It is true that notes which pass from hand to hand as money are not scanned as closely as are other evidences of debt, nor can there be the same discrimination exercised in their use. They must, if circulated in small denominations, of necessity be taken by many who have no means of forming correct conclusions as to the soundness of the issues, and who can least afford to suffer loss. But the circulation of small notes of any sort is to be deprecated. Adam Smith pointed out the difference in the forms of money required for dealers and for consumers; that for the uses of the latter, paper money is not fitted, no matter what its form or security. The soundness of this view has been largely discussed since his time, but the preponderance of opinion has been in its favor. Mr. McCulloch, in his recent report, recommended the discontinuance of small notes. It would bring out a large amount of silver and small gold, which furnish the best kind of money for the smaller transactions of trade, and afford the best possible protection for the small dealers, the wage-earners—men, women, and children—who suffer most from a defective currency.[1] If small notes were retired, the smaller savings, the stocking-hoards, would consist of gold and silver, and obviously it is best that this part of the country's reserve—no inconsiderable part—should be of specie. The aggregate issue of legal-tender and national-bank notes of denominations under ten dollars is about two hundred and twenty million dollars. It is probable that nearly this entire amount could be replaced with gold and silver before the point of specie saturation would be reached. Such a volume of hard money would supply the best obtainable guarantee against currency disturbances.
That, if relieved from the function of furnishing wage and pocket money, a bank currency, suited for the larger operations of trade, and yet not handicapped with the obligation of special bond deposits, could be established with safety, may be asserted. That banks of issue can be safely conducted and furnish a sound currency has been sufficiently shown under conditions far more unfavorable than now obtain in the United States. The Scotch banks are examples. So well have they been conducted that Professor Jevons admitted that their system would be an excellent one for general adoption, "if we were all Scotchmen." It may be fairly doubted, however, whether the satisfactory results in Scotland are wholly due to exceptional integrity, sagacity, and caution on the part of Scottish managers. May it not be that the bank-currency system, properly conducted, has had a fairer trial in Scotland than elsewhere?
One does not need to be very old to remember when this country, especially the West, was dependent upon a paper currency that was, for the most part, of a very trashy kind; and to remember, also, that
- ↑ That the forced circulation of a debased coinage, by this or any other method, is not intended to be advocated, need hardly be explained; but a discussion of the silver question is no part of this paper.
