Democratick Editorials: Essays in Jacksonian Political Economy

William Leggett, courtesy of United States Library of Congress
Leggett, William
Display paragraphs in this book containing:
Lawrence H. White, ed.
First Pub. Date
Indianapolis: Liberty Fund, Inc.
Pub. Date
Essays first published 1834-1837.
45 of 108



Plaindealer, July 22, 1837.


The man in the fable who fought his own shadow got nothing but bruised knuckles as a reward for his valour. It will be well if the monopoly democrats, who are fighting the shadow of an exclusive metallick currency, should come off with as little injury. They lay their blows about them lustily, but the impassive nature of their enemy mocks their sturdiest efforts.

As easy might they the entranchant air
With their keen swords impress,

as seek to put down the democracy by attacking the bugbear of an exclusive metallick currency. "There is no such thing." It is an empty phantom conjured up by themselves. The monopoly democrats are the only persons who ever said a word about such a currency. But some of the arguments they use against it are as absurd, as the assertion is false that any party in this country is in favour of an exclusive compulsory circulation of gold and silver money.


In expatiating on the manifold evils of gold and silver, they are fond of drawing highly coloured pictures of the "prodigious ruin and combustion" which a sudden annihilation of the paper credit system would occasion. A farmer or mechanick, they say, has purchased a farm or a workshop under the present system for a given sum of money, half of which perhaps, the earnings of many years of industry and frugality, he has paid, and given a mortgage for the other half. While things are in this posture, they go on to state, you introduce your agrarian notions into legislation, annihilate paper credit, require that gold and silver shall alone circulate as money, and in consequence reduce the prices of all things at least fifty per cent; so that the poor farmer or mechanick has to yield up his farm or shop to satisfy the mortgage upon it, and will be lucky indeed if he be not brought into debt for a large remainder.


Statements of this sort, in which "poor farmers" and "poor mechanicks" are made to figure very conspicuously, are every day put forth by the advocates of the bank monopoly. The champions of exclusive privileges display a wonderful degree of sympathy and commisseration for the labouring poor, whenever the principles of the paper money fraud are attacked. The "publick good" is always put prominently forward as the chief, if not the sole motive of the bank philanthropists, in their applications for charters; and no sentiment but solicitude for the "publick good," and more particularly for the good of the agricultural and mechanick classes, animates them in the vehement opposition with which they always resist assaults upon the paper system.


There can be no sort of doubt that a sudden fall of prices, however occasioned, is productive of vast injury to multitudes of men. All fluctuations in the currency, sudden or gradual, are productive of extensive and serious evils, moral and political, as well as financial. Nay, all changes of state policy, of every kind and name, no matter how obviously demanded by the principles of publick justice or expediency, are necessarily injurious, to some extent, greater or less, according to the circumstances. A nation cannot enter into war, however strong the provocation, or however important the interests to be defended, without occasioning vast loss and suffering to a portion of its citizens, whose prosperity depended on the preservation of peace. It cannot make peace, after having entered into war, without causing, by that change of policy, however beneficent in its general and aggregate result, great evils to another portion of inhabitants. It cannot vary its mode of taxation, lay a new impost on commerce, or remove an old one, without disadvantageously affecting the interests of some of those whose equal rights it is bound to respect. Nay, further than this, an improved process in art or agriculture is never discovered, nor a labour-saving machine invented, no matter how much the good of the majority may be promoted by it, that it does not occasion more or less evil and hardship to a portion of society. This is the inevitable consequence of all changes which vary the relations of men.


If we spoke the words which we now address to our readers, they would fall upon the ears of but a few hearers, and would be forgotten almost as soon as uttered. But we address them to thousands of attentive minds, through the aid of that potent and beneficent instrument, the press. There is no one of those thousands who does not entertain a deep conviction of the vast benefits which have resulted to mankind from the assistance of that wonder-working engine. By it, all the accumulated truths of science and art, the lore of sages, the discoveries of genius, the precepts of philosophy, the sallies of wit, and the harmonious numbers of poetry, are diffused over the whole earth, and placed within the reach of the humble, as well as the affluent and lordly. Yet the introduction of the press was a grievous evil to a large class of persons; to the cloistered monks and scholars, who devoted their lives to the painful task of transcription, and some of whose illuminated missals yet remain to attest the wonderful patience and skill they exercised in their art. The invention of the German mechanick deprived this large number of sequestered labourers of their accustomed means of obtaining bread, and many of them, doubtless, underwent severe privations, before they learned to apply themselves with success to other modes of occupation. But survey the vast aggregate of benefits to mankind, and see how gloriously a few cases, comparatively, of individual suffering was atoned for by the inestimable augmentation of general good.


But the reader will perceive that the common argument against an exclusive metallick currency, the evils which must arise from a change of systems, would have applied as strongly against the art of printing. The fact that a sudden change from paper credit to an exclusive metallick currency would occasion great hardship in many particular instances, is not a valid argument against the reformation, if even such a scope were contemplated as is alleged. It ought to be shown that the change is not justified by sound principles of publick economy, and would be productive of a preponderance of evil. Any exposition which falls short of this is wholly destitute of weight to turn the scale in favour of the credit system.


And if a change from high prices to low is an evil to those who have money to pay, is not a change from low prices to high equally an evil to those who have money to receive? Yet this change the advocates of the paper money fraud defend. The introduction of paper originally occasioned a rapid inflation of price, and caused many a poor man who had contracted for wages according to the metallick standard, to be paid in a medium which would not procure him half the same quantity of the necessaries of life. This change has been perpetually progressive, ever since the paper money system was invented. Prices have been forever on the advance, except in as far as counteracted by labour-saving machinery and improved methods of agriculture and the arts; and the continual inflation of the currency has occasioned a continual injustice to one party in all money contracts. The exhaustion of this paper currency, and the return to silver and gold, would but have a retributive effect; yet now, for the first time, the injustice of any fluctuation that changes the relations of value is discovered and made the subject of much intemperate declamation.


