with specie.

If the system were adopted throughout the United States, the banks of each State would be likely to have agencies of this kind in all the great cities. Each of these agencies would exchange the bills of every other State for the bills of its own State; and thus the bills of each State would find their way home, without any demand for their redemption in specie having ever been made.

Where railroads were used as capital, all the banks in the United States could form one association, of the kind just mentioned, to establish agencies at all the great commercial points, for the redemption of their bills.

Of course each railroad would receive the bills of all other roads, for fare and freight.

Thus all railroad currency, under this system, would be put at par throughout the United States.

CHAPTER V.

THE SYSTEM AS A CREDIT SYSTEM.

Section 1.

Perhaps the merits of the system, as a credit system, cannot be better illustrated than by comparing the amount of loanable capital it is capable of supplying, with the amount which the present "National" banks (so called) are capable of supplying.

If we thus compare the two systems, we shall find that the former is capable of supplying more than fifty times as much credit as the latter.

Thus the entire circulation authorized by all the "National" banks,[E] is but three hundred and fifty-four millions of dollars ($354,000,000).

But the real estate and railroads of the country are probably worth twenty thousand millions of dollars ($20,000,000,000). This latter sum is fifty-six times greater than the former; and is all capable of being loaned in the form of currency.

Calling the population of the country forty millions (40,000,000), the "National" system is capable of supplying not quite nine dollars ($9) of loanable capital to each individual of the whole population. The system proposed is capable of supplying five hundred dollars ($500) of loanable capital to each individual of the whole population.

Supposing one half the population (male and female) to be sixteen years of age and upwards, and to be capable of producing wealth, and to need capital for their industry, the "National" system would furnish not quite eighteen dollars ($18) for each one of them, on an average. The other system is capable of furnishing one thousand dollars ($1,000) for each one of them, on an average.

Supposing the adults (both male and female) of the country to be sixteen millions (16,000,000), the "National" system is capable of furnishing only twenty-two dollars and twelve and a half cents ($22.12½) to each one of these persons, on an average. The system proposed is capable of furnishing twelve hundred and fifty dollars ($1,250) to each one, on an average.

Supposing the number of male adults in the whole country to be eight millions (8,000,000), the "National" system is capable of furnishing only forty-four dollars and twenty-five cents ($44.25) to each one. The other system is capable of furnishing twenty-five hundred dollars ($2,500) to each one.

The present number of "National" banks is little less than two thousand (2,000). Calling the number two thousand (2,000), and supposing the $354,000,000 of circulation to be equally divided between them, each bank would be authorized to issue $177,000.

Under the proposed system, the real estate and railroads of the country are capable of furnishing one hundred thousand (100,000) banks, having each a capital of two hundred thousand dollars ($200,000); or it is capable of furnishing one hundred and twelve thousand nine hundred and ninety-four (112,994) banks, having each a capital ($177,000), equal, on an average, to the capital of the present "National" banks. That is, this system is capable of furnishing fifty-six times as many banks as the "National" system, having each the same capital, on an average, as the "National" banks.

Calling the number of the present "National" banks two thousand (2,000), and the population of the country forty millions (40,000,000), there is only one bank to 20,000 people, on an average; each bank being authorized to issue, on an average, a circulation of $177,000.

Under the proposed system, we could have one bank for every five hundred (500) persons; each bank being authorized to issue $200,000; or $23,000 each more than the "National" banks.

These figures give some idea of the comparative capacity of the two systems to furnish credit.

Under which of these two systems, now, would everybody, who needs credit, and deserves it, be most likely to get it? And to get all he needs to make his industry most productive? And to get it at the lowest rates of interest?

The proposed system is as much superior to the old specie paying system (so called)—in respect to the amount of loanable capital it is capable of supplying—as it is to the present "National" system.

Section 2.

But the proposed system has one other feature, which is likely to be of great practical importance, and which gives it a still further superiority—as a credit system—over the so-called specie paying system. It is this:

The old specie paying system (so called) could add to the loanable capital of the country, only by so much currency as it could keep in circulation, over and above the amount of specie that it was necessary to keep on hand for its redemption. But the amount of loanable capital which the proposed system can supply, hardly depends at all upon the amount of its currency that can be kept in circulation. It can supply about the same amount of loanable capital, even though its currency should be returned for redemption immediately after it is issued. It can do this, because the banks, by paying interest on the currency returned for redemption—or, what is the same thing, by paying dividends on the Productive Stock transferred in redemption of the currency—can postpone the payment of specie to such time as it shall be convenient for them to pay it.

All that would be necessary to make loans practicable on this basis, would be, that the banks should receive a higher rate of interest on their loans than they would have to pay on the currency returned for redemption; that is, on the Productive Stock transferred in redemption of the currency.

The rate of interest received by the banks, on the loans made by them, would need to be so much higher than that paid by them, on currency returned for redemption, as to make it an object for them to loan more of their currency than could be kept in circulation. Subject to this condition, the banks could loan their entire capitals, whether much or little of it could be kept in circulation.

For example, suppose the banks should pay six per cent. interest on currency returned for redemption—(or as dividends on the Productive Stock transferred in redemption of such currency)—they could then loan their currency at nine per cent. and still make three per cent. profits, even though the currency loaned should come back for redemption immediately after it was issued.

But this is not all. Even though the banks should pay, on currency returned for redemption,