The Online Library of Liberty

A project of Liberty Fund, Inc.

• Foreword
• Part One: the Doctrine of Equal Rights
• True Functions of Government
• The Reserved Rights of the People
• Objects of the Evening Post
• Reply to the Charge of Lunacy
• The Legislation of Congress
• Religious Intolerance
• Direct Taxation
• The Course of the Evening Post
• Chief Justice Marshall
• Prefatory Remarks
• The Sister Doctrines
• The True Theory of Taxation
• Strict Construction
• Legislative Indemnity For Losses From Mobs
• The Despotism of the Majority
• Morals of Legislation
• The Morals of Politics
• Part Two: Separation of Bank and State
• Bank of United States
• Small Note Circulation
• The Monopoly Banking System
• Uncurrent Bank Notes
• Fancy Cities
• Causes of Financial Distress
• Why Is Flour So Dear?
• Thoughts On the Causes of the Present Discontents
• Strictures On the Late Message
• The Value of Money
• The Way to Cheapen Flour
• The Money Market and Nicholas Biddle
• The Pressure—the Cause of It—and the Remedy
• Connexion of State With Banking
• The Crisis
• The Bankrupt Banks
• What We Must Do, and What We Must Not
• “the Foresight of Individual Enterprise”
• The Safety Fund Bubble
• Separation of Bank and State
• The Remedy For Broken Banks
• “blest Paper Credit”
• Questions and Answers
• The True and Natural System
• The Bugbear of the Bank Democrats
• Bank and State
• Theory and Practice
• Separation of Bank and State
• “specie Basis”
• The Natural System
• The Credit System and the Aristocracy
• The Divorce of Politicks and Banking
• Part Three: Abolition Insolence
• Riot At the Chatham-street Chapel
• Governor Mcduffie’s Message
• The Abolitionists
• Reward For Arthur Tappan
• The Anti-slavery Society
• Abolitionists
• Slavery No Evil
• Progress of Fanaticism
• An Argument Against Abolition Refuted
• Commencement of the Administration of Martin Van Buren
• The Question of Slavery Narrowed to a Point
• “abolition Insolence”
• Part Four: the Division of Political Classes
• Despotism of Andrew Jackson
• The Division of Parties
• Rich and Poor
• The Street of the Palaces
• American Nobility
• The Inequality of Human Condition
• A Bad Beginning
• The Whig Embassy to Washington, and Its Result
• Right Views Among the Right Sort of People
• Newspaper Nominations
• Foreign “paupers”
• Part Five: the Principles of Free Trade
• Monopolies: I
• “a Little Free-trade Crazy”
• Asylum For Insane Paupers
• Monopolies: Ii
• Revolutionary Pensioners
• Joint-stock Partnership Law
• The Ferry Monopoly
• Free Trade Post Office
• Stock Gambling
• Weighmaster General
• State Prison Monopoly
• Corporation Property
• Regulation of Coal
• Free Ferries and an Agrarian Law
• Thanksgiving Day
• Municipal Docks
• Associated Effort
• The Coal Question
• The Corporation Question
• Free Trade Weights and Measures
• Associated Effort
• Sale of Publick Lands
• Manacles Instead of Gyves
• The Meaning of Free Trade
• Gambling Laws
• Free Trade Post Office
• Free Trade, Taxes, and Subsidies
• Meek and Gentle With These Butchers
• The Cause of High Prices, and the Rights of Combination
• Omnipotence of the Legislature
• Part Six: Literary Property
• Rights of Authors
• The Rights of Authors
• Right of Property In the Fruits of Intellectual Labour

“SPECIE BASIS”

Plaindealer,

August 12, 1837.

We hear much of the specie “basis” of our paper circulation. The way to ensure an adequate basis to banking institutions, is to give perfect freedom to the trade in money and credit, and leave competition and enterprise to act and react without legislative stimulus or restraint. The inevitable result of wholly emancipating credit from monopoly legislation, from that arbitrary system which affects “to preserve and regulate, but not destroy,” would be to build up voluntary associations of great capital, that would immediately enter into banking business, under circumstances that would command the utmost publick confidence. When we say a great capital, we do not mean silver and gold exclusively but a capital of real, substantial, imperishable property, such as lots, farms, houses, ships, and the like. There never was a grosser piece of deception than has been practised upon the world by the financial cant about a specie basis of banking. No bank of discount and circulation ever had a specie basis. The Bank of Amsterdam has a specie basis, or rather a basis of specie, jewels, plate, and other articles of great and unvarying intrinsick value; but this is a mere bank of deposit, deriving its profit from the charge it makes for the safe keeping of the treasures entrusted to it, and liable for the redemption of no paper money but the checks drawn against those treasures. But to talk of a specie basis to any of our note issuing banks is preposterous. The basis of a thing is the foundation it rests upon. The foundation of our bank is credit, not money. Few of them have, in the best of times, enough specie in their vaults to redeem a tithe part of their obligations. To speak of that specie, then, as the basis of those institutions, is about as correct as it would be, were a pyramid inverted, to call its cope-stone a basis. If the laws of gravitation were not suspended for its accommodation, the pyramid, tumbling into fragments, would show that its basis was but a poor basis indeed; as our prostrate and shattered banks now show how poor and inadequate was the specie basis on which they pretended to stand.

The true foundation for a bank is actual property to an amount sufficient, under any contingency of trade, for the redemption of its notes. This would be a basis of some solidity, and such a basis competition would lead men to furnish, if our legislative master would throw open this business to the wholesome influences of freedom. The notes of private banking associations would, of course, be redeemable in specie, but this is a very different thing from having, or pretending to have, a specie basis.They would be redeemed in silver and gold, and silver and gold may always be procured for that purpose by those who have property. Silver and gold, like iron and lead, are merchandize, and can always be bought for a fair equivalent. A free trade bank, founded on the secure basis of real property, would never had occasion of more silver and gold than could be readily obtained, at a very small sacrifice, from the dealers in those commodities. The greatest drains of specie to which banks are subject, are occasioned by panick—by fear of their insolvency; but a free trade bank, founded on known security of adequate property, would never be liable to the suspicions and apprehensions which the least untoward circumstances in financial affairs are sure to arouse against institutions pretending to rest on a metallick basis, that every man, woman and child in the community know it is not sufficient to redeem a tenth part of their debts.1

[1 ]In the free banking system of Scotland, which Leggett praises elsewhere, almost all banks operated with unlimited shareholder liability for bank obligations. They experienced no runs for specie, though their specie reserves were a small percentage of their note and deposit liabilities.—Ed.