Democratick Editorials: Essays in Jacksonian Political Economy
WHY IS FLOUR SO DEAR?
Plaindealer, December 3, 1836. Extract abridged.
This question is in every body's mouth, and the following paragraph hints the answer which the writer seems to think will explain the difficulty:
...Is it a scarcity of the article of flour in the market, which raises the price to ten dollars per barrel, at a moment when money is worth two per cent a month? Or have those who had the control of money facilities combined to buy up all the wheat at moderate prices, with the design of speculating by a monopoly of one of the necessaries of life? Mechanicks and others have been indicted for combining to raise the price of labour; and it might be well to inquire whether combinations to raise the price of wood, pork, flour, and other necessaries of life, beyond a fair profit, are not equally offences against society.
The foregoing is from the Albany Argus. The information it conveys in relation to the amount of the wheat crops is valuable. But the measure which it suggests for the purpose of reducing the price of flour is at utter variance with the principles of free trade, and with the natural rights of citizens. If mechanicks combine to raise the price of wages, they but hold forth an invitation to competition from beyond the sphere of combinations, and competition will soon arrange prices according to a just scale of equivalents. If merchants combine to raise the price of flour by purchasing all in the market, they but provoke competitors in foreign ports, whose rivalry will soon set matters right. The laissez nous faire maxim applies here as forcibly as in any other concern of trade. The true way is to leave trade to its own laws, as we leave water to the laws of nature; and both will be equally certain to find their proper level.
We already find that, incited by the high prices of bread stuffs here, foreign competitors are sending supplies across the ocean, and underselling our agriculturists at their own doors. Part of the cargo of the Bristol, which was wrecked at Rockaway a fortnight ago, was English wheat; and we notice in the accounts of importations in the newspapers that frequent mention is made of large quantities of foreign grain. Why is this? Why are prices so high in this country that the wheat growers of Europe can incur all the expenses of transportation, freight, insurance, commissions, and storage, and still undersell us in our own markets? Does the Argus really suppose that this result is brought about by a combination among the dealers in flour, "with the design of speculating by a monopoly of one of the necessaries of life?" The cause, let it rest assured, lies deeper than this. The monopoly is one of a worse character, of greater power, of more ruinous operation. Short crops may do something; combination may do something; but the high prices are mainly the result of the monopoly of banking. They are the natural and inevitable consequence of the wretched system which places the currency of the country completely under the control of a comparatively few specially privileged chartermongers, who avail themselves of the speculative disposition of the people to flood the country with a paper circulation, till the influx produces its natural effect of causing a vast depreciation of money, or appreciation of money prices, which is the same thing, and attracts competitors from all parts of the world to our market. These competitors do not take in payment, and carry away with them, the spurious currency which the monopoly banks have issued, but demand specie; and then comes the necessity of sudden retrenchment, followed by wide spread commercial distress. Prices then begin to fall; and at this point we are now arrived. Flour must soon go down, despite of all combinations, fancied or real; produce of all kinds must go down; rents must go down, and labour must go down; and all things must gradually adjust themselves to the retrenched state of the currency. When this period of depression is past, and the crops of the next year have paid up the deficit occasioned by overtrading during the present, the banks will begin to be liberal again, (munificent institutions!) and, urged on and stimulated by them, the people will act over again the same scenes of mad speculation, till the drama again concludes with a catastrophe of disastrous revulsion.
We should be glad if the Argus would turn its attention to the monopoly which is the true source of our high prices and all our financial difficulties. It will find that our exclusive bank system is the cause of the evil, and the repeal of the restraining law the only effectual remedy.
THOUGHTS ON THE CAUSES OF THE PRESENT DISCONTENTS
Plaindealer, December 10, 1837. Text abridged.
The title of this article is borrowed from Burke; and would that we could borrow, also, the power of cogent reasoning and affluence of eloquent expression which distinguished the writings of that strong and original thinker, for the theme we have to treat of is worthy of such qualities. That theme is the present financial difficulties, which press with intolerable weight upon the community, and force a murmur even from the sturdiest of those who have stood unmoved amidst all former revulsions. The pressure now, unlike that of 1834, is not purposely caused by the strategy of a gigantick monied institution, warring with the government of the country, and attempting to set itself up as a second estate, greater than the people. It is not caused by a withdrawal of mutual confidence between man and man, during the temporary influence of a panick, created and fomented by the demagogues of a desperate party, for a political end. It is not caused by any failure in the sources of real national wealth; by a sudden falling off in the great staple commodities of the land; nor by any extraordinary or unlooked for vicissitudes in the affairs of the countries with which we carry on reciprocal commerce. What then is the cause of the suffering so keenly felt, and so loudly complained of at the present time? To this we answer, throwing all minor and inadequate circumstances out of view, that the pernicious bank system of our country is the cause! That is the fountain from which the stream of mischief issues, swelled, it is true, by unimportant tributaries, but there taking its rise, and thence deriving the chief volume of its waters. That is the source of the modern Phlegethon, whose burning tide sets those who drink it mad, and wastes the land through which it flows, making it a second Tartarus.
Any person who has soberly observed the course of events for the last three years, must have foreseen the very state of things which now exists. Any person who, from the present unhealthy and dangerous elevation to which the business affairs of the community have been pushed, will turn back his eyes in calm retrospection, must perceive that we impute the evil to its true origin. He will see that the banks, ever since the temporary revulsion of 1834, have been striving, with all their might, each emulating the other, to force their issues into circulation, and flood the land with their wretched substitute for money. He will see that they have used every art of cajolery and allurement to entice men to accept their proffered aid; that, in this way, they gradually excited a thirst for speculation, which they sedulously stimulated, until it increased to a delirious fever, and men, in the epidemick frenzy of the hour, wildly rushed upon all sorts of desperate adventures. They dug canals, where no commerce asked for the means of transportation; they opened roads, where no travelers desired to penetrate; and they built cities where there were none to inhabit, which now stand in their newness, like Palmyra in its ruins, untenanted and solitary, amidst a surrounding desert.