It would be well, if those who are so eloquent in illustrating by parables and supposititious instances, the evil effects of a sudden fall of prices, would sometimes turn their attention to the effects which flow from the opposite cause. It must be evident that fluctuations are not more injurious from a decline, than from an appreciation, in the nominal values of things. The farmer, who has to pay for his farm at a time when agricultural products will bring but half as much as when he purchased it, suffers from depreciation. But he who has to receive payment at a time when money will purchase but half the commodities it would have purchased when the debt was contracted is equally injured by the general appreciation. If you look into the particular cases to which this latter statement of the proposition will apply, you will find many of extreme hardship and cruelty. The poor mechanick who, relying on the stability of the currency, contracted to perform a piece of work when materials were low, is involved in irremediable embarrassments by that unexpected rise which the managers of the exclusively privileged monopoly paper money system have it always in their power to occasion by a sudden effusion of their notes—by an exercise of what is commonly considered "bank liberality."


But the defenders of the paper currency have planted their battery on a bed of sand. Their arguments are as destitute of foundation as the system they support, and they are wasting their ammunition in attacking an imaginary foe. No party, no faction, and not a single individual of note, has ever urged nor advised the adoption of an exclusive metallick currency. They war, not against credit, but only against the credit system. They war, not against a paper currency, but only against paper authorized by law, and stamped with an illusory character as money by special and unequal legislation. They war, not against banking, but only against exclusively privileged banks. They ask for no measure by which a sudden change would be made in the relations of value; but a measure which would prevent such sudden and ruinous changes as have marked our history and demoralized our people. They ask, in short, only for freedom; for the complete divorcement of politicks from banking; for the separation of bank and state.


The first inquiry which all intelligent minds should make in regard to the great subject of publick discussion is, what scheme is recommended by abstract truth and justice; for whatever is just and true in theory is not less so in practice. Their next inquiry should be as to the best means of reducing it to practical utility. A large portion of the community have come to the conclusion that the true scheme of government, in the respect in question, is to have no connexion with banking and commercial credit, and to impose no restraints on trade. They have come to the conclusion that the principles of economick and democratick freedom, in regard to currency as in regard to every subject to which they have been applied, will be found to exercise the most beneficent influence, and most effectually promote the general prosperity of mankind. This scheme does not contemplate an exclusive metallick currency. It does not contemplate any measure which need alarm any man not governed by the debasing and aristocratick desire to render the many tributary to the few.

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Plaindealer, July 22, 1837. Text abridged and extract deleted.


The Evening Post a day or two since remarked that, "there never was a more popular catch word than THE SEPARATION OF BANK AND STATE. It is a phrase full of democratick meaning; it is musick to the ears of the people. It is a phrase which will never be laid aside till all that it imports is fully realized. On this feeling in the people the administration may confidently rely, sure that if they trust to it they will be triumphantly sustained." Whatever merit there may be in having originated this phrase, we believe may be justly claimed by this journal. And not the phrase only, but the important measure which it implies, has been urged on the attention of our readers with a frequency which we might fear would weary them, were it not for the vast importance of the subject. The separation of bank and state, and the emancipation of credit from legislative fetters are the two great objects for which the real democracy are contending. "DIVORCE OF BANK AND STATE," and "FREEDOM TO TRADE," are phrases which deserve conspicuous and continual insertion in every democratick newspaper. They should constitute our "watchword and reply" in the coming contest.


In the complete separation of government from the bank and credit system consists the chief hope of renovating our prosperity, and restoring to the people those equal rights, which have so long been exposed to the grossest violations. Leave credit to its own laws. It is an affair between man and man, which does not need special government protection and regulation. Leave banking to be conducted on the same footing with any other private business, and leave the banker to be trusted or not, precisely as he shall have means to satisfy those who deal with him of his responsibility and integrity. All this is a matter for men to manage with each other in the transaction of private affairs. But the part which the government shall act in regard to banking and credit is a political matter, to be decided by the voice of communities through the constituted channels of suffrage. There are two principles at war on the subject. One of these is the principle of aristocracy, the other the principle of democracy. The first boasts of the vast benefits of a regulated paper currency, and asks the federal government to institute a national bank "to regulate the currency and exchanges," or, in other words, to regulate the price of the labourer's toil, and enable the rich to grow richer by impoverishing the poor. The principle of democracy, on the other hand, asks only for equal rights. It asks only that the government shall confine itself to the fewest possible objects compatible with publick order, leaving all other things to be regulated by unfettered enterprise and competition. It asks, in short, for free trade, and the divorce of bank and state.

47 of 108



Plaindealer, July 29, 1837.


It is a very common thing for the antagonists of the political doctrines maintained by this journal to admit that they are true in theory, but they assert they cannot be reduced to practice. Nothing can be falser than this position. There is no such thing, in morals or politicks (and politicks are, indeed, but a branch of morals) as impracticable truths. Whatever is true in theory it is our duty to reduce to practice; for the great end of human effort is the accomplishment of truth. Whatever is our duty is within the compass of our ability; for it is a condition of our nature that we are endowed with powers for the performance of all the moral obligations under which we are placed. To argue otherwise is to impeach the justice and beneficence, and to deny the order and harmony, displayed throughout the whole system of the universe.


