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exposed to the same errors, to the same dangers, to the same temptations. It had no vital conservative principle of its own. It was in the hands of men to be managed for safety and for interest. These two conditions are not always compatible with each other. The conditions of safety may not always conduce to our interests, and it is certain that our supposed interests do not always lead to safety. The system of discount is a system of credit. It is the assumption of risk, for an interest, and therefore subject to the contingencies of trade. It is more than this; the prevailing system of discount is a powerful stimulant to trade, and perhaps to this source more than to any other, are attributable the great evils of over-trading and speculation of the present day. The trader is induced to sell on credit, and to obtain discounts on all his transactions. In this way he makes a large capital out of his sales, although his real capital may be a small one. He trusts a customer a certain amount for a commission, and on a certain term of time, but he instantly parts with the bill of his customer to a bank, and pays interest, realizing ready money for a new transaction. This, often repeated, is called "good business." The debts are transferred to the banks, and they become parties to the sales and risks, for interest.

The objection to this system of discount is, that it tempts men to speculate beyond their means. What tempts one, tempts all; and the aggregate of transactions soon exceeds the capacity of the currency of the country, and failures become inevitable. If it were required that every man should give direct security for loans, as such, and if every trader who gave credit were required to wait for payments from his customers, business would become more permanent. Sales would be less, but profits would be more. Risks would be lessened, and failures could seldom happen.

But this is not the present condition of things. The banks are involved in the business of the country. They are subject not only to the disasters of mismanagement, but to the frauds, errors, and follies of the whole trading and speculating com.

munity. They part with a portion of their power of self-protection whenever they assume a risk. They may exercise their best judgment, their nicest prudence, but neither good judgment or prudence will prevent the errors of others.

At one time, there was no man in the country more respected for his sound judgment and financial skill, than Nicholas Biddle, president of the United States Bank, chartered by the State of Pennsylvania. That he had as much ability to manage a bank well, as any other man, we have no doubt. His operations were great, because his means were great; and though similar mistakes in less degree had been committed by others, thousands of times, his errors were called great errors because connected with great sums. He was made to believe that he possessed more power than he really did possess; and it is easy to see, that after this step was gained, it led to another and a more fatal one. He was asked to give more aid than he was able to give. Others were made to believe that he had the power, and he adopted the error, and attempted to execute financial impossibilities. In the end, he alone was unjustly held responsible. The results are before the world. The bank committed its errors, and lost its power. It failed. The government of the bank, doubtless, had its share of error in its operations; but the actual causes of its failure were with those who subjected the institution to transactions that were inevitably ruinous in their nature. It is true, the bank had the power to negative a proposition, but it must be remembered that even this is often mastered by superior influence, or superior interests. This bank differed from other banks only in the extent of its capital. It was no safer because it was large. If it had more means it was subjected to more risks, and in no way was it exempted from the penalties of error, fraud, or mismanagement.

It was an extraordinary foresight in President Jackson, that the former Bank of the United States, by his firmness and influence, failed to obtain a renewal of its charter. But for his firmness and unexampled integrity it would have been

continued, perhaps, even to this day. He saw in it elements not warranted by the Constitution, and such as were dangerous to the best interests of the country. It was liable to great abuses; it became the agent of political power, and in the end it even attempted to master the government itself. Its friends were indignant at its fall, but that indignation gave way to calm reflection, and, after a ruinous experiment to establish a similar one under a State charter, they have become persuaded that the people can prosper in the absence of a United States Bank.

When the charter of this bank expired, our government was compelled to rely upon the State banks as places of deposit of the public funds. This was a necessity rather than a choice. The consequences were bad for government and fatal to some of the banks. It could not well be otherwise, in the nature of things. New transactions, risks, and temptations were multiplied beyond the wants of the communities in which the banks were located, and losses followed. The experiment furnished another striking example, tending to prove that the government ought not to rely for the safety of its funds upon banks.

It soon became a leading question with government, what system should be adopted for the collection, disbursement, and safe keeping of the public moneys.

In 1840, a sub-treasury was established, but it was repealed by the whigs in 1841.

The present constitutional treasury was established in 1846, and it commenced its operations in January, 1847.

It takes the standard of all the banks, and receives and pays nothing but specie.* It is made strictly the agent of the gov

* "If Congress were to pass forty statutes on the subject," said Mr. Webster, in 1816, "they could not make the law more imperative than it now is, that nothing should be received in payment of duties to the government but specie. The whole strength of the government, I am of opinion, should be put forth to compel the payment of the duties and taxes to the government in the legal currency of the country."

ernment for the people. It loans no money, incurs no risks. Its business is simply to receive, to keep safely, and to pay out according to the requisitions of law.

The effects of the constitutional treasury upon the banks have proved in the highest degree beneficial. Its reserve of specie is a check upon their discounts. It is not counted as a part of their means, and therefore cannot make a part of their loans. (See Appendix G G. and H H.)

A community is not made richer by having unlimited access to money under the conditions of discount. Far from it. It is made poorer. The spirit of industry which seeks the use of money is generally a safe one. But the motive which offers money to industry is generally a selfish or a speculative one. Money being the ultimate object of trade, as controlling all classes of property, each person aims at increasing his share, without sufficiently thinking that the success of the few is at the expense of the many.

FREE TRADE. TARIFF OF 1846.

TRADE is the exchange of commodity. The basis of trade is industry. Industry produces, and it is the function of trade to exchange.* How far trade should be controlled and industry protected by law, have been the great and exciting tariff questions of the country.

To understand this subject, we reduce it to its elements. To do it justice would require a treatise, and our brief allusion to it is for the purpose of asking attention to the results of the tariff of 1846.

As all nations must have sources of revenue, means to pay the expenses of government, it becomes an important question how far home industry may be protected by an assessment of duties on articles of foreign production or manufacture, which are imported to displace similar articles of our own?

All taxes for government purposes are apt to be regarded as evils, and it becomes the study of the political economist, how these supposed evils may be balanced by a system of compensation. No direct taxes, for example, are assessed upon the people by the general government. But duties are imposed upon foreign articles; merchants pay the duties, and the peo

*"Man,” says Archbishop Whately, "might be defined as an animal that makes exchanges; no other, even of those animals which make the nearest approach to rationality, having to all appearance the least notion of bartering, or in any way exchanging one thing for another." - Political Economy, Lecture I.

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