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Art. X.-Considerations on the Currency and Banking System
of the United States. By Albert Gallatin. Philadelphia.
1831. 8vo. Our impression as to the peculiar qualifications of Mr. Gallatin for the task which he has here undertaken was formed long before his pamphlet came under our notice; and we therefore gave it welcome, with more than the ordinary measure of interest and curiosity which belongs even to a new work on an important subject;—of interest, because we were prepared to derive instruction from any reasoning and opinions, proceeding from that quarter and upon such questions; and of curiosity, for we felt a strong anticipation that much accurate and valuable fact, hitherto neglected or unknown, would be presented in its pages, for the illustration of one of the most complicated branches of political science. In aid of such expectations came also the conviction that, though in this country understood by few, the history of the circulating medium of the United States offers to research and study some rare materials from the stores of actual experience; and we have little hesitation in expressing our belief that, within the span of its independent existence, the North American Republic has exhibited and suffered a more remarkable series of changes and combinations in its monetary system than any other modern state. That the science of circulating media has of late years gained great and sure advances, by the demonstration of facts, we need not remark to those of our readers, whose attention has dwelt at all
In Great Britain alone, the last forty years have done more to disclose the true principles upon which its results are based, than whole previous ages.
But the United States of America have now existed, as a constituent member in the community of civilized nations, for somewhere about half a century; and in that period, with the exception of a legal debasement of the standard, from which they are protected by the letter of their written constitution, there is scarcely another form of contingency affecting the currency, which has not marked their annals. Government paper, in their infancy, current at a depreciation of eight thousand
per cent.;-convertible notes, issued and supported by private and separate banks, at first without, and then in co-existence with, a corresponding national establishment;—the expiration of the charter, without renewal, of this last mentioned institution ;consequent irregular excesses among the private paper issuers ; -a singular suspension of their specie payments, without legal sanction;—the result, a common redundancy and depreciation of
the currency ;-then a revival of the National Bank Charter; thereby a recovery and control of the standard circulation; not to mention circumstances incident to their peculiar political organization, such as the bank notes of one state at par,-of the next at 50 or 100 per cent. discount;-cautious regulations in this quarter, unrestricted license in that;-here notes of the higher denominations only, there of the very lowest ;-individual and joint stock banks in immediate co-existence;—all have occurred within the limits of their national experience, and form a course of facts, more varied and more valuable than could be gleaned from the same space of history in any other society of the globe.
With expectations however thus awakened, so far are we from having to announce disappointment, as to be bound to acknowledge that we consider this one of the most remarkable pamphlets with which it has ever been our fortune to meet. It has the advantage of proceeding upon the contents of several public documents, and among them" particularly,” as it informs us, of a Report presented by Mr. M Duffie, from the Committee of Ways and Means, to the House of Representatives. This report bears date so far back as the 13th of April, 1830, but it is an able and instructive paper, drawn up on so much of the President's message as related to the Bank of the United States;for all these productions are the offspring of the same occasion, namely, the approaching term of the existing United States Bank Charter, and the suggestion thereupon, of certain proposals to Congress for its transfer or renewal. At a moment when the same practical problem is to be solved in our own case, and is in fact now in the very course of solution, we have thought that this coincidence of circumstances would not weaken the recommendation which we have already offered, of the merits of the work before us, and we therefore propose, if it were but for the object of rendering it more duly known, to give to our readers a short notice of its contents, with, at the same time, strong counsel to those who wish to look deeper into such subjects than the surface, that they should read, or rather study, (for it well deserves the graver term,) the original itself.
The name of Mr. Gallatin will need no commentary, for any one who has attended to the History of the United States,—who has visited their territories,-or who has been at all connected personally either with their political or commercial concerns. But there must be many of our readers to whom no such circumstances have made it known, and for them therefore we would just remark, that he is one of their most distinguished politicians, and has, among other offices, himself held that of Secretary to the Treasury, or Finance minister; that subsequently, in the years 1826 and 1827, he was in this country as envoy, and in that capacity conducted with Mr. Canning, (or rather with Mr. Huskisson, who we believe was his actual antagonist, though in the name of the Foreigo Secretary,) a well-known correspondence on the West Indian trade and navigation --one of the ablest, we will venture to assert, in the records of commercial diplomacy. Although Switzerland was the country of his birth,* Pennsylvania has long been that of his adoption; and notwithstanding his having been a short time since a candidate for the vice-presidency of the United States, and his mission to the British court, we believe he has of late years passed much of his time on a possession which he owns in the western district of that state, in partial, but, as it seems, not unemployed retirement.
In the work before us, originally, as it announces in its titlepage, written for the American Quarterly Review, and afterwards extended for separate publication," the importance of preserving a permanent standard of value is," to use his own words, (p. 62,) “ the leading principle which he has tried to enforce." To secure this end, he avows his persuasion that there are no means so effectual as the maintenance of a sound metallic circulation. The United States' Bank has, however, he admits, contributed much to give steadiness to the existing system.
