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before the House, at the next and each successive session of Congress, copies of such statements or returns, showing the capital, circulation, discounts, specie, deposits, and condition of the different stare banks and banking companies, as may have been communicated to the legislatures, governors, or other officers of the several states within the year, and made public; and when such statements cannot be obtained, such other authentic information as will best supply the deficiency,” the officer to whom the duty was entrusted found these returns and sources of information exceedingly imperfect, both incomplete and inexact; of which the evidence furnished by the annual reports made since 1834 is unfortunately only too conclusive. The returns of the banks in different states are made in different months from January to December, affording no certainty as to the amount of circulation on any one day of any one year, and more especially rendering their reports of specie wholly unreliable; the weakest and worst.of them being at liberty to put a parade dress upon their condition to answer the exigencies of their affairs. Apart from all honest uncertainties incident to this manner of reporting, it is well known that returns of the same specie funds were in many instances duplicated, counted once by the weaker bank having a specie credit in the stronger, and by the latter as coin actually in its vaults, with all the other manipulations of accounts and statements to which irresponsible corporations are known to resort. The only confidence that these returns deserve is, that they never overstate their liabilities or understate their resources, and that when they give their circulation on a stated day, or an average for any period, they are sure to put the figure at its minimum estimate. Moreover, the Secretary of the Treasury, in 1855, says of the data afforded : In some years their returns have been very imperfect, the confusion that reigned among them being such that they apparently hardly knew how to make returns.”
For the period previous to 1834 we have no documentary publications, nothing but estimates of experts, which, however, may well be as worthy of reliance as the nature of the enquiry they were engaged in permits. Those given for the earlier years of our banking history are estimates by Samuel Blodgett, who published his " Economica” in 1806; for the years between 1806 and 1830 we have the authority of Mr. Gallatin, Mr.Woodbury, and Mr. Crawford, Secretaries of the Treasury. The annual reports of the Treasury began in 1835.
A brief history of the bank circulation since 1790 will answer the purpose for which it is here presented: In 1790 there were but four banks in the Union, having an aggregate capital of $1,950,000; in 1804 there were fifty-nine banks in operation, with an aggregate capital of $39,500,000.
İt is believed that but a small part of the capital of the state banks was paid up. The United States Bank was established in 1791, with a capital of $10,000,000, and its paid-up capital probably exceeded that of all the state banks together. It is known, also, that so lately as the year 1800 coin constituted the bulk of the currency, banknotes being rarely seen south of the Potomac or north of the Alleghanies.
In the year 1808 the estimated specie in the country exceeded the amount of banknotes in circulation. The return made to the Treasury by the United States Bank in that year gave its specie at $15,300,000, its circulating notes at $4,787,000; and another return made in 1810 did not materially vary in these respects. But the policy of the New England banks for some time previous to 1808 was widely different. They commenced the expansion of their issues probably in 1803, and pushed it to the extreme limit of their credit. so that in 1808 and 1809 a grand explosion occurred, by which most of them were damaged and some of them totally destroyed.
The abundance of specie existing before the year 1808 is accounted for by the long continuance of the wars in Europe between the maritime nations, which threw the carrying trade of the South American mines into our hands. In that year Napoleon invaded Spain ; England became her ally and protector, and the long interrupted direct trade between England and the Spanish colonies in America was resumed. At the same time our embargo law, followed by the act of non-intercourse, and finally by war with England, from June 1812 till December 1814, prevented the export of United States produce to foreign countries, and drained away the precious metals after the accidental supply had been cut off. The resulting scarcity of coin, and the increased demand for currency required by the exigencies of the war, was, as is well known, supplied by an excessive issue of banknotes, which was followed by a suspension of specie payments by all the banks south of New England in September, 1814. The check of redemption removed, the expansion went on, and seems only to have been accelerated by the proclamation of peace in February, 1815. The bank issues, estimated at thirty
millions in 1811, before the war, and at forty-seven millions about the time of the general suspension of specie payments, are put by Mr. Gallatin at seventy millions in 1816, and by Mr. Crawford, with probably a closer approximation to the truth, at ninety-nine millions. An inflation so prodigious occurring in time of peace,
and the consequently diminished rapidity of business circulation, was necessarily followed by a correspondingly heavy collapse. A population of not above nine millions, with a paper currency of eleven dollars per capita in their hands, or fully double the amount required by the condition of industry and trade, the whole mass resting upon a specie basis of about twenty millions, or one dollar for the redemption of five, could not escape a revulsion alike extensive and disastrous. The consequence was the most appalling distress which the country had ever seen, and which even to this day is without a parallel. The root of the evil was in the attempt of the government to carry on an expensive war by loans of bank credits and banknotes, thereby making irredeemable paper a national currency, assisting in its circulation, and encouraging its expansion. A national currency, such as our “greenbacks,” or the notes of the national banks, based upon United States bonds, rests upon the faith and resources of the nation; and, however much it may be temporarily depreciated, is yet redeemable. But a corporation currency, rest
, ing only upon the debts of bankrupt borrowers, is utterly baseless, and its total excess is simply worthless.