"Nothing," says Say, in his admirable work on Economy,*37—"Nothing can be more idle than the opposition of theory to practice. What is theory, if it be not a knowledge of the laws which connect effects with their causes, or facts with facts? And who can be better acquainted with facts, than the theorist who surveys them under all their aspects, and comprehends their relation to each other? And what is practice without theory, but the employment of means without knowing how or why they act?" The people of this country have been employing means, in regard to banking, without understanding the theory; without viewing the whole chain of causes and effects, which, in its entire concatenation, constitutes the science of banking. Those who understood the theory, long since foretold the ruin that would result from the rash and ignorant employment of those means. They explained the principles in accordance with which alone the business of banking can be conducted so as to produce prosperous and equable results. We are told that this is true in the abstract, but utterly impracticable. It is clearly demonstrated, on the other hand, that the system which has been pursued was true neither in theory nor practice. It was founded on false principles. It had its origin in a gross violation of the great maxim of liberty, the equality of man's rights. This is admitted by its champions; but they excuse the deep original sin on account of the good fruit which they alleged would be the consequence of the violation. That fruit is now pressed to our lips, and do we not find that it is bitter?


The exclusively privileged system of banking, then, is proved to be sound neither in the abstract nor concrete, neither in theory nor practice, neither in the inception nor execution. Would it not be the part of wisdom, in this emergency, to make trial of a system which is admitted, on all hands, to have the recommendation of theoretick truth? But we are met on the threshold with an assertion that this system "has been, from time immemorial, demonstrated to be utterly impracticable and visionary for the common affairs of life." Alas! then, for the woful condition of humanity, which is thus forced to reject what it acknowledges to be true, and embrace what it knows to be false, and the progeny of which is ruin.


But when, where, and how, has experience demonstrated our theory to be impracticable? Our theory is, that men have equal rights; that government, which is the guardian of their equal rights, should confine itself within the narrowest circle of necessary duties, the mere protection of that equality, by preventing the encroachment of one man upon the rights of another; and that all beyond this should be left to the influence of publick opinion, and those natural principles of commercial intercourse which are called the laws of trade. This is our theory. This is the theory of a popular government. This is the theory of democracy. We ask again, when, where, and how, has it been demonstrated to be impracticable?


If we look back to ancient times, we shall find that those countries which made the nearest approaches to popular government exhibited a spectacle of the most diffused happiness and prosperity, and that the happiest and most prosperous portion of their history embraced that period when their approach to the popular principle was nearest. We say the period of the greatest happiness and prosperity, not of the greatest splendour. The distinction is a broad one. Autocracies, monarchies, aristocracies, and hierarchies, present spectacles of splendour; democracies the less dazzling, but more pleasing ones of equal and diffused happiness. The contemplation of despotick and kingly governments, from the distant points of historick observation, is like the contemplation of embattled and turreted cities from afar off. Their towers and domes, their palaces and spires, attract the eye, and impress the mind with a sense of grandeur; and it is not led to think of the squat dwellings of wretchedness and toil, and the gloomy dungeons of captivity, which are girt round by the lordly abodes of affluence and power. We survey a democratick government, from a point of distance, as we look on a fertile champaigne country, and find little to attract our attention, which soon tires of the dull uniformity. But on a nearer approach we find, if monotonous, it is at least the monotony of happiness, and that if nothing attracts the eye by the commanding stateliness of its height, nothing repels it by the abject lowness of its degradation. The fancy may be dissatisfied, but the heart acknowledges that the condition of democratick equality is best, since it accomplishes the chief desideratum of philosophy, "the greatest good of the greatest number."


But it is not by a reference to ancient governments alone that we shall discover proofs of the correctness of the theory which shows the superiority of the popular principle of government. Look abroad through Europe at the present day, and tell us what is the result of your observations. Do you not find that each country has increased in general prosperity in the precise ratio that it has made advances towards the democratic principle? Do you not find that the most wretched country is that where the government is most absolute; and the most happy where it is most liberal? What else is it that constitutes the difference between a serf of Russia and a citizen of England? By the plain principles of inductive reasoning, then, as well as abstract and a priori speculation, we are led to the conclusion that democracy, in its widest signification, is the most felicitous condition of mankind. America is the happiest country in the world, because it is the most democratick. To be happier, it only needs that the principles of democracy should be more inviolably observed. Every trespass upon the equal rights of men, by conferring exclusively on a few the privileges which belong by nature to all in common, is a breach of those principles. Every breach of principle is sure to be followed by punishment; and under this head we must place the distress we experience from the disruption of our chartered banking system. It will be well if we are effectually admonished by the lesson of experience.


Our theory of banking consists simply in the position, that it is an affair of trade, which ought to be left wholly to the laws of trade. How can it be said that experience has demonstrated this theory to be impracticable, when all experience proves the very opposite to be true? Do not enterprise and competition, in every pursuit in which they are left untrammelled by the laws, produce the most admirable results? The keels of our swift-cleaving vessels seam the ocean with their sparkling wakes; the mighty forest of the west bows and retires before the sturdy salutation of the woodman's axe; and all the vast aggregate of human industry presents a spectacle of order and prosperity, without the intervention of law to regulate its details, designate its field of action, or stimulate or check its operations. Is there anything in the nature of banking which makes it an exception to the universal rule, that enterprise and competition are the best regulators of trade? What is this latent quality, this secret, this mystery, which makes banking so different from every other business, rendering it necessary to have rules of its own, and privileges and immunities; and requiring it to be tenderly cloaked up from the least breath of competition, and screened so that the winds of heaven shall not visit it too rudely? Banking is neither more nor less than an exchange of notes between one individual or association, having such known means as give the publick confidence in the ability to meet their obligations, and another individual, whose means are of a less publick or satisfactory kind, the one paying the other an equivalent for the advantage of the exchange. There is nothing mysterious in this; nothing that withdraws it from the ordinary sphere of trade, or requires special laws and exclusive privileges.


