This section is from the "The Science Of Wealth" book, by Amasa Walker.
It is not enough to evade this, by saying that such an event has never happened, though the banks have several times suspended. That is quite true; yet it does not follow that it never will. Previous suspensions have originated in commercial causes. Suppose, on the other hand, a run were made on account of political or social disturbances; that the laboring class — factory operatives, railroad gangs, the servants in our families — were incited to demand their deposits in the savings institutions. Could they not prostrate the entire currency in twenty-four hours, by merely demanding their just dues?
Whether such a probability is remote or uncertain, it does not seem wise to maintain a system which can, by any possibility, produce results so disastrous; especially, if there are no advantages whatever in such a state of things.
Premonitory symptoms have not been wanting of such a catastrophe as, under aggravating circumstances, might overthrow all the moneyed institutions of the country, and even endanger the government itself.
We are not the homogeneous people we were. We have elements of weakness and discord that did not exist in earlier times. We have, especially, a large foreign population, as much interested as any other in the funds of our savings institutions, which might, at any moment, if provoked to do so, throw our whole banking system into suspension.
It cannot be wise to ignore these palpable facts, or the consequences that, in the natural course of things, are likely to come out of them. The danger can only be removed by a change of system.
II. A mixed currency has a demoralizing influence upon a community, industrially and socially.
If what has been said in regard to this kind of currency is correct, such an influence cannot for a moment be questioned. If it excites to wild and extravagant speculation at one time, and plunges its victims into bankruptcy and ruin without fault at another; if it excites hopes and expectations which must necessarily come to disappointment and distress; if it increases to an enormous extent the natural risks of trade, and exposes all business operations to an incalculable hazard, — then the mercantile character and the general tone of morals cannot but be unfavorably affected.
The influences that hold men to strict probity, steady industry, and a strong sense of honor, are feeble enough, and have enemies enough, without the discouragements and embarrassments arising from such causes as we have described.
Society should place its premium on virtue, and not on vice.
Those who have witnessed the terrible convulsions occurring in the United States within forty years, know but too well how sad has been the effect on individual and national character.
It is unnecessary to dwell upon a point so evident, and so generally admitted by all who understand the matter; yet its recognition could not properly be omitted in the examination of the mixed-currency system.
III. A mixed currency endangers the national safety in war.
With the existing ideas and institutions of society, and while no preparations are made in time of peace to prevent the recurrence of war, but every effort to meet it, and thus, of course, to strengthen and perpetuate the war system, it becomes a matter of great interest to inquire as to the effects of a mixed currency on the safety of a nation in the event of war.
We have already shown that a mixed currency is greatly affected by a demand for specie to send abroad. Hence, as war must always call for an extraordinary importation of foreign merchandise and materials, and as such extraordinary importation must require the shipment of specie, a contraction and panic, or speedy suspension, must be the certain consequence.
Again, since so great a part of a mixed currency usually consists of credit, and since credit rests wholly on confidence, any thing which impairs the latter compels a contraction or withdrawal of the currency.
Now, war generally, we may say uniformly, does this: for how long it may last, how great may be the demand for money, how large the destruction of capital, and what the final issue, must be a matter of doubt; and therefore its occurrence always impairs public confidence to a greater or less extent.
These two causes, then, are at once brought to bear upon a mixed currency with fatal effect. The result has always been, and always must be, that, under such circumstances, the mixed-currency banks suspend; because their circulation cannot be withdrawn at the time without producing universal bankruptcy, annihilating their own capital, and stopping the wheels of government.
It was so in England during the war with Napoleon; in the United States during the war of 1812, and in the time of the great Rebellion.