A Short History of Paper Money and Banking

The practices of trade seem, in most countries, to fix the standard of commercial honesty. In the Hanse towns and Holland, while they were rising to wealth, this standard was very high. Soldiers were not more careful to preserve their honor without stain, than merchants were to maintain their credit without blemish.

The practices of trade in the United States, have debased the standard of commercial honesty. Without clearly distinguishing the causes that have made commerce a game of hap-hazard, men have come to perceive clearly the nature of the effect. They see wealth passing continually out of the hands of those whose labor produced it, or whose economy saved it, into the hands of those who neither work nor save. They do not clearly perceive how the transfer takes place: but they are certain of the fact. In the general scramble they think themselves entitled to some portion of the spoil, and if they cannot obtain it by fair means, they take it by foul.

Hence we find men, without scruple, incurring debts which they have no prospect of paying.

Hence we find them, when on the very verge of bankruptcy, embarrassing their friends by prevailing on them to indorse notes and sign custom-house bonds.

Instances not unfrequently occur of men who have failed once or twice, afterwards accumulating great wealth. How few of these honorably discharge their old debts by paying twenty shillings in the pound!

How many evade the just demands of their creditors, by privately transferring their property.

It is impossible, in the present condition of society, to pass laws which will punish dishonest insolvents, and not oppress the honest and unfortunate.

Neither can public opinion distinguish between them, The dishonest share the sympathy which should be given exclusively to their unfortunate neighbors: and the honest are forced to bear a part of the indignation which should fall entirely on the fraudulent.

The standard of commercial honesty can never be raised very high, while trade is conducted on present principles. “It is hard,” says Dr. Franklin, “for an empty bag to stand upright.” The straits to which many men are reduced, cause them to be guilty of actions which they would regard with as much horror as their neighbors, if they were as prosperous as their neighbors.

We may be very severe in our censure of such men, but what else ought we to expect, when the laws and circumstances give to some men so great advantages in the great game in which the fortunes of the whole community are at issue—what else ought we to expect, but that those to whom the law gives no such advantage, should exert to the utmost such faculties as remain to them in the struggle for riches, and not be very particular whether the means they use are such as the law sanctions or the law condemns.

Let those who are in possession of property which has been acquired according to the strict letter of the law, be thankful that they have not been led into such temptations as those on whom the positive institutions of society have had an unfavorable influence.

But, Banking has a more extensive effect on the moral character of the community, through that distribution of wealth which is the result of its various direct and remote operations. Moralists in all ages, have inveighed against luxury. To it they attribute the corruption of morals, and the downfall of nations. The word luxury is equivocal. What is regarded as a luxury in one stage of society, is, in another, considered as a comfort, and in a still more advanced stage as a necessary. The desire of enjoyment is the great stimulus to social improvement. If men were content with bare necessaries, no people would, in the arts and sciences, and in whatever else renders life desirable, be in advance of the lowest caste of the Hindoos, or the unhappy peasantry of the most unhappy country of Europe.

But, whatever moralists have said against luxury, is true when applied to that artificial inequality of fortune which is produced by positive institutions of an unjust character. Its necessary effect is to corrupt one part of the community, and debase the other.

The bare prospect of inheriting great wealth, damps the energies of a young man, It is well if this is the only evil it produces. “An idle man’s brain,” says John Bunyan, “is the devil’s workshop.” Few men can have much leisure, and not be injured by it. To get rid of the ennui of existence, young men of wealth resort to the gambling table, the race ground, and other haunts of dissipation. They cannot have these low means of gratification, without debasing those less favored by fortune.

The children of the poor suffer as much in one way, as the children of the rich suffer in another. The whole energies of the father and mother are exhausted in providing bread for themselves and their family. They cannot attend properly to the formation of the moral character of their offspring—the most important branch of education. They can ill spare the means to pay for suitable intellectual instruction. Their necessities compel them to put their children to employments unsuited to their age and strength. The foundation is thus laid of diseases which shorten and imbitter life.

Instances occur of men, by the force of their innate powers, overcoming the advantages of excess or defect of wealth; but it is true, as a general maxim, that, in early life, and in every period of life, too much or too little wealth, is injurious to the character of the individual, and, when it extends through a community, it is injurious to the character of that community.

In the general intercourse of society, this artificial inequality of wealth produces baneful effects. In the United States, the pride of wealth has more force than in any other country, because there is here no other pride to divide the human heart. Some of our good republicans do, indeed, boast of a descent from the European nobility; but when they produce their coats of arms, and their genealogical trees, they are laughed at. The question is propounded, if their noble ancestors left them any money. Genius confers on its possessor a very doubtful advantage. Virtue, with us, as in the days of the Roman poet, is viler than sea weed, unless it has a splendid retinue. Talent is estimated only as a means of increasing riches. Wealth alone can give permanent distinction, for he who is at the top of the political ladder to-day, may be at the bottom tomorrow.

One mischief this state of things produces, is, that men are brought to consider wealth as the only means of happiness. Hence they sacrifice honor, conscience, health, friends—every thing, to obtain it.

The other effects of artificial inequality of wealth, have been treated of at large, by moralists, from Solomon and Socrates downwards. To their works, and to the modern treatises on crime and pauperism, we refer the reader. The last mentioned treatises are, for the most part, only illustrations of the ultimate effects of positive institutions, which operate unequally on different members of the community.