Chapter XV: Money and Banking

Probably on no subject has there been such confused thinking or have such widely varying views been held as on that of money. There is, however, substantial unanimity of opinion on the important points among economists today, though in practice there still remain many unsolved problems. The modern industrial system has already been characterized as one of capitalistic production, of large-scale enterprises with extended use of machinery. Not less fundamental are the processes of valuation and exchange made possible by the use of money and credit; and also by the machinery for the geographical distribution of goods, our railroads and steamship lines. The modern stage of economic development has been described by Hildebrand as one of “credit economy,” as opposed to those of barter and money economy, which preceded. It is inconceivable that the modern complex system of exchange could be maintained without the extended use of money and credit. Without attempting to define these terms or to trace their historical development, we may proceed at once to state some of the problems to which they have given rise.

The first question that suggests itself is, what determines the value of money? The generally accepted answer may be briefly stated: it is, that the value of money depends, other things remaining the same, upon its quantity. According to the quantity theory an increase in the supply of money will cause a fall in the value of each unit, just as 138 an increase in the supply of wheat or cotton will cause a fall in the value of each bushel or bale. Conversely, a decrease in the quantity of money will cause a rise in the value of money. It is simply an application of the general law of value to money. The phrase “other things remaining the same” is however an important one, for it assumes that the amount of business and the methods by which it is conducted will remain substantially unchanged. Of course if an increase in the amount of money is accompanied by an equivalent expansion of trade, the one may offset the other and the value of money remain unchanged. Now, inasmuch as the prices of all goods and services are measured and expressed in terms of money, it is clear that a fall in the value of money means a rise of general prices; the value of each commodity is now expressed in terms of a larger number of less valuable units or dollars. Prices will be high if the quantity of money in circulation in a country is large; they will be low if the quantity is small. To the question, which is better for a country, high prices or low prices, it may be answered that it is a matter of indifference, provided only that there is enough money to do the work of exchange efficiently and that fluctuations are prevented. Just how much constitutes enough is, however, a matter of contention. In the undeveloped sections of our country, where capital is scarce and banking facilities undeveloped and where most of the people are debtors, there has always been a demand for cheap and abundant money. Capital and money have been confused and the need of one has led to a demand for the other.

It is not a matter of indifference, however, whether prices be rising or falling, that is, whether inflation or contraction of the currency is taking place. A period of falling prices means hardship and injustice to debtors and producers of goods, as farmers, manufacturers, etc. Having contracted obligations and engaged in the 139 production of commodities with the expectation of a given price, they find their goods worth less when ready for the market and themselves confronted with a loss instead of the anticipated profit. Under such circumstances a contraction of the currency and falling prices means lessened production of wealth. Consequently many writers, and even so good an economist as President Walker, have urged that a slow steady inflation of the currency would promote trade and “give a fillip to industry.” The monetary history of the United States is filled with attempts to realize this in practice: colonial and revolutionary bills of credit were first issued; when these were forbidden by the new Constitution resort was had to issues by state banks. When the Federal Government began the issue of greenbacks and restricted the use of state bank notes, the inflationists looked to this source for assistance. After the defeat of the Greenback party, they turned finally to the coinage of silver, which was now falling in price, and the question of bimetallism in the United States was made a practical political issue.

Down to 1870 practically all the nations of Europe and America had the system of bimetallism at ratios of 15½ or 16 to 1. About that date the great increase in the supply of gold and the fall in the value of silver led one country after another to abandon the latter and to adopt the system of gold monometallism. This was vigorously resisted by many persons and several fruitless efforts made to secure a system of international bimetallism. Failing that, the friends of silver in this country endeavored to secure independent action by the United States alone, and were ultimately successful in obtaining the purchase by the Federal Government of practically the entire silver output of the country during the years 1878-1893.

Development of the Manufacturing Industries in the United States,
1800-1905.

