the Popular Arguments in favor of Banking

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The objections to the American Banks are tripartite. They are, first, such as arise from their substituting paper money for metallic. Secondly, such as arise from their introducing an unsound system of credit. And: thirdly, such as arise from their nature as corporations. If the reader will take a view of all the different operations of the Banks, connecting them in his mind as they are connected in fact, he will require no refutation of the popular arguments in favor of the system. Nevertheless, it may not be amiss, for the satisfaction of some, to consider these arguments in the form in which they are commonly presented. ” Banks make money plenty.”

Nay, they make real money scarce. As Banknotes are circulated, gold and silver are driven away. It is contrary to the laws of nature that two bodies should fill the same space at the same time: and no fact is better established than that, where there are two hinds of currency authorized by law or sanctioned by custom, that which has the least value will displace the other. If Banks at any time make money more plentiful than it would be if only gold and silver circulated, they diminish its value in increasing its quantity. The valuation or relative estimation of things is thereby enhanced, but not an atom is added to the wealth of the community. ” Banks diminish tile rate of interest.”

 So far is this from being true, that the Banks tend to increase the rate of interest, by collecting capital into large masses, and diminishing the competition among money lenders. They, also, by their various operations, immediate and remote, give rise to a multitude of usurious transactions. ” Banks do much good by lending money to individuals.” But much less good than would be done, by the owners of this money-lending it themselves. Banks, as was observed in a previous chapter, do not increase the loanable capital of the country, but only take it out of the hands of its proprietors, and place it under the control of irresponsible Bank Directors.

” If there were no Bank paper, specie must of necessity be frequently transported to and from distant parts of the country, at great expense and great risk.”

The trade between different parts of the country does not consist of an interchange of Banknotes or specie, but the products of the soil and the industry of the inhabitants. By private bills of exchange, the sums due to one trader could be transferred to another; and it would be necessary only occasionally to discharge balances in specie. This is, in fact, the present custom of trade, Banknotes being to only a limited extent, substitutes for bills of exchange. “

Banks diminish the rate (if the exchange between different parts of the country.” Then they do great evil. The rate of exchange is the natural balance wheel of trade between different parts of the country. Banks cannot interfere with this, without harming. When they lessen the rate of exchange, they remove a natural check on overtrading.

Banks give greater security than individuals in buying and selling exchange.” If so, it is because the other operations of Banking have rendered all kinds of business uncertain. In countries where paper money is unknown, no more risk attends dealings in exchange than other kinds of dealings.

 “Such is the customs of trade in the United States, that Banking seems necessary.” But the customs herein referred to have their origin in Banking, and, as they are pernicious, ought to be abolished. “All commercial countries have some systems of Banking.”

And none have a worse system than the United States. In all commercial countries, some men receive money on deposit, lend money, and deal in exchanges; but the system of Banking on paper money is of modern origin. The cities of Greece, and Rome, and Egypt, and ancient Asia, attained to wealth far greater than we can boast of, without the aid of Chartered Banks. In all countries in which paper money Banking, or paper money of any kind, has been introduced, it has done much evil. Austria, Russia, Sweden, France, Denmark, Portugal, Brazil, and Buenos Ayres, all bear witness to this truth, as well as England and the United States. To these countries we may add China, in which paper money was tried before the commencement of our era, and, on the experience of its ill effects, abandoned.

” The various evils that are mentioned as flowing from Banking, proceed, in fact,from abuses of it. Banking on proper principles is.productive of great benefits.”

we willingly admit that Banking on proper principles would be productive of great benefit8: but we deny that Banking with paper money, or by corporations possessing peculiar privileges, is Banking on proper principles. ” Paper is more convenient than specie in large payments.”