But we are happily not reduced to the necessity of arguing this matter by induction from the nature of banking, and the effect of freedom on other branches of traffick. The success of the principle of unrestrained competition is not a matter of inference only, but of fact. Of all the paper money countries of the world, Scotland is the only one where the banks rest on the basis of individual enterprise, unchartered, unprivileged, and exempt from no penalties or impediments to which other pursuits are subject. Yet Scotland is the only paper money country which escapes commercial revulsion. Bankruptcy has swept through England on more than one memorable occasion, with the desolating fury of a tornado, prostrating the loftiest fabricks, and shattering the firmest institutions. But the storm hurtled over Scotland without injury, for she was ensconced behind the impregnable barriers of free trade. The foresight of individual enterprise had descried, in good season, the gathering of the tempest, and was prepared for its rudest assault.


Let us see what countries will best bide the peltings of the pitiless financial storm which is now raging throughout the commercial world. Our life upon it—the holy cause of free trade and equal rights, dearer to us than life, upon it—that the free banking system of Scotland will stand erect and unshaken amidst the tempest, which will beat all other paper money systems to the earth! Is this demonstrating the impracticability of our theory?

Notes for this chapter

Jean Baptiste Say, French classical economist, was author of A Treatise on Political Economy, the fifth American edition of which was published in 1832, from which this quote is likely taken.—Ed.


End of Notes

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Plaindealer, August 5, 1837. Text abridged and extract deleted.


We have heretofore more than once invited the attention of our readers to the remarkable sentiment of General Jackson, expressed in the document giving his reasons for the removal of the publick deposites from the Bank of the United States, that it was his desire "that the control of the banks and the currency should, as far as possible, be entirely separated from the political power of the country," and that "the action of the federal government on the subject, ought not to extend beyond the grant in the Constitution which only authorizes Congress to coin money and regulate the value thereof. All else," said General Jackson "belongs to the states and to the people, and should be regulated by publick opinion and the interests of trade."


Here, in the compass of a few words, is given the outline of the only true system for this country to pursue in regard to banking. What alone is needed—what is demanded by both the letter and spirit of our institutions, and by the fundamental principle of liberty, is freedom of trade, and a complete separation of bank and state. We ask that the federal government should not connect itself with any banking association in any way or degree, and that the state governments should likewise wholly separate themselves, in every respect, from the banking and credit system. When this is once carried into full effect, and banking is left to be conducted on the same basis with other branches of private traffick, without either peculiar encouragement or peculiar hindrance from the laws, we shall rise to a higher degree of general prosperity than we yet have ever attained.


Under such a free and equitable system, it is true, certain classes of the community, who contribute nothing to the national wealth, the mere buyers and sellers, the mere commercial go-betweens, the mere factors of the farmers, mechanicks, and labourers, (for the merchants are no more) may not be afforded the means of outstripping all others in the fruits of affluence, and enabled to riot in every sort of luxury and extravagance, by incurring enormous debts through the instrumentality of bank-credit, which the hard-working men and women of the country have at last to pay with the earnings of incessant toil. This consequence may not and would not result from a free trade system. And if it can be shown that this consequence is more to be desired than diffused happiness and prosperity; if it can be shown that the encouragement of a mad spirit of commercial enterprize, totally regardless of the good old distinction between mine and thine, is better than steady industry and gradual accumulation, obtained without violating the principles of morals; if it can be shown, to the conviction of sober reason, that a magnificent city is better than a fruitful and well cultivated country, and a luxurious mercantile class better than a thriving population engaged in all the various branches of productive industry and useful occupation: if these things can be demonstrated, we say, then shall we at once and forever abandon the position we now maintain, and raise our voice, with those of the monopolists, in demanding from the federal government a national bank, and from the states a continuation and extension of their systems of exclusive chartered privileges. But till these points can be clearly proved, we shall continue to do battle on the side of freedom.


It is a very common thing to point to the rapid growth of our commercial marts, our vast enterprises of internal improvement, our canals, railroads, steamboats, spacious hotels, new cities springing up in the midst of deserted cornfields, and untenanted towns all over the country, as evidences of the wonderful effects of the monopoly bank credit system. We admit these are, in a great measure, the effect of that system. But we are of those who consider them, in the quaint phraseology of old Polonius, "effects defective."

Ill fares the land, to hastening ills a prey,
Where wealth accumulates, and men decay.


If the great end of the government is to promote the especial good of mercantile speculators, land speculators, and stock speculators, then indeed we shall receive these things as cogent proofs of the excellence of the monopoly bank credit system. But we are of that agrarian school of politicks which teaches that the sole duty of government is to extend equal protection to all classes of people, to secure them from mutual aggression, and beyond this to leave them to the influence of their natural desires and affections, to those influences of enterprise and competition which are called the laws of trade. The monopoly bank paper system does a great deal, it is true, for the speculative trader on anticipated means. It enables him to build a princely mansion, fill it with costly furniture, stock his cellar with the choicest wines, and load his board with the most luxurious viands. It enables him, without a dollar of actual property, earned by useful toil, to ride in a splendid equipage, repose on a couch of down, and realize all the advantages of prodigious wealth. But what does it do for the farmer who laboriously cultivates his few acres, and obtains, in return for continual toil, but enough to sustain him in the execution of his task? What does it do for the poor mechanick, whose lap-stone or anvil rings all day long with the click of his incessant hammer? What does it do for the poor labourer, who rises with the sun, and sweats, like a beast of burden, in its burning glare, till evening comes to dismiss him to a few hours of heavy slumber on his straw-filled pallet? Let us hear what praises there are to be bestowed on the monopoly bank credit system as it affects the condition of these people who, if government has privileges to give, are entitled, not less than the mere buyer and seller of silks and laces, or the blowers of stock bubbles, to an equal share.