======+==========+========================+===========+===========+
| | Wealth. | | |
| +---------------+--------+ | |
Fiscal| | | | | |
Year,|Population| | | Production| Raw wool |
ending| June 1. | | Per | of | imported. |
June | | Total. |capita. | wool.[B] | |
30-- | | | | | |
| | | | | |
| | | | | |
------+----------+---------------+--------+-----------+-----------+
| | Dollars. |Dollars.| Pounds. | Pounds. |
| | | | | |
1800 | 5,308,483| -- | -- | -- | -- |
1810 | 7,239,881| -- | -- | -- | -- |
1820 | 9,638,453| -- | -- | -- | -- |
1830 |12,866,020| -- | -- | 35,802,114| 669,883|
1840 |17,069,453| -- | -- | 52,516,959| 9,898,740|
1850 |23,191,876| 7,135,780,000| 307.69| -- | 18,695,294|
1851 |23,995,000| -- | -- | -- | 32,607,315|
1852 |24,802,000| -- | -- | -- | 18,343,218|
1853 |25,615,000| -- | -- | -- | 21,616,035|
1854 |26,433,000| -- | -- | -- | 20,228,035|
1855 |27,256,000| -- | -- | -- | 18,599,784|
1856 |28,083,000| -- | -- | -- | 14,778,496|
1857 |28,916,000| -- | -- | -- | 16,505,216|
1858 |29,758,000| -- | -- | -- | -- |
1859 |30,596,000| -- | -- | 60,264,913| -- |
1860 |31,443,321| 16,159,616,000| 513.93| 75,000,000| -- |
1861 |32,064,000| -- | -- | 90,000,000| -- |
1862 |32,704,000| -- | -- |106,000,000| 42,131,061|
1863 |33,365,000| -- | -- |123,000,000| 73,931,944|
1864 |34,046,000| -- | -- |142,000,000| 90,464,002|
1865 |34,748,000| -- | -- |155,000,000| 43,877,408|
1866 |35,469,000| -- | -- |160,000,000| 67,918,253|
1867 |36,211,000| -- | -- |168,000,000| 16,558,046|
1868 |36,973,000| -- | -- |180,000,000| 24,124,803|
1869 |37,756,000| -- | -- |162,000,000| 39,275,926|
1870 |38,558,371| 30,068,518,000| 779.83|160,000,000| 49,230,199|
1871 |39,555,000| -- | -- |150,000,000| 68,058,028|
1872 |40,596,000| -- | -- |158,000,000|122,256,499|
1873 |41,677,000| -- | -- |170,000,000| 85,496,049|
1874 |42,796,000| -- | -- |181,000,000| 42,939,541|
1875 |43,951,000| -- | -- |192,000,000| 54,901,760|
1876 |45,137,000| -- | -- |200,000,000| 44,642,836|
1877 |46,353,000| -- | -- |208,250,000| 42,171,192|
1878 |47,598,000| -- | -- |211,000,000| 48,449,079|
1879 |48,866,000| -- | -- |232,500,000| 39,005,155|
1880 |50,155,783| 43,642,000,000| 850.20|240,000,000|128,131,747|
1881 |51,316,000| -- | -- |272,000,000| 55,964,236|
1882 |52,495,000| -- | -- |290,000,000| 67,861,744|
1883 |53,693,000| -- | -- |300,000,000| 70,575,478|
1884 |54,911,000| -- | -- |308,000,000| 78,350,651|
1885 |56,148,000| -- | -- |302,000,000| 70,596,170|
1886 |57,404,000| -- | -- |285,000,000|129,084,958|
1887 |58,680,000| -- | -- |269,000,000|114,038,030|
1888 |59,974,000| -- | -- |265,000,000|113,558,753|
1889 |61,289,000| -- | -- |276,000,000|126,487,729|
1890 |62,622,250| 65,037,091,000|1,038.57|285,000,000|105,431,285|
1891 |63,844,000| -- | -- |294,000,000|129,303,648|
1892 |65,086,000| -- | -- |303,153,000|148,670,652|
1893 |66,349,000| -- | -- |298,057,384|172,433,838|
1894 |67,632,000| -- | -- |309,748,000| 55,152,585|
1895 |68,934,000| 77,000,000,000|1,117.01|272,474,708|206,033,906|
1896 |70,254,000| -- | -- |259,153,251|230,911,473|
1897 |71,592,000| -- | -- |266,720,684|350,852,026|
1898 |72,947,000| -- | -- |272,191,330|132,795,202|
1899 |74,318,000| -- | -- |288,636,621| 76,736,209|
1900 |76,303,387| 88,517,306,775|1,164.79|302,502,328|155,928,455|
1901 |79,003,000| -- | -- |287,450,000|166,576,966|
1903 |80,372,000| -- | -- |291,783,032|177,137,796|
1904 |81,752,000|107,104,211,917|1,310.11|295,488,438|173,742,834|
1905 |83,143,000| -- | -- |298,915,130|249,135,746|
1906 |84,216,433| -- | -- |298,294,750|201,688,668|
1907 |85,817,239| -- | -- |311,138,321|203,847,545|
1908 |87,189,392| -- | -- | -- |125,980,524|
------+----------+---------------+--------+-----------+-----------+

