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100 CHAPTER VII.

ON THE STRICT CONVERTIBILITY OF BANK NOTES AND CREDITS.

BUT it may be asked, how are banks to ascertain the precise limits beyond which they cannot extend their issues without endangering their solvency and depreciating the currency, and of course injuring the public? And what guarantee has the public, who, from the nature of things, can know nothing of the state of their issues at all times, that their confidence will not be misplaced?

The answer to this question is not easily to be arrived at. In the various investigations before the British House of Commons in reference to the Bank of England, rules for prudent issues have been laid down by different directors, with a variety which showed that all did not possess a scientific acquaintance with the principles of banking. In the management of the numerous banks of the United States, an inexcusable ignorance of first principles has been repeatedly manifested, and hence, we have seen repeated expansions and contractions of a highly prejudicial nature. These expansions and contractions, however, with the fluctuations in prices necessarily accompanying them, would exist only to a limited extent, if there were a real boua fide convertibility; and I wish it to be distinctly understood that all my remarks favoring banks of circulation, are founded upon the supposition of such convertibility.

How then is absolute convertibility to be attained? I answer, by the joint co-operation of the banks, of the public, and of the legislatures.

The duties which the banks have to perform are, first, to deal honestly with their creditors, by keeping themselves in a condition at all times to meet their