every quarter; so that everybody can know the state of each bank in particular, as well as the state of the whole circulation. In the second place, the whole amount of the circulation cannot be increased at the will of the banks or the will of the comptroller, or in any other way except by an act of Congress authorizing such increase; so that the system is not so liable to those sudden contractions and expansions which have been the bane of our paper money hitherto. In the third place, the bills will be uniform in value all over the country, and debts can be paid by them through the post-office or otherwise, without the mediation of any bank or the payment of exchanges. In the fourth place, besides the absolute security of ultimate redemption, the ratio of lawful money actually on hand to the aggregate circulation is much higher than has hitherto prevailed in practice throughout the country. Add to these reasons this other, that the homogeneousness of the money circulating among them, in connection with a common creditorship towards the United States Government, is an additional bond binding the States and the people together, and tending powerfully to neutralize the centrifugal forces which are always at work in large societies and governments. But we shall get an idea too favorable to the new national banking system, unless we look also at

THE DANGERS.

The money which these banks are to circulate is, after all, nothing but credit money, and will be liable in some degree to the disorders which are inseparable

from every form of credit. Credit is not payment, but a promise to pay. The promise may be good, it may be sure to be fulfilled; but it is not, and never can be made, the same thing as fulfilment. These bills bear upon their face the acknowledgment that they are promises to pay, and not the pay itself; and men are so constituted, and society is so delicately organized, that times are liable to come when men shall have a general distrust of mere promises, and .shall desire to see them changed into fulfilment. If a panic should ever arise in regard to these notes, and a general desire be manifested on the part of the holders to convert them into cash, it is evident that many of the banks would be obliged to suspend specie payments, since they are only required to hold twenty-five per cent. of their circulation and deposits in cash, and this ratio, as a general thing, is not likely to be exceeded. It is true that their notes cannot all come back at once for redemption, nor indeed any very considerable proportion of them, since, unlike the circulation of the State banks, they will pass freely beyond the boundaries of States and sections, and become necessarily very widely dif fused; yet general confidence is a thing so sensitive, and credit money is in its nature such, that an absolute freedom from panics and from supensions cannot rationally be predicted. They are liable to come: it will be strange if they do not come.

But the most imminent danger that threatens this system is this: that Congress will unwisely increase the amount already authorized to be issued before the system gets fairly settled and the resumption of specie payments takes place. This is every, way to

be deprecated. The system will be sound and wholesome just in proportion as Congress refuses to add to the present amount of $300,000,0000. When the war broke out, the whole paper circulation of the country, north and south, was only $202,000,000; and in the loyal States, $150,000,000; and on the first of January, 1862, in the loyal States, only $130,000,000, according to the authority of Secretary Chase. Now, we do not want an exclusively paper currency. We want a broad substratum of gold and silver underneath it to support it, control it, and redeem it. There ought to be at least as much of gold and silver in the currency and in the banks as of paper money. The English have more. That is the grand reason why the British currency is so sound and excellent; not that a part of it is credit money, but that the greater part of it is gold and silver. If Congress will only hold firm, and allow those channels of circulation which $300,000,000 of paper cannot fill to be filled up with gold and silver money, as they will be in accordance with natural laws, without the necessity of a syllable of legislation, then the banking system will stand firm, then the paper will be equal with gold, then we shall have a circulation of perhaps $650,000,000 of good money, redemption of the notes will rarely be called for, and will be perfectly easy when it is called for, and such a thing as a panic attacking the currency will be rarely or never witnessed. Let no man say that it will cost too much to maintain $350,000,000 of metallic money. The Director of the United States Mint, in his Report for 1862, tells us, as the result of careful observations and experiments at the

mint, that the average abrasion of all our gold and silver coins in times of their circulation is per annum. To maintain, then, a metallic circulation of $350,000,000 would cost $145,833 a year; we doubt whether as much paper money can be kept good for that sum, considering the losses from accident, from counterfeiting, and similar items. There is no credit in gold and silver money. It promises nothing. It represents nothing. It stands in its own right of value exactly as any other commodity, as is shown by the fact that it is worth scarcely more as coin than as bullion. The most that can be said of any paper money is, that it approximates in value and steadiness to a gold and silver money. The closer the approximation, the better the paper. Considering the likelihood that Congress will be urged to allow of more paper money, and the likelihood that they will yield to such urging, and the certainty that such action will postpone the day of resuming specie payments, and the probability that the whole system will be more or less endangered thereby, we cannot predict with any confidence the high success of the system. It is perhaps rather to be hoped for than expected.

CHAPTER XII.

ON CREDIT.

POLITICAL Economy is the science of exchanges; but there are certain exchanges which have this peculiarity, that the return service is not rendered immediately, but is impliedly or expressly promised to be rendered in the future. This peculiarity is important to be considered, and gives rise to all those phenomena which pass under the general name of Credit. The commercial use of the term credit is loose and various, denoting sometimes the reputation of a person for solvency, as when it is said, "So and So has good credit;" and sometimes denoting a general state of the public mind, in which use it is synonymous with confidence, as when it is said, "There is no credit in a time of commercial crisis;" and sometimes denoting also 'the paper evidences of an obligation resting on some party to render a return service for some service already received. Credit, in general, may be defined as an exchange in which the return service is delayed, and which usually gives birth to a written evidence that such service is due. In order that this form of exchanges may be common, it is of course needful that there should be a general confidence in the public mind; in other words, a general expectation that such debts will be promptly paid.