A New Banking System / The Needful Capital for Rebuilding the Burnt District

by Lysander Spooner

On the other hand, it would be impossible to have so much as four hundred millions, ($400,000,000)—one fiftieth of the amount before mentioned—of so called specie paying paper currency; that is, a paper promising to pay specie on demand; and constantly able to fulfil its obligations.

It is of no appreciable importance that a paper currency should be payable on demand with specie. It is sufficient, if it be payable according to its terms, if only those terms are convenient and acceptable. For then the value of the currency will be known, and its contracts will be fulfilled to the letter. And when these contracts are fulfilled to the letter, then, to all practical purposes, specie payments are maintained. When, for example, a man promises to pay wheat, either on demand, or at a time specified, and he fulfils that contract to the letter, that, to all practical purposes, is specie payments; as much so as if the promise and payment had been made in coin. It is, therefore, the specific and literal fulfilment of contracts, that constitutes specie payments; and not the particular kind of property that is promised and paid.

The great secret, then, of having an abundant paper currency, and yet maintaining all the while specie payments, consists in having the paper represent property—like real estate, for example—that exists in large amounts, and can always be delivered, on demand, in redemption of the paper; and also in having this paper issued by the persons who actually own the property represented by it, and who can be compelled by law to deliver it in redemption of the paper. And the great secret—if it be a secret—of having only a scanty currency, and of not having specie payments, consists in having the paper issued by a government that cannot fulfil its contracts, and has no intention of fulfilling them; and by banks that are not even required to fulfil them.

It is somewhat remarkable that after ten years experiment, we have not yet learned these apparently self-evident truths.

The palpable fact is that the advocates of the present "National" currency system,—that is, the stockholders in the present "National" banks,—do not wish for specie payments. They wish only to maintain, in their own hands, a monopoly of banking, and, as far as possible also, a monopoly of all business depending upon bank loans. They wish, therefore, to keep the volume of the currency down to its present amount. As an excuse for this, they profess a great desire for specie payments; and at the same time practice the imposture of declaring that specie payments will be impossible, if the amount of the currency be increased.

But all this is sheer falsehood and fraud. It is, of course, impossible to have specie payments, so long as the only currency issued is issued by a government that has nothing to redeem with, and has no intention of redeeming; and by banks that are not even required to redeem. But there is no obstacle to our having twenty times as much currency as we now have, and yet having specie payments—or the literal fulfilment of contracts—if we will but suffer the business of banking to go into the hands of those who have property with which to redeem, and can be compelled by law to redeem.

It is with government paper, and bank paper, as it is with the paper of private persons; that is, it is worth just what can be delivered in redemption of it, and no more. We all understand that the notes of the Astors, and Stewarts, and Vanderbilts, though issued by millions, and tens of millions, are really worth their nominal values. And why? Solely because the makers of them have the property with which to redeem them in full, and can be made to redeem them in full. We also all understand that the notes of Sam Jones, and Jim Smith, and Bill Nokes, though issued for only five dollars, are not worth two cents on the dollar. And why? Solely because they have nothing to pay with; and cannot be made to pay.

Suppose, now, that these notes of Sam Jones, and Jim Smith, and Bill Nokes, for five dollars, were the only currency allowed by law; and that they were worth in the market but two cents on the dollar. And suppose that the few holders of these notes, wishing to make the most of them, at the expense of the rights of everybody else, should keep up a constant howl for specie payments; and should protest against any issue of the notes of the Astors, the Stewarts, and the Vanderbilts, upon the ground that such issue would inflate the currency, and postpone specie payments! What would we think of men capable of uttering such absurdities? Would we in charity to their weakness, call them idiots? or would we in justice to their villainy, denounce them as impostors and cheats of the most transcendent and amazing impudence? And what would we think of the wits of forty millions of people, who could be duped by such preposterous falsehoods?

And yet this is scarcely an exaggerated picture of the fraud that has been practiced upon the people for the last ten years. A few men have secured to themselves the monopoly of a few irredeemable notes; and not wishing to have any competition, either in the business of banking, or in any business depending upon bank loans, they cry out for specie payments; and declare that no solvent or redeemable notes must be put into circulation, in competition with their insolvent and irredeemable ones, lest the currency be inflated, and specie payments be postponed!

And this imposture is likely to be palmed off upon the people in the future, as it has been in the past, if they are such dunces as to permit it to be done.