Action of the Chamber of Commerce on the Death of Pelatiah Perit,............. 253 ......... V. STEAM ON THE PACIFIC OCEAN. TRADE BETWEEN CHINA AND JAPAN. BY H. B. A........................ 280 VI. THE DANO-GERMAN WAR. BY T. M. J... 288 VII. DEATH OF THOMAS TILESTON 294 ............ Proceedings of the Chamber of Commerce on the Death of Thomas Tileston.... 295 VIII. COMMERCIAL CHRONICLE AND REVIEW. 296 818 Besolution Authorizing Secretary of Treasury to Dispose of Gold... STATISTICS OF TRADE AND COMMERCE. Flour and Grain Trade for 1863: Receipts and Shipments at Chicago, Oswego, Detroit, Buffalo, Albany and Montreal, and Imports into Great Britain...... Commerce of the Sandwich Islands... A Successful Insurance Company.. 318 321 893 THE MERCHANTS' MAGAZINE AND COMMERCIAL REVIEW. MAY, 1864. OUR NATIONAL FINANCES. CONTRACTION VS. INFLATION. OUR National Finances, how they can and should be managed so as to avoid, if possible, the disasters which threaten-is a question of the greatest interest and importance to us at the present time. Ever since this war began we have labored, by appealing to history and to reason, as well as by foreshadowing the disaster that must inevitably flow from a depreciated paper currency, to impress upon our readers the importance of sound financial principles. To fail in the war we are now carrying on is, as all will admit, no trifling matter, and yet the whole issue in the event of its being prolonged, will depend upon our financial policy. Let any of our readers ask himself, what will be our position in a year from now with even the same comparative rise in paper money prices, (or, more properly speaking, depreciation in the currency) we have experienced the last six months. It will not do to charge this rise to speculation as many delight to do. We will grant there is speculation in every commodity, and common sense teaches, and history shows us, that this speculation will increase-four fold; for it is caused by the very inflation that is now going on. It may receive temporary checks; but unless the cause is removed, it will break out again, more wildly than ever, until the whole bubble bursts. The present is simply illustrating what the past has proved that when the standard of value is once lost sight of or interfered with by government action, there is no safety-prices must rise-speculation must reap a harvest. But the errors of the past are not now what we have to do with, for nearly all reflecting men are at length alive to them, and the only question is, how shall we best return to or approach correct principles; how can the impending difficulties be avoided. This unanimity of sentiment as to the past is certainly a favorable indication, promising well for the future. It is not too late to save ourselves, but the disease requires prompt action and severe remedies. All then who are in earnest in this war, all who desire the success of the government and the overthrow of the rebellion, in a word, all who seek their countries welfare, should act together at once, and see to it that some correct financial policy is adopted without delay. And, in considering financial matters, it should be remembered that any remedy proposed must not only contemplate a cure, but also provide the ways and means for the support of government. Our daily wants are large, and must be met. And yet one thing is clear-they must not be met by further issues of government paper. Inflation is the cause of our present distress, contraction alone will be the cure. Increasing the amount of circulation, or multiplying banks, and giving them the privilege of issuing notes, cannot be condemned in too strong terms. The plea of necessity will not stand since no such necessity exists, for the required funds can be easily raised, as has been demonstrated the past year. Nor will any relief be found in knocking down the price of gold; that only aggravates the difficulty. The rise in this metal is not the cause of the rise in prices, as all know, but is merely a result of the same cause that appreciates all values. Speculators may for a time be able to carry the price up unduly, the same as they may that of butter or any other commodity, but it cannot be a permanent rise; nor can any unnatural depreciation in its value be permanent. Gold has a fixed value throughout the civilized world, and the idea that the few handfuls in Wall Street are to change it, is novel. If by law or government acts we force its value below its true value, it will leave the country only the faster, seeking the point where it is worth more. Or, on the other hand, if speculators run it up beyond its true value, it will flow into the country and not flow out. Gold like every other commodity always seeks the market where the highest prices for it rule. These principles are so plain and self-evident, and have been repeated and enlarged upon in these pages so often that they are as familiar to our readers as household words. Then, again, no hesitating or doubting policy will work a cure. There must be a radical change, and that at once. Suppose we hesitate and wait until, for instance, there has been a battle on the Potomac. Of course we all hope and expect it will result in a victory. Yet the past should teach us that the event of any battle is uncertain. Should we then be unfortunate in it, is there not danger of a financial panic, and who can tell the consequences in the present feverish state of the money inarket. The only safety is to act at once. It should be remembered, also, that this change of policy involves high rates of interest. Money can be borrowed at five or even one per cent if sufficient greenbacks are emitted to flood the market; and with the money thus obtained we can have the pleasure of paying one hundred per cent more for supplies. But when this currency is being retired of course the rates of interest must rise and prices fall. The government, therefore, to obtain the necessary funds, will have to increase the rate of interest on its bonds from time to time, but will be compensated many times over in the fall in prices. We would refer our readers to the Commercial Chronicle and Review in this number of the Magazine for a faithful history of the effect on prices, &c., of the government financial measures, and from the figures there given one may easily see how we have thoughtlessly allowed ourselves to be carried down the stream, our fears being quieted by an apparent prosperity, abundance of money and low rates of interest. It is evident too from the facts stated, showing the effects of the present system, what would be the effect now of contraction. Hence the first step in