Democratick Editorials: Essays in Jacksonian Political Economy

William Leggett, courtesy of United States Library of Congress
Leggett, William
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Lawrence H. White, ed.
First Pub. Date
Indianapolis: Liberty Fund, Inc.
Pub. Date
Essays first published 1834-1837.
35 of 108



Plaindealer, May 13, 1837.


"Laissez nous faire."

The community is now experiencing a beautiful illustration of the excellence of the monopoly system. All the banks in this city suspended payment on Wednesday last, and it is to be presumed the example will be followed far and wide. Here, then, is an end of the safety fund bubble, the best system of banks and currency ever devised by human ingenuity, if we may believe the Albany Argus, and its followers of the monopoly school, and one of the worst that ever fraud imposed upon credulity, if we will but examine it by the lights of wisdom and experience.


We say here is an end of the safety fund bubble; but this position is conditional on the people's asserting their equal rights, and demanding the absolute divorcement of legislation from the business of banking, and from all supervisory connection with trade and credit, further than the mere enforcement of the obligations of contracts, and the punishment of frauds. If the present condition of things does not impel them to do this, they are sunk in a depth of fatuity beyond all hope of redemption. It is as palpable to the mind, as the universal light of day to the senses, that the present anarchical and chaotic condition of financial affairs is the result, the direct and inevitable result, of the unholy alliance between politics and banking. The union of bank and state in this country is crushing the people under the weight of a despotism as grievous as was ever imposed upon mankind by the union of church and state. Better, far better, to be under the dominion of a hierarchy, than under the galling and ignoble rule of legislation money-changers.


What a world of wisdom there is in the brief phrase we have placed as a motto to this article! Society, recovering from the delirium excited by the stimulus of special legislation, begins to see that true wisdom consists, not in regulating trade by a system of artificial checks and balances, perpetually liable to be thrown into disorder, which the very complication of the contrivance then renders almost irremediable, but simply in letting trade alone. There are abundant indications around us that we shall not long stand unaided in the views we have frequently expressed of the utter folly and inevitable evil of all legislative intermeddling with the natural laws of trade. Banking is a good thing enough in its intrinsic nature; but government should have no connection with it, and should recognize nothing as money but silver and gold.


We are not an enemy to a paper representative of money, any more than we are to confidence between man and man in any other shape it may naturally assume, for mutual convenience, in the transaction of necessary dealings. We are not an enemy to banking, any more than we are to any other branch of traffic instrumental in carrying on the great commercial intercourse of society. We are an enemy only to a mixture of politics with banking; to the vain attempts to regulate the channels in which trade shall run; to that legislative intermeddling which withdraws credit from the harmonious operation of its own laws, disturbs its equal flow, and leaves the community to be at one time deluged with a cataclysm of paper money, and at another exposed to all the horrors of financial drought.


It would be a happy thing for this country, if the doubtful power under which banks are created had been positively withheld. It would be a happy thing if all right of interference with trade, either by immunities or prohibitions, by restraining laws or special charters, had been solemnly interdicted. More misery, more immorality, more degradation of the many for the undue elevation of the few, than can even be conjectured, have resulted from the vain attempts to regulate the currency. Let commerce, and let the currency, which is but an appendage and accident of commerce, regulate themselves; and let the government confine its attention strictly to the purposes which constitute the sole legitimate ends of political organization, the mere protection of person and property. We should then soon present to the world the spectacle of a people more free, more equally prosperous, and more happy, than has ever yet furnished a subject to the historian. The history of the past is but a Newgate Calender*32 on an extensive scale; the history of the future would be a work of a sublimer-character.


In the midst of the financial desolation which has been brought upon us by the inevitable operation of monopoly legislation—by the wretched charlatanry which seeks to prop up an artificial system of credit with special statutes, and hedge it round with penalties and prohibitions—the community has an ample opportunity to contemplate the consequences of that folly which would substitute the laws of man for those of nature, and wholly change the irreversible order of causes and effects. Can any man who has eyes to see, or ears to hear, or understanding to conceive, survey the deplorable wrecks of commerce and credit strewn on every side, the broken columns and arches of the great fabric of trade, or listen to the groans of an agonized community lying prostrate beneath the ruins, without the conviction rushing into his mind, that the melancholy result must be ascribed to those, who, clothed in brief legislative authority, interpose their fantastic expedients in place of that natural system which constitutes the eternal fitness of things. Each fragment of our shattered commerce bears, stamped in characters which he who runs may read, the forceful inscription—"THIS IS THE FRUIT OF MONOPOLY LEGISLATION."


We were forewarned, timely forewarned, and by one whose counsel we had reason to respect, of the embarrassments in which special legislation would involve us. The messages of Andrew Jackson are replete with lessons of admonitory wisdom. But the passion of avarice had seized upon our hearts, and the desire of sudden riches outweighed the suggestions of reason. We behold now the consequences of our infatuation. We are now admonished by that sternest of teachers, experience. But the lesson, though rude, will lead only to good, if we have the sense to pause, and read it aright.


The banks are broken, and, without legislative intervention, will soon forfeit their charters. We have been sorrowfully taught the miserable impotence of legislation; it is the fountain from which the waters of bitterness have flowed; let us not then again unseal it, that it may effuse another desolating flood. What can legislation do? Insult the community, by confirming the special privileges of money changers, after their own acts have declared their utter worthlessness? Enable a band of paper-money depredators to prey more voraciously than before on the vitals of the people? Authorize them to pour out a fresh torrent of their promises, now really of no more value than the paper on which they are writ? Will the community tolerate such an enormous fraud?