We are no enemy to credit, as we have said a thousand times. We are no enemy to a free and natural system of credit between man and man, the result of mutual confidence, the exercise of one of the kindliest attributes of our nature, without which the frame of society would fall into dividual fragments, and be utterly destroyed. But we are an enemy to a monopoly credit system, which bestows all its advantages on a few, at the expense of the many; which raises to undue importance the undignified vocations of traffick, and depresses to unnatural lowness, as if they were intrinsically mean, the pursuits of agriculture and the mechanick arts. Your monopoly credit system fosters the city, but it ruins the country; it builds up lordly mansions for the keen-eyed sons of trade, but it leaves to irremediable dilapidation the cabins of the farmer and mechanick; it encourages luxury and profusion among the few, and spreads penury and vice among the many. It is a demoralizing system. It makes the acquisition of sudden wealth the prime object of general effort, and blunts the publick moral sense as to the means of gain. It deranges the whole economy of life, unsettles the natural balance of industry, and leads, with inevitable certainty, at periodical intervals, to such explosions as that which has now scattered ruin over our land.


Give us freedom, and leave credit to adjust itself to the wants of society, without political stimulus or restraint. Give us freedom, that the madness of speculation may not involve the government in all the fluctuations of trade. Give us freedom, that, while we boast of our equal rights, we may not in truth be subjected to a worse tyranny than was ever imposed on man by the feudal oligarchists of the middle ages. We have separated Church from State. It yet remains for us to separate Bank from State, and teach the world, by a new and sublime illustration, the invariable efficacy of THE VOLUNTARY PRINCIPLE.

· · · · · ·

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Plaindealer, August 12, 1837.


We hear much of the specie "basis" of our paper circulation. The way to ensure an adequate basis to banking institutions, is to give perfect freedom to the trade in money and credit, and leave competition and enterprise to act and react without legislative stimulus or restraint. The inevitable result of wholly emancipating credit from monopoly legislation, from that arbitrary system which affects "to preserve and regulate, but not destroy," would be to build up voluntary associations of great capital, that would immediately enter into banking business, under circumstances that would command the utmost publick confidence. When we say a great capital, we do not mean silver and gold exclusively but a capital of real, substantial, imperishable property, such as lots, farms, houses, ships, and the like. There never was a grosser piece of deception than has been practised upon the world by the financial cant about a specie basis of banking. No bank of discount and circulation ever had a specie basis. The Bank of Amsterdam has a specie basis, or rather a basis of specie, jewels, plate, and other articles of great and unvarying intrinsick value; but this is a mere bank of deposit, deriving its profit from the charge it makes for the safe keeping of the treasures entrusted to it, and liable for the redemption of no paper money but the checks drawn against those treasures. But to talk of a specie basis to any of our note issuing banks is preposterous. The basis of a thing is the foundation it rests upon. The foundation of our bank is credit, not money. Few of them have, in the best of times, enough specie in their vaults to redeem a tithe part of their obligations. To speak of that specie, then, as the basis of those institutions, is about as correct as it would be, were a pyramid inverted, to call its cope-stone a basis. If the laws of gravitation were not suspended for its accommodation, the pyramid, tumbling into fragments, would show that its basis was but a poor basis indeed; as our prostrate and shattered banks now show how poor and inadequate was the specie basis on which they pretended to stand.


The true foundation for a bank is actual property to an amount sufficient, under any contingency of trade, for the redemption of its notes. This would be a basis of some solidity, and such a basis competition would lead men to furnish, if our legislative master would throw open this business to the wholesome influences of freedom. The notes of private banking associations would, of course, be redeemable in specie, but this is a very different thing from having, or pretending to have, a specie basis.They would be redeemed in silver and gold, and silver and gold may always be procured for that purpose by those who have property. Silver and gold, like iron and lead, are merchandize, and can always be bought for a fair equivalent. A free trade bank, founded on the secure basis of real property, would never had occasion of more silver and gold than could be readily obtained, at a very small sacrifice, from the dealers in those commodities. The greatest drains of specie to which banks are subject, are occasioned by panick—by fear of their insolvency; but a free trade bank, founded on known security of adequate property, would never be liable to the suspicions and apprehensions which the least untoward circumstances in financial affairs are sure to arouse against institutions pretending to rest on a metallick basis, that every man, woman and child in the community know it is not sufficient to redeem a tenth part of their debts.*38

Notes for this chapter

In the free banking system of Scotland, which Leggett praises elsewhere, almost all banks operated with unlimited shareholder liability for bank obligations. They experienced no runs for specie, though their specie reserves were a small percentage of their note and deposit liabilities.—Ed.


End of Notes

50 of 108



Plaindealer, August 19, 1837.


The opposition party and the monopoly democrats are alike the friends of an exclusive banking system, but differ widely, as to the authority on which such a system should rest. The one side advocates the monarchical principle of a great central bank established by federal authority, and the other is equally strenuous in favour of the aristocratic principle of state institutions. They both agree in the most extravagant eulogiums of "the credit system," and consider it the source of all the blessings and advantages which we enjoy. They alike disclaim, with seeming enthusiasm, on the resources of wealth which our country contains, on the activity of its industry, the boldness of its enterprise, and the fertility of its invention, ever on the stretch for new and speedier modes of gain; and they alike demand, with an air of triumph, what has caused these resources of wealth to be explored, what has given energy to industry, confidence, and enterprise, and quickness to the inventive facilities of our countrymen, but the happy influence of "the credit system?" It is this, they tell us which had dug our canals, constructed our railroads, filled the forest, and caused the wilderness to smile with waving harvests. Every good which has happened to our country they ascribe to the credit system, and every evil which now afflicts it they allege may be effectually remedied by its aid. But they differ widely as to the mode of remedy; a cordon of state monopolies being the object aimed at on the one side, and a great central money power the darling project of the other.


