Much has been said, at different times, of the desirableness of free banking. Of the propriety and rightfulness of allowing any person who chooses to carry on banking, as freely as farming or any other branch of business, there can be no doubt. But it is not, and can never be, expedient or right to authorize by law the universal manufacture of currency. While banking, as at present, means the issuing of inconvertible paper, the more it is guarded and restricted the better. But when such issues are entirely forbidden, and only notes equivalent to certificates of so much coin are issued, banking may be as free as brokerage. The only thing to be secured would be that no issues should be made except upon specie in hand.

With this restriction, however, it is plain that no banker would issue paper for the profits of the circulation, but solely for the convenience of his business.

It may be objected to this programme of a mercantile currency, that no provision is made for the convertibility of deposits, which are as truly currency as the circulation itself. To this we reply, that, if the circulation be represented by its full amount in specie, we think that little danger or difficulty would be likely to arise from deposits; because under such a system, suppose that twenty millions of specie were wanted for exportation, the circulation could only be reduced by that precise sum; consequently there would be much less strain upon the money market. The banks of Louisiana, under the State-bank system, held, on an average, thirty-three per cent of specie to their immediate liabilities. This, it was found, made them very stable, as compared with the banks of other States, and enabled them to withstand panics which drove their cotemporaries into suspension. If the banks were required to hold one hundred per cent of specie upon their circulation, can there be any doubt of their being able to meet all their liabilities without embarrassment? The specie would be held, by the terms of their charter, for the conversion of their notes. If specie were wanted, it must be demanded for the notes. Banks standing in that position would be very cautious in making discounts, and passing the same to the credit of their customers as deposits, unless they were in a condition to pay the same in their own notes, and ready to cash the latter on demand, if required. They would not lend money unless they had it to lend. Who can question that such a currency would be a stable one? — and stability is the great desideratum.

Panics in the currency would be unknown. Banking companies, public or private, might, and very likely would, often extend their credits so extravagantly as to involve themselves in embarrassment or ruin. That cannot be helped. That is no concern of the government, whose only duty is to forbid a false standard of value, and an unreliable medium of exchange. All notes used as money should be virtual certificates of deposits for coin absolutely held for their conversion. Such a currency can be easily secured, either through present banks, upon the principle here indicated, or through the national sub-treasuries, which might be authorized to issue certificates of any denomination (say from ten to one thousand dollars) for all specie left with them on deposit. In either case, the specie being held for their redemption, all notes in circulation would be actual money, which could neither be arbitrarily expanded or contracted; and that is just what is wanted, — nothing more, nothing less. If it be urged that this latter measure would give the government the power to control the currency, we reply, Not at all: government would be merely a trustee, with no power to make currency or loan it to anybody. It could exert no influence whatever on the money market.

We close with the following table: —

Table X. — Characteristics of the Different Currenciesi







As a Standard of Value.





Perfectly reliable

Cumbersome in

large amounts

Needs no conversion

Correct and invariable


Paperbased on credit

Local and arbitrary

Liable to be continually augmented





Paper based

on coin and credit

Local and conventional

Constantly Fluctuating


Only partially convertible

Defective and variable


Paper based

wholly on


Local and conventional

Perfectly reliable


Fully convertible

Correct and invariable