes was nearly equal to the bank capital:
2d. That, in the year 1815, it exceeded the capital by one-eighth: 3d. That, in the year 1819, it was less than the capital nearly in the proportion of 1 to 2.5:
4th. That, whilst the amount of bank capital has increased since 1813 from 65 to 125 millions; the metallic basis, upon which the circulation of notes is founded, has decreased in the proportion of 15.5 to 28; being equal to 44.6 per cent. :
5th. That the circulation of notes in the year 1819, in proportion to the specie in the possession of the banks, exceeded that of 1813, 25.9 per cent. :
6th. That, in the year 1813, the discounts, in proportion to the bank capital employed, exceeded those of 1815, in the ratio of 18 to 17, and those of 1819, in the ratio of 18 to 12:
7th. That the increase of bank notes in circulation, between the years 1813 and 1815, exceeded the increase of discounts during the same period by 4,000,000 dollars; whilst the specie, in the vaults of the banks, was diminished 11,000,000 dollars :
8th. That, whilst, between the years 1815 and 1819, an addition of 37,000,000 dollars has been made to the nominal bank capital, but 6,000,000 dollars have been added to the aggregate amount of discounts.
It is probable, that, between the year 1811 and the year 1813, a considerable addition was made to the paper circulation of the country. From a return of the former bank of the United States, made to the Treasury in 1808, it appears, that, with 15,300,000 dollars of specie, it circulated only 4,787,000 dollars of notes. Another return made in 1810 shows its condition was not materially changed. Shortly after the expiration of its charter, bank capital, to a great amount, was incorporated in some of the states. The expenditures produced by the war, which was declared in 1812, without doubt, contributed, in some degree, to produce the difference between the condition of the sixteen banks already referred to, and that of the former bank of the United States. If it be admitted, however, that the circulation in 1813 was not redundant, it must have become excessive in 1815. An increase of the currency, in the space of two years, in the proportion of 99 to 62, even if it had been wholly metallic, could not have failed to have produced a very great depreciation; but, when it is considered that, not only the increase, but the whole circulation consisted of paper, not convertible into specie, some idea of its depreciation may be formed. The depreciation, however, was not uniform in every part of the Union. The variation in the degree of depreciation depended not only upon the greater issues of banks in one section of the nation, than in others; but, also, upon the local advantages which they enjoyed as to commerce. It is impossible to determine, with precision, where the most excessive issue of bank notes occurred. Statement E, which exhibits the rate of exchange between the principal cities to the east of this place and London, and the price of bills at New York upon Boston, Philadelphia, and Baltimore, during the years 1813, 1814, 1815, and 1816, may be considered presumptive evidence of that fact. So far as it can be relied upon for that purpose, Baltimore was the point of greatest depreciation among the above-mentioned places. This is probably true; as it is known that the banks in that place made greater advances to the government in the loans which it obtained during the late war, in proportion to their capital, than those of Philadelphia, New York and Boston. But the greatest depreciation of the currency existed in the interior states, where the issues were not only excessive, but where their relation to the commercial cities greatly aggravated the effects of that excess.
This statement may also assist in explaining the cause of the necessity which existed in 1814 for the suspension of specie payments by the banks. From the commencement of the war until that event, a large amount of specie was taken out of the United States by the sale of English government bills, at a discount frequently of from 15 to 20 per cent. Immediately after the suspension, they commanded a premium in those places where the banks had sus
pended payment, which gradually rose to 20 per cent. ; whilst at Boston they remained at a discount of about 14 per cent. until February, 1815,
Whatever may have been the degree of depreciation of the currency in 1815, it continued to augment throughout the first six months of the year 1816, if the rate of exchange with London is considered conclusive evidence of that fact. The excessive importations of British merchandise during that period, and in the preceding year, might indeed account for the increase of premium paid upon sterling bills, and was, probably, one of the principal causes of it. The great fluctuations which occurred in the latter part of that period furnish some reason, however, for ascribing them, in some degree, to changes in the value of the currency, in which their price was calculated, rather than to the ordinary principles of exchange. It is more probable that the currency, in those places where it was not convertible into specie, fluctuated in value according to the efforts which were made, in particular places, to prepare for the resumption of specie payments, than that the balance of payments between the two countries should have varied to such an extent as is indicated by the sudden variations which occurred during that period in the rate of exchange. So far as these fluctuations are ascribable to the currency in which the rate of exchange was determined, a considerable appreciation of that currency took place in the last months of the year 1816. From that period until the sent time, the circulation has rapidly diminished; and all the evils incident to a decreasing currency have been felt in every part of the Union, except in some of the eastern states.