For our own part, we are free to acknowledge that if we were confined to a choice of these evils we should not hesitate to decide in favour of the central bank. We are not alone in this sentiment. There are myriads and tens of myriads of truehearted democrats in the land who, if the unhappy alternative were alone presented to them of a federal bank or a perpetuation of the system of exclusively privileged state monopolies, would decide promptly and earnestly in favour of the former. Better a single despot, however galling his rule, than more galling tyranny of a contemptible oligarchy. While a federal bank is not more dangerous to the principles of political liberty, its influence would be less extensively pernicious to public morals. They who live in the purlieus of a monarch's court may draw out but a sickly existence; but the moral health of a whole country suffers, when it is under the domination of a league of petty tyrants who fix their residences in every town, and taint the universal atmosphere with the contagion of luxurious example. Bad as is the monarchical principle of a federal bank, the aristocratic principle, which would distribute the same tremendous power among a thousand institutions scattered throughout the confederacy, is worse. Mankind suffered heavier oppression under the rule of the feudal barons, than they had ever before suffered when the political power was centered in the throne. But they arrived not at the rich blessings of freedom, until monarchical and feudal tyranny were both overthrown, and the doctrine of divine right and exclusive privilege gave way before that of universaI equality.


He who compares the financial history of Europe with its political, will be surprised to find how perfect is the analogy between them. Her ingenious and philosophical mind would be well employed in running the parallel. It would be found that political revulsions, as well as commercial, are the inevitable result, sooner or later, of conferring exclusively on the few privileges that belong, by nature, in common to all; and that all violations of the holy principle of equal rights, while in politics, they produce tumults, insurrections, and civil war, in economy, exercise a corresponding influence, and are followed by panic, revulsion, and a complete overthrow of all the established commercial relations of society.


The fundamental maxim of democracy and of political economy is the same. They both acknowledge the equal rights of all mankind, and they both contemplate the institution of "a wise and frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labour the bread it has earned." The preservation of man's equal rights is the be-all and the end-all of the natural system of government. The great maxim which acknowledges human equality is, in the political world, what gravitation is in the physical—a regulating principle, which, left to itself, harmoniously arranges the various parts of the stupendous whole, equalizes their movements, and reduces all things to the most perfect organization. Monarchy, aristocracy, and all other forms of government, are founded on principles which deny the equal rights of mankind, and they all attempt to substitute an artificial system for that of nature. The effect is sometimes to produce a seeming increase of prosperity for a time; but nature avenges her violated laws sooner or later, and overthrows the unsubstantial fabric of presumption and pride.


The great end which is alone worthy of the efforts of the champions of democratic and economic truth, is to institute the natural system in all matters both of politics and political economy. Let them aim to simplify government, and confine it to the fewest purposes compatible with social order, the mere protection of men from mutual aggression. We need but few laws to accomplish this object. We need particularly few in regard to trade. What is the whole essence and mystery of trade, but an exchange of equivalents to promote the convenience of the parties to the barter? Leave the terms, then, to be settled by men's own notions of mutual convenience and advantage. There is no need of political interference.


Extreme simplicity is usually considered as the condition of barbarism, before man has raised himself by science and art from the degradation of mere animal nature. But the saying that extremes meet is as true in politics as in any of its applications. Simplicity may be the goal, as well as the starting-point, of social effort. Is it not a fact verified by the observation of every man of cultivated mind, that in religion, in literature, in art, and in the conventional manners of a community, simplicity and refinement go hand in hand? As society advances it throws off its cumbrous forms and ceremonies; it follows more and more the simple order of nature, which does nothing in vain, but carries on its stupendous operations by the directest processes, linking cause and effect, without superfluous complication, and adapting its means with the utmost exactness to the end. Compare the nations of the earth, and see if simplicity and refinement are not always found together, in whatever respect the comparison is instituted. In architecture, why are the gorgeous edifices of Constantinople, glittering with "barbaric pomp and gold," deemed inferior to the plainer structures of the cities in western Europe? In literature, why are poems crowded with oriental splendour of imagery, and heaped with elaborate ornaments of diction, thrown aside by the reader of taste for those which breathe the unstudied sweetness of nature? In manners, why do those seem the most refined which seem most truly to flow from the promptings of native amenity and elegance of soul? It is because that is most excellent which comes nearest to the simplicity of nature. Nature does nothing in vain.


Simplicity in government is not less a proper object of those who wish to raise and refine the political condition of mankind. Look at those governments which are the most complex, and you will find that they who live under them are the most wretched. As governments approach simplicity, the people rise in dignity and happiness; and all experience as well as all sound reasoning on the certain data of induction, bears us out in the conclusion, that when they conform most nearly to the simplicity of nature, then will mankind have reached the utmost bound of political prosperity. Then will the cumbrous artificial and arbitrary contrivance of "the credit system," be abandoned, for the harmonious and beneficial operation of natural, spontaneous credit, the free exercise of confidence between man and man.

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Plaindealer, August 26, 1837. Title added.


