We stated two principal questions in regard to mixed currency: —

1st, Does it perform satisfactorily the functions of money?

2d, What, and how great, are its effects on public interests, beyond the proper effects of value currency?

In the four chapters immediately preceding, we have discussed the first question, with a result unfavorable to such a currency. We now approach the second of these questions,—What are the effects of mixed currency?

I. A mixed currency endangers domestic tranquillity. This is a proposition which we shall consider solely with reference to society in the United States.

That mixed-currency banks can never, in fact, fulfil their agreements, if called on to do so, we have already shown; and, since they are ever liable to such calls, there is constant danger from this source. At any moment, there may reasonably arise, through this cause, such general dissatisfaction among the lower classes as shall tend to extensive disturbances of the public peace.

This danger is greatly enhanced by the fact, that, within the last forty years, there has been created a vast system of savings institutions, which receive the money individuals are disposed to deposit with them, and promise to return it on demand, or at short notice; generally on demand.

N0.6

Bank Liabilities in Massachusetts 1860 and basis of Specie Liabilities 100 Millions               Specie 6 Millions

Now, should any cause operate by which confidence in the solvency of the general banking system of the country is shaken, it will naturally, nay, inevitably happen that a run will be made on the savings institutions. These can only meet their engagements by drawing on the banks. But, if these have all their resources strained to meet the ordinary wants of the business community, how can the drafts of the saving banks be met? How can currency be supplied for this extraordinary demand? This question can only be intelligently answered by reference to the condition of both these kinds of institutions.

We will, for this purpose, take the currency of Massachusetts as it stood in 1860: —

The savings banks had on deposit......$45,000,000

                  deposits......30,000,000

The currency banks had {

                  circulation.....25,000,000

Total . ............$100,000,000

The currency banks had specie....... 6,500,000

Difference............$93,500,000

This is exhibited in Currency Diagram No. 6.

Here, then, are legal immediate demands, upon the currency banks, of fifty-five millions; and, upon the savings banks, of forty-five millions. Suppose there should arise some dissatisfaction, or public uneasiness, which should prompt to a run on both these kinds of banks. It certainly is possible, not to say probable. Suppose that the institutions for savings are called on for only one-fourth of their deposits. They must look to the banks for eleven millions of currency at once. The banks begin to pay out their bills; but the specie is at once demanded, and of that they have but six and one-half millions against their own immediate liabilities of fifty-five millions. They could not stand a run of two days, because their own deposits would be drawn in specie just as soon as the real state of affairs was discovered. The banks must, therefore, suspend at once. What would naturally follow in a time of great public excitement, when the interests of some party or faction required a general breaking-up of society?