Let the Banks perish! Let the monopolists be swept from the board! Let the whole brood of privileged money-changers give place to the hardy offsprings of commercial freedom, who ask for no protection but equal laws, and no exemption from the shocks of boundless competition. We commisserate the innocent who suffer by the downfall of the banks; but we cannot consent that a mitigation of their troubles shall be purchased by the perpetuation of a system fraught with so much evil to the entire community. Now is the time for the complete emancipation of trade from legislative thraldom. If this propitious moment is suffered to pass by unimproved, the fetter, now riven almost asunder, will be rivetted anew, and hold us in slavery forever. The choice is presented to us of freedom or perpetual bondage. Let us demand, then, as with one voice, the reintegration of our natural rights; let us protest against the renovation of that cumbrous fabric of legislative fraud and folly, which has fallen of its own weight, and, if raised again, will again topple before the first commercial revulsion, to bury other myriads in its ruins.


If we knew any form of speech which would arrest the attention of our reader, or any mode of argument which would satisfy his reason, that we have not again and again used, we would employ it now, with all the earnestness of a sincere conviction of the importance of the subject, to persuade him that the only true ground of hope for the enduring prosperity of our commerce, in all its vast and complicated relations, consists in giving freedom to trade. Free banking is the system pursued in Scotland, and that country escapes revulsions, while England and America are exposed to continual paroxysms and collapsions, to expansions that unsettle all the foundations of property, and contractions that reduce whole communities to wretchedness and want. England, with all the monarchical and aristocratic potentiality of its government, has never yet been able to regulate the currency, with its stupendous machinery of finance. But Scotland, without any separate government, and without any legislative machinery of finance, has enjoyed a sta[b]le and uniform currency, because it has wisely been left to the natural laws of trade.


If the wants of the community require a great banking institution, capable of regulating the currency and exchanges, set trade free, and it will supply such an institution of its own accord. We need not go as humble petitioners either to our state or federal government, and beseech it to bestow special privileges on a few, that they may regulate the affairs of the many: we have only to adopt the franker and manlier course of demanding back those natural rights, of which we have been defrauded by dishonest and ignorant legislators. We need seek no immunity, but only claim our own. We need ask for the imposition of no new statute on the overburthened people, but only for the abrogation of laws which now weigh them to the earth. We desire nothing but the common privilege of pursuing our own business, in our own way, without a legislative taskmaster to say how much we shall do, what equivalent we shall have for our toil.


The same enterprise which freights the ocean with our products, which breaks our rivers into a thousand eddies with the revolving wheels of steamboats, which permeates the land with canals, and binds state to state in the iron embrace of railroads, would be abundantly able to perform the humble functions of banker, without the aid of legislative favour, or protection. Enterprise would build up, and competition would regulate, a better system of banks than legislation ever can devise. We have tried, to our cost, the competency of the latter, and we are now tasting the bitter consequences of our credulity.


Let us now test the experiment of freedom. It cannot place us in a worse condition than that to which we have been hurled by the terrible avulsion of the monopoly system.

Notes for this chapter

A four-volume biographical record of the more notorious criminals confined at London's Newgate Prison, published 1824-28.—Ed.


End of Notes

36 of 108



Plaindealer, May 13, 1837.


The newspapers, with scarcely an exception, eulogize the banks for suspending payment, and now that they have thus declared themselves bankrupt by their own unanimous act, pronounce them as good and solvent as before, and call upon them to extend their loans. Loans of what? Irredeemable promises! On what possible pretence of justice or common sense, can the banks continue their ordinary business of discount, and charge a difference of six and seven per cent between their dishonoured paper, and the valuable paper of those merchants and traders who have withstood the shock of commercial revulsion, and met all their engagements punctually and to the letter? Will any one be so preposterous as to say that the promises of the banks, which are a lie on their face, are as good as the promises of such individuals? But the banks, it is contended, are perfectly solvent, and have assets sufficient to meet all their engagements. This may be so, or it may not; but, for our own part, we have no confidence in these soulless corporations, managed in secret by a mysterious junto, and shrouded altogether from the wholesome scrutiny of the publick eye. What proof have we that the banks are solvent? Is the testimony of the bank commissioners appealed to? How many days, we would then ask, was it, before the Mechanicks Bank declared itself bankrupt, that the community were solemnly assured by a bank commissioner that that institution had abundance of specie to redeem all its obligations to its bill holders and depositors? We know little of the secrets of the prison house; but we know enough to excite deep distrust of this ready exclamation of a venal press that the banks are all perfectly solvent. We know that at least two of the broken institutions have been lending large sums of money without the knowledge of the directors, and one without the knowledge of either president or directors. How many more are in the same category? And to what extent have these unauthorized loans been made? And what is the degree of solvency of those to whom the "accommodations" were extended? Who can answer these questions?


Again, if possibly they are solvent, which is much to be doubted, are they more so, we would ask, than those individuals who are the owners of known and substantial property, and who have not yet suspended payment, but whose promises are scrupulously fulfilled? Who believes that the notes of any of the broken banks are as good as the notes of Mr. Astor? Who would not take, if it were not for the mere facility of passing again, the promise of Mr. Astor, or Mr. Lenox, or Mr. Bronson—nay, who would not take the promise of the humblest mechanick to the extent of his visible means, in preference to the invalidated and faithless promises of those great exclusively privileged bankrupt institutions in Wall street, which now stand as memorials of the egregious folly and dishonesty of special legislation?