======+==========+=====================================================+
| | Manufactures of cotton. |
|Production+--------------------------+--------------------------+
Fiscal| of | Thousands of spindles in | Thousands of bales of |
Year,|cotton.[B]| operation on Sept. 1st. | domestic cotton taken |
ending| | | by mills. |
June | (500-lb. +--------+--------+--------+--------+--------+--------+
30-- | bales, | In | In | Total | In | In | Total |
| gross |Southern|Northern| United |Southern|Northern| United |
| weight.) |States. | States.| States.| States.| States.| States |
------+----------+--------+--------+--------+--------+--------+--------+
| Number. | Thou- | Thou- | Thou- | Thou- | Thou- | Thou- |
| | sands. | sands. | sands. | sands. | sands. | sands. |
1800 | 73,222| -- | -- | -- | -- | -- | -- |
1810 | 177,824| -- | -- | -- | -- | -- | -- |
1820 | 334,728| -- | -- | -- | -- | -- | |
1830 | 732,218| -- | -- | -- | -- | -- | -- |
1840 | 1,347,640| 181 | 2,104 | 2,285 | 71 | 166 | 237 |
1850 | 2,136,083| 265 | 3,733 | 3,998 | 78 | 497 | 575 |
1851 | 2,799,290| -- | -- | -- | 60 | 404 | 464 |
1852 | 3,130,338| -- | -- | -- | 111 | 588 | 699 |
1853 | 2,766,194| -- | -- | -- | 153 | 650 | 803 |
1854 | 2,708,082| -- | -- | -- | 145 | 592 | 737 |
1855 | 3,220,782| -- | -- | -- | 135 | 571 | 706 |
1856 | 3,873,680| -- | -- | -- | 138 | 633 | 771 |
1857 | 3,012,016| -- | -- | -- | 154 | 666 | 820 |
1858 | 3,758,273| -- | -- | -- | 143 | 452 | 595 |
1859 | 4,309,642| -- | -- | -- | 167 | 760 | 927 |
1860 | 3,841,416| 324 | 4,912 | 5,236 | 94 | 751 | 845 |
1861 | 4,490,586| -- | -- | -- | 153 | 650 | 803 |
1862 | 1,596,653| -- | -- | -- | -- | -- | -- |
1863 | 449,059| -- | -- | -- | -- | -- | -- |
1864 | 229,372| -- | -- | -- | -- | -- | -- |
1865 | 2,093,658| -- | -- | -- | -- | -- | -- |
1866 | 1,948,077| -- | -- | -- | 127 | 541 | 668 |
1867 | 2,345,610| -- | -- | -- | 150 | 573 | 723 |
1868 | 2,198,141| -- | -- | -- | 168 | 800 | 968 |
1869 | 2,409,597| -- | -- | -- | 173 | 822 | 995 |
1870 | 4,024,527| 328 | 6,804 | 7,132 | 69 | 728 | 797 |
1871 | 2,756,564| -- | -- | -- | 91 | 1,072 | 1,163 |
1872 | 3,650,932| -- | -- | -- | 120 | 977 | 1,097 |
1873 | 3,873,750| -- | -- | -- | 138 | 1,063 | 1,201 |
1874 | 3,528,276| -- | -- | -- | 128 | 1,192 | 1,320 |
1875 | 4,302,818| -- | -- | -- | 130 | 1,071 | 1,201 |
1876 | 4,118,390| -- | -- | -- | 134 | 1,220 | 1,354 |
1877 | 4,494,224| -- | -- | -- | 127 | 1,302 | 1,429 |
1878 | 4,745,078| -- | -- | -- | 151 | 1,345 | 1,496 |
1879 | 5,466,387| -- | -- | -- | 186 | 1,375 | 1,561 |
1880 | 6,356,998| 561 | 10,092 | 10,653 | 189 | 1,382 | 1,570 |
1881 | 5,136,447| -- | -- | -- | 225 | 1,713 | 1,938 |
1882 | 6,833,442| -- | -- | -- | 287 | 1,677 | 1,964 |
1883 | 5,521,963| 860 | 11,800 | 12,660 | 313 | 1,759 | 2,072 |
1884 | 5,477,448| 1,050 | 12,250 | 13,300 | 340 | 1,537 | 1,877 |
1885 | 6,369,341| 1,125 | 12,250 | 13,375 | 316 | 1,437 | 1,753 |
1886 | 6,314,561| 1,150 | 12,250 | 13,400 | 381 | 1,781 | 2,162 |
1887 | 6,884,667| 1,200 | 12,300 | 13,500 | 401 | 1,687 | 2,088 |
1888 | 6,923,775| 1,250 | 12,300 | 13,550 | 456 | 1,805 | 2,261 |
1889 | 7,472,511| 1,360 | 12,700 | 14,060 | 480 | 1,790 | 2,270 |
1890 | 8,562,089| 1,570 | 12,814 | 14,384 | 539 | 1,979 | 2,518 |
1891 | 8,940,867| 1,740 | 12,900 | 14,640 | 613 | 2,027 | 2,640 |
1892 | 6,658,313| 1,950 | 13,250 | 15,200 | 684 | 2,172 | 2,856 |
1893 | 7,433,056| 2,100 | 13,450 | 15,550 | 723 | 1,652 | 2,375 |
1894 |10,025,534| 2,200 | 13,500 | 15,700 | 711 | 1,580 | 2,291 |
1895 | 7,146,772| 2,400 | 13,700 | 16,100 | 852 | 2,019 | 2,871 |
1896 | 8,515,640| 2,850 | 13,800 | 16,650 | 900 | 1,605 | 2,505 |
1897 |10,985,040| 3,250 | 13,900 | 17,150 | 999 | 1,793 | 2,792 |
1898 |11,435,368| 3,550 | 13,900 | 17,450 | 1,254 | 2,211 | 3,465 |
1899 | 9,459,935| 3,950 | 14,150 | 18,100 | 1,415 | 2,217 | 3,632 |
1900 |10,266,527| 4,368 | 15,104 | 19,472 | 1,523 | 2,350 | 3,873 |
1901 | 9,675,771| 5,500 | 11,700 | 20,200 | 1,583 | 1,964 | 3,547 |
1902 |10,827,168| 6,400 | 15,000 | 21,400 | 2,017 | 2,066 | 4,083 |
1903 |10,045,615| 6,900 | 15,100 | 22,000 | 1,958 | 1,966 | 3,924 |
1904 |13,679,954| 7,650 | 15,200 | 22,850 | 1,889 | 2,046 | 3,935 |
1905 |10,804,556| 7,631 | 16,056 | 23,687 | 2,140 | 2,139 | 4,279 |
1906 |13,595,498| 8,995 | 16,255 | 25,250 | 2,373 | 2,536 | 4,909 |
1907 |11,375,461| 9,528 | 16,847 | 26,275 | 2,411 | 2,574 | 4,985 |
1908 |13,587,306| 10,201 | 17,304 | 27,505 | 2,187 | 2,352 | 4,539 |
------+----------+--------+--------+--------+--------+--------+--------+

