Merchants' Magazine and Commercial Review

PRESENT SYSTEM OF THE FEDERAL TREASURY-WORKING OF THE ACT-OBJECTS OF THE BILLSOURCES FOR SUPPLY OF THE METALS-PLACES OF IMPORT-MINT AT PHILADELPHIA-LEGAL TENDER-DEMAND FOR COIN-AMOUNT OF REVENUES ACCUMULATION OF SPECIE-IMPORTS ADVANCE THE DUTY-ACCUMULATION OF SPECIE SUPPOSED AN EVIL-DEFICIT IN REVENUETREASURY PRINCIPLE APPLICABLE TO STATES--ACT OF OHIO-REVENUES OF OHIO--DISTRIBUTION OF COIN--REVENUES OF THIRTY STATES WHOLE AMOUNT TO BE COLLECTED-BANK-NOTES IN CIRCULATION-SMALL NOTES-MODE OF ASCERTAINING THE SPECIE IN THE COUNTRY-TABLE OF SUPPLY-AMOUNT IN THE COUNTRY-IMMIGRANTS-AMOUNT BROUGHT BY EACH-SILVER COINAGE-SUPPLIES BY IMMIGRATION--CIRCULATION OF THE COUNTRY--SPECIE TO BANK-NOTESWORKING OF OHIO LAWS-BANKS OF UNITED STATES INDIVIDUAL NOTES-VALUE OF COTTON CROPS SPECIE TAKES PLACE OF PAPER CURRENCY FURNISHED BY BANKS-NET CIRCULATION.

THE present Treasury System of the Federal Government was approved by the President, August 5th, 1846, and will, consequently, have been twelve years in operation in August next. The object of it was, primarily, to enhance the specie basis of the general currency by promoting a demand for coin at the Custom-house, consequently from the banks, to cause the metals to pour into the vaults of the government, and to be by it paid out to its numerous officials and for contracts and expenses; thus diffusing into the channels of circulation coin instead of the bank paper, which, up to that time, had been the medium of payments. The act has worked well up to this time, although, perhaps, the course of events has, upon the whole, favored its action. One of the objects of the bill was to restrain speculative action by keeping up so continued a demand for coin upon the banks at the commercial centers, as to prevent them from lending the usual ratio of paper. It was, however, not enough for the law to demand coin, since the constitution had also conferred upon Congress the exclusive right of manufacturing it-a right which Congress had greatly neglected up to that time. Thus all the gold and silver then in the country was supplied exclusively by the operation of commerce. The produce

of American industry was carried abroad by the merchants and exchanged for the precious metals, which, for the most part, were brought into New York and Boston or New Orleans. To convert these metals into coin was the exclusive right of the Federal Government. Instead of doing this, it made foreign coins a legal tender, and placed one mint at Philadelphia, which it was expensive to reach, and nobody had any interest in paying the expenses. Foreign coins served the banks better than American coins, because people preferred bank-notes to strange money. The exporters preferred foreign coin because they were always better to send abroad, and the Federal Government used bank paper. Hence, there was little progress in the formation of a national currency, until the gold bills of 1834-37 changed the standard, without increasing the facilities of coinage. The independent treasury bill created a necessity for coin, and when bullion and foreign coins were received by the department, they were sent, at the government's expense, to Philadelphia for coinage. Immediately following the inauguration of the independent treasury came the gold discovery, and the material for coin has since poured steadily in, giving an impulse to general business, which has carried the Federal revenues up to a point not contemplated on the passage of the treasury law. The result was a great accumulation, which, in some degree, marred the action of the law. The principle had been, that under the action of the specie drain speculation would not arise, that, consequently, the customs would be no more than the real wants of the government; that the gold called in with one hand would be disbursed with the other, keeping coin in action without accumulation. The result has been as seen in the following table :

1848..

On hand

June 30.

$5,760,915

Step by step with the increase of the customs has this amount of idle coin accumulated in the treasury, and altogether from the gold paid by merchants out of their capital in advance to the government for import taxes. That is to say, the importer must pay the duty when he receives his goods, and he gets it again only when he sells them. It is the custom with some persons to ascribe this fact of accumulation to the inevitable operation of the sub-treasury system. This is, however, not the case— the accumulation is a direct violation of the sub-treasury principle, and arises from the neglect of Congress to regulate the revenue by changing the rates. In the above table it is seen that the identical duties which gave but $28,346,000 in 1849, gave more than double that in 1853, and has since given still more under the impulse of business. The events of the past fall have emptied the treasury, and the coin thus accumulated was a very welcome aid when it came out.