Turn a deaf ear then, reader, we entreat you, to all these fraudulent attempts to cajole you into the belief that the banks, though broken, are as good as ever. They may be as good as ever, but they never were good. They were conceived in corruption. They were the spurious offspring of fraud and folly, and their whole career has been illustrative of their parentage. Attempt not, then, to heal the wound inflicted upon their credit by their own suicidal act. Set your face firmly against any legislative resuscitation of the exanimate brood of exclusively privileged money-changers. Now is the accepted time to overthrow forever the ignoble order of rag barons. Now is the auspicious moment when, by an energetick exercise of the popular strength, we may sunder forever the fetters of the paper money feudal system. The utter fatuity of legislative guardianship of the currency is signally illustrated by the present disruption of the links of the most strongly concatenated chain ever fastened by arbitrary power on the limbs of trade; and it is the part of wisdom to see that the broken fragments are not rivetted anew.


Let the banks rise from their ruins, if they can, by the recuperative force of what little vitality is left in them. We would neither render them assistance, nor oppose the slightest hindrance. But let us, in the meanwhile, embrace the lesson taught by their prostration, to insist that our legislative servants should immediately emancipate trade from arbitrary restrictions. If men of capital were at liberty to act, a system of free banking would arise on the ruins of monopoly which would dispense all the good that has ever been performed by the privileged institutions, and would be liable to none of their manifold abuses. The financial facilities which the community requires, in the prosecution of trade, are themselves a branch of trade, and perfectly within the influence of its natural laws. Let us then insist upon the divorcement of legislation from banking. Let us demand commercial freedom. Let us require that politicks shall confine itself to the affairs of government, and leave trade to manage its own concerns.


On the very day when the banks of this city and Brooklyn declared themselves bankrupt, stocks rose in price some fifteen or twenty per cent. This was in the confidence of a new inflation of paper money trash. But will the community consent to this? Will they tamely be imposed upon by a spurious, irresponsible, unredeemable paper currency, not worth so much as the ink wasted in recording the lying promises on its face? Will they witness a fresh series of fluctuating prices; new enterprises of mad speculation; and the prostrate fabrick of monopoly credit, now confessedly without a basis, again reared up to the clouds, to fall again, sooner or later, with more disastrous ruin?


The state of things which now exists we long since foretold; and it does not require a prophetick vision to see that worse difficulties are in reserve, unless we give freedom to trade, separating it from all the corrupt and disordering influences of legislation, and subjecting it to the salutary operation of boundless competition. Leave enterprise and rivalry alone; and the one will build up, and the other regulate, a better system of currency and exchange, than we can ever hope from the wisest legislation, to say nothing of such tampering Solons as govern our political affairs.

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Plaindealer, May 13, 1837. Extract deleted.

· · · · · ·


There are from three to four millions of dollars in specie in circulation in this city at the present moment. That it does not circulate very freely is probable enough; for people may very naturally be supposed not particularly anxious to exchange real value for broken promises. It is nevertheless in circulation, and would circulate actively, if confidence were restored, forming an ample understratum of currency, without the help of small notes. The great object then is to restore confidence, and the question arises, How is this to be done?


The Journal of Commerce cannot suppose that legislative authority to bankrupt institutions to continue their business, after they have declared themselves destitute of the means of business, to continue to issue their promises, after they acknowledge they have no means of redeeming them, will restore confidence to the community. Bank notes may, it is true, and perhaps must, be taken as the medium of barter, from those who have no actual money; but it is as certain as any result which depends on figures, that prices will be appreciated, and will be constantly fluctuating, while the community has to depend on such a medium, and that there will be a wide difference between the price for money, and the price for the spurious and dishonoured representative of money.


We agree with the Journal of Commerce that we require legislative action; but with a difference as to the kind of action we should ask for. That paper would have the legislature tinker and patch up the leaky and battered system of banking; while we would have it remove those impediments which hinder enterprise from supplying the place of the old system, demonstrated to be so utterly inefficient, with a bran[d] new one. Remove all legal restraints from capital, and how long does the Journal of Commerce suppose it would be before we should have a voluntary banking association in this city, with fifty millions of actual capital, certified and secured in such a manner as would command the publick confidence, and going into harmonious operation with such celerity as to restore, almost as by magick, financial order out of chaos?


If this is so—and our convictions have not been lightly adopted—it is manifestly the duty of the press to exercise its influence to bring about such a state of things. Let the broken banks take care of their own affairs as well as they can under the conditions of their charters. We are sorry for the losses in which they involve thousands who had no share in their misdoings; but we can see no good reason why these exclusively privileged insolvents should receive aid from the legislature, more than the unprivileged insolvents who have been breaking for months past. The best thing to do, in our judgment, and that which would have the speediest, as well as the most certain efficacy, is to emancipate the trade in money wholly from legal restraint. We have tried the forcing and monopoly system; let us now try the voluntary and free trade system.

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Plaindealer, May 13, 1837. Extracts deleted.

· · · · · ·


Why not leave banking, then, to "the wholesome caution and sagacious foresight which regulate individual enterprise?" Can any one give an intelligible answer why? We have asked this question often, but never met with a response that addressed itself to the judgment of men.


The Board of Trade, of this city, has embraced the occasion of the present crisis in the monetary affairs of the country, to renew its recommendation of the scheme of a federal bank.

· · · · · ·


A National Bank never yet, in this or any other country, afforded an effectual preventive or remedy for revulsion. Unlimited and unrestricted competition would build up the best system. It would give you a bank possessed of all the financial powers which a federal bank could be clothed with, and without the political powers, which, aside from the constitutional difficulty, compose the main ground of objection to such an institution. Let us have no overshadowing monopoly, but as gigantick an institution as you please, so long as its growth is only nourished by the demands of commerce, under the wholesome checks which competition supplies.