======+===========+===========+===========+============
| | | |
| | | |
Fiscal| | | Unmanu- |
Year,| | | factured | Imports
ending| Exports. | Imports. | silk | of crude
June | (domestic)| | imported. | rubber.
30-- | | | |
| | | |
| | | |
------+-----------+-----------+-----------+------------
| Dollars. | Dollars. | Pounds. | Pounds.
| | | |
1800 | -- | -- | -- | --
1810 | -- | -- | -- | --
1820 | -- | 7,812,326| -- | --
1830 | 1,318,183| 5,774,013| -- | --
1840 | 3,549,607| 6,504,104| -- | --
1850 | 4,734,424| 20,781,346| -- | --
1851 | 7,241,205| 22,164,442| -- | --
1852 | 7,672,151| 19,689,496| -- | --
1853 | 8,768,894| 27,731,363| -- | --
1854 | 5,535,516| 33,949,503| -- | --
1855 | 5,857,181| 17,757,112| -- | --
1856 | 6,967,309| 25,917,999| -- | --
1857 | 6,115,177| 28,685,726| -- | --
1858 | 5,651,504| 18,584,810| -- | --
1859 | 8,316,222| 26,976,381| -- | --
1860 | 10,934,796| 33,215,541| -- | --
1861 | 7,957,038| 25,271,382| -- | --
1862 | 2,946,464| 8,890,119| -- | 2,125,561
1863 | 2,906,411| 14,121,589| -- | 5,104,650
1864 | 1,456,901| 14,341,501| 407,935| --
1865 | 3,451,561| 9,223,686| 288,286| --
1866 | 1,780,175| 27,502,194| 567,904| --
1867 | 4,608,235| 19,302,005| 491,983| --
1868 | 4,871,054| 17,335,406| 512,449| 8,438,019
1869 | 5,874,222| 20,481,312| 720,045| 7,813,134
1870 | 3,787,282| 23,380,053| 583,589| 9,624,098
1871 | 3,558,236| 29,876,640| 1,100,281| 11,031,939
1872 | 2,304,330| 35,307,447| 1,063,809| 11,803,437
1873 | 2,947,528| 35,201,324| 1,159,420| 14,536,978
1874 | 3,095,840| 28,193,869| 794,837| 14,191,320
1875 | 4,071,882| 27,738,401| 1,101,681| 12,035,909
1876 | 7,722,978| 22,725,598| 1,354,991| 10,589,297
1877 | 10,235,843| 18,923,614| 1,186,170| 13,821,109
1878 | 11,438,660| 19,081,037| 1,182,750| 12,512,203
1879 | 10,853,950| 19,928,310| 1,889,776| 14,878,584
1880 | 9,981,418| 29,929,366| 2,562,236| 16,826,099
1881 | 13,571,387| 31,219,329| 2,790,413| 20,015,176
1882 | 13,222,979| 35,719,791| 3,549,404| 22,712,862
1883 | 12,951,145| 38,036,044| 4,731,106| 21,646,320
1884 | 11,885,211| 29,074,626| 4,284,888| 24,574,025
1885 | 11,836,591| 27,197,241| 4,308,908| 24,208,148
1886 | 13,959,934| 29,709,266| 6,818,060| 29,263,632
1887 | 14,929,342| 28,940,353| 6,028,091| 28,649,446
1888 | 13,013,189| 28,917,799| 6,370,322| 36,628,351
1889 | 10,212,644| 26,805,942| 6,645,124| 32,339,503
1890 | 9,999,277| 29,918,055| 7,510,440| 33,842,374
1891 | 13,604,857| 29,712,624| 6,266,629| 33,712,089
1892 | 13,226,277| 28,323,841| 8,834,049| 39,976,205
1893 | 11,809,355| 33,560,293| 8,497,477| 41,547,680
1894 | 14,340,886| 22,346,547| 5,902,485| 33,757,783
1895 | 13,789,810| 33,196,625| 9,316,460| 39,741,607
1896 | 16,837,396| 32,437,504| 9,363,987| 36,774,460
1897 | 21,037,678| 34,429,363| 7,993,444| 35,574,449
1898 | 17,024,092| 27,267,300| 12,087,951| 46,055,497
1899 | 23,566,914| 32,054,434| 11,250,383| 51,063,066
1900 | 24,003,087| 41,296,239| 13,073,718| 49,377,138
1901 | 20,272,418| 40,246,935| 10,405,555| 55,275,529
1902 | 32,108,362| 44,460,126| 14,234,826| 50,413,481
1903 | 32,216,304| 52,462,755| 15,270,859| 55,010,571
1904 | 22,403,713| 49,524,246| 16,722,709| 59,015,551
1905 | 49,666,080| 48,919,936| 22,357,307| 67,234,256
1906 | 52,944,033| 63,043,322| 17,352,021| 57,844,345
1907 | 32,305,412| 73,704,636| 18,743,904| 76,963,838
1908 | 25,177,758| 68,379,781| 16,662,132| 62,233,160
------+-----------+-----------+-----------+------------

[B] Calendar years.

Development of the Manufacturing Industries in the United States,
1800-1905--Continued.