It is curious to observe what studied and elaborate panegyricks are bestowed by the aristocratick press generally on what they term "the credit system." They seem to be fully impressed with the truth of the sentiment, "interdum fucata falsitas, in multis est probabilior, sape rationibus vincit nudam veritatem."*39 It is for this reason they invent sounding names, and use such a profusion of false colours, to deck out a system, which, if called by its proper appellation, and shown in its true, undisguised features, would repel every body by its ugliness. What is their credit system but a system which bestows exclusive privileges on the scheming few, at the expense of the industrious and hard handed many? Credit, we admit, in the broadest terms, is a useful and beneficial agent in carrying on the great and various intercourse of society. We avow ourselves the friend of credit—so much its friend, that we are unwilling to see it cramped by arbitrary restrictions. We would have it left to the unbounded freedom of nature. We would have it, like the sunshine and dew of heaven, to dispense its blessings equally upon all. We would have it, like a bounding river, to flow wither it listeth in its natural channels, not dammed up between artificial barriers, and forced to run only in particular directions, fertilizing the lands of a favoured few, and leaving the rest to be parched with drought, or lie in sterile loneliness. We are the friend of credit, for the same reason that we are the friend of any other generous impulse or affection of the human heart, and we would no more regulate its action by law, than we would that of hope, benevolence, friendship or love. If by "the credit system," free spontaneous, natural credit is meant, then we are the friend of the credit system; but if, on the other hand, a system of legislation is meant, by which exclusive privileges of exercising credit, are conferred on a set of men and prohibited to the rest of the community, then are we its determined and unappeasable foe. We are for leaving capital free, and credit free. We are, in all things, for trusting to the glorious principle of freedom—that principle which recognizes the equality of the rights of all mankind, and considers government as having no legitimate functions beyond the mere preservation of those rights. "There is no more reason," says Raymond in his Political Economy,*40 "why a man, or body of men, should be permitted to demand of the publick interest for their reputation of being rich, than there would be in permitting a man to demand interest for the reputation of being wise, learned, or brave. If a man is actually rich, it is enough for him to receive interest for his money, and rent for his land, without receiving interest for his credit also." We oppose this sentiment not less strenuously than we oppose the opposite system which would annex peculiar privileges to "the reputation of being rich." We would neither confer upon men by law nor deny to them the right of receiving interest on their credit. We see no reason why a man or body of men should not be permitted to demand interest for their credit, as well as for their actual means, provided the rest of men are left equally free to give or refuse that interest as they please. If you go to a wealthy person, and ask him to lend you his promissory note for a given sum, telling him that, by reason of his known wealth, his note will answer all the purposes of money to you, he has a perfect natural right, and we can perceive no good argument in favour of that right being interdicted, to charge you a price for the accommodation he affords by the loan of his credit.—The true credit system is the free trade system. Leave credit free, and the relations of demand and supply will "regulate and preserve," far better than all the quackery and tyranny of special legislation.


But when we pass beyond the ground of mere permission to charge an interest on credit, and come to that of express and exclusive legislative authority to do so, the question assumes a very different shape. With this limitation we wholly agree with the writer. What reason is there, which has not its foundation in palpable injustice, why any particular set of men should be specially privileged by law to issue their promises to pay, their mere acknowledgements of indebtedness, and force the community to pay an interest of seven per cent, not on the money they have, but on that which they have not, on their mere credit? It may be said they do not force the community to do so. They virtually force the community to do so, however, by reason of the false character which their exclusive privileges give to the notes they issue. The law considers those notes as money; the government receives them as such, and becomes, in some measure answerable for their punctual payment on demand; and thus they are necessarily received into general circulation as money. This is a gross and crying injustice.


If the money business of the community were left to take its natural course, does the reader suppose that the principal financial stations would be filled, as many of them now are, by men, not of wealth, not of financial talent nor experience, but mere party electioneerers, mere brawlers at pot houses and ward meetings? Does he suppose, under a system of free trade, that mere fidelity to "party usages," the mere fact of a certain equivocal sort of political influence, the mere having some dozens or some hundreds of voters at one's heels, would constitute such ability to transact banking business, as would be certain to give those possessing such qualifications the confidence of the community? What made Cornelius W. Lawrence, and Gideon Lee, and George D. Strong, and Walter Bowne, presidents of banks? Were they appointed solely in reference to their ability in financial transactions, or was the office given to them as a reward for party services and sacrifices? These are plain questions, but they relate to proceedings of the utmost notoriety, and on such a subject it is needless to mince matters. The time has arrived for plain questions, and plain answers too, and the argumentum ad hominem is sometimes a very useful division of logick. We have too long submitted to a system of banking founded on political capital, instead of money capital, and hedged around with exclusive privileges, instead of being left open to the wholesome influence of the freest competition. If we do not wish to be slaves forever, we must no longer deceive ourselves and others by honeying affairs over with sweet words. "Let the candied tongue lick absurd pomp;" but the honest tongue should speak out boldly, and call things by their right names.


If the political services of Mr. Lawrence, or Mr. Lee, or Mr. Strong, or Mr. Bowne, were of that magnitude and general importance as to entitle them to publick rewards, let them be rewarded openly and liberally, and we shall never utter a word in censure of the act. We give, from the coffers of the federal government, a beggarly annual stipend to the remaining soldiers of the revolution. The only complaint we have ever heard on this account is that the country is so parsimonious in its gratitude. The great body of the people would be willing that a much larger sum should be given to the remnant of the revolutionary veterans, in token of the sense entertained by the country of their heroick services and sacrifices. A similar sentiment would govern them no doubt in relation to Messrs. Lawrence, Lee, Strong and Walter Bowne, if it were distinctly pointed out in what way the signal patriotism of those worthies has been displayed. But they would still ask, and with good reason, that the reward, or token of gratitude, or whatever it might be called, should be bestowed openly and without disguise or indirection. Such a course is due alike to the character of the state, and to that of the patriots for whom the publick purse is opened. The reward, and the illustrious services for which it was rendered, should be inscribed in enduring letters on the muniments of our state, so that all future times might profit by the example of patriotism exhibited by Messrs. Lawrence, Lee, Strong, and Walter Bowne, and by the example of gratitude exhibited by their countrymen. But we protest against the creation of exclusive privileges for the purpose of paying these men for their political services. We protest, in the name of freedom, against such a violation of its fundamental principle. We protest, in the name of the worthies themselves, against fobbing them off with so poor and equivocal an acknowledgement of their claims on legislative munificence.