We have tried various other experiments; but that last, and best, and most certain experiment, remains yet to be tried. It is an experiment in perfect accordance with the principles of freedom, both political and economical. It violates no man's equal rights. It shuts no man out from the field of enterprise he may deem himself best qualified to cultivate. The time has arrived when a really energetick demand for the emancipation of the credit system from the fetters of political control would be listened to. Let us not spend our strength, then, in clamouring for a federal bank, which the democracy of the country will never grant. Let us join in the cry for free banking. It cannot at all events, make our condition worse than it has been rendered by the odious system of concatenated state monopolies.

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Plaindealer, May 20, 1837. Extract deleted.


—Help me, Cassius, or I sink!

The prayer of the insolvent Banks has been granted by our monopoly legislature, and they are permitted, in the teeth of their own confession of inability to perform their contracts, to continue to issue their worthless and lying promises, which the community are virtually obliged to receive as real money. Was there ever a piece of grosser legislative fraud than this? Here have been merchants failing by scores for months past. Many of them show, to the entire satisfaction of their creditors, that their property far overbalances their debts. The difficulty of obtaining ready money has obliged them to suspend their payments; but it is rendered manifest, by a full exposition of their affairs, that not a dollar will ultimately be lost by those having claims upon them. The immediate cause which compelled these persons to suspend their business was the impossibility of obtaining money on any kind of securities. But that impossibility was itself the effect of another cause: and if we trace the connexion of cause and effect to the beginning, we shall find that the whole evil grew out of the monstrous expansion of bank credit, which provoked a most inordinate thirst of speculation, and stimulated men to undertake the wildest enterprises. These enterprises were of a nature to require a continually increasing expansion of bank credit. But there was a limit which the banks did not dare to overpass. When that limit was reached, the demand for money to sustain the mad projects which had been undertaken led to the freely giving of the most exorbitant rates of interest to private money dealers. These rates of interest soon consumed the actual means of speculators, and they were forced to sacrifice their property to meet the further demands upon them. Capitalists, seeing that the financial revulsion had commenced, withdrew from the field in alarm. The banks, fearful of a demand for specie, began to retrench as rapidly as they had expanded; and the merchant, in the meanwhile, who had pursued the even tenor of his way, neither enlarging nor diminishing his business, but keeping within those bounds which all former experience told him were compatible with safety, now began to experience the bitter consequences of folly in which he had had no share. In vain he offered triple and quadruple securities for the sums necessary for the transaction of his business. The extravagance and rapacity of the banks had produced, as their natural fruit, a general prostration of commercial confidence. Individuals were afraid to lend; for in the midst of the fictitious values which speculation had given to every thing, they could not decide whether the proffered security was real or illusory, whether substantial or a mere phantom of property, which would melt to nothing in their grasp. The banks could not lend, for they were involved in the meshes of their own wide-spread net; and to extricate themselves, as the result has shown, was a task beyond their strength. They had been potent instruments in producing the general derangement, but were utterly powerless to remedy it. The consequence was, that many a sound and solvent merchant was arrested by inevitable necessity, in the midst of a prosperous career, and obliged to trust his affairs entirely to the mercy of his creditors, and to the sport of accident.


While these deplorable bankruptcies were taking place, we heard of no proposition of relief from our legislature; but the instant that the banks, those prolific fountains from which the streams of mischief flowed, became insolvent, all other business of the state was laid aside, and the sole question deemed worthy of consideration was what means should be devised for propping up the worthless monopoly institutions. As the result of legislative wisdom, employed on this commendable object, we have the following law.

· · · · · ·


To discuss the particular provisions of the law which we have submitted to our readers would be a waste of their time and our own. It is enough that it is the law. The measure, which the exigency of the times could not but suggest to every mind at all imbued with the true principles of economic freedom, has not been accomplished; but in its stead, a measure has been adopted, by an overwhelming majority, to continue the privileges of an affiliated league of monopolies, after the condition on which those privileges were originally granted has been violated, and the object they were designed to effect has utterly failed. The chartered banks should have been left to their fate. If they are solvent, no loss could occur to any connected with them, nearly or remotely, by such a course; and if they are insolvent, on what principle of justice are they permitted to continue their depredations on the community? The repeal of all the restraints on the trade in money would open the field of banking to universal enterprise and competition; and enterprise and competition, in that branch of business, as in every other, would lead to the happiest results.


It was once feared that religion could not flourish, if separated from the supervision of government; but the success of the voluntary principle in this country has refuted the theories of hierarchists. The success of the voluntary principle in banking would be not less exemplary. The day is coming, we are convinced, when men will universally deprecate all connexion between Bank and State, with as much abhorrent earnestness as they now deprecate a connexion between Church and State. We have no established religion; why need we have an established bank? One of two things is absolutely certain: either we must utterly dissolve the affairs of politics from those of trade; or we must go back to the system of federal supervision. We must either have no chartered bank, or we must have a national bank. We must either leave trade wholly free, or place it under effectual control. Bad as is the scheme of a federal bank, worse evils are to be dreaded from the fraud and folly of state monopolies. The only true system—the system which has been proved to be good in every thing to which its principles have been applied—the system in entire accordance with the fundamental maxims of liberty—is to confine politics to the affairs of government, and leave trade to its own laws. When our federal Government and our State governments separate themselves entirely from banking and credit, recognizing nothing as money but money, keeping their own revenues in their own custody, and leaving men to form their own system of currency and credit, without intervention, further than to enforce the obligation of contracts, or exact the penalty of violating them—then, and not till then, shall we be a happy and a prosperous people.