=====+=======================+============+
| | |
| Production of | Exports of |
| | domestic |
+------------+----------+ copper & +
Year.| | | manufac- |
| Coal.[C] |Copper.[C]| tures |
| | | of. |
| | | |
| | | |
-----+------------+----------+------------+
| Long | Long | Dollars. |
| tons. | tons. | |
| | | |
1800| -- | -- | -- |
1810| 20| -- | 17,426|
1820| 3,080| -- | 18,547|
1830| 285,779| -- | 36,601|
1840| 1,848,249| 100 | 86,954|
1850| 6,266,233| 650 | 105,060|
1851| 7,798,683| 900 | 91,871|
1852| 8,764,879| 1,100 | 103,039|
1853| 9,437,757| 2,000 | 108,205|
1854| 10,698,841| 2,250 | 91,984|
1855| 11,541,672| 3,000 | 690,766|
1856| 12,095,469| 4,000 | 534,846|
1857| 11,910,883| 4,800 | 607,054|
1858| 12,477,213| 5,500 | 1,985,223|
1859| 13,958,192| 6,300 | 1,048,246|
1860| 13,044,680| 7,200 | 1,664,122|
1861| 14,721,439| 7,500 | 2,375,029|
1862| 15,612,353| 9,000 | 1,098,546|
1863| 19,034,877| 8,500 | 1,026,038|
1864| 21,076,003| 8,000 | 251,272|
1865| 21,243,012| 8,500 | 991,746|
1866| 25,896,056| 8,900 | 143,761|
1867| 27,432,520| 10,000 | 474,110|
1868| 29,341,036| 11,600 | 479,488|
1869| 29,378,893| 12,500 | 355,274|
1870| 29,496,054| 12,600 | 504,741|
1871| 41,861,679| 13,000 | 188,218|
1872| 45,940,535| 12,500 | 185,983|
1873| 51,430,786| 15,500 | 88,711|
1874| 46,969,571| 17,500 | 356,758|
1875| 46,739,571| 18,000 | 1,085,688|
1876| 47,571,429| 19,000 | 3,441,939|
1877| 54,019,429| 21,000 | 2,913,943|
1878| 51,728,214| 21,500 | 2,319,901|
1879| 60,808,749| 23,000 | 2,831,053|
1880| 63,822,830| 27,000 | 793,455|
1881| 76,679,491| 32,000 | 824,896|
1882| 92,456,419| 40,467 | 658,941|
1883| 103,310,290| 51,574 | 1,404,243|
1884| 107,281,742| 64,708 | 2,664,964|
1885| 99,250,263| 74,052 | 5,447,423|
1886| 101,500,381| 70,430 | 2,602,869|
1887| 116,652,242| 81,017 | 2,033,523|
1888| 132,731,837| 101,054 | 3,812,798|
1889| 126,097,779| 101,239 | 2,348,954|
1890| 140,866,931| 115,966 | 2,349,392|
1891| 150,505,954| 126,839 | 4,614,597|
1892| 160,115,242| 154,018 | 7,226,392|
1893| 162,814,977| 147,033 | 4,525,573|
1894| 152,447,791| 158,120 | 19,697,140|
1895| 172,426,366| 169,917 | 14,468,703|
1896| 171,416,390| 205,384 | 19,720,104|
1897| 178,776,070| 220,571 | 31,621,125|
1898| 196,407,381| 235,050 | 32,180,872|
1899| 226,554,636| 253,870 | 35,983,529|
1900| 240,789,310| 270,588 | 57,852,960|
1901| 261,874,836| 268,782 | 43,267,021|
1902| 269,277,178| 294,423 | 41,218,373|
1903| 319,068,229| 311,627 | 39,667,196|
1904| 314,121,784| 362,739 | 57,142,081|
1905| 350,820,840| 402,637 | 86,225,291|
1906| 369,783,284| 409,735 | 81,282,664|
1907| 428,895,914| 387,945 | 94,762,110|
1908| -- | -- | 104,064,580|
-----+------------+----------+------------+

