in an

of apprehended danger to the whole American house, strip his notes, the use of which had been paid for, as money, of the functions of money hour, thus reducing them to the miserable place of a set-off to cancel the obligations of the other partners to him, or that of certificates of ownership upon the division of effects in the Controller's office. To discredit his own notes was only to be done or suffered by him, after the assignment and sale of his reserved property; and prior to this the plea of necessity, as against his partners, was the plea of infamy.

Thus stood the case at the end of the eighth week. It was apparent that no compromise could be effected, and that internecine war must try its powers in the firm to accomplish what submission and persuasion had failed to effect. In the strife, hundreds of solid men in industrial firms had been dishonored, and their names sent along the swift lightning paths of the land, branded as bankrupts. A few thousand bank debts, lent them on four-fold securities, would have saved them the disgrace. But no! the money partner must retire his debts, and his debts or circulating notes were the principal money of the house. His solvency required it-there was no help for it.

It was a time of cruel necessities. The huge boa-constrictor of paper debt money coiled around every industrial interest of the American house, was still tightening his folds, and gazing the while with stony apathy upon the livid agony of his victims. Was there no help for it? If the day of judgment to the American house had come, and all debts must be paid, and there was no help for that, still it was of immense importance whose debts among the mutually indebted partners should be paid first. If a settlement must be had all around, (and nobody could deny that debts justly and already due should be paid,) it was equally clear that they should be paid in the order in which they were due. And now through the thick meshes of self-interest and custom, which had overgrown the commercial mind, a faint glimmer of light gained entrance. It began to be felt rather than said, that there was a right and wrong about this complication of disasters; and a wright and wrong discovered anywhere, no less in finance than in ethics, is a safe clue to follow out of any labyrinth.

Whose debts were due first?-for those were the debts which ought to be paid first. Why--the money partner's, to be sure. He had not been called upon to pay his, time out of mind, and he seemed to have forgotten, and everybody else to have forgotten, that they had been due and justly payable any time these twenty years. And now the demand was made of the money partner-PAY IN MONEY, PAY AT THE DAY, without grace, as you require of us; let liquidation go on in the order of time in which the debts fell due.

The 13th of October became therefore a great protest day. Substantially, with unimportant exceptions, the paper currency of the United States was protested for non-payment on that day-for the fate of the New York city banks involved in it the fate of all others, and though numbers did not formally publish their suspension, they escaped that necessity merely through the forbearance of their note-holders and depositors. They are solvent, just as the thousand suspended mercantile. firms, already on the lists, most of them are, viz.:-having property which, if it could be sold at the average values of the past two years, would suffice to clear their estates; insolvent, in that they are none of them able to pay in money their full liabilities when these fall due.

My task is done. I have sketched, and only sketched, what seems to me an exposition of the crisis in its general form and leading features, its cause, its route, and its movement. Its cause stands before us as debt, not of the American house to the rest of the world, but of the partners to each other-itself the first shock of the encounter between the money partner and the rest of the American house, to determine which of them shall first meet the last consequences of debt-payment. Shall all other interests be sacrificed to uphold a vaunted solvency of the money partner, which every quarter-day's exhibit, openly shown and solemnly sworn to, proves to be fictitious? Shall the law of forbearance, by which he exists, be abrogated in his dealings with the other partners? Shall the extension of the time of payments, which by clothing his debts with the functions of money, and paying upon them the wages of money, is granted him in perpetuo, be sternly refused by him to his co-partners in their time of direst need? Shall he who demands a full settlement, confessedly on the ground of his own necessities and the consequence of his own delinquency, himself refuse to settle?

These were some of the issues which went to trial October 13th, 1857, and with what result we have seen. Added to them, and only to be answered by the progress of events and the disclosures of the future, is the larger question yet pending:-is the inevitable loss of final settlement, which a vicious currency has fastened upon us in the inflated values and inflated debts of the third era of debt-money, to be equitably distributed over all the partners, or shall the money partner alone, under shelter of legislative action or judicial construction, be suffered to shift the loss from his own shoulders to the shoulders of the others!

*

It is not the design of this article to advocate or even propose simply relief measures. Its aim is to discuss facts and principles, confident that all dealing with our "sick man," neglecting these, will prove but shallow empiricism. REMEDY instantaneous and complete, there is none, nor need it be anticipated. That paper expansion will follow paper contraction, may certainly be counted upon; and that temporary relief will come by this means, and movement among the industrial interests once more take place, is likely enough, and sooner probably than after the revulsion of 1837. Now nothing has broken but the machinery of currency, and upon its readjustment things will go forward again. But in all this there is no remedy, and the homilies of the public journals upon extravagance, overtrading, speculation and panic, confidence and panic, and all that, will be as idle to prevent another revulsion as to lecture the drunkard in his cups upon gravity of carriage and propriety of demeanor while the power of his betrayer is upon him.