What has been, what ever must be, the consequence of such a sudden and prodigious inflation of the currency? Business stimulated to the most unhealthy activity; a vast amount of over production in the mechanick arts; a vast amount of speculation in property of every kind and name, at fictitious values; and finally, a vast and terrifick crash, when the treacherous and unsubstantial basis crumbles beneath the stupendous fabrick of credit, and the structure falls to the ground, burying in its ruins thousands who exulted in the fancied security of their elevation. Men, now-a-days, go to bed deeming themselves rich, and wake in the morning to find themselves stripped of even the little they really had. They count, deluded creatures! on the continued liberality of the banks, whose persuasive entreaties seduced them into the slippery paths of speculation. But they have now to learn that the banks cannot help them if they would, and would not if they could. They were free enough to lend their aid when assistance was not needed; but now, when it is indispensable to carry out the projects which would not have been undertaken but for the temptations they held forth, no further resources can be supplied. The banks must take care of themselves. "Charity begins at home." The course of trade is turning against the country. We have purchased more commodities abroad than our products will pay for, and the balance will soon be called for in specie. The banks, which lately vied with one another in effusing their notes, are now as eager competitors in withdrawing them from circulation, and preparing for the anticipated shock. They have no time to listen to the prayers of the deluded men whom their deceitful lures seduced so far upon the treacherous sea of credit. They cast them adrift without remorse and leave them to encounter, unaided and unprepared, the fury of the gathering tempest. Or should, perchance, some tender hearted moneychanger relent, and consent to tow a few victims into harbour, is it unreasonable that he should charge wrecker's fees for the service—half the cargo and twenty per cent commissions on the remainder? The cashiers of some of our banks can tell you that these are but the usual rates.
It suited the purposes of party, a short time since, to lay all the difficulties of the money market to the account of certain orders of the Treasury Department, removing a portion of the government funds from one place of deposit to another. And it equally answered the purpose of another class of politicians to ascribe the evils to the necessary operation of the distribution law. But the election is now past, unduly to influence the result of which both these theories were maintained, and, by common consent, it is now tacitly admitted that neither fully accounts for the effect. Beyond all question, both had some share, and particularly the latter, in swelling the amount of embarrassment; but the great, abiding, all-sufficient causes lay deeper than these: the madness of speculation was the immediate one, the inflation of the currency the remote. A pernicious bank system had stimulated the nation into the wildest overtrading, and we now experience the necessary consequences of reaction. The vehement complaints against the banks, because they do not afford relief, which daily fill the columns of certain newspapers, are utterly absurd. The banks cannot help the community; they have enough to do to take care of themselves. They are fearfully potent in producing the mischief, but utterly impotent to remove it. They have a power of evil, but not of good. They administer the bane, but have no antidote. The same causes which occasion pecuniary distress among the merchants, equally affect the money changers, and in the same way. The banks are overtraders as well as the others, and both have to learn that there is but one relief for an overtrading nation, and it must wait for that to be applied by the slow hand of time. They who borrow from the future, and squander in extravagance what is thus acquired, must drudge slowly on in poverty until they acquit themselves of the debt. It is with a people, as with an individual: when the income of a year is lavished in a month, the costly robes and sumptuous table must be succeeded by such food and apparel as served the prodigal son in his reverse of fortune. An invariable law of mechanicks establishes that what is gained in speed is lost in power; and this is not less true in political economy. We have prematurely exhausted our vigour in too rapid a race, and must now pause to recruit our wasted strength.
It is curious, as well as melancholy, to look round, and note the evidences which everywhere meet the eye of that fever of speculation which, for two years past, has been the moral epidemick of the land. The fields, in many places, lie untilled, because the agricultural population has been drawn off to construct railroads and canals, or lay out sites for cities, and prepare the ground for superb edifices capable of accommodating millions yet unborn! Hence we find there are short crops of the main staples of home consumption. Hence we see flour at fifteen dollars a barrel, and hay at forty dollars a ton; and hence foreign agriculturists, the wheat growers of England, and of the very northernmost parts of Europe, are sending their grain to this country—the cultivators on the stormy coast of the Black Sea and the icy shores of the Dnieper send hither their produce, and undersell our farmers on the pleasant banks of the Hudson and the Potomack, at their very doors. During the long wars of Napoleon in Europe, we exported our breadstuffs, and supplied the opposing armies with food. Now we have a standing army at home to support, not of soldiers, but of canal diggers, city builders, and stock gamblers; while the plough stands idle in the unturned furrow, and crows fatten undisturbed in the deserted cornfields. The speculator flaunts by in his carriage, and casts a scrutinizing eye over the neglected farm, not to ascertain the capacities of its soil, but its eligibility as the site for some new scheme of a city, and the probable price it would yield, not by the acre, but by the foot. The children at the wayside scarcely look up at the shining equipage as it dashes along, for shining equipages have become too common to attract the attention even of rusticks. A coach with footboard and hammercloth is no longer a novelty, when half a nation turn builders of carriages for the other half to ride in. But there is an old saying which foretells the destiny of a beggar on horseback, and we fear that there are many in this community now on the eve of experiencing its truth.
STRICTURES ON THE LATE MESSAGE
Plaindealer, January 14, 1837. Text abridged and extract deleted.
The limits into which we were crowded last week by the length of Governour Marcy's message, allowed us to speak of that document only in a brief paragraph, and in the most general terms. But as we felt called upon to speak of it with censure, it is proper that the grounds of our unfavourable opinion should be candidly stated to our readers.
The fault that we find with the message is that it is a timid, indecisive, commonplace document, following, in a cautious and craven spirit, in the path of publick opinion, and afraid to recommend strenuously even those measures which the publick voice has clearly and energetically demanded. The only exception to this remark is the passage concerning the usury laws, which we fancy must have been written while the author's mind was still glowing with indignation from the perusal of some able essay on the subject—Jeremy Bentham's Defence of Usury, perhaps—and sent to the legislature before he had time to revise his opinion according to the suggestions of all those busy fears and scruples which commonly seem to exercise the authority of prime ministers in Governour Marcy's cabinet councils.