If, as previously stated, the circulation of 1813 be admitted to be the amount required to effect the exchanges of the community with facility and advantage, and that, in the year 1815, that circulation was extended to 99,000,000 dollars, which was, in some degree, augmented in 1816, the extent of the diminution of the currency, in the space of three years, may be perceived. But it is proba ble that the currency in 1815, exceeded 99,000,000 dollars. The banks, upon whose situation that estimate is founded, were estab lished at a period when the practice of dispensing with the pay ment of those portions of their capital falling due after they went into operation, had not been generally introduced. Some of them did not suspend specie payments during the general suspension. The rest were among the first to resume them, and have continued them to the present time. It cannot be expected that banks which went into operation during the war, and after the general suspen sion had occurred, were conducted with an equal degree of pru dence and circumspection. A reasonable allowance being made for bank notes supposed to be in circulation at that period, but
which were, in fact, in the possession of other banks, and for the excess of issues beyond the estimate, the circulation may, it is believed, be safely calculated at not less than 110,000,000 dollars. The paper circulation in 1813 has been estimated at 62,000,000 dollars. At that period, however, gold and silver formed a substantial part of the currency. The condition of the old bank of the United States, in 1810, and of the sixteen banks in 1813, proves that the demand for specie from the vaults of the banks was inconsiderable. It is, therefore, probable, that the whole circulation of 1813 amounted to 70,000,000 dollars. In 1815, it is estimated to have risen to 110,000,000 dollars, and this amount was probably augmented in 1816. At the close of 1819, it has been estimated, upon data believed to be substantially correct, at 45,000,000 dollars. According to these estimates, the currency of the United States has, in the space of three years, been reduced from 110,000,000 to 45,000,000 dollars. This reduction exceeds fifty-nine per cent. of the whole circulation of 1815. The fact that the currency in 1815 and 1816 was depreciated has not sensibly diminished the effect upon the community, of this great and sudden reduction. Whatever was the degree of its depreciation, it was still the measure of value. It determined the price of labor, and of all the property of the community. A change so violent could not fail, under the most favorable auspices in other respects, to produce much distress, to check the ardor of enterprise, and seriously to affect the productive energies of the nation. The reduction was, in fact, commenced under favorable auspices. During the year 1817 and the greater part of 1818, all the surplus produce of the country commanded, in foreign markets, higher prices than ordinary. The rate of foreign exchange afforded no inducement for the exportation of specie for the purpose of discharging debts previously contracted. The only drain, to which the metallic currency was subject, was the demand for it, for the prosecution of trade to the East Indies and to China. In this trade, specie being the principal commodity, and indispensable to its prosecution, the amount exported during those years was very great, and seriously affected the amount of circulation, by compelling the banks to diminish their discounts.
Notwithstanding the drains for this commerce during these years was unusually large, every other circumstance was favorable to the restoration of the currency to a sound state, with the least possible distress to the community. The capacity of the country to discharge a large portion of the debts contracted with banks, and which had occasioned their excessive issues, was greater than at any former period, and than it probably will be again for a lapse of successive years. The effort to reduce the amount of
currency during those years, though successful to a considerable degree, was not pursued with sufficient earnestness. In the latter part of 1818, when the price of the principal articles of American production had fallen nearly fifty per cent. in foreign markets; when the merchant needed the aid of additional loans to sustain him against the losses which he had incurred by the sudden reduction in the price of the commodities he had exported; he was called upon to discharge loans previously contracted. The agriculturist, who saw his income reduced below his indispensable necessities; the manufacturer, who was not only struggling against foreign competition, but who saw the sale of his manufactures reduced by the incapacity of his customers to buy; in fact all classes of the community, under circumstances so adverse to the command of funds, were subjected to curtailments wherever they had obtained discounts.
All intelligent writers upon currency agree that where it is decreasing in amount, poverty and misery must prevail. The correctness of the opinion is too manifest to require proof. The united voice of the nation attests its accuracy. As there is no recorded example in the history of nations of a reduction of the currency so rapid and so extensive, so, but few examples have occurred of distress so general and so severe as that which has been exhibited in the United States. To the evils of a decreasing currency are superadded those of a deficient currency. But, notwithstanding it is deficient, it is still depreciated. In several of the states the great mass of the circulation is not even ostensibly convertible into specie at the will of the holder. During the greater part of the time that has elapsed since the resumption of specie payments, the convertibility of bank notes into specie has been rather nominal than real in the largest portion of the Union. On the part of the banks, mutual weakness had produced mutual forbearance. The extensive diffusion of bank stock among the great body of the citizens in most of the states had produced the same forbearance among individuals. To demand specie of the banks, when it was known that they were unable to pay, was to destroy their own interests, by destroying the credit of the banks in which the productive portion of their property was invested. In favor of forbearance, was also added the influence of the great mass of bank debtors. Every dollar in specie drawn out of the banks, especially for exportation, induced the necessity of curtailments. To this portion of the community all other evils were light, when compared with the imperious demands of banks. Their exertions to prevent the drain of specie in the possession of those who controlled their destiny, equalled the magnitude of the evils which were to be avoided. In most parts