a sound financial system must be to raise the interest on our loan to six per cent, and retire a part of the currency obtained by negotiating it. Another point we must bear in mind at this time is that the disease is of long standing, and the remedy, therefore, must be a severe one. All will be called upon to make sacrifices in some respect greater than have yet been made. There is wealth enough in the country to carry on this war for years, if that wealth is only brought out by proper taxation, and there is no doubt that the country is not only ready for it but earnestly desires it. As we stated in the early part of 1862, "we cannot and do not expect, at this time of peril to our country, to keep all we would like, we must choose that which is most precious to us, without which, our existence as a nation would be worthless; we must save this first, and the rest afterwards, if we can. We must have subordination to our government; we must have its laws upheld and its authority maintained; we must have peace in our homes and prosperity in our market-places, and whatever it costs we must pay for them. But let it be with the preventive ounce rather than with the curative pound. Let us remove our mountain, one load at a time; let us eat our peck of sand grain by grain, and both will be gone before we know it. "For years, taxation has been held up, like a scarecrow on a pole, to frighten generation after generation of men; but, like most other bugaboos, when you walk boldly up to it and grasp it, 'tis but the semblance of a horror; it has flapped in the wind long enough, and scares us no more. On the contrary, we begin to like it. The physic that a well man rejects with disgust, he swallows with gladness when he is sick; and our big pill has been transformed into a great bon-bon. We had so much rather be taxed than to be impoverished; so much sooner pay a tithe of our income this year, than not to get any at all next year; we so much prefer to be hard up' now, than to be hard down by and by, that we clamor for taxation as the best blessing of life." Had this taxation been laid then, we should have escaped many of our present troubles.* Still it is not too late even now to save the country from the financial disaster that threatens. Let us, therefore, have no child's play about it. Our finances can only be put upon a sound basis by a thorough system of taxation giving us a revenue of at least $400,000,000. Less might have done two years ago, but we must now pay for past folly and fun. Another feature of the new system must be the taxation of all State and national bank circulation out of existence. Much has been said of late in regard to the inflation caused by State Banks. Even the Treasurer has charged, in a letter written to the Committee on Ways and Means, that the present rise in prices is due to these persecuted institutions, but at the same time is exerting himself to the utmost to obtain the passage of bills through Congress extending the circulation of United States Banks, and granting them all kinds of privileges. Such acts, coupled with such professions, we cannot understand. If State bank circulation is an evil, certainly it is not mitigated by transferring that circulation to United States Banks, and increasing it. We have no objection to these new banks if the country wants them, but we do object decidedly to persecut We published in the February number (1864,) an article by the Hon. AMASA WALKER, on this subject of taxation which contains very many valuable suggestions. 十一 ing the old tried institutions of the land that have served us so well in times past; and further, we protest most earnestly against allowing these new pets at a moment like this to infest the land with their circulation like the frogs of Egypt. To the country at the present time belongs all the advantages of this mode of borrowing. Greenbacks, and greenbacks only, should be our currency till the war is ended. Whatever interest is to be made in this way, should be saved by Government, and not given away to banks. The country can not afford to spend one penny more than is absolutely necessary with the strictest economy. Our financial condition is critical, but not past remedy if the proper means are used at once and without fear or favor. Let us, therefore, treat all banks alike, and while the government is required to retire a part of its circulation, require them to retire all of theirs. Corporations as well as individuals must expect to make sacrifices at the present time. Such, then, is a faint outline of what we believe should be our financial system at the present time, or, more correctly speaking, of the remedies required to cure the present evils. It may be feared by some that sufficient means cannot be thus obtained to support government while a portion of the currency is being retired. We think it is very clear that no such difficulty could arise.* The past has shown the ability of the gov ernment to sell its bonds, and if it will only raise its interest the demand for them can be very greatly increased. Then, too, a large portion of the expenses will be paid by taxation. If we raise four hundred millions in this way as proposed, a greatly increased revenue will be secured for the government, its credit will be improved and the demands for its bonds became more extensive. But besides all this, the retiring of a portion of the government currency and of all the circulation now issued by the banks, will reduce the government expenses at least one third by reason of the fall in prices that will ensue, and thus our finances may be gradually placed upon a sound basis. Much more might be said—the ideas we have thrown out might be extensively enlarged upon, but we think we have said enough to show that our national disease is not incurable, and yet to indicate the absolute necessity there is for prompt and earnest action. We trust and pray that those who manage our country's affairs at the present time may see the dangers by which we are surrounded, and act before it is too late. * If any difficulty should arise in obtaining the necessary funds (which we cannot believe possible,) it would be only temporary and during the first stages of a change of policy. In such case relief could be found by issuing one or two year Treasury notes, with interest high enough to make them in demand as a temporary investment, taking away from them the legal-tender feature of the present issues, but permitting their conversion, principal and accrued interest, into legal-tenders on certain notice. Thus the use of a very large portion of the deposits in our banks would be obtained by government. |