now-a-days do not realize or appreciate, unless they know what the previous history had been; that currency banking, and with it, to a large extent, the whole system of banking, were brought under federal control.
The "national currency," to call it by its technical and proper name, was a uniform currency, such as the people had dreamed of and hoped for for fifty years, and such as never has existed anywhere else over a territory even a fraction as great. If it has not produced an equalization of the exchanges, it has reduced the internal exchanges of the country to an insignificant minimum. It would be a disaster, if it were possible, to do away with the rate of exchange which distributes capital and currency as they are wanted; but it is a marvellous thing that that re-distribution should be brought about at such slight expense over a whole continent, as is now the case amongst us.
This banking system incorporated and employed the Suffolk system, around local centers, throughout the country, embodying another of the most successful experiments of the previous time.
Various attempts have been made to construe and explain the system of the national currency, because it may, in fact, be turned into very different lights. The government guarantees the note-holder, because it is itself a debtor of the bank; and it promises to pay the note-holder, who is a creditor of the bank, instead of paying the bank; and in order to be in a position to do this, it takes back the evidence of its debt from the bank, holds it in its own control, and when the exigency arises, sells it to somebody else,—that is, contracts a loan elsewhere, in order to pay the note-holder. It has been objected, and on theoretical grounds with complete good reason, that this system guarantees only ultimate re-payment, not cash redemption or true convertibility; but in practice the note is as good after the bank has failed as before, and continues on its course, the holder probably never knowing that it was issued by a bankrupt institution, until it finds its way to the redemption bureau. It must be noticed that, in this respect, the national currency differs essentially from its prototype in New York. In that State, when a bank belonging to the free bank system failed, its notes became uncurrent.
It seems a much more useful and correct construction of this currency system, however, to regard it as reaching substantially the same result which is reached in the Bank of England, under the act of 1844, constituting the Issue Department as an independent thing, entirely separated from all the vicissitudes of the banking business. The Bank of England loaned on a book debt to the government, and the notes of the Issue Department are based, as respects what might be called their permanent amount, on this debt, and the fluctuating margin (which, it is true, in that case is very large), rests upon an equal amount of specie. In our national bank system bonds, as circulating evidences of a government loan, are bought and deposited, and the notes issued upon them may properly be regarded as constituting an internal core or permanent part of the total circulating medium of the country, with a provision for cash redemption upon the variable margin.