But gesting apart—for it is a subject which hardly admits of gest—we desire once more to raise our voice against monopoly legislation on the subject of banking. Our state banking system is an odious system of exclusive privileges, dangerous, in their very nature, to the principles of political, as well as gross violations of the plainest fundamental maxims of economick freedom. It is a system of exclusive privileges built up for the especial reward of party services. It is instituted to provide sinecures for a band of gentlemen pensioners. It was conceived in the stews of legislative prostitution, born in corruption, and smells to heaven with the rank odour of hereditary rottenness. How long will freemen—or men claiming to be free—consent to have this bastard offspring of fraud and folly for their master? How long will they consent to be the cringing vassals of a feudal system instituted for the support of such a contemptible baronage as our paper-money lords?

Notes for this chapter

Roughly, "it stands to reason that painted falsehood, in much it is more likely, occasionally conquers the naked truth.''—Ed.
A reference to Daniel Raymond, The Elements of Political Economy, the second edition of which was published in 1823.—Ed.


End of Notes

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Plaindealer, September 2, 1837.


Our next number will contain the Message of the President to Congress. We have reason to feel very confident in the expectation that this document will strenuously recommend the complete separation of the federal government from the bank and credit system. This great scheme, we observe, is assailed, in advance, with a good deal of violence by the opposition newspapers; but in their "plentiful lack" of arguments, they for the most part vent their spite only in epithets. Acting upon the sentiment that there is much in a name, they call this proposed separation of bank and state a plan to institute a Treasury Bank; and they discourse with a good deal of well affected apprehension of the evils which must flow from placing the sword and purse in the same hands. This cant about the sword and the purse is the merest declamation that ever demagogue employed to gull the minds of a credulous auditory, and never was appellation more misapplied than that of Treasury Bank to the scheme which aims to separate the government from all the injustice, favouritism, casualties and fluctuations of the banking system. The effects of the policy would, in all respects, be the very reverse of those which are brought about by our wretched and tyrannous paper money system.


If the government of the United States should absolutely disconnect itself, in every way, from the banking and credit system, receiving and disbursing as money, nothing but the money of the Constitution, one of the necessary consequences would be the continual circulation of an under currency of silver and gold sufficient for all the most ordinary purposes of a circulating medium. Should the principal commercial and agricultural states, then, or even this great state alone, (which is the natural centre of the commercial and monetary concerns of the country) entirely repeal all restraints in the trade in money and credit, banking business, as a natural and inevitable consequence, would immediately be undertaken by private enterprise, and this enterprise would be subject to the regulation of unbounded competition. That competitor, whether an individual or association, who should satisfy the publick of the possession of the largest amount of actual property answerable for his obligations, would naturally enjoy the greatest confidence. It would be the interest, therefore, of all entering into banking business, to give publick evidence of their possessing ample property, liable, in the event of any miscarriage, for the redemption of their issues. Those who did not give such evidence would not enjoy publick confidence. Their notes would not be received by other bankers, nor by individuals generally, except at a discount; for every trader and mechanick would have it perfectly at his option to take nothing but silver and gold, since, by reason of the government recognizing nothing else as money, silver and gold would always freely circulate.


One check on over issues would consist, partly, in the prudence and foresight of those bankers who, having a large aggregation of actual capital, would desire to conduct their business on safe banking principles with the sole purpose of realizing a moderate and steady profit on investment. Whenever other bankers, of a more speculative turn, should show a disposition to extend themselves too far, the prudent ones, both for their own safety, and from the natural rivalry of trade, would be led to discredit the notes of the former, which, in consequence of this repudiation, would immediately fall below par, and thus force those issuing them to retrench.


Another check would be found in the fact, that real money and paper money cannot circulate together. One invariably and inevitably drives the other away. But as there is an absolute necessity, in the state of things supposed, for the circulation of silver and gold to an amount necessary for all the ordinary purposes of daily traffick; so consequently it would be paper that would be expelled. The government would keep an amount, equal to its annual expenditures, say some thirty or forty millions of dollars, in continual and active circulation. It would receive nothing else for lands, customs, postages, or taxes in any shape, and would pay nothing else to the judiciary, the army and navy, publick contractors, workers on the publick roads, fortifications, lighthouses, and, in short, to those engaged in every branch of publick service. These sums would necessarily perform a circuitous circulation between the time of disbursement and of repayment into the publick treasury; and here would be a hard money currency, which, to its extent, would banish paper. This would constitute another check on over issues.


Banking business, under such a free trade system, would naturally confine itself to commercial operations. The sagacity and prudence of individual enterprise, when its own actual means are jeoparded by extravagance, would lead to that result. The notes of bankers would, as a general rule, represent only actual mercantile transactions. They would not be loaned to speculators, as now, to enable them to purchase lands in the moon, or under water "deeper than did ever plummet sound." If they loaned their notes to speculators it would be on real security, and speculation can never produce great publick evil, as long as it does not extend beyond that basis.


That there would be over issues to some extent, and occasional revulsions, under a system of perfect freedom of trade, and perfect disconnexion of bank and state, is highly probable. There are revulsions in nature, and we cannot expect that there should be none in trade. The political circumstances of nations, the instability of seasons, war, pestilence, and famine, are all causes which may jar the great machine of commerce, and throw some of its parts into extreme disorder. But these revulsions would be lighter and less frequent than those which happen under the bad system of exclusively privileged banking, which is wholly artificial, and at utter variance with the natural mechanism of trade. The revulsions of a free trade system would not be political revulsions, they would not provoke to such mad exasperation the bad passions of men, and set a whole people in the deplorable attitude of two opposing parties, surveying each other with the scowl of mutual hatred, instead of the glances of fraternal kindness.

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