The analogy which the message attempts to trace, between the power claimed and exercised by the General Government of coining money, and the power which it is asserted belongs to the state governments of interdicting the community (all but a favoured few) from issuing their own notes, has no existence, except in the brain of Governour Marcy.
The restriction imposed by our federal government on the power of coining money, is much less extensive than is generally supposed; but to whatever extent it exists, it is no infringement of the principle of the equal rights of the citizen, if it is an infringement of the principles of free trade. In the most important view which can be taken of the subject, that of its political character and effect, it is entirely free from the fatal objection which lies against the power claimed for the state governments by Governour Marcy. The provisions of the federal constitution on the subject of coining, and the laws in accordance with them, were instituted for the common protection and convenience of the whole people equally, and give no peculiar facilities and advantages to a few at the expense of the many. In this vital respect the difference is fatal to Governour Marcy's supposed analogy.
But the power claimed by the General Government "to coin money, and regulate the value thereof," does not interdict the citizen from coining money also, but only the state governments. Any person may stamp pieces of metal with their name, weight, and quality, and pass them for what they are worth. Any person may make medals, of any form or device he pleases, and sell them, or barter them away, to the best advantage he can; and this is coining money.*25 He has no power of declaring that pieces of metal bearing a certain stamp shall be received as of a certain value; because this is an attribute of sovereignty which belongs to communities only in their political organization, and can only be exercised by the duly constituted political authorities. It cannot even be exercised by them, however careful in their adjustment of the size and quality of the coins to the general rate of metallick value, without continual arbitrariness and injustice; since silver and gold, to say nothing of copper, are commodities of continually fluctuating values, as much so in fact, though not in degree, as cotton or flour. The discovery of a new mine, or the invention of a labour saving machine, by suddenly increasing the quantity, diminishes the value; precisely in the same way that a favourable season operates on the wheat or cotton crop. A war in South America, or an epidemick disease or insurrection among the slaves employed in mining, by suddenly diminishing the quantity, increases the value; in the same way that a drought, or an exceedingly rainy season, influences the prices of cotton and grain. A government, therefore, which undertakes to say that a given number of grains of pure gold or silver shall always be received at a given value, is necessarily guilty of an arbitrary exercise of power; and we have our doubts, notwithstanding Governour Marcy affirms that this "has never been considered an invasion of a common right," whether it is not so in fact, and whether it would not be better to leave actual money, as well its paper representative, to leave coining, as well as banking, entirely to the laws of trade. But to consider this subject now would take us too far from our present object.
The reader will see, from what we have already said, that there is not the slightest validity in the pretended analogy which Governour Marcy has brought forward, and that, as he rests the whole weight of his reasons for the restrictions he recommends on that analogy, they must necessarily fall to the ground. Any individual has a right to stamp his name, and his image too, if he pleases, on a piece of silver or gold, and exchange it for what it is intrinsically worth. In the same way we contend that he has a natural right to give his promise to pay a certain sum on a piece of paper, and, subscribing it with his name, to pass it for what those with whom he deals may be willing to receive it. If he stamps a figure on a piece of gold or silver counterfeiting that made use of on coins authorized or recognized by the government, he is guilty of forgery; and so he would be if he should write a promissory note, and sign it with the name of another person.
But if Governour Marcy's analogy is good for any thing, it is good in a much larger application than he intended. If the issuing of paper promises is, in fact, issuing a substitute for a metallick currency, and therefore forbidden by the restrictions of the Constitution of the United States against coining, the state governments, in authorizing the chartered banks to do this, violate the conditions of the federal compact, and our whole paper currency is destitute of the warrant of constitutional law.
The passage in Governour Marcy's message on the subject of banks betrays a degree of feebleness and indecision for which, we confess, after the almost unanimous expression of publick opinion, through the press and through the resolutions of popular assemblies, we were utterly unprepared. We did think that, thus backed and prompted, even Governour Marcy would have spoken out boldly. Yet all he has ventured to say is to refer the legislature to his equivocal and two-sided remarks in a former message, and to express a hope that they will charter no more banks this session. "If you should do so, however, gentlemen, perhaps it would be well to modify and improve the mode of distributing the stock." How ineffably contemptible! We trust in heaven, if the legislature should pass any more bank charters, that the cupidity and rapaciousness which alone will lead to such legislation may prevent them from making any change in the manner of apportioning stock. A few more such scenes of eager scrambling for the "spoils," and of venality and corruption in distributing them, as was represented when the stock of the State Bank was divided, will do more to promote true principles of legislation, than a thousand such Bob Acre[s]*26 messages as that on which it has been our unpleasant duty to comment. We intended to touch some other points, but we sicken of the subject.
Notes for this chapter
Leggett may have been aware of the private Bechtler mint in North Carolina, which coined several million dollars worth of Southern Appalachian gold between 1831 and 1850. Congress did not outlaw private coinage until 1864.—Ed.
Bob Acres is a shallow-headed comic character in Richard Sheridan's play The Rivals (1775).—Ed.
THE MONEY MARKET AND NICHOLAS BIDDLE
End of Notes
THE VALUE OF MONEY
Plaindealer, January 21, 1837.
One of the powers bestowed on the federal government by the Constitution is that of regulating the value of money. "Congress shall have power to coin money, regulate the value thereof, and of foreign coin," &c. Has any reader a clear conception of the meaning of this phrase? The meaning commonly attached to the word value, both by lexicographers and political economists, as well as by men generally, without reference to dictionaries or books of political economy, is the relation which one thing bears to another, as an exchangeable commodity. This is the so commonly received opinion, that it has been reduced to the form of one of those familiar rhymes, into which a large portion of the popular wisdom is condensed.
The worth of a thing
The worth or value of a dollar, according to this definition, is fixed by the amount of exchangeable commodities which may be procured for it. Thus, if you can buy of a man a day's labour for a dollar, a day's labour is one measure of its value. If you can buy with it eight loaves of bread, those eight loaves of bread are another measure of its value. When the Constitution therefore declares that Congress shall have power to regulate the value of money, is it to be understood that it has the power to say how much labour, or how much bread, shall be given for a coin of silver or gold bearing a certain stamp? We cannot believe that it ever entered into the minds of the people of the United States, or of the framers of the Constitution, to bestow on government such an enormous and terrible power, which could not possibly be exercised, in any case, or to any degree, without the most inconceivable arbitrariness and injustice. Our Restraining Law, and the project of that more infamous law introduced into the Senate of this state by Mr. Maison, were both written with a pencil of light, compared with that clause in the Constitution, if it confers any such absolute and despotick power on Congress. The common sense of every reader will at once reject the idea, as too monstrously at variance with the natural and unalienable rights of man to be entertained for a moment.