=====+===========================================+======================+
| | |
| Production of | Iron and steel +
| | Manufactures. |
+----------+----------+----------+----------+----------+-----------+
Year.| | | | | | |
| Natural | Iron | Pig | Steel.[C]| Imports. | Exports |
| gas.[C] | ore.[C] | iron.[C] | | | (domestic)|
| | | | | | |
| | | | | | |
-----+----------+----------+----------+----------+----------+-----------+
| Dollars. |Long tons.|Long tons.|Long tons.| Dollars. | Dollars. |
| | | | | | |
| | | | | | |
1800| -- | -- | -- | -- | -- | 52,144|
1810| -- | -- | 53,908| -- | -- | 91,914|
1820| -- | -- | 20,000| -- | -- | 46,552|
1830| -- | -- | 165,000| -- | 6,346,287| 322,747|
1840| -- | -- | 286,903| -- | 8,157,923| 1,127,877|
1850| -- | -- | 563,755| -- |20,145,067| 1,953,702|
1851| -- | -- | -- | -- |22,439,297| 2,336,587|
1852| -- | -- | -- | -- |23,568,649| 2,368,384|
1853| -- | -- | -- | -- |34,944,002| 2,541,554|
1854| -- | -- | 657,338| -- |35,456,143| 4,249,959|
1855| -- | -- | 700,159| -- |28,693,979| 3,803,706|
1856| -- | -- | 788,515| -- |29,050,101| 4,256,613|
1857| -- | -- | 712,640| -- |30,743,649| 4,959,238|
1858| -- | -- | 629,548| -- |20,171,007| 4,843,592|
1859| -- | -- | 750,560| -- |22,379,743| 5,577,748|
1860| -- | -- | 821,223| -- |26,158,235| 5,870,114|
1861| -- | -- | 653,164| -- |21,160,235| 6,039,149|
1862| -- | -- | 703,270| -- |11,451,707| 4,732,348|
1863| -- | -- | 846,075| -- |16,152,843| 6,681,417|
1864| -- | -- | 1,014,282| -- |23,822,876| 7,541,967|
1865| -- | -- | 831,770| -- |16,660,991| 11,227,294|
1866| -- | -- | 1,205,663| -- |25,598,147| 4,006,180|
1867| -- | -- | 1,305,023| 19,643|31,630,519| 9,351,062|
1868| -- | -- | 1,431,250| 26,786|30,346,768| 10,950,275|
1869| -- | -- | 1,711,287| 31,250|38,213,717| 10,938,492|
1870| -- | 3,031,891| 1,665,179| 68,750|40,273,682| 13,483,163|
1871| -- | -- | 1,706,793| 73,214|53,024,075| 21,189,692|
1872| -- | -- | 2,548,713| 142,954|67,852,616| 11,463,880|
1873| -- | -- | 2,560,963| 198,796|74,302,102| 13,655,087|
1874| -- | -- | 2,401,262| 215,727|46,786,469| 15,098,248|
1875| -- | -- | 2,023,733| 389,799|31,432,380| 19,534,215|
1876| -- | -- | 1,868,961| 533,191|23,197,417| 15,449,846|
1877| -- | -- | 2,066,594| 569,618|19,320,927| 16,501,638|
1878| -- | -- | 2,301,215| 731,977|18,987,130| 16,053,571|
1879| -- | -- | 2,741,853| 935,273|19,594,608| 15,133,493|
1880| -- | 7,120,362| 3,835,191| 1,247,335|71,266,699| 14,716,524|
1881| -- | -- | 4,144,254| 1,588,314|60,604,477| 16,608,767|
1882| 215,000| -- | 4,623,323| 1,736,692|67,976,897| 20,748,206|
1883| 475,000| -- | 4,595,510| 1,673,535|58,495,246| 22,826,528|
1884| 1,460,000| -- | 4,097,868| 1,550,879|40,147,053| 21,909,881|
1885| 4,857,200| -- | 4,044,526| 1,711,920|33,610,093| 16,592,155|
1886|10,012,000| -- | 5,683,329| 2,562,503|37,534,078| 15,745,569|
1887|15,817,500| -- | 6,417,148| 3,339,071|49,203,164| 15,958,502|
1888|22,629,875| -- | 6,489,738| 2,899,440|48,992,757| 17,763,034|
1889|21,097,099|14,518,041| 7,603,642| 3,385,732|42,377,793| 21,156,077|
1890|18,792,725|16,036,043| 9,202,703| 4,277,071|41,679,591| 25,542,208|
1891|15,500,084|14,591,178| 8,279,876| 3,904,240|53,544,372| 28,909,614|
1892|14,870,714|16,296,666| 9,157,000| 4,927,581|28,928,103| 28,800,930|
1893|14,346,250|11,587,629| 7,124,502| 4,019,995|34,937,974| 30,106,482|
1894|13,954,400|11,879,679| 6,657,888| 4,412,032|20,925,769| 29,220,264|
1895|13,006,650|15,957,614| 9,446,308| 6,114,834|23,048,515| 32,000,989|
1896|13,002,512|16,005,449| 8,623,127| 5,281,689|25,338,103| 41,160,877|
1897|13,826,422|17,518,046| 9,652,680| 7,156,957|16,094,557| 57,497,872|
1898|15,296,813|19,433,716|11,773,934| 8,932,857|12,626,431| 70,406,885|
1899|20,074,873|24,683,173|13,620,703|10,639,857|12,100,440| 93,716,031|
1900|23,698,674|27,553,161|13,789,242|10,188,329|20,478,728|121,913,548|
1901|27,066,077|28,887,479|15,878,354|13,473,595|17,874,789|117,319,320|
1902|30,867,863|35,554,135|17,821,307|14,947,250|27,180,247| 98,552,562|
1903|35,807,860|35,019,308|18,009,252|14,534,978|51,617,312| 96,642,467|
1904|38,496,760|27,644,330|16,497,033|13,859,887|27,028,312|111,948,586|
1905|41,562,855|42,526,133|22,992,380|20,023,947|23,510,164|134,728,363|
1906|46,873,932|47,749,728|25,307,191|23,398,136|29,053,987|160,984,985|
1907|52,866,835|51,720,619|25,781,361|23,362,594|40,587,865|181,530,871|
1908| -- | -- |15,936,018| -- |27,607,909|183,982,182|
-----+----------+----------+----------+----------+----------+-----------+

