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stitute currency even when unconnected
with the Government, and are doubly dis
| qualified by reason of that connection, which


subjects them to sudden expansions and con-


fractions, and exposes them to fatal catas-


trophies, such as the present. zsss.e


will explain my views. A bank note


clrculates hot merely on account of the cred


1t OF the Institutions by which it is issued,


but because Government receives it like gold


and silver in all its dues, and thus adds its


own credit to that of the bank. 1t, in fact,


virtually endorses on the note of every spe-


Gle paying bank receivable by Government


in its Dues To understand how greatly


this adds to the circulation Of bank notes, we


great money dealer Of the country, and the


holder of immense public domains, and that


it has the power of creating demand a.


gainst every citizen as high as it pleases, in


the shape Of tax or duty, which can be


discharged, as the law now is, only by bank


notes or gold and silver. This Of course,


cannot but add greatly to the credit of bank


notes, and contribute much to their circula-


ton, though it may be difficult to determine


with any precision to what extent. 1t GER


tainly is very great. For why is it that an


individual of the first credit, whose respon-


sibility is so indisputable, that his friend of


equal credit endorses his note for nothing,


should put his with his friends, being their


Joint credit, into bank, and take out the


notes of the bank, which is in fact but the


credit of the bank itself, and pays six per


cent discount between the credit of himself
and his friend and that of the bank? The


known and established credit of the bank
| may be one reason, but there is another and


powerful one. The Government treats the
Fxl III
its transactions, and does not treat the cred
it of individuals in the same manner. To
test the truth, let us reverse the case, and
suppose the Government to treat the joint
credit of the individuals as money, and not


the credit of the bank, and is it not obvious
| that instead of borrowing from the bank and


paying six per cent. discount, the bank


would be glad to borrow from him on the
| same terms. From this we may perceive
the powerful influence which bank circula-
ton derives from the connection with the
credit of the Government.


| 1t follows as necessary consequence,
| that to the extent of this influence, the is
sues Of the banks expand and contract with
the expansion and contraction of the fiscal
action of the Government; with the in
crease of its duties, taxes, income and ex-
penditure; with the deposits in its vaults
acting as additional capital, and the amount
of bank notes withdrawn, in consequence,
from circulation all of which must directly
effect the amount of their business and is


sues, and bank currency must Of course par


take of all those vibrations to which the fs-


cal action of the government is necessarily


exposed, and when great and sudden, must


expose the system to catastrophes, such as


we now witness. In fact, more suitable
| oopoof ho eoloofod fo ;l1,,.,.,+o ~ :,


truth of what assert, than the present: as


shall proceed to show:


To understand the causes which have led


to the present state of things. we must go


back to the year 1924, when the tariff system


triumphed in congress- system which i'm


posed duties, not for the purpose of revenue,


but to encourage the industry of one portion


of the Union at the expense of the other


This was followed up by the act of 1928,


which consummated the system. 1t raised


the duties so extrava vagantly, that out of an an


nual importation of sixty -four millions, thir-


ty-two passed into the treasury: that is,


Government took one-half for the liberty of


introducing the other. Countless millions


were thus poured into the treasury bey yond


the wants of@the Government, which be-.


came in time the source of the most extrav-


agant expenditures. This vast increase of


receipts and expenditures, was followed by
! a corresponding expansion of the business
Of the banks. They had to discount and is
sue freely to enable the merchants to pay


their duty bonds, as well as to meet the vast
ly increased expenditures Of the Govern


ment. Another effect followed the act Of
1928, which gave still farther expansion to
the action of the banks, and which is worthy


of notice. 1t turned the exchange with
England in favor of this country. That por-


ton of the proceeds of our exports, which in
consequence of the high duties, could nc
longer return with profit, in the usual arti-
cles, which we had been in the habit of re-
ceiving principally from that country in ex-
change for our exports, returned in gold and
t silver, III order to purchase similar articles
at the north. This was the first cause which
: gave that western direction to the precious
J, metals, the revulsive return of which has
/ been followed by so many disasters. With
/ the exchange in our favor, and consequent
| ly no demand for gold and silver abroad, and
the vast demand for money attendant on an
, increase of the revenue, almost every res


traini was removed on the discounts and is
, sues of the banks, especially in the northern
J, section of the Union, where these cause;
principally operated. With their increase
!, wages and price of every description rose il
proportion, followed of course by an increas
ing demand on the banks for further issues
) This is the true cause of that expansion O
the currency, which began about the com
mencement of the late administration bu
= which was enormously changed by it to ths
r Bank of the United States. 1t rose out O
2 the action of the Government. The banl
in increasing its business, acted in obedience
to the condition of things at the time, ant
: in conformity with the banks generally il
: the same section. 1t was at this junctur'


that the late administration came into pow