What then does the expression, regulate the value of money, mean? If we draw our conclusion from what Congress has done on the subject of money, we shall suppose it means the power of regulating the relative exchangeable values of different coins, one with another; a gold coin, bearing a certain stamp, and containing a certain number of grains of pure gold, shall always be deemed to be worth, as a tender in payment of debts, as much as a certain number of silver coins, bearing a given stamp, and containing a given number of grains of pure silver. In other words, ten silver dollars shall at all times be equivalent to one gold eagle, and one gold eagle to ten silver dollars.
But even in this limited sense of the phrase "regulating the value of money," Congress cannot possibly exercise the power without being guilty of injustice, for gold and silver do not, in fact, bear any certain and unchangeable relative value. A grain of gold, considered merely as a merchantable commodity, will at one time purchase a greater quantity of silver than at another. Silver is sometimes relatively dearer than gold, and sometimes relatively cheaper; and Congress, therefore, when it gives to the debtor his option as to which he will make payment in, by any invariable standard of relative value, gives him the power of defrauding his creditor. The errour is the same in principle, though not as extensively injurious to the community as if they should exercise, in its fullest latitude, the power conferred by the terms of the Constitution, and declare how much of every mentionable commodity should be exchangeable for a given number of coined grains of silver or gold. Congress, it seems to us, would best discharge its power "to coin money and fix the value thereof," by simply establishing, for the convenience of traffick, and the deciding of disputes, a unit of value; in other words, by simply declaring that a certain number of grains of pure silver should constitute the dollar; and leave all other divisions and ramifications of currency to adjust themselves by that standard. We threw out a brief hint on this subject in our last number; and have been induced to make these further observations by having our attention drawn to it by a correspondent, whose note we here subjoin:
MR. PLAINDEALER: I have been an attentive reader of your paper since it first had existence, and I freely confess that I have been much edified in the perusal of your articles on free trade, as applicable to banking, &c. But in your last number, the views you express on coining, strike me as being decidedly bad. What benefit could possibly accrue to the community, were every man to manufacture his own money, after his own capricious ideas? Without some standard to regulate the matter, we would have a currency composed of gold, silver, brass, lead, iron, and, in fact, of every thing under heaven, of the value of which no two people could be found to agree, and which would give rise to interminable disputes. As well might you recommend that instead of adhering to plain English, in their converse with each other, men should use unintelligible sounds to express their meaning; and certainly to me the one plan appears as feasible as the other.
But, sir, I remain open to conviction, and if you think this worth replying to, I should be pleased to hear your views at length on the subject.
Our correspondent shall hear our views at length on the subject; but not now. Our columns are preoccupied, and besides, this is a topick which does not require instant pressing. It is enough for present purposes to suggest it as theme for reflection; and we shall be mistaken if the result of meditation be not to convince many an intelligent mind that the free trade principle is susceptible of a far more extended application than they had perhaps dreamed before.
The analogous case which our correspondent has furnished us is very appropriate, but he must excuse us if we choose to consider it an analogism sustaining our views rather than his own. The laws of language are not established by Congress or any other body of delegated powers. Words, it is true, are sometimes coined by Congress, but they do not pass very current, and are generally soon rejected by common consent. What is it then sustains the language in its purity, fixes the meaning of words, and enables us to give to expression a precise and unchangeable import? Every man is at full liberty to be as unintelligible as he pleases. He may reject alike the authority of Johnson and Webster, and fabricate a new language for himself. What restrains him from doing so? The necessities of social intercourse: the mutual advantage which all men find in promoting the general convenience. The necessities of commercial intercourse, and the mutual advantage which all men would find in promoting the general convenience in matters of traffick, would lead, we think, to as certain and desirable results in regard to money, as in regard to language.
If the laws of trade are adequate to the perfect regulation of the matter, no one, we think, certainly no one animated by the genuine principles of democracy, will hesitate to acknowledge that it were better to deny the right of regulating it to the government. Whatever unnecessarily strengthens government, weakens the people; and whatever tends to narrow the powers of government to the execution of the fewest and simplest functions, increases, in the same degree, the strength and dignity of the people.
THE WAY TO CHEAPEN FLOUR
Plaindealer, February 18, 1837. Text abridged.
Our paper contains, under the appropriate head, an account of the daring and causeless outrage which disgraced our city last Monday evening. There never was a riot, in any place, on any previous occasion, for which there existed less pretence. There is no circumstance to extenuate it, in any of the aspects in which it can be viewed. The only alleged excuse is the high price of flour, and a suspicion which it seems was entertained, that the price was in part occasioned by a combination among the dealers. But this suspicion has not only no foundation in fact, but if it were well founded, if it were an established truth too notorious for contradiction, it would afford no sort of justification or shadow of excuse to any portion of the community to commit acts of violence, and much less to that portion which was chiefly concerned in this disgraceful tumult.
The chief actors in the riot of Monday evening were, beyond question, members of some of the numerous associations of artisans and labourers affiliated under the general name of the Trades Union. What, let us ask, is the very first and cardinal object of the Trades Union? To enable labour, by the means of combination, and of extensive mutual countenance and co-operation, to command its own price. And is not labour as much a necessary of life as flour? Is it not, in fact, more indispensable? Is it not the chief, the prime, the very first necessary of man, in his social organization? What would this city do for a week, nay, for a single day, if labour, in all its varieties of form and application, should wholly and obstinately refuse to perform its offices? It does not require any great fertility of imagination to picture the social anarchy, the chaotic confusion, into which the whole frame of things would be thrown. Yet it is to enable it, on occasion, to do this, or, as the only alternative, to compel capital to pay whatever price it chooses to exact, that the combination of different mechanic and operative crafts and callings has been formed. And these very people, thus combining to create, in effect, a monopoly of the chief necessary of life, are so enraged by the mere suspicion that the dealers in flour—a commodity for which there are many substitutes, and not indispensable if there were none—have followed their example that they assault the doors and windows of their storehouses with stones, crowbars, and levers, break down all barriers, scatter their property to the winds, and even tear, into irrevocable fragments, their most valuable books and accounts!
