that, among the Jews, Moses enacted a sponging law, which was to be carried into effect every fifty years; that Solon, among the Greeks, began his administration with the Seisachtheia, or relief-laws, designed to rescue the poor