40 of 108



Plaindealer, May 27, 1837.


When a hurricane passes over the land, spreading its surface with wrecks, they who survive its fury, though for a while stupified with terrour, soon recover their faculties, and set about to free the soil of the shivered fragments, and reconstruct their edifices in a mode better able to sustain the violence of future tempests. We are now in this condition. A hurricane has passed over our land, and the traces of its wrath are scattered around us. We have spent a sufficient time in the inactivity of dismay, and it is now proper to bestir ourselves, and make preparations for the future. It is particularly incumbent on those who are imbued with economick principles, and animated by a sincere desire to promote the lasting good of their country, to exert themselves in forming a correct publick opinion as to the course to be pursued. We lay claim to the latter of these qualifications, and obey its promptings to urge upon our readers that plan which we think alone has the recommendation of perfect accordance with the principles of democracy, and which alone promises, as its result, "the greatest good of the greatest number."


Our plan may be stated in a phrase of the utmost brevity; for it consists merely in the absolute separation of government from the banking and credit system. Bank and state have been hitherto joined in an unholy union, and we see the fruits of the connexion. Let us now try if we cannot divorce the ill assorted pair, and by so doing promote the prosperity of both, and of all dependant upon them.


It is to be expected that many projects, differing in their nature, motives, and objects, will be urged upon the people. Every scheme of reformation will find earnest, because interested, advocates, and most of them will probably be presented with all the advantages of eloquent exposition and plausible argument. The country constitutes the tribunal which must at last decide the question; and relying, with unbounded confidence, on the foundation which supports the democratick creed, the intelligence and integrity of the great body of the people, we await the final decision with deep interest, but without apprehension.


Among the schemes which will probably be urged, the proposition to reestablish a national bank presents itself most conspicuously. This will assume various modifications. Some will demand the reintegration, in its federal powers, of that gigantick institution which the late administration overthrew, and which now, as a state corporation, lies in wait for a favourable opportunity again to fasten itself upon the American people. Others, rejecting a scheme of resuscitating a bank so justly odious to the great body of the people, will vary their demand, and ask for a federal bank, composed of other corporators, and clothed with more limited powers. A third party, equally anxious for a vast federal engine of finance, will cloak their object under the thin disguise of "a loan office;" while others, having in view the same end essentially, will use a yet more modest appellation, and merely urge the propriety of establishing "a fiscal agent of the government." These propositions will all naturally spring from the professed aristocracy; while another class of schemes will probably be put forward under the name of the democracy. The aim of these will be, either to raise and reconstruct the prostrated system of state banks as depositaries for the federal revenue, or to build up some new monetary agencies under state control.


Against all these plans alike we avow uncompromising hostility. They all rest on principles violative of the equal rights of man. They are all fraught with danger to popular freedom. They are all essentially the same in their intrinsick characters, differing, indeed, in modes and degrees, but all adverse to that great principle of democratick freedom, on which rest the best hopes of political philanthropy for the complete emancipation and happiness of mankind. They alike ask for exclusive privileges to a few, which are to be withheld from the many. They alike ask for powers dangerous in their very nature; powers to regulate the currency and exchanges; powers, in other words, to control every man's business, fix the value of property at their arbitrary will, and take from labour the bread it has earned.


We have twice tried the scheme of a federal bank, and twice found that its fruits are bitter. We have seen it fail in the objects for which it was created; and we have seen it nearly succeed in other objects, fatal to the supremacy of the popular will. As a financial agent, we have proved it impotent for the prevention of fluctuations and revulsions; as a political engine, we have proved it dreadfully potent, and by the use of the most detestable means. We have tried the scheme of state banks, also, and the result which we now behold, and which is but the repetition of former similar results, unanswerably proves its deplorable inefficiency.


This is a plain statement of incontrovertible facts. Shall we, then, have recourse anew to the same system which has so utterly failed us before; or shall we not pause to inquire if there is not another system, more in accordance with natural justice, more effectual for the specifick objects proposed, and more free, besides, from objections which, if incidental and collateral, are yet of the most serious moment? We are no enemy to banking. We are no enemy to credit, in any form it may naturally assume between man and man. We confine our enmity solely to political interference with a subject which belongs to trade, and should be left to be governed by the same principles which harmoniously regulate all the affairs to which they are applied. If competition and enterprise were left in an unbounded field, they could not run to wilder excess, than that which we deplore as the consequence of the monopoly system. If free banking should prove as bad, it could not prove worse than the scheme of exclusively privileged banks, and we should at least escape all the degrading effects of bribery, corruption, and the thousand legislative evils, which are the obvious and inevitable consequences of the present system.


But when we speak of free banking, we deal in general terms, and the reader may desire that our views should be stated somewhat more explicitly. We would have banking, then, placed on the same basis as any other business, and neither protected nor restricted by laws, any more than the commonest traffick in which man engages. This depends upon the action of the states, and the sole legislative measure necessary to accomplish it, is to repeal entirely the act known as the restraining law.*33 We would have the federal government also separate itself wholly from all connexion with banking, recognizing nothing as money but silver and gold, and entrusting its funds to no private individual or association, voluntary or corporate, for safe keeping. The money of the government should be deposited, either in a single depositary at the commercial focus of the country, or at the principal points where collected, and officers appointed charged with the especial duty of guarding it. The various branches of the publick service should be paid with checks or drafts on these depositaries. Banking would thus be reduced to its proper field of action, as a mere auxiliary of commerce. It would not extend itself to a prodigious size, on the borrowed resources of the people, and finally bursting from its own distension, leave the government bankrupt and spread ruin and dismay through all classes of the community.