With regard to the question of combination we wish to be distinctly understood. If the dealers of flour had combined to monopolize the article, and to fix a high price upon it, we would hold them answerable for their conduct neither to the civil law nor to mob law, but to the inevitable penalties of a violation of the laws of trade. In the same way, when labourers combine to fix the price of labour, we would hold them responsible only to those natural and immutable principles of trade which will infallibly teach them their error, if they do not graduate the price according to the relations of demand and supply. We are for leaving trade free; and the right to combine is an indispensable attribute of its freedom.
That the price of flour is not the result of combination, but of causes which lie much deeper, we fully believe. One of those causes is a deficient crop; but the chief cause of the enhancement in price, not of that article alone, but of every variety of commodity, is the vast inflation which the paper currency has undergone in the last two years. It is not that exchangeable commodities have risen in value, but money, or that substitute for money which the specially privileged banks issue, has depreciated. The fluctuations in the currency must necessarily occasion equal fluctuations in money prices; and these fluctuations must necessarily be exceedingly oppressive to many, since all commodities do not instantly rise and fall in exact relative proportion, but require, some a longer, and some a shorter time, to be adjusted to new standards. The clergyman and the accountant on stated salaries, the tradesman who sells his articles according to a price fixed by ancient custom, and very many others, cannot immediately increase their demands as the price of other things increase; and such are affected most injuriously by the continual augmentation of paper money, resulting from the incorporation, every year, of whole herds of specially privileged bankers.
The true way to make flour cheap, and beef cheap, and all the necessaries of life cheap, is, not to attack the dealers in those articles, and strew their commodities in the streets, but to exercise, through the ballot boxes, the legitimate influence which every citizen possesses to put an end, at once and forever, to a system of moneyed monopolies, which impoverish the poor to enrich the rich; which, building up a class of lordly aristocrats on the one hand, and degrading the mass into wretched serfs on the other; and which has already exercised a vast and most pernicious influence in demoralizing both the educated and the ignorant classes of society—both those who fatten on the spoils of the paper-predatory system, and those from whose very blood the spoils are wrung.
THE MONEY MARKET AND NICHOLAS BIDDLE
Plaindealer, April 1, 1837. Title added. Text abridged and extract deleted.
The money-market has been in a violent ferment during the past week. Meetings of the merchants, "protracted meetings," and frequent informal conferences have been held. The result of the whole matter has been an application to the Philadelphia Money Autocrat, Nicholas Biddle,*27 for his gracious and merciful interposition. "Drowning men catch at straws," and a mere man of straw has the bank potentate proved himself to be on this occasion. His worshippers, however, reverence him as possessing the attributes of potentiality, and their homage is as fervent as that of a race of croakers of old to King Log....*28
Either Nicholas Biddle has the prodigious money power which the merchants ascribe to him, or he has not. If he has in truth the power of relieving the financial distresses of the times, then the ground of the last administration for opposing the renewal of the charter of such a potential institution, which holds the destinies of the Confederacy in the hollow of its hand, and which can create plenty or scarcity, prosperity or ruin, at the volition of a single mind, is shown to have been correct. If he has not this power, what a wretched farce is now played off before the community. But the merchants obviously believe in his potentiality, and thus, so far as they are concerned, acknowledge the validity of General Jackson's original and chief position. Yet they opposed him for assuming it. This, then, shows that their temporary pecuniary interest outweighs with them the eternal political interests of their country. What a commentary on the patriotism of the desk and the ledger!
But are the proposed measures*29 truly measures of relief, or are they only calculated to arrest, for a brief space, the descending blow, to fall at last with accelerated force and augmented weight, not on the heads now justly exposed to the shock, but on the heads of those who, not having been participants in the enormities of mad speculation, have not merited its terrible consequences? The latter clause of this alternative question, it seems to us, must be answered in the affirmative.
What has produced the evil state of things under which the community now groans? A too wide extension of credit, far surpassing the demands of healthy and legitimate business, and diffusing itself to all sorts of chimerical enterprizes. The legitimate business of a country is measured by the amount of its exportation and the domestick consumption of its own products. When it exceeds this limit it becomes unhealthy speculation, certain to terminate, sooner or later, in revulsion and ruin; as the machine, driven beyond the rate of speed fixed by the laws of its mechanism, is sure to be thrown out of repair, if not broken all to pieces. That this is the case with our community is a position too self-evident to require argument. The plan of relief, as it is called, which is now proposed, is a mere plan to put off the day of payment of the immensely over-inflated amount of debt. But the means of procras[tina]tion are of the most expensive kind. Those who are to receive the benefit of the extension of credit, will be obliged, in the nature of things, to pay prodigious rates of interest for the present funds they realize, and the day of ultimate payment will find them less able to meet their obligations than they are now. Those whose imaginary wealth consists in houses and lands held at a nominal value far exceeding their intrinsick worth, will not suffer the bubble which they have so long fancied actual substance, to burst into empty air, as long as they can keep up the sparkling nothing by forced loans, procured at any rate of extortion. Neither will they retrench their luxurious style of expenditure, assumed in the confidence of sudden wealth. The shock which is thus deferred will thus fall at last with accumulated force. But in the meanwhile one set of creditors will be substituted for another. The banks, which, if the crisis were now to take place, would sustain their share, or a share, of the loss, will, in the interval of prolonged credit, take good care to entrench themselves behind triple securities. The foreign creditors, in extending indulgence, will be equally on the alert to secure ultimate payment; and the blow will finally fall on the mechanick and labourer, on thousands of general creditors, who, if men were now suffered to experience the natural consequences of their rashness and folly of speculation, would come in for an equal portion of indemnity.