It matters not to our present purpose whether the banks resume specie payments this week or this year; whether their enormous strength, which the journals are industriously recording, enables them to pay 10 or 20 cents on the dollar; whether that invisible and irresponsible being in the land "the bank movement," (whose up-risings and down-sittings must be pored over by every petty trader before he can know whether he can safely buy or sell, on credit, a hat or a coat,) is now moving this way or that. These considerations have significance only as indications of temporary relief-none as remedy. That the stimulant will be administered and the ravages of the disease marked by means of it; that an artificial life will be set up; that the levity of youth will incline to forget the crisis;

that the dead will be decently buried, and the wounded be put out of sight in hospital; and that a great outrage will be submitted to as an inevitable and mysterious necessity, is perhaps not unlikely. But who PAYS for this ruin?

To defend the future against these periodic revulsions, which no less prostrate commercial integrity than scorch and desolate the industry of the land, something besides an expanding bank movement is needed-for systems, though hoary with age, though interwoven with the commercial habits of even prosperous States, and though forever defended on grounds of expediency and supposed necessity, may be, and often are, trusted too long. It demands of every man grave, earnest, and thorough inquiry whether a system which unjustly calls and treats the money partner's debts (i. e., his promissory notes) as money, while those of the other partners are held to be simply debts; a system which robs money of its first and greatest function, viz., that of being a stable measure of value, and plunders the currency of value while it enlarges the amount; a system which invests him with despotic sway over industry in its every form, placing its creations forever at the mercy of his necessities or interests, is not a system which should be dismissed at once and forever.

DEBT-MONEY is in its nature an eternal falsehood, nor can any dexterity of management make it to be a truth, or to serve as well as the truth, and of this we have terrible demonstration in the crises of 1837 and 1857-for these are no accidents, no mysterious and unaccountable phenomena, but a logical development and out-working of the hidden vice of its nature. Nor is the nature of debt-money, changed in its essential character under the ingenious disguise of the New York State banking system, with its property basis and multiplied securities, the highest phase and refinement of the falsehood-for the power of the bank-bill to sustain itself, as money, being contingent upon the sale or payment of its reserves lodged in the Controller's office, and that sale or payment being contingent upon and only possible while the integrity of the bank bill as money is somehow upheld, our money system itself is but a microcosm of debt, and useless for any purpose but to discharge itself, except as it is propped up by the fiction of confidence at one time, or the fraud of suspension at another.

Accordingly, though lauded to the echo in fair weather, the New York State system has proved as powerless in soul as any of its despised predecessors and cotemporaries. Its State stocks were as unavailable in the storm to raise money ENOUGH upon, as were the bank stocks of the others. And the second problem of debt-money, which has been resolving itself since 1837, whether with an ample property basis lodged with the State as trustee, and guarantied by the State, the bank-bill could be kept in power as money, at all times, seems now to have received its solution-for never was a banking system more thoroughly anchored in a property basis than that of which the New York system is the head; and never was the experiment of debt-money tried under more favorable circumstances than with a gold mine, of almost fabulous richness, emptying itself weekly into the currency.

Debt is not money; promises to pay, by whomsoever made, are not money. Contingencies are not the material of which it is made; confidence is not the metal which can endure the fiery trial. These, employed in their true place, have value; but they are not money. Leave them

where they belong, to do their appropriate work under a sound credit system; and while with unshaken faith in the CREDIT SYSTEM itself, in its innumerable applications to the business of life, and which, having its roots in the mutual dependence of the family of man, must (let it be said emphatically) always exist under a high and Christian civilization, the crisis of 1857 once more pronounces and, by the heritage of bankruptcy which it leaves behind, enforces the lesson that there are boundaries which it cannot pass, and alliances which it cannot make, without both giving and receiving a fatal taint. Credit, by its very definition, is the transfer of values in the confidence of future payment. No money but a value money can meet the terms of the case. Debt, planted in money, carries its fruitful and pestiferous germs into every field of credit, and yields a plentiful crop of debt in them all. God has made the precious metals, gold and silver, to float the exchanges of commerce at home and abroad, as he made the great ocean to float our ships. Is it wise to abandon the ocean and take again to ballooning?

But though remedy, full and final, for these periodic eruptions is hopeless on any other basis, something is in the power of every man of us to alleviate the present exigency. In patient practical endeavor to extricate our individual affairs from the universal confusion, under the guidance of the great moral law of forbearance, now by stress of the times made also the first financial law of safety and of movement, there is business for every partner of the house. And first, let every man try to pay his debts, courageously meeting his quota of the inevitable general loss. Every debt paid is so much of the cause and substance of this catastrophe forever buried in the earth, returning no more to plague his peace.

Who is in debt and bankrupt without stain upon his integrity, overtaken by a hurricane which no foresight of his could provide against? Let no such man hang his head. His credit gone? grant it; but there is something better than credit-the basis of all credit-industry and integrity. These are the substances of which credit is but the shadow; these command credit. They have the ring of the true metal-they are a bank which cannot be broken. And now that the fair casket of his individual credit is shivered, it remains to be seen whether the jewel of his individual integrity is safe; that safe, let no man disturb himself, lest the shadow should not follow the substance.

Art. II.-INTEREST AND CHEAP CURRENCY.

FREEMAN HUNT, Editor of the Merchants' Magazine and Commercial Review:— Ir is important to consider the nature of interest with reference to any movement for the reform of the carrency. It is almost uniformly supposed to be the value of money, and this false idea is the cause of more obscurity, in the consideration of the currency question, than anything belonging to the nature of the subject.

Interest indicates the value of debt-not of money. It is inversely as the quality of debt-the poorer the debt, the higher the rate of interest. This applies to the whole mass as well as to each individual debt, or to the average value of the debt in every community. That of California is

the lowest in value, with panic exceptions, of any in the world. This is owing partly to the same cause that degrades the security and increases the quantity of debt here-namely, debt banking. The bankers of California grant two promises to pay the same dollar, upon the principle of our chartered banks, and of course, when pay-day arrives, the same result follows that always must attend this system of banking-somebody must break for the obligation based upon the dollar created without value. Yet they grant only book-credits-people love to deceive themselves by calling them "deposits." Adams & Co., and Page, Bacon & Co., were ruined by this, with many other bankers and merchants. One would think there could be no occasion to add dollars of debt to the abundant gold currency of California; but there is no limit to the demand for dollars, whether made of gold, or silver, or debt, because there can be no limit to the price of commodities attending the increase and consequent degradation of the currency. Money can be merged in price forever.

But the principal difficulty with California, is her position as a goldproducing country. This keeps the market glutted with commodities that, from the nature of the case, must flow there. The fact that the material of money is cheaper at the source of supply, is only the converse of the fact that commodities are dearer there than elsewhere. If it were not so, the gold could not be brought away. Nobody would send merchandise from New York to San Francisco, intentionally, if he could obtain as much gold for it—that is, as much price for it-here as there. California must keep down the value of her gold to sell it, and this can be done only by keeping up the price of her imports. Gold is almost her only crop; it is but an infhrior want-the superior or more essential wants are food, raiment, and shelter; to procure these she must sell her gold. Thus it is that prices, with accidental exceptions, must be higher there than elsewhere, and they will always attract an excess of imports. Prices cannot be low there permanently, therefore that excess, not wanted for money, is sold on credit, or advanced upon on time by commission merchants, at the high prices caused by cheap gold, the bills are discounted by the bankers, and the gold brought away for the sum of the proceeds. California is too new a country to possess much capital. Gold is not capital more than any other product of human labor, and relatively her commerce and her people are oppressed with a heavy debt. For these reasons the rate of interest is almost uniformly higher there than anywhere else. It is because of much debt and little capital.

As the quantity of debt, in relation to capital, increases anywhere, the quality depreciates in proportion-most especially is this law applicable to the currency. Therefore when our debt-currency, in which I include credits as well as circulation, is at the highest, as in 1837, and in the middle of August last-when, according to the fallacious notion of our people, we have the most money-interest is at the highest. The truth is, then we have the most debt and relatively the least money, and much of the debt is in the worst place in which it can present itself-the currency. As debt declines in amount it improves in quality, except during the frenzy of the change; and when the debt-currency is at the lowest, interest is at the lowest. It was so in 1843-4, and now most of the debt existing four months ago having been removed from the market by defalcations and the reduction of bank loans, interest will fall below the legal rate in a very few weeks, (probably by the time this article is in type,) if