Page:Treatise on Currency and Banking.djvu/192

 170 A TREATISE ON prudent conduct of which was too apparent to be con- cealed, no want of confidence as to ultimate solvency appears to have entered into the estimate of the de- preciation. The amount of excessive issues in each place, appears to have determined the depreciation of the currency of that place, and we have seen that just in proportion to the absorption of the excess, the de- preciation disappeared. There is, however, a reason why bank notes are not necessarily involved under a general suspension of specie payments, in a depreciation arising from dis- credit. The public is always indebted to the banks to an amount far greater than the banks are indebted to the public, and as a bank note will be received by the bank that issues it in discharge of a debt, there always ex- ists, except in a case of an extensive bankruptcy among the borrowers, a demand for notes greater than the supply. Herein consists the difference between paper money issued by banks, and paper money issued by governments. The former is accompanied by a legal obligation on the part of a responsible borrower, to return it, or an equal sum of coin to the bank at a specified time with interest, whilst the latter is uncon- nected with any such stipulation, and in most cases forms a much larger supply than is wanted for pay- ments of debts and taxes to the government. A second cause of depreciation to which bank notes are liable, is a want of confidence in their ultimate re- demption, .or in their redemption at any fixed or defi- nite period. The effect of this depreciation, where the want of confidence referred to is very considerable, is to hrow the notes entirely out of circulation, except perhaps in the immediate vicinity of the bank. In this event they are bought up by capitalists to hold until the bankcancollectitsdebts, upon the very fair presumption that the whole of the capital of the stockholders must be sunk before any loss can attach to the creditors of the bank, it must have been a miserably managed insti- tution, that cannot sooner or latter contrive to pay its