Front Page Titles (by Subject) THE DIVORCE OF POLITICKS AND BANKING - Democratick Editorials: Essays in Jacksonian Political Economy
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THE DIVORCE OF POLITICKS AND BANKING - William Leggett, Democratick Editorials: Essays in Jacksonian Political Economy 
Democratic Editorials: Essays in Jacksonian Political Economy, Foreword by Lawrence H. White (Indianapolis: Liberty Fund, 1984).
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THE DIVORCE OF POLITICKS AND BANKING
September 2, 1837.
Our next number will contain the Message of the President to Congress. We have reason to feel very confident in the expectation that this document will strenuously recommend the complete separation of the federal government from the bank and credit system. This great scheme, we observe, is assailed, in advance, with a good deal of violence by the opposition newspapers; but in their “plentiful lack” of arguments, they for the most part vent their spite only in epithets. Acting upon the sentiment that there is much in a name, they call this proposed separation of bank and state a plan to institute a Treasury Bank; and they discourse with a good deal of well affected apprehension of the evils which must flow from placing the sword and purse in the same hands. This cant about the sword and the purse is the merest declamation that ever demagogue employed to gull the minds of a credulous auditory, and never was appellation more misapplied than that of Treasury Bank to the scheme which aims to separate the government from all the injustice, favouritism, casualties and fluctuations of the banking system. The effects of the policy would, in all respects, be the very reverse of those which are brought about by our wretched and tyrannous paper money system.
If the government of the United States should absolutely disconnect itself, in every way, from the banking and credit system, receiving and disbursing as money, nothing but the money of the Constitution, one of the necessary consequences would be the continual circulation of an under currency of silver and gold sufficient for all the most ordinary purposes of a circulating medium. Should the principal commercial and agricultural states, then, or even this great state alone, (which is the natural centre of the commercial and monetary concerns of the country) entirely repeal all restraints in the trade in money and credit, banking business, as a natural and inevitable consequence, would immediately be undertaken by private enterprise, and this enterprise would be subject to the regulation of unbounded competition. That competitor, whether an individual or association, who should satisfy the publick of the possession of the largest amount of actual property answerable for his obligations, would naturally enjoy the greatest confidence. It would be the interest, therefore, of all entering into banking business, to give publick evidence of their possessing ample property, liable, in the event of any miscarriage, for the redemption of their issues. Those who did not give such evidence would not enjoy publick confidence. Their notes would not be received by other bankers, nor by individuals generally, except at a discount; for every trader and mechanick would have it perfectly at his option to take nothing but silver and gold, since, by reason of the government recognizing nothing else as money, silver and gold would always freely circulate.
One check on over issues would consist, partly, in the prudence and foresight of those bankers who, having a large aggregation of actual capital, would desire to conduct their business on safe banking principles with the sole purpose of realizing a moderate and steady profit on investment. Whenever other bankers, of a more speculative turn, should show a disposition to extend themselves too far, the prudent ones, both for their own safety, and from the natural rivalry of trade, would be led to discredit the notes of the former, which, in consequence of this repudiation, would immediately fall below par, and thus force those issuing them to retrench.
Another check would be found in the fact, that real money and paper money cannot circulate together. One invariably and inevitably drives the other away. But as there is an absolute necessity, in the state of things supposed, for the circulation of silver and gold to an amount necessary for all the ordinary purposes of daily traffick; so consequently it would be paper that would be expelled. The government would keep an amount, equal to its annual expenditures, say some thirty or forty millions of dollars, in continual and active circulation. It would receive nothing else for lands, customs, postages, or taxes in any shape, and would pay nothing else to the judiciary, the army and navy, publick contractors, workers on the publick roads, fortifications, lighthouses, and, in short, to those engaged in every branch of publick service. These sums would necessarily perform a circuitous circulation between the time of disbursement and of repayment into the publick treasury; and here would be a hard money currency, which, to its extent, would banish paper. This would constitute another check on over issues.
Banking business, under such a free trade system, would naturally confine itself to commercial operations. The sagacity and prudence of individual enterprise, when its own actual means are jeoparded by extravagance, would lead to that result. The notes of bankers would, as a general rule, represent only actual mercantile transactions. They would not be loaned to speculators, as now, to enable them to purchase lands in the moon, or under water “deeper than did ever plummet sound.” If they loaned their notes to speculators it would be on real security, and speculation can never produce great publick evil, as long as it does not extend beyond that basis.
That there would be over issues to some extent, and occasional revulsions, under a system of perfect freedom of trade, and perfect disconnexion of bank and state, is highly probable. There are revulsions in nature, and we cannot expect that there should be none in trade. The political circumstances of nations, the instability of seasons, war, pestilence, and famine, are all causes which may jar the great machine of commerce, and throw some of its parts into extreme disorder. But these revulsions would be lighter and less frequent than those which happen under the bad system of exclusively privileged banking, which is wholly artificial, and at utter variance with the natural mechanism of trade. The revulsions of a free trade system would not be political revulsions, they would not provoke to such mad exasperation the bad passions of men, and set a whole people in the deplorable attitude of two opposing parties, surveying each other with the scowl of mutual hatred, instead of the glances of fraternal kindness.