In the same way a shipment of rice might be traced from South Carolina, of cotton from Georgia, of boots and shoes from Massachusetts, or of imported goods from the seaboard. All this mechanism of credit has been devised under the pressure of competition, in order to cheapen the cost of forwarding goods from the producer to the consumer. To modern traffic it is as indispensable as the railroad and the steamship- so indispensable that even a poor banking system is better than none ; and the country endured patiently for nearly half a century a mode of banking which involved losses to the public in worthless and counterfeit bills, high rates of exchange and needless failures, amounting to more than $50,000,000 a year.

It is the duty of the government to prevent these needless disasters by inspecting the banks, as it inspects steam-boilers; and for the first time in the history of the United States the government is performing that duty. The national banks are required to conduct their business safely and prudently; they are compelled to secure their entire credit circulation, and the government holds the security as trustee and guarantor.

The notes are simply a form of credit. When the St. Paul bank issues its notes in exchange for the private note of the wheat buyer, the transaction is substantially the same as when the Chicago bank takes the Chicago seller's draft on Buffalo, and enters the proceeds to his credit on the books. The only difference is, that the book credit is a matter between the bank and the customer, who has every opportunity to know the condition of the bank, while the note credit becomes a matter between the bank and the community at large, which is not so well qualified to protect itself. For this. reason the government properly requires the notes to be secured.

The privilege of using their credit in this form enables the banks to aid in a larger number of transactions than could otherwise be performed. The profit upon their circulation enables them to furnish this accommodation at a lower rate than would otherwise be possible. The volume of their circulation rises or falls with the tide of business. It has been contended that this form of credit is peculiarly liable to a dangerous expansion under the stimulus of speculation, and even that the banks have the power to create an epoch of speculation by efforts to extend their loans of currency. Whatever element of truth may be found in these theories applies also to book credits and loans of capital, or deposits. The argument, pursued to its logical conclusion, lies against every form of credit. That credit involves risk, is no new discovery. The practical question is to reduce the risk to a minimum without impairing the efficiency of this powerful factor of civilization.

If the national bank act can be still further improved, amended, and qualified, to secure not only note-holders but depositors and share-holders, any proposition looking in that direction will deserve careful consideration. It is certain, however, that we cannot afford to go back to the clumsy State laws; and it is equally certain that the government cannot properly undertake to furnish a credit currency.

In the first place, no government currency would answer for the village banks, which have light deposits, and depend mainly upon their circulation for means to accommodate their customers. The treasury notes would find their way into the vaults of the city banks. The country banks, restricted to their capital and forbidden to use their credit, would be compelled to raise the rate of interest on their loans, or close their doors. Either alternative would be injurious to the communities which they serve. Their separate transactions are small, but the number of these banks is large, and the aggregate of their business is an important part of the business of the country. The village pensioner gets his quarterly check cashed at the bank; the trader gets a cashier's check to pay his debt in the city; the drover gets his note discounted until he can collect a herd of cattle and drive them to market. It is for these and similar services to the public that banks were invented, and will be maintained in spite of all the speculations of all the currency theorists. To propose to dispense with the country banks is like proposing to abandon the way-stations on the railroads, and to run only through trains.

This is a fatal objection to the scheme; but there is still another, inherent in the character of the treasury notes. A currency representing a part of the public debt, gathered up for taxes and paid out for the expenses of the government, would be totally unlike a bank currency expanding and contracting in strict conformity to the demands of traffic. Banks are expressly contrived to collect and lend money for the transaction of private business. Governments are established to collect and spend money for public uses. The machinery which is fitted for one of these purposes is necessarily unfit for the other. How unfit, can best be shown by a comparison of the operations of the treasury for the last ten years, so far as they affect the amount of money in circulation, with the fluctuations of the bank-note currency during the same period. The following table gives the cash balances on the books of the treasury, as they appear on the 1st of July for each year, and the circulation of the banks in June, as reported by the comptroller of the currency ; both in millions:

During the years 18G9 and 1870, it will be seen, the banks were contracting their circulation. The process of retiring the United States notes had been stopped, but Congress had solemnly pledged the faith of the nation to provide for their payment, and the business of the country was adjusting itself to a specie basis. The treasury, during the fiscal year 1869, withdrew from active circulation $25,000,000. But in 1870 the treasury began to expand, and during the next three years paid out $50,000,000 more than the revenue for the same time. The era of speculation set in, which ended in 1873. The banks responded to the demand for money. Their circulation ran up to $340,000,000. In 1873 the treasury suddenly drew in $25,000,000. The explosion followed. In 1874 the treasury absorbed $20,000,000 more. The banks, on the contrary, kept up the volume of their circulation until the panic had spent itself. Then they began gradually to contract their issues. During the next four years their circulation declined to $300,000,000. The treasury, in 1875 and 1876, threw upon the market $29,000,000, and then, turning another sharp corner, drew in $65,000,000 in 1877, and $71,000,000 in 1878. The variation in the volume of bank currency, running smoothly through a series of years, is $46,000,000. The spasmodic expansions and contractions of the treasury balance amount in extreme cases to 50 per cent. more than this sum in a single year. In 1879 the banks, answering the call for money consequent upon a partial revival of business, increased their circulation by $7,000,000. The treasury collected at the same time nearly $100,000,000 more than the current expenditures, but prevented a serious disturbance of the money market by largely increasing the sum of United States deposits with the banks.

This is precisely what might be expected. Between the revenue of the government and the aggregate of private business some faint and uncertain relations may be traced; but the interest payments, the pensions, the cost of Indian wars, the expenditures for public buildings, for harbor improvements, and for official salaries, bear no relation whatever to the business of the country. Yet a treasury note currency can only be issued in the course of such payments-unless the government should undertake to lend money on good names and collateral security, for which purpose the banks would have to be employed as government agencies. Without some such contrivance it is impossible to harmonize the varying demands of business with the movements of a currency representing a portion of the public debt. The national banks have performed that office in a degree; and they have been enabled to do it by the law which permits them to receive public deposits and to issue an elastic currency of their own.

It appears, then, that the maintenance of a treasury note currency is unprofitable to the government; it involves the constant danger of a misappropriation of the reserves by Congress; and if it were both profitable and safe, the treasury is nevertheless wholly unfit to take the place and perform the service of banks of issue.