It is our s[i]ncere conviction that the proposed measure of procrastination, and any measure of procrastination, can be followed only by an increase of ultimate evil. That evil may be spread over a wider surface, but it will not be diminished in amount. The old saying, that the hair of the dog is a cure for his bite, will be found as false in its present, as in its more usual application. It is seldom the same thing possesses utterly opposite qualities. There is a new theory in medicine which administers as a remedy that which caused the disease. The merchants and Mr. Biddle are now for applying this theory to business. An excessive inflation of bank credit caused the evil; and they now propose a still further inflation as the cure. The traveller who warmed his frozen hands with his breath in the cave of the Satyr, and afterwards blew in his porridge for an opposite purpose, excited the admiration of his host. We shall not less admire the miraculous qualities of Nicholas Biddle if the breath of his nostrils can produce such contrary results. The frog, in the fable, when he was blown up to unnatural dimensions, finding himself in pain, asked to be still further distended; but he was destroyed, not relieved, by the experiment. When the rain for forty days and forty nights covered the earth with a deluge, it was not a continuation of the storm that caused the waters to subside. We doubt if the community can be rescued from the dreadful consequences of a deluge of bank credit, by a further effusion from the fountain of evil.
Notes for this chapter
President of the Second Bank of the United States, at the date of this editorial operating under a charter from the state of Pennsylvania.—Ed.
An allusion to the fable of the frogs desiring a king, to whom Jupiter sent down a log of wood.—Ed.
A reference to Biddle's offer to rediscount bills held by the New York banks.—Ed.
THE PRESSURE—THE CAUSE OF IT—AND THE REMEDY
End of Notes
THE PRESSURE—THE CAUSE OF IT—AND THE REMEDY
Plaindealer, April 29, 1837. Text abridged and extracts deleted.
These three phrases embrace the only topick which now has interest for the publick mind. Amidst the desolation of the financial tempest raging on every side, men regard nothing but the ruin it is spreading through the land, and think of nothing but staying its progress, or escaping from its wrath. Consternation is painted on every face, and anxiety throbs in every heart. "What shall we do to be saved?" is the question that falters on myriads of lips; while the incoherent and contradictory statements of those who attempt to reply show how feeble are the struggles of reason in minds paralyzed with fear.
It is one of the inevitable consequences of popular institutions, that no subject of general interest can arise, which publick writers will not endeavour to turn to the uses of party. It would be strange, indeed, if wide spread pecuniary embarrassment should constitute an exception to the remark; since, while it obviously furnishes a prolifick theme of criminatory declamation, but few persons, are sufficiently acquainted with the principles of commerce to detect the real cause of derangement, and ascertain what secret spring has interrupted the revolutions of the stupendous machine, and thrown its vast complication of wheels and levers into disorder. While trade is in prosperous operation, it seems governed by laws as fixed and harmonious and to most minds as inscrutable, as those of the universe. Each link in the mighty chain, each part of the prodigious whole, performs its allotted office, and contributes to the grand result—the improvement of the physical and intellectual condition of mankind. But when derangement takes place, when any thing occurs to interrupt the harmonious movement, such are the mutual relation and dependence of the various parts, that the inquirer is bewildered in his attempts to investigate the cause of the confusion, and is ready to listen to any explanation that fixes the blame of the disaster on those whom he had previously regarded with dislike.
That party writers should take advantage of the present commercial embarrassments to impute censure to those of opposite politicks is therefore not surprising; nor need we be surprised that the wildest of their theories are listened to with credulity by some. Those who impute all the disorders of the community to the operation of that order of the General Government which requires that gold and silver only shall be received in payment for publick lands, find themselves followed notwithstanding the monstrous absurdity of their creed, by a numerous class of disciples; while they, on the other hand, who charge the calamity solely to the distribution of the federal revenue, have also their followers who give full faith to the explanation. Our own opinion has been so frequently expressed, both in this journal and elsewhere, and not only since the embarrassments commenced, but long before the activity of commerce received its first check, that it would be idle to repeat it now. Overtrading has been the cause; and the multiplication of specially chartered banks, with the prodigious amount of paper currency issued by them, has been the main cause of the extravagant spirit of traffick and speculation which the whole people have displayed. One branch of this extensive credit business, carried on entirely through the assistance of the false capital of these paper money institutions, is ably exposed in the annexed article from the Journal of Commerce of Wednesday morning.*30
There is another branch of enormous overtrading, the data in relation to which are precise and certain. We allude to the speculations in the publick lands—lands yet lying in a state of nature, over many of which the foot of the white man has hardly ever trod, and which, in the ordinary course of events will remain untrodden for years. The speculators have far outrun the tardy operations of nature. If men had the fecundity of fishes, it would yet take a long time for population to increase sufficiently to realize their projects. Their cities, towns, villages and watering places, are yet in the same condition with the cotton on which the New Orleans bank and cotton monopolists have advanced their two hundred millions of paper credit. The seed of the cotton is not yet planted, and the very building materials of those cities and towns are yet to be sought in the quarry, the clay-pit and the forest. But in the meanwhile all engaged in these speculations—in this enormous overtrading—have been living as if their wildest plans had been realized. Bank credit has supplied them with the means of present luxury, and they have not scrupled to use it at the most lavish rate. Much of the real profits of the country have gone to the vintners and lace workers of France. People have worn out in costly clothes, and drank up in costly wines, the products of labour.