The fluctuations in the amount of paper currency which led to and resulted from the great revulsion of this period, according to the estimates of Mr. Crawford, Secretary of the Treasury, in 1820, stood thus : Banknote circulation in 1811.....
$29,000,000 1813..62,000,000 to 70,000,000 1815..99,000,000 to 110,000,000
1819..45,000,000 to 53,000,000 Taking the lowest figures in these estimates, they would give a per capita circulation in 1811, before the war, of $3.87 ; in 1813, before the suspension of specie payments, $7.72; in 1815, at the close of the war, $10.58; in 1819, immediately after the general bank crash, $4.81. But it is well known that during the year 1816 the banks continued to issue abundantly, and that floods of unchartered currency besides were poured out in notes of all denominations, from six cents up to five and ten dollars. The banknote reporters of the time give lists of notes in circulation by chartered and unchartered companies and individuals about equally numerous. After the 20th of February, 1817, Con- . gress prohibited the receipt of inconvertible paper in payment of public dues. About the middle of 1818 the contraction began, and at the end of 1819, the banks had settled into what “Nile's Register” calls “a state of regularity;" meaning that the survivors had reduced their circulation to such an extent that, for the purpose of remittance, their notes or drafts on the metropolitan banks were worth a fraction more than silver coin, which was itself very scarce,
, owing to the preparation then making by the Bank of England, and the imports of specie by Austria and Prussia, for the replacement of their paper currencies with specie. At this time lands in the interior and agricultural products were for sale at one-third the price they commanded when the unusual indebtedness of the people was made, and at half the prices readily obtained in 1808-10.
In the period 1820 to 1830 the increase of banks and of paper money was not in the aggregate considerable, but the conduct of many of these ungovernable institutions was such that in the decade several ruinous fluctuations occurred in different districts of the country. We have no statenient of the condition of the banks and the amount of currency afloat during this term, but we know that the years 1826-7-8 were marked by convulsions of the banks of New York, Georgia, South Carolina, North Carolina, and Rhode Island, with heavy failures among the manufacturers of New England, and widespread distress, insolvency, and litigation all over the country. All of which means not, perhaps, excessive issues of bank currency, but a general and disastrous disturbance of monetary affairs, which neither the state banks nor the United States Bank, then in full operation, with its capital of thirty-five millions and its credit worth still more, was able to remedy.
Mr. Gallatin puts the circulation of 1830 at sixty-one millions, a per capita average of $4.74, something too small, perhaps, for the demands of business; but the paper money of this date was helped by a considerable excess of imports over the exports of specie in the two preceding years, amounting to above eight and a half millions of dollars ; the great increase of the home supply of manufactures, protected by the high tariff cf 1828, and the reduction of the exports of specie to China and the East Indies by the use of bills drawn
by the United States Bank on England for the accommodation of our merchants, which temporarily deferred the export of specie.
But in the ensuing six years the banks went wild again. Catching the earliest hopes of reviving prosperity, they extended their issues from sixty-one millions in 1830 to one hundred and forty-nine millions in 1837. Their specie, in the meantime, increased but sixteen millions (from twentytwo to thirty-eight millions). The average circulation for this year of enormous expansion affords $9.52 per capita, while that of great Britain and Ireland in the same year stood at $6.47. It stood at thirty-two cents per head above that of England and Wales, with their two-fold annual products of industry at that date, and correspondingly larger requirements of currency. The consequence was a suspension of payments by all the banks, including the mammoth United States Bank, in May, 1837, as if by common consent. During the residue of the year specie bore a premium at Philadelphia of various rates up to twelve per cent., and the bank paper of the different states was at various and fluctuating rates of discount, in some instances as high as twenty per cent., not in specie, but in the paper of the Philadelphia banks.
Favored by an excess of imports of specie over exports in the two years ending September 30, 1838, amounting to nearly twenty millions, the banks of New York and New England resumed specie payments in May, 1838. The banks of Philadelphia made three resumptions and as many suspensions before February, 1841; and did not effectively resume until March, 1842. The notes of the banks to the south and west of New York were at various rates of discount-one, five, ten, fifteen, and even to eighty per cent.; and specie at various rates of premium up to fourteen per cent., as measured in Philadelphia paper, which was at the time inconvertible. The reaction of this monetary crash is shown, as in that of 1819, by the fact that the circulation, which amounted to one hundred and forty-nine millions in 1837, was reduced in 1843 to fifty-eight millions—an average per capita of the population of $3.06, as against $9.52 in 1837. This is fluctuation with a vengeance.
The next general explosion of our paper money system occurred nine years after the California gold mines were fairly opened. From July 1, 1848, to July 1, 1857, California had furnished to the Mint and branches $383,873,100; and the mines of Virginia, North Carolina, South Carolina,