=====+========================================+===========
| Prices of staple commodities. |
+-------------------+---------+----------+ Washed
| Per ton.[C] | | |Ohio fleece
|---------+---------+ Middling| Standard | wool, per
Year.| | Steel | cotton, |sheetings,| lb., in
| Pig iron| rails, | per | per | eastern
| No. 1, |standard |pound.[C]| yard.[C] | m’k’ts,
| foundry.|sections.| | | July 1.
| | | | | Medium.
-----+---------+---------+---------+----------+-----------
| Dollars.| Dollars.| Cents. | Cents. | Cents.
| | | | |
| | | | |
1800| -- | -- | -- | -- | --
1810| -- | -- | -- | -- | --
1820| -- | -- | -- | -- | --
1830| -- | -- | -- | -- | 50
1840| 27.88 | -- | -- | -- | 39
1850| 20.88 | -- | 12.34 | 7.87 | 37
1851| 21.38 | -- | 12.14 | 7.08 | 42
1852| 22.63 | -- | 9.50 | 6.96 | 38
1853| 36.13 | -- | 11.02 | 7.92 | 53
1854| 36.88 | -- | 10.97 | 7.96 | 37
1855| 27.75 | -- | 10.39 | 7.64 | 40
1856| 27.18 | -- | 10.30 | 7.50 | 42
1857| 26.34 | -- | 13.51 | 8.90 | 50
1858| 22.19 | -- | 12.23 | 8.25 | 37
1859| 23.33 | -- | 12.08 | 8.50 | 40
1860| 22.70 | -- | 11.00 | 8.73 | 50
1861| 20.26 | -- | 13.01 | 10.00 | 30
1862| 23.92 | -- | 31.29 | 18.55 | 47
1863| 35.24 | -- | 67.21 | 36.04 | 70
1864| 59.22 | -- | 101.50 | 52.07 | 100
1865| 46.08 | -- | 83.38 | 38.04 | 73
1866| 46.84 | -- | 43.20 | 24.31 | 67
1867| 44.08 | 166.00 | 31.59 | 18.28 | 49
1868| 39.25 | 158.46 | 24.85 | 16.79 | 45
1869| 40.61 | 132.19 | 29.01 | 16.19 | 48
1870| 33.23 | 106.79 | 23.98 | 14.58 | 45
1871| 35.08 | 102.52 | 16.95 | 13.00 | 60
1872| 48.94 | 111.94 | 22.19 | 14.27 | 70
1873| 42.79 | 120.58 | 20.14 | 13.31 | 48
1874| 30.19 | 94.28 | 17.95 | 11.42 | 53
1875| 25.53 | 68.75 | 15.46 | 10.41 | 49
1876| 22.19 | 59.25 | 12.98 | 8.85 | 35
1877| 18.92 | 45.58 | 11.82 | 8.46 | 44
1878| 17.67 | 42.21 | 11.22 | 7.80 | 36
1879| 21.72 | 48.21 | 10.84 | 7.97 | 38
1880| 28.48 | 67.52 | 11.51 | 8.51 | 48
1881| 25.17 | 61.08 | 12.03 | 8.51 | 44
1882| 25.77 | 48.50 | 11.56 | 8.45 | 45
1883| 22.42 | 37.75 | 11.88 | 8.32 | 41
1884| 19.81 | 30.75 | 10.88 | 7.28 | 34
1885| 17.99 | 28.52 | 10.45 | 6.75 | 31
1886| 18.71 | 34.52 | 9.28 | 6.75 | 33
1887| 20.93 | 37.08 | 10.21 | 7.15 | 37
1888| 18.88 | 29.83 | 10.03 | 7.00 | 39
1889| 17.76 | 29.25 | 10.65 | 7.00 | 39
1890| 18.41 | 31.78 | 11.07 | 7.00 | 37
1891| 17.52 | 29.92 | 8.60 | 6.83 | 35
1892| 15.75 | 30.00 | 7.71 | 6.50 | 34
1893| 14.52 | 28.12 | 8.56 | 5.90 | 26
1894| 12.66 | 24.00 | 6.94 | 5.11 | 21
1895| 13.10 | 24.33 | 7.44 | 5.74 | 21
1896| 12.95 | 28.00 | 7.93 | 5.45 | 18
1897| 12.10 | 18.75 | 7.00 | 4.73 | 23½
1898| 11.66 | 17.62 | 5.94 | 4.20 | 29
1899| 19.36 | 28.12 | 6.88 | 5.28 | 31½
1900| 19.98 | 32.29 | 9.25 | 6.05 | 31½
1901| 15.87 | 27.33 | 8.75 | 5.54 | 26
1902| 22.19 | 28.00 | 9.00 | 5.48 | 26¾
1903| 19.92 | 28.00 | 11.18 | 6.25 | 31½
1904| 15.57 | 28.00 | 11.75 | 7.13 | 32½
1905| 17.88 | 28.00 | 9.80 | 7.00 | 39
1906| 20.98 | 28.00 | 11.50 | 7.25 | 37
1907| 23.89 | 28.00 | 12.10 | 7.62 | 36
1908| 17.70 | 28.00 | 10.62 | 6.75 | 38
-----+---------+---------+---------+----------+-----------

[C] Calendar year.

The arguments in favor of bimetallism are as various as the motives of its advocates, but two or three of the more important ones may be 140 briefly stated. It is urged because it would give a more stable measure of value than either silver or gold alone could do; and the evil effects of fluctuations in the value of gold since 1873 are pointed out to illustrate this contention. Monometallists answer this by asserting that most of the price changes can be accounted for by improvements in production; that even if they were caused by a contraction of the currency, this was simply one of the risks of business; and finally, that the evil effects of falling prices are offset by a corresponding reduction in interest rates. A second argument of the bimetallists was the alleged insufficiency of gold on which to do the world’s business. As this has been practically met by the phenomenal increase in gold production in the last decade, especially since the gold discoveries in Alaska, it is not necessary to dwell upon this argument. On February 1, 1909, the per capita circulation of money in the United States reached $35.00, the highest point in our history. A final argument of the bimetallists concerns foreign trade: it would facilitate this by establishing a fixed par-of-exchange between all countries. While the weight of this may be admitted, it has been practically deprived of all force by the adoption of the gold standard by virtually all the industrially developed nations of the world. This last fact shows that the question has now been actually settled by the logic of events and today the issue of bimetallism has only an academic interest.

Another problem connected with money which has been removed from the arena of oratory to that of calm discussion is that of government paper money. It is urged, with much truth, that if a nation issued paper money instead of gold or silver, it would save all the expense of mining these metals. It would resemble, as Adam Smith said, the discovery of wagon roads through the air in the realm of transportation. Another argument advanced in favor of government paper money is that it would be possible by a scientific adjustment of the 141 issues to regulate the amount of money in circulation and so to prevent all fluctuations in prices. Both contraction and inflation would be prevented and a cheap and yet ideal system of money would exist. Still others see in this form of money an instrument for the creation of wealth; this last argument simply results from a confusion of ideas and need not be dealt with. A sufficient answer to the other two is an appeal to the lesson of history: no government which has embarked upon the issue of paper money has ever been able to restrict the issues within reasonable limits; often it has led to national bankruptcy and the repudiation of the entire issues. The experience of the United States with the greenbacks has been more fortunate than that of many countries, but does not tempt to further experiment.

