Page:Speeches, correspondence and political papers of Carl Schurz, Volume 2.djvu/524

504 use, its value would begin to sink below that of greenbacks. As soon as this happened, the banks would be called upon to redeem in greenbacks until the superfluous part of their issue was again in their vaults. In this way depreciation below the greenback standard would be avoided, and the volume of currency would regulate itself. This is substantially the English plan. The greenbacks correspond to the Bank of England notes, and the national-bank notes to those of the English country banks. Our readers will find in the first volume of Tooke's History of Prices copious extracts from the testimony of English country bankers on the working of the system there, under a suspension of specie payments. This testimony shows that the amount of currency they could keep afloat varied regularly with the season of the year. During the spring and fall trade they discounted freely, but soon after, their notes were presented for redemption, until the surplus issue was again stored away in their vaults. When the Bank of England contracted its issues, theirs increased; when it increased its issues, theirs contracted. In other words, the currency issued by banks, which could legally circulate any amount whatever, contracted and expanded in precise proportion to the needs of the country. It was thoroughly elastic. Free banking would indirectly aid the resumption of specie payments in two ways. It would make it possible to contract the greenback currency without paralyzing business, because as the greenbacks were withdrawn fresh bank-notes would be issued to take their place. And, again, it would help contradiction, because the new banks formed under it would have to keep their reserves in legal-tenders, and thus a good deal of the greenback currency would be withdrawn from circulation. The Congressmen who are opposing the bills for free banking on anti-inflation grounds are making a great mistake. The measure is not a compromise with the other side. It is a straightforward step towards specie payments.

Mr. . When I read that article I must confess that it staggered me a little at first sight; but great as