“Although," he therefore remarks, "we have freely expressed our opinion, that, taking into consideration all the circumstances which belong to the subject, it might have been preferable in the United States to have bad nothing but a metallic currency, we are quite aware that this is not at this time the question. We are only to inquire, whether any
otber or better security can bc found, than that wbich is afforded by the Bank of the United States, against either the partial failure of banks, the want of an uniform currency, or a general suspension of specie payments. The great difficulty arises from the concurrent, and perbaps debateable jurisdiction of the general and state governments : and we are to examive, not only what are the provisions necessary to attain the object intended, but also by what authority the remedy must be administered."-p. 55.
The object intended then, in the first branch of this inquiry, is in fact the "enlargement of the circulating metallic currency;' of effecting which, " he perceives,” as he says, “ but two means; 1st. The suppression of small notes; ed. The measures necessary to bring again gold into circulation,” (p. 56,) from whence it is found, in that country, to have been continually withdrawn. For the latter of these purposes, and the most simple, he discusses, and proposes to amend the existing regulations of the mint; while in his investigation of the former, he exhibits, by
* As has been already incidentally noticed in this journal, iu the sketch of M. Dumont, wbichi appeared in No. IX.
most valuable accounts, the general condition and history of the banking system of the republic; and proving the amount of loss which such a change would probably entail, argues at the
the sums of the various currencies of the civilized world, and upon the nature of the demand which is henceforth to be supplied by the sources of the precious metals.
Having thus given our readers a concise sumniary of the structure of the work, proceeding analytically, in order more clearly to point out its objects, from the opinions and conclusions of the author, to his facts and arguments, we will now advance with him, according to the synthetical order which he has taken, to explain the outline of the reasoning by which he establishes their connection.
It is manifest that money, being in its sound state “not merely the sign or representative of wealth,” (p. 23,) but having trinsic value," and being therefore “ wealth itself,” it is a point of first importance in all questions touching currency, in whatever form, to ascertain the real nature of that value, and of the changes which may affect it, derived as it is from the qualities of those materials which have been, for well known reasons, adopted for such purpose, by the universal assent and usage of mankind. But in this instance there is moreover a special inducement to that inquiry, since the object of the author being to establish a more extensive use of metallic money in the country for which he writes, the change recommended must necessarily be accompanied by a fresh demand to the amount required, and must therefore have direct and immediate relations with the state of the market upon which it is to act. He accordingly at the outset applies himself to an examination of the circumstances affecting the supply of the precious metals, and we cannot say that the result is such as to remove from our minds the impression that each such successive attempt to attain accuracy in this most obscure branch of statistical inquiry, only serves to show more certainly how unattainable, we might almost say how unapproachable it really is. So conscious indeed does Mr. Gallatin seem to be of this truth, that he does not dwell upon the topic sufficiently even to give us the grounds of his several calculations; and one page alone, (p. 9) contains the comprehensive abstract of the results to which they have conducted him, yet at which he does not seem to have carelessly arrived. As far as the year 1803 inclusive, he follows Humboldt, (the only authority on the subject now worth consulting for the period which bis inquiries embrace,) in assuming the whole amount of gold and silver drawn from the American mines at about 5,600 millions of dollars. From this period to 1830 he estimates the produce, for reasons to which he does not allude, at 750 millions, and adding 550 for the additions from other sources, with 300 for the amount in existence before the discovery of the New World, concludes that a total of 7,200 millions of dollars is not far from the true quantity which has been available to the uses of mankind during that period. In the total absence of all information as to the data whereon this estimate has been founded, from the point at which the aid of Humboldt fails us, we should however be inclined to think that it has been raised too high for the interval from that time to the present. That illustrious traveller and philosopher has stated the annual produce of America, in the years of his researches, or the first two or three of this century, at about 43,500,000 dollars, and in adding 6,500,000, or taking a total of 50,000,000 for that of the six subsequent years to 1809 inclusive, we cannot but believe that we are rather over than underrating the increase which is known to have then taken place.
This would give us an addition, for that period, of 300 millions ; and if for the years from 1810 to 1830, which exhibit a supply very much reduced in consequence of the political confusion of those countries, we adopt the sum of about 385 millions, which is the result at which Mr. Jacob's investigations fix it after much research, we shall obtain a total contribution of no more than 685 millions of dollars for the whole interval, and we should in fact doubt whether it has amounted to more than 650 millions, that is, 100 below the quantity assumed by Mr. Gallatin.
This view of the subject seems, indeed, to be supported by his own calculations in a subsequent passage (p. 17), where he supposes the whole annual supply from America, Asia, and Europe, to have been only fifty millions between 1803 and 1810; (though he gives twenty-seven for that of the last twenty years, which would present an entire total of 840 millions for the period in question ;) and it appears to us to be still further confirmed by a very curious return, lately laid before the House of Commons, from the British diplomatic and consular agents in the mining countries of America and Russia, which, so far as it goes, is valuable as an auxiliary document on this subject, but which at the same time shows the hopeless futility of all inquiry into such facts in the former regions; and, as one of the officers in question expresses it, the “ impracticability of collecting any thing to be depended upon respecting the working or produce of the mines,” except, indeed, it were by the personal labours, and minute knowledge, combined and employed by a Humboldt. Vague and uncertain, however, as are all such accounts, they are certainty itself, compared with those which can be obtained for the next question, namely, the quantities or proportions in which