But under such a system would banks, adequate to the demands of commerce, spring into existence? With the same certainty that the demand brings supply in every other affair of trade. The demands of commerce require an immense number of ships to interchange our commodities with those of every quarter of the globe; but we need no law to say that this man shall be a shipwright and that a joiner, one a rigger and another a caulker. The supply accommodates itself to the demand under the harmonious operation of the laws of trade. It requires enormous capital to carry on certain branches of commerce, the India trade, for example. But no exclusive legislative privileges are necessary. The mere stimulus of profit, the mere fact of demand, immediately sets capital flowing in that channel.


The same universal principle would supply us with banks adequate to all the legitimate demands of commerce. Competition would regulate them more effectually than law. It would lead to their giving the greatest amount of security, and to their paying the highest rate of interest on deposites, and charging the lowest rate of discount on their loans, compatible with a reasonable profit on the investment of capital.


But would you inundate the country with an irresponsible paper currency? We have already guarded against such a result, by requiring that the government, in all its various branches of receipt and expenditure, should know nothing as money but silver and gold. This would, of necessity, always keep a sufficient amount in circulation for all the purposes of ordinary currency. If the bankers exceeded their proper limits, their notes would immediately depreciate, and thus oblige them to retrench. But in the common affairs of life, in the everyday dealings of men, a paper representative of money would be unknown. Your duties to the Custom House, your purchase of publick lands, your fees in the courts of law, and all payments to the officers and functionaries of the government, of every branch and degree, being absolutely required in actual money, the notes of bankers would be restricted to commercial operations, gold and silver would become the common medium of ordinary traffick, and the people would at last realize the prodigious benefits of a Constitutional Currency.

Notes for this chapter

This law prohibited the entry of any bank not expressly chartered by the state legislature.—Ed.


End of Notes

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Plaindealer, June 3, 1837. Title added.


Governour Marcy is at present in this city. We understand that more projects for tinkering the currency are on foot. It is said that Governour Marcy has signified his willingness to convene the legislature, if petitioned to do so, for the purpose of recommending it to pass an act authorizing the exclusively privileged broken monopoly banks to issue a spurious small note currency. We should not be at all surprized at such a proceeding from Governour Marcy. We used to look on that man as feeble minded, but honest. Our opinion of him in the former respect has undergone no change, except the change from impression to conviction; but in the latter respect we confess we begin to think we were in errour. There are some points in his conduct which certainly cannot easily be reconciled with the idea of perfect political integrity.


The authorizing of the broken banks to issue a small note currency at this time, we should consider one of the most unwarrantable and knavish exercises of legislative power that ever a free people submitted to. There is, beyond all question, a great want of a circulating medium which would enable persons to make change. But it is equally beyond question that there is an abundance of silver and gold coin in the country to supply this want. There never was, indeed, at any former period of our history, so much specie in the country. The only reason why it does not circulate freely, is because the paper currency is spurious and dishonoured, the banks having refused to redeem it, and the legislature having justified them in that refusal. What then is the proper object of remedial measures? Surely not to increase the amount of spurious paper, by authorizing the banks to issue a new class of unredeemable notes, which would only put further off the day of ultimate resumption of specie payments; but to give freedom to that spirit of enterprise which even now, in the chaotick state of things to which exclusively privileged bank monopolies have reduced us, stands ready, if only allowed free scope, to rescue the community from the terrible confusion of general bankruptcy. If Governour Marcy wishes to convene the legislature, let it be for the purpose of repealing all the restraints on the trade in credit and money, and not for imposing new burdens on the defrauded people, for the benefit of a few privileged charter mongers.


If an association of individuals, having fifty millions of dollars worth of real property, at a moderate appraisement, should undertake banking business, in the first place, by some publick act, making that property answerable, beyond all peradventure, for the notes they might issue, who can deny that such an institution would command publick confidence? Who can suppose that their notes would not be readily received as equivalent to silver and gold? Such an association would immediately spring into existence if all restraints on banking were removed, and, as a necessary consequence, the money which is now hoarded would again flow in the accustomed channels of circulation. We should thus have an abundance of actual money for the purposes of change, through the assistance of freedom; not a wretched substitute for money obtained by making a further sacrifice of our rights to the insatiate spirit of monopoly.

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Plaindealer, June 10, 1837.


The history of paper money is a history of revulsions; of alternate prosperity beyond the natural bounds of health, and adversity as far beyond the ordinary limits of commercial distress. The scenes we are passing through now are but the repetition of scenes that have often been enacted before; and if the ruin occasioned by the present disruption of the paper system is more sweeping and intense than the ruin produced by the same causes on previous occasions, it is only because the business of the country is now conducted on a more extended scale. In 1816 we had but two hundred banks, whereas now we have seven hundred and upwards.


The causes of the terrible revulsion from the effects of which the country is now suffering are the same that produced a similar result in 1816. They may be accurately explained by quoting the very language made use of on that occasion by those who traced the mischief to its proper source. "The evil of the times," said Mr. Randolph,*34 in a memorable speech in Congress, when the proposition for establishing a national bank as a remedy for the financial distress then experienced was before that body, "The evil of the times was a spirit engendered in this republick, fatal to republican principles, fatal to republican virtue; a spirit to live by any means but those of honest industry; a spirit of profusion; in other words, the spirit of Cataline himself, alieni avidus, sui profusus;*35 a spirit of expediency, not only in publick, but in private life; the system of Diddler in the farce*36—living any way and well, wearing an expensive coat, and drinking the finest wines, at any body's expense."


