That the people of the United States have reached the degree of science and civilization proper to the creation of such a currency is not yet evident; but there is reason to believe that they will take the lead in this as they have in some other actions indicative of advance,—that they will erelong understand the impropriety of attempting to measure value by means of merchandise, that is, by a means that is subject to variations of quantity,—a conclusion that may not appear obvious in this aspect, but it will be readily understood that in commerce a variable measure is absurd in theory and intolerable in practice. Yet this is precisely parallel with using gold, or any other article of merchandise, as a measure of value.
The elements of currency are value, a commercial relation derived from persons, and quantity, a property of things derived heretofore from the precious metals or their representatives. But this quantity is inconstant, and to use an inconstant quantity as a measure, is absurd. The quantity of the currency may, however, be rendered constant, both positively and relatively, by deriving it wholly from persons,—that is, by giving it an invariable quantitative relation to the population: a rule that is both simple and easy of practice, because value is already nominated and numerated, and the population is already sufficiently well known. The divisions of the currency should be the simplest possible, that is, binary, and the definitions of the parts should be as simple as those of coins.
With regard to the legal-tender currency, so called, it serves well for temporary use,—much better, indeed, than any of its predecessors; and as long as its promises are ignored, and as long as its quantity is not increased faster than the increase of the population, it is practically a value-currency, resting on its own inherent right of use, with the exception of the limitation defined by the law of legal tender.
One of the duties of the National Government is to supply the people with a currency. That this is to be used is sufficiently obvious; and that, being intended for use, and authorized by law, it has the right of use, is equally obvious; there is, therefore, little need of a law of legal tender to give it that right. Accordingly, however affirmative such laws may be in form, their intention is not so much to bestow as to withhold.
That the currencies of the world have great defects is so well known that the statement of the fact would be superfluous, except as introductory to an attempt to ascertain the nature of those defects, and to propose an adequate remedy,—an attempt suggested by the rapidity with which the people, profiting by their present tuition, are learning wisdom by the things which they suffer in the defence and enforcement of right.
Of a specie-currency the defect is want of constancy. This defect, derived from its material element, has a particular and a general aspect. The particular is the reduction of the quantity of metal in coins. The Roman money-unit—the as—consisted originally of a pound of bronze; that of England—the pound sterling—and that of France—the livre—consisted each of a pound of silver. The first Punic war caused the pound of bronze to be reduced to two ounces; the second caused its further reduction to half an ounce; and what now is the weight of the pound sterling? where now is the livre? and what of coins generally? Like these individuals, types of the class, they depreciate. The general aspect is, the occasional reduction of the quantity of coin in circulation. The merchant, believing it to be more immediately profitable, exports the coin,—that is, finding the currency to consist of an article of merchandise that suits his immediate purpose, he treats it accordingly,—though by so doing he causes a rise of prices where he buys and a fall where he sells, and to that extent nullifies his own business-intentions, and deranges those of others. If this derangement be sufficient, hoarding commences; and as this action multiplies itself, the currency is soon reduced to its minimum quantity, and business of every kind with it, until the industry of the country is reduced to a state of atrophy, until a mere commercial derangement is converted into an immense loss; because the rise in the value of the currency, due to its scarcity, causes a corresponding fall in the value of all the wealth of the country, and thus checks industry and stays production.
These defects are not pointed out for the purpose of preventing the adoption of a specie-currency. There is no probability of such a currency ever prevailing in this country, except in the neighborhood of the mines, and there only for a time. Much is said about it, as is usually the case with subjects that are little understood; but the driblets of specie that may be seen occasionally are not a currency; neither are those larger quantities held by banks and brokers. Indeed, a specie-currency in the presence of bank-notes is an impossibility, because the notes proclaim their own inferiority; consequently, the specie is retained and the notes circulated. Yet, the operations of the mint are continued, with the avowed object of creating a specie currency. This practice is, however, of some use. It serves to show that mind and matter are governed by the same general laws,—that either being put in motion wilt continue to move in the given direction, though the original intention may have ceased. That the original intention of coining has ceased when the use of the precious metals is confined almost exclusively to ornamentation and security is a plain case.
The National Government issues coin for currency, and the States create banks, with the privilege of using the coin as security, and of issuing in its stead a larger quantity of notes. These, diluted in value to the extent of the difference, form, with the authority derived from State laws, a species of currency that, because of its great convenience, derived from its representative character, has become, notwithstanding its defects, one of the greatest powers known to man. The defects of a bank-note currency are, that, being based on specie, it is necessarily inconstant, and being insufficiently based, it is necessarily insecure.
The precious metals are desired for three distinct uses,—ornamentation, security, and currency; they have, therefore, three distinct elements of value. By the creation of banks a portion of the currency is converted into security, and another portion undergoes the same change by reason of the insecurity of bank-notes. Thus, by the influence of banks, the precious metals are deprived of most of the value they had as currency, the specie and the notes depreciating together, and maintaining an equilibrium of value, until the exportation of the former to countries where its value is not thus impaired becomes profitable. Then, if the notes continue to depreciate, as is sometimes the case, the equilibrium is destroyed, and specie commands a premium. This causes the remainder to be hoarded, so that it then commands an additional premium as security, in view of the increasing insecurity of bank-notes.
A result of the inconstancy of a bank-note currency is exhibited in each of its several states,—as a diluted, as a depreciated, and as an irredeemable currency; but more especially in this its third state. But as it is not intended to be redeemed, except to a very limited extent, and as these several states are proper to it, and differ only in degree, it will be sufficient to point out the final result or climax. This is depreciation in relation to specie, because of the demand for that article, first for exportation, and then for security; and, at the same time, appreciation in relation to every other article of merchandise, because of the reduction of its own quantity, necessary to the restoration of the lost equilibrium,—necessary to the reëstablishment of its essential element, credit. Thus it appears that the results of a bank-note currency are similar to those of a specie-currency, but as much more disastrous as its expansions and contractions are greater and more sudden.