The monetary situation in the United States today may be regarded as fairly well settled. Although we have a very heterogeneous assortment of different kinds of money, a fairly distinct sphere is allotted to each, and as the basis for all, the gold standard has been definitely established by law. Money of large denominations consists of gold and gold certificates (lowest denomination, $20), of greenbacks and national bank notes (lowest denomination, $10, though one-third of bank notes may be $5); the needs of retail trade are met by the issue of silver certificates and silver dollars, and of fractional currency. The system would be much simplified by the retirement and destruction of the $346,000,000 in greenbacks, but as there is now a fifty-per cent reserve in gold back of them, little danger need be apprehended from their presence. Many people have regarded the existence of some $500,000,000 worth of silver dollars as a menace to the goodness of our money supply, but as the amount of gold in circulation increases the silver will form a constantly smaller percentage of the whole. It is a cumbersome and not very valuable asset of the Government, but 142 is now almost powerless for good or ill.

Important as is the subject of money and essential as is the need of a standard of undoubted goodness, it is overshadowed in practical significance by the problems of banking and credit. An investigation by the Comptroller of the Currency some years ago showed that over 90 per cent of the receipts of the national banks consisted of credit instruments, while probably 60 per cent of the trade of the country was carried on by credit rather than by cash transactions. A credit transaction is a transfer of goods or money for a future equivalent; the element of time is introduced. This makes possible an enormous increase in the number of exchanges and obviates the necessity, to a large extent, of using money. Most of us enjoy personal credit, which is limited only by our ability to persuade other people to trust in us. But this power of purchasing things without immediate payment must be made readily available if the ordinary business man is to make use of it. This is done through the medium of a bank, whose business it is to discount the notes of its customers, which in turn is based upon confidence in their prospective earnings. The bank credit thus obtained may be transferred by means of checks to other persons and to other banks. It is the most fluid and volatile means of payment yet devised, and is subject to dangers and abuses. In the last analysis business based upon such a system of credit rests upon confidence in the honesty of individuals and in the enforcement of the law governing contracts, and also in the ability of those who have pledged themselves to future payment to make good their obligations. In times of panic credit fails and resort is had to money.

The fundamental institution in our credit economy is the bank, and it is therefore essential that it be thoroughly safe and responsive to the needs of the business world. A bank may furnish its customers 143 with the ready means of payment they need in exchange for their future promises either in the form of bank notes or bank credit. The former are more largely used on the continent of Europe and in rural districts in this country, the latter by England and the United States, especially in the cities. The preference for one or the other seems to be a matter of geography. The issue of bank notes has been very carefully safeguarded since the establishment of the national banking system in 1863. They are based upon the purchase of government bonds and are absolutely safe. They lack, however, one essential quality of good bank money in that they are quite inelastic. That is to say, the amount of bank notes in circulation does not vary according to the needs of business, increasing to meet an increased demand, and then declining again when the demand has passed. Being based upon government bonds and not upon the value of business assets, they vary in amount only with the price of the former and not at all with the volume of the latter.

The main practical problem connected with our banking system is, therefore, to find some other basis for the issue of bank notes, especially as it is not desirable to maintain a permanent bonded indebtedness solely for this purpose. Various suggestions have been made, as the establishment of a central bank with sole power of issue, like the government banks in European countries. This is a favorite proposal with the big bankers, but is unlikely to be adopted as it is directly contrary to the spirit of the existing system. The Canadian system is held up as a model, with its system of branch banking and 5 per cent safety fund for the redemption of the notes of failed banks. Curiously enough this was copied after the system in operation in New York State, which was nipped in the bud by some early mistakes and by the development of the national banking system. It works admirably in Canada and is well worth careful study. The plan of asset currency 144 is another suggestion, according to which bank notes should be issued up to a certain percentage of the resources of the bank, but without pledging any specific property for their redemption as is done in the case of the national banks at present. It has finally been urged that our present bond deposit system should be modified by substituting state, municipal, railroad, or industrial bonds for those of the Federal Government, but that in other respects the system should be left intact. We may look for legislation along one or another of these lines in the next few years, as the subject is an urgent one whose solution cannot long be postponed.

Another problem is connected with the money reserves that the banks are required by law to keep on hand in order to meet demand liabilities. Under the national system in the United States the country banks may deposit three-fifths of their lawful reserves with banks in reserve cities, and these banks in turn may deposit one-half of their reserves in banks in central reserve cities (New York, Chicago, and St. Louis). Thus there is a massing, under this system, of the bank reserves of the country in the city of New York, and within that city in some twenty banks. While there is great economy in such a system the concentration of reserves is certainly attended by great dangers, not the least of which is its use by speculative influences in the New York money market, as a great part of it is loaned out to speculators on call.

Still another practical problem connected with the monetary and banking system of the United States is that of the independent treasury system. The Federal Government is to a large extent its own banker; it collects, disburses its revenue and keeps its money in its own vaults; it even, as we have seen, issues paper money and keeps a reserve therefor. By its action in withdrawing large amounts of money from use, or on the other hand making large disbursements, it can and 145 does affect the money market vitally and sometimes disastrously. While it is permitted to deposit funds in selected national banks and has recently made increasing use of this privilege, thus correlating in a measure the reserves of the Government and the needs of the business community, it is held by most students that the independent treasury system should be abolished, and that the banks should act as the intermediaries between the Government and the people in the collection and expenditure of its funds.

So far we have been discussing commercial banks, but there is another kind of institution which goes by the same name but serves quite a different purpose, namely, the savings bank. The essential and almost the only requirement of such an institution is safety. As we have seen, it is not only desirable for personal reasons to inculcate habits of saving and thrift in individuals, but it is also necessary to secure the accumulation of capital needed in modern industry. It is therefore important that such institutions should be widespread, accessible, and thoroughly trusted. These requirements seem to be best fulfilled by the postal savings banks in England and elsewhere, which have led to a great increase in savings on the part of the people. The introduction of such a system in the United States is greatly to be desired.