But we are tired of contemplating this side of the picture. Let us turn to consider in what manner the evil can be remedied. There are those who eagerly avail themselves of the present condition of affairs to demand the reinstitution of a federal bank. But, to say nothing of constitutional objections, and nothing of the political evils to be apprehended from such an institution, has a federal bank ever prevented commercial revulsion? Let the history of 1819, 1825 and 1834 answer the question. As for remedy, there is but one—a steady exercise of industry and frugality. The remedy for a whole community in bankrupt circumstances, is preciseIy the same as for a single individual. When a man contracts debts to a larger sum than the amount of his earnings, he can pay the balance against him only by increased industry and economy. But the means of avoiding a recurrence of the evils now experienced is as important a subject of consideration, as the means of remedying them. In our judgement, they are exceedingly simple. Perfect freedom of trade presents an effectual safeguard against commercial revulsion, and all the thousand horrours which speculation, stimulated to madness by the intoxicating cup of bank credit, inflicts upon the community. Do you want a banking institution to regulate the currency and exchanges? Freedom of trade will supply you with one. It will supply you with all the facilities of trade which a federal bank could supply, and will be free from all the political objections which rest against such an institution. If the restraints on trade in money and credit which exist in this state alone, were repealed to-day, a voluntary banking association would be formed to-morrow, with an aggregation of capital sufficient for all the mercantile purposes of the community. The liability to boundless competition would lead it to place the most unquestionable security for its issues before the publick. The natural rivalry of trade would cause it to return the notes of other institutions for specie, whenever they accumulated beyond a certain point, and this would prevent overissues. We should have a vast banking institution, in effect monopolizing, to a great extent, the financial business of the country, but without anything odious or oppressive in the character of the monopoly, since it would be hedged round by no special enactments, would be open to universal competition, and would depend for its success, and the continuation of its advantages, on the correctness with which it conducted its affairs. It would partake of the character of a monopoly, simply because of the extent of its real capital; and only in the same way that large capitalists, in all branches of business, monopolize, in proportion to the amount of their means, and the intelligence and activity with which they are employed, the peculiar traffick in which they are engaged. Such an institution, subject to the rivalry of jealous, vigilant, and active competitors, would be the immediate offspring of free trade. We see that all attempts to regulate credit and currency by political intermeddling, both in this country and in Europe, have signally failed. We see that in Scotland, where the business of banking is left as free from legislative interference as the business of boot-making, no revulsions, no panicks, no general bankruptcies, have ever taken place. What obliquity of vision is it then that hinders us from perceiving, that the course which wisdom points out for us is to emancipate commerce and finance from legislative thraldom, and leave them to manage their own affairs, subject only to their own irrevocable and immutable laws?
Notes for this chapter
This extract, and another following it, described speculations in cotton financed by bank credits.—Ed.
CONNEXION OF STATE WITH BANKING
End of Notes
CONNEXION OF STATE WITH BANKING
Plaindealer, May 6, 1837. Text and extract abridged.
A paragraph from a recent number of this paper, under the head of Political Meddling with Finance, is copied by the Richmond Whig, and commented upon as a concession that the "experiment" of the last administration, with regard to the currency, has failed. That journal holds the following language:
"The following article from the Plaindealer, the ablest and most honest Van Buren paper with which we are acquainted, makes the important concession that the great 'Experiment' of the hero has failed...."
...This is not a Van Buren paper. The great purpose of our journal is to advance the cause of political truth. We do not adopt, as our maxim, the stale and deceptive cant of principia non homines, which is usually the motto of those whose purposes are utterly selfish and base. We contend for men, as well as principles; but for the former as the means, and the latter as the object. For this reason, we are friendly to Mr. Van Buren, considering him as the instrument chosen by the democracy of the country to carry into effect democratic principles in the administration of the federal government. So far as he is true to that great trust, he shall assuredly have our zealous support; but we shall support him in no deviation, however slight, from the straight and obvious path of democratic duty, and should he, in any instance, stray widely from it, he will assuredly encounter our decided opposition. Of this we have already given an earnest, in our condemnation of the strange and startling avowal with which he commenced his executive career—his precedaneous exercise of the veto power.*31 It is an unwarrantable use of political metonymy, then, to call the Plaindealer a Van Buren journal. It is a democratic journal, and is ambitious of no higher name.
With regard to the imputed concession made by this paper, we only ask that our language should not be strained to larger uses than its obvious purport justifies. We do not consider that the "experiment" has failed, if by that party catchword is meant the measures of the last administration in regard to the United States Bank. We approved then, and approve now, the veto of the bill to recharter that institution. We approved then, and approve now, the removal of the federal revenues from its custody. And we should consider the reinstitution of a bank, in the popular sense of that word, by the federal authority, as one of the very worst evils which could befall our country. What we disapprove now, and what we have always disapproved, is that the government should connect itself, in any way, or to any extent, with the business of banking. When it removed its money from the federal bank, it should not have deposited it with the banks which exist under state authority. It should have stood wholly aloof from such institutions. The only legitimate use which it has for its funds is, in our view, to pay its necessary expenses; and the only legitimate keeper of them in the meanwhile is itself. The treasures of the United States are raised by taxation, in specified modes, for the purpose of paying the debts and providing for the common defence and general welfare of the country. The Constitution recognizes nothing as money but gold and silver coin; and the government should therefore receive its revenues in nothing else. It recognizes, in strictness, nothing as an object to which those revenues are to be applied but the necessary expenses incurred in conducting the general political affairs of the Confederacy. The safe keeping of the money, then, is the only object to be effected, between the collection and the disbursement of it. For this purpose the government is itself fully competent. It has but to establish a place of deposit, under proper guardians, in the commercial focus of the country, and pay the various branches of public service with checks or drafts on that depositary. It has, properly, nothing to do with the exchanges of the country. They are an affair of trade, which should be left to the laws of trade. It has, properly, nothing to do with the currency, which is also an affair of trade, and perfectly within the competency of its own natural laws to govern. Let the government confine itself to its plain and obvious political duties. Let it have nothing to do with a "credit system." Let it connect itself neither with corporations nor individuals. Let it keep its own money, taking care that it is money, and not promises; and let it leave it to unfettered sagacity and enterprise to devise and carry into effect whatever system of exchange and credit may be found most advantageous to the commercial interests of society.
The first objection which will probably suggest itself to these views is, that they contemplate the keeping of a vast fund of the precious metals hoarded up from use, which might be profitably employed as the basis of commercial credit. But it is not necessary that the fund should be vast, and, on the contrary, it is admitted by politicians both of the democratic and aristocratic sects, the former on general political principle, and the latter from aversion to the dominant party, or distrust of its integrity, that the revenue should be adjusted to the scale of expenditure. The keeping of the surplus safely locked up in the shape of money, would afford an additional motive to both parties to increase their efforts to reduce the revenue to the minimum amount. Again, as to this money being susceptible of being usefully employed as a basis of credit. Credit to whom? The government does not need it; for it has no business to transact on credit. The people collectively do not need it; for it is as much a part of the substantial wealth of the country under the lock and key of the federal treasury, as it would be under that of any bank or individual. And no bank or individual needs it; for the credit of every bank and of every person is sufficiently extended when it covers the basis of their own real wealth. If extended beyond this, on the basis of a loan or deposit from the government, it is obvious such bank or individual would be deriving an advantage by jeoparding the money of the government; that is, of the people; that is, the rights of the many would be endangered for the benefit of the few.
Another objection to our theory may be urged, that if the government gathered its revenue for safe keeping at any one point, its checks on that fund, in some quarters where payments would be necessary would be below par, and the receiver of them would thus be defrauded of a portion of his dues. This would not be so, in fact, in any part of our country, if the commercial focus of the Confederacy were selected as the place for the federal depositary. Should it happen, however, in relation to any branch of the public service, say, for example, some military outpost, the government would but be under the necessity of transporting the requisite amount of funds to such outposts; and the cost of doing so would be as much the legitimate expense to be defrayed out of the general fund, as any other expense incurred in the conducting of our political affairs. The same remark will hold good of the cost of conveying the revenues from the various points where collected, to the place of general deposit.
These are, in brief, our views as to the duty of the federal government, in regard to the collection and disbursement of its revenues. The great object which we desire to see accomplished, and to the accomplishment of which, we think, the course of things is obviously tending, is the utter and complete divorcement of politics from the business of banking. We desire to see banking divorced not only from federal legislation, but from state legislation. Nothing but evil, either in this country or others, has arisen from their union. The regulation of the currency, and the regulation of credit, are both affairs of trade. Men want no laws on the subject, except for the punishment of frauds. They want no laws except such as are necessary for the protection of their equal rights. If the government deposites its money with a corporation, a voluntary association, or an individual, it does so either on the condition of some return being rendered, or none. If none, an advantage, which is the property of the whole people, is given to one or a few, in manifest violation of the people's equal rights. If it receives a return, that return is either an equivalent or not. But no corporation, association, or individual would render an exact equivalent, since only the profit of the trust would present a motive for assuming it. If the return is not an equivalent, it is still manifest that one or a few are benefited at the expense of the many.
We are no enemy to banking. It is a highly useful branch of trade. It is capable of accomplishing many important results, the advantages of which, without legislative control or impediment, would naturally diffuse themselves over the whole surface of society. Banking is an important wheel in the great machine of commerce; and commerce, not confining the word to merchants, who are mere intermediaries and factors, but using it to express the stupendous aggregate of that vast reciprocal intercourse which embraces alike the products of agriculture and art, science and literature—commerce is the efficient instrument of civilization and promoter of all that improves and elevates mankind. We cannot therefore be an enemy of any essential part in so beneficent a whole. Our hostility is not directed against banking, but against that legislative intermeddling, by which it is withdrawn from the harmonious operation of its own laws, and subjected to laws imposed by ignorance, selfishness, ambition and rapacity.
The "experiment" of the last administration, so far as it was an experiment intended to separate the government from connexion with banks, and to bring about the repudiation of every thing but real money in its dealings with the citizens, has our warmest approbation. The specie circular, for the same reason, is an "experiment" which we wholly approved, and Mr. Van Buren has strengthened our good opinion of him by his firmness in adhering to that measure, against the clamour of which it has been made a prolific theme. Glad should we be, if a law, of a tenor corresponding with that order, were enacted in relation to the payments at the customs. We should be rejoiced if the federal government should set so noble an example to the monopoly-loving legislatures of the states, and teach them that the money of the Constitution is the only money which should be known to the laws. They who ascribe the present embarrassments of trade to the "experiments" of Andrew Jackson are not wholly in the wrong. Much of the present evil, we do not question, might have been avoided, had the United States Bank been quietly re-chartered, without opposition, and without curtailment of its powers. It would then have had no motive for its alternate contractions and expansions, beyond the mere desire of pecuniary gain, unless, indeed, it had chosen to play the part of "king-maker," and dictate to the people whom they should elect to fill their chief political trusts. But not being quietly re-chartered, it undertook to coerce the administration to do what it was not disposed to do of its own free will, and hence was tried, in the first place, the efficacy of a sudden pressure, and afterwards of a sudden expansion. It was this course which gave the original impulse to the spirit of wild speculation, and led to the creation of such a large number of banking institutions by the several states. The result, probably, was not wholly unforeseen by the late President, when he refused his signature to the act renewing the charter of the United States Bank. The path of duty, however, lay plain before him; and to turn aside from it would have been as inexcusable, as would be the conduct of that judge who should pardon an atrocious criminal from the fear that, if executed, his confederates might embrace the occasion to excite a tumult, and throw the community into temporary disorder. The course of justice ought not to be stayed by such a consideration in the one case more than in the other.
If the community desire a banking institution, capable of regulating the currency and the exchanges, and possessed of all the power for good which distinguished the United States Bank, without that enormous power of evil by which it was more distinguished, let them, through the ballot-boxes, insist on the abolition of all restraints on the freedom of trade. Enterprise and competition, if they were free to act, would soon build up a better bank than it is in the power of Congress to create, putting out of sight the constitutional objection; and they would regulate its issues, ensure its solvency, and confine it within the proper field of bank operations, far more effectually than could the most cunningly devised checks and conditions which legislative wisdom ever framed. This is the great "experiment" which has yet to be tried; and it requires no spirit of prophecy to foresee that one of the great dividing questions of politics for some years to come will resolve itself into a demand, on the one hand, for a federal bank, and, on the other, for the total separation of bank and state. We have provided with great care against the union of politics and religion; but in our judgment a hierarchical mixture in our government is not more to be deprecated than an alliance between legislation and banking. Church and State, has an evil sound; but Bank and State grates more harshly on our ears.
Notes for this chapter
See "Commencement of the Administration of Martin Van Buren" below, p. 221.—Ed.
End of Notes
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