The American Democrat/On the Circulating Medium
ON THE CIRCULATING MEDIUM.
Necessity has induced men to establish a certain standard of value, by means of the precious metals, to represent property. As it is desirable that this standard of value should fluctuate as little as possible, laws have been passed rendering it illegal to receive more than a fixed rate of interest for money. There can be no question that these laws would be singularly useful, did not dealers find means to evade them, for a variation in the value of the representative of property, renders all contracts liable to the hazards of a fluctuation, in addition to that of the article purchased. It is to be feared, however, that nothing short of making usury criminal, will ever effect this object; if, indeed, such a remedy be practicable.
As the world does not contain a sufficiency of the precious metals to represent any considerable amount of its debts, it has been found necessary to resort to a system of credits, for tho purposes of commerce, that is based on gold and silver. This system is so simple, that any one can understand it. The precious metals have a currency throughout christendom, while the credit of an individual, or of a banking institution, is limited. All that is required of the two latter, therefore, is, that its paper should be redeemed in specie, as specie shall be wanted.
In a country like America, a purely specie currency is utterly impracticable. Although money is not actually wanted for a tithe of the debts that are due, at any one moment, so much more is wanted than can be obtained in the precious metals, that a recourse to the credit system is unavoidable, as a single feature of the true condition of the country will show.
America, in the states and territories, contains about twelve hundred thousand square miles. This immense country is in the course of settlement, and the transfers of real estate, are a hundred-fold what they are in Europe, on the same extent of surface. A piece of land is frequently sold several times in the course of a single year, whereas centuries often elapse in older countries, without the sale of a given property. Every transfer of title causes an indebtedness, and consequently a necessity for a circulating medium to represent it. The earth does not probably contain a sufficiency of the precious metals, at their present value, to represent all the debts of this one country.
On the other hand, nothing is easier than to abuse a system of credits. The unrestrained issue of paper-money, with its attendant contractions, keeps the value of property unsettled, creates pressures and bankruptcies, and otherwise produces the instability that so peculiarly marks the condition of American trade.
Specie should be the basis of all currency. There should also be enough of the precious metals floating in the community, to meet its minor daily wants, the proper office of credit being to represent money in large sums, and not to represent money in small sums. For all the purposes of payments from the pocket, nothing is so convenient, or so safe, as gold and silver, as all who have tried it well know. Indeed, so palpable is the fact, that in Europe, men of wealth almost invariably use gold for this purpose, even in those countries in which it is slightly above the standard of value in price, and it may be questioned if any paper ought to be issued of a value less than fifty or a hundred dollars. In short, the precious metals are intended to circulate among those who have not the leisure nor knowledge to ascertain the credit of paper, while the credit system is to facilitate the operations of trade, and to supply the deficiency in gold and silver in the payment of larger sums. Any effort to make paper do more than legitimately belongs to its office, is an attempt to supplant the interests of society by serving the interests of money dealers.