It has thus been seen that the collection of coin by the government through the customs has been no bar to the large business, or to the increase

of general commerce. It is true, no doubt, that during the activity of business there were times when the accumulation of coin in the government vaults was regarded ruefully as a hinderance to expansion, and as the cause of temporary scarcity in the money market. But there is now a deficit, and if the government under the law is required to borrow coin, it cannot keep it. Upon the whole, the distrust and opposition which the law at first encountered has passed away, and its working has begun to be regarded as applicable to States and cities. The State of Arkansas, having been unfortunate in her experience of banks, persists in requiring the constitutional currency in payment of dues to her. Wisconsin has a law prohibiting the receipt of anything but gold and silver coin in payment of public dues, but under the rapid increase of baking in that State the law has been hitherto inoperative, although it may now be enforced.

The State of Tennessee has passed a law requiring resumption of specie payments by the banks, November, 1858, and prohibiting after January, 1859, the circulation of notes under $5, and after January, 1860, of notes under $10; after September next, no bank to issue any but its own notes. Ohio has passed a law, in all respects like that of the Federal Government, to take effect July, 1858-a condensed view of it was contained in our last number. It provides that, at that date, all payments of State moneys at $5 and under shall be specie, and the grade of payments increases each year, until in 1865 all payments shall be made in specie only. The total taxes in Ohio amount to about $9,000,000 per annum, and the gradual collection of this amount in specie, will not greatly affect the general demand for coin, but will have a very great effect in passing coin into circulation. The revenues of the Federal Government are paid in large amounts by merchants who have large reservoirs at hand. When the collections are to be made from individuals in small sums by tax-gatherers, it becomes necessary for those individuals to be provided with coin -bank notes will not answer. If these continue to circulate, it will be requisite for each bank to keep a much larger supply of coin than they have been wont, to meet this effective demand when taxes are to be paid. Should this system become more popular and penetrate in all the States, it would involve the collection from taxes of a sum in specie about equal to that which the Federal Government now collects from customs and lands. Those collections would, however, be far more effectual in causing a current of coin to set through the small channels of business than would the operation of the Federal Government. The revenues of thirty States last year amounted to $60,101,281, including only the State taxes and payments. If the city, town, and country revenues were added, it would be at least as much more-say $120,000,000, which, added to the Federal revenues, would give very nearly $200,000.000, to be collected and paid out in specie. Of late years, the amount of mixed currency in the country has varied considerably; and it may be worth while here to trace it, as nearly as possible, by the official figures. The currency furnished by the banks to the public at these periods is as follows:

BANK NOTES IN CIRCULATION IN THE UNITED STATES.

This was the net amount of currency furnished by all the banks and in the hands of the public at each period. Taking the amount of imports and exports as an index to the general business, it is apparent that the money furnished by the banks bore no proportion to the quantity apparently demanded by trade. It is to be further remarked, that of the net circulation outstanding, only $50,000,000 are of notes under $10. If we now take the official tables, and observe the progress of metallic currency, as they indicate it, we have some singular results. There are three modes by which the precious metals arrive in the country. 1st, from the mines, as well in the Atlantic cities as California; 2d, by the operation of commerce bringing in foreign coins; and 3d, by immigration bringing in, according to the researches of the Commissioners of Emigration, an average of $100 each in money, besides watches and jewelry, and plate, which, sooner or later, finds its way to the mint as bullion. Of the sup plies from the first two sources, we have pretty accurate official information. The third can only be estimated by such data as are afforded by the commissioners. The quantity of the metals that goes out of the country is pretty well ascertained by the official figures. To ascertain the quantity of the metals in the country at any one time, it is necessary to take the quantity supposed to have been in the country in 1822, when the official tables were commenced; add to it the known supplies from the mines, and deduct from the sum the known exports. This process gives results as follows down to 1837, the first return for bank circulation in the above table.

The supply of gold and silver in three periods has been as follows:

NET IMPORT AND UNITED STATES PRODUCTION OF THE PRECIOUS METALS.

Total....

Gr'd total.

$53,120,900

.....

......

$17,886,151

$19,044,330 $368,654,477 $387,698,807 $240,630,704 $147,068,103

$92,811,939 $381,454,195 $474,158,169 $256,648,896 $218,075,154

Specie in the country in 1820..

Specie in the country, 1857..

31,000,000

$249,075,154

Since the change of the gold standard by the laws of 1834-37, the import of silver has been less. On the other hand, since the receipt of California gold, there has been a product of silver parted from the gold. It appears from the results, that the net increase of specie in the country from the mines and imports from 1821 to 1840 was $53,120,900, which would make the quantity of the metals then in the country $84,120,900. In one of the reports of Levi Woodbury, Esq., it was estimated for that

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