Who can deny that it is to this same immoral thirst of sudden affluence, and prodigality of ostentatious luxury, to this alieni avidus, sui profusus, to this insane desire of acquisition and display, the present distress is to be ascribed? And who can deny that the bad desire has been provoked now, as it was then, by the effusion of a too copious flood of paper credit, which has borne men far away from a safe footing, and left them at the sport of the most treacherous sea that ever mocked the struggles of drowning wretches in their death-agony?


Our only remedy for the present evils, and our only true means of avoiding a recurrence of them, is to give freedom to trade—to do away with banking as a matter of legislative control, to take from paper the currency which it has received by being recognized as money by the Government, and leave it to find its own level as the mere evidence of private debt. The exclusively privileged paper money system of this country is the greatest curse which we endure. It is a curse in all its relations and influences, political, financial, and moral. It endangers liberty; it destroys the equilibrium of trade; it induces a gambling spirit, in the place of the better spirit of honest industry, and unsettles all the established ethicks of property.


Mr. Randolph, in the same speech from which we have already quoted, well termed the banking system of this country a monstrous alliance between bank and state. "We are tied hand and foot," said he, "and bound to conciliate this great mammoth, which is set up to worship in this christian land. Whilst our Government denounces a hierarchy; whilst it will permit no privileged order for conducting the service of the only true God; whilst it denounces a nobility, it has a privileged order of new men, the pressure of whose feet is upon our necks."


Now is the most favourable opportunity we can ever hope to have for crushing this terrible evil. There is no intermediate ground of safety. We must either crush it, or it will crush us. We must either abolish exclusive privileges, or exclusive privileges will abolish freedom. Let us not be misunderstood, nor misrepresented, as we often are. We neither express nor entertain any desire to abolish banking. We desire merely to separate it from legislation, and to abolish the restraints which shut it up from the salutary influence of enterprise and competition. We desire to take from it every thing of a political character, and restore it to its proper field as a branch of private traffick. When this is done, when banking is left to the laws of trade, and the Government ceases to know anything as money but the money of the Constitution, we shall be a happy and a prosperous people, and not till then.

Notes for this chapter

John Randolph of Roanoke, Representative of Virginia, 1800-1824.—Ed.
"Greedy toward others, extravagant toward himself."—Ed.
The character Jeremy Diddler, in James Kenney's farce Raising the Wind (1803), continually contrives to borrow money.—Ed.


End of Notes

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Plaindealer, June 17, 1837.


A correspondent puts the following questions to us, in relation to the free-trade system of banking:

1. What guarantee can be given to the hard workingman, in need of money, that he will not be obliged to pay private bankers exorbitant rates of interest?
2. Is there bullion enough at command wherewith to supply a constitutional currency?


To the first question we answer, competition between money lenders; to the operation of the same principle which regulates the profits of all other branches of business. The banks, under a free-trade system, would be governed by the same motives, and subject to the same influences, which impel and guide men in other classes of occupation. There is just as much need for legislative regulation to restrain the dealers in other kinds of commodities from demanding enormous profits, as there is for restraining the dealers in money or credit. The relations of demand and supply fix the rates of profit in all callings, left free from the impositions of arbitrary enactments.


To the second question we answer yes. There is an ample amount of bullion for all the purposes of a currency. But freedom of trade does not imply the abolition of paper credit. It merely contemplates the separation of government from the credit system, whether in the way of restraint, regulation, or encouragement. There is an ample quantity of bullion in the world for an exclusive metallick currency, but prices would, of course, have to undergo a vast reduction, to adjust them to a hard money scale. But an exclusive metallick currency could only be instituted and maintained by the force of arbitrary government edicts, totally contrary to the first principles of natural justice. Bank-notes, in their intrinsick nature, are nothing more than the promisory notes of one individual to another, they are merely one of the forms which confidence between man and man assumes. So long as the laws do not interfere, and give an adventitious character to these notes, there is no reason, in natural justice or social expediency, why they should be interdicted. If left to themselves, they will not extend beyond the limits of a secure foundation, nor the demands of general convenience.

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Plaindealer, July 8, 1837.


The theory of banking which we are desirous of embracing all opportunities of pressing on the attention of the community, consists simply in giving freedom to that branch of trade, and separating government from all sort of connexion with it. This theory we have maintained for years, and the events of each year have added force to our conviction of its perfect practicability, of the harmony with which it would work, and the diffused prosperity it would occasion. The events of the present year, we think, will do more than a thousand treatises to forward the desired reformation.


In the first place, the utter separation of the federal government from banking would have the inevitable effect of giving the country a hard money currency, as its circulating medium in all the minor and every day dealings of the people. By utter separation of the government from banking, we mean, that it should not only not create any bank by law, whether composed of private corporators, or founded on its own funds or credit, and managed by officers of its own appointment, but also, that it should not recognize the existence of any such institution, whether authorized by state legislation, or founded on the voluntary principle, and should know nothing, as money, in its receipts and expenditures, but the money of the Constitution, namely, gold and silver coin. This absolute disconnexion from banking, includes, as one of its essential features, the duty of keeping the federal revenues, between the time of collection and disbursement, deposited, under its own sole custody, in some place or places of safety, where they could not be used or jeoparded, in any way or degree, as a basis of credit.


The sole objection to this feature of the plan, is the loss of the profit which might accrue to the government from interest on its funds, if loaned to private associations or individuals, or to bodies politick. But this disadvantage is more than compensated by the single fact of absolute security. If lent out to any class of borrowers, the funds of the government would necessarily be exposed, more or less, to the hazards of trade, and might be totally swept off by an extensive commercial revulsion, the consequence of an extravagant spirit of speculation, fomented, in part, by the very facilities which the loan of the publick treasures afforded. If not so swept off, they would be liable, at any moment, to be withdrawn from use, by sudden political exigences; and this withdrawal would necessarily occasion embarrassments, more or less extensive, according to the amount of the funds, and the nature of the employment of them for which there had arisen unexpected occasion. These embarrassments would naturally cause much clamour against the government and much disaffection, however just its grounds of action, and might thus expose it to serious perplexities in a course of measures absolutely required by the permanent interests of the country, and a comprehensive regard for the publick good.


Another class of evils which would almost inevitably grow out of the lending of the publick money, consists in the facilities thus afforded to those in power to make a corrupt and subsidizing use of it, for the promotion of personal ambition, the enforcing of unwise measures, or maintaining the ascendancy of party principles, not in accordance with the unbiased sense of the community. Whether such a use of the publick funds were or were not made in fact, as only a small portion of the applicants for the loan could be successful, those who were disappointed would naturally impute folly and corruption to the government, and thus tend to aggravate factious opposition, unsettle the publick mind, and expose the country to the evils of a fluctuating policy in the management of its political affairs.


It will be perceived that the objections we have here merely hinted at in general terms, might easily be extended into much more particular exposition, and illustrated with references to facts furnished by the present condition and past history of the country. But it is our purpose to be as brief as possible, and we must trust to the intelligence of the reader to carry out the argument to the degree of fulness necessary for a perfect application of it to the objections which may be offered.


For the reasons we have stated, and others that will suggest themselves, we would have the government utterly separate itself from the banking and credit system, collecting its revenues only in gold and silver coin, keeping them, until disbursement, in its own places of secure deposite, and then paying them out to its creditors in the various branches of the publick service. The payments would naturally be made by the officers of the Treasury in drafts on the depositaries. These drafts, on account of their convenience for remittance from place to place, might not be presented for payment immediately upon being issued, but this would in nowise alter the nature of the transaction.


We have said that this plan would inevitably be followed by a hard money currency, abundantly adequate for all the ordinary purposes of a circulating medium. This truth is so obvious that it scarcely requires illustration. The annual expenditures of the federal government are from thirty to forty millions of dollars. The receipts, under any scale of revenue, and any mode of taxation, must, of course, be as much. These revenues are collected chiefly in the principal seaports and at the principal land-offices, but in some measure in every township in the Confederacy. Wherever there is a post-office, there a portion of the federal revenue is collected. The judiciary, the army and navy, those engaged in the dockyards, on fortifications, and lighthouses, in constructing publick roads, in carrying the mails, and in numerous other branches of publick service, are the recipients of the money so collected. These persons are scattered over the entire surface of the country. The silver and gold they would receive in payment from the government, would necessarily flow in a circuitous channel before it emptied itself again into the Treasury in the shape of customs, postages, and the purchase money of publick lands. The action of the federal government alone would thus keep a sum at least equal to thirty or forty millions of dollars in continual circulation—a sum adequate to all the ordinary purposes of currency.


What we have here stated, comprises what we deem to be the duty of the federal government, in reference to the question of banking and credit. The next branch of the subject is the duty of the states. This consists, simply in giving freedom to trade, and leaving men to pursue the business of banking, or any branch of traffick in money and credit, without more restraint upon them, than there is in reference to the commonest vocation of life. The state governments, as well as that of the United States, should also recognize nothing as money but money, and the evidences of publick debt. But this is not absolutely essential to the success of our theory.


This plan, it will be perceived, contemplates no aggression upon existing institutions, no interference with "vested rights," no violent change of established systems. The federal government is now confessedly bankrupt, by reason of the universal disruption of the chartered banks, to the keeping of which its funds were entrusted. All we ask from it is, that for the future it shall collect its revenues only in money, and keep them itself in convenient depositaries situated at the chief commercial points, paying them out again to the different branches of the publick service by drafts on that deposite. All that we ask from the state governments is, that they should repeal those enactments which forbid the free use of capital and credit. Let existing banks be subject to unrestricted competition, and then the banking associations, whether corporate or voluntary, that give the publick the largest securities, and conduct their affairs with the wisest economy, will meet with the greatest success. In the meanwhile the people will have a hard money currency for all the minor purposes of traffick, and banking will naturally confine itself to those operations which constitute its only legitimate field—the mere exchange of bank credit for mercantile credit, to the extent of actual commercial transactions. Bank notes would be used in large commercial dealings, but would not go into the channels of ordinary circulation and become a part of the general currency of the country.


The system which we propose is either a good one or it is not. If not, the particulars wherein it is defective may easily be pointed out. Mere general condemnation of it, as impracticable and visionary, will not satisfy intelligent minds. Yet no stronger objections have ever been urged. It is indeed sometimes asserted that the plan requires the cooperation of twenty-six separate sovereignties, having, in some respects, different interests, and governed by opposite views of economick expediency. But the position is not true. The success of the plan does not depend on the concurrence of so many parties. If the state of New York alone would emancipate the trade in money and credit from legislative control, the result would at once be accomplished. This city is the great commercial mart and the great bullion depot of the entire Confederacy. The rays of trade diverge from this point to all parts of the country. The streams of business all tend to this centre. If the state of New York would dissolve all political connexion with banking, and leave it, as an affair of trade, to manage its own concerns, with no limit or check, other than penalties for frauds, a system of banking would at once arise, at the bidding of associated enterprise, which would answer all the good purposes that banks ever accomplished, with a smaller alloy of evil than banks ever before contained.


There are but two conditions necessary to perfect success—absolute disconnexion of bank and state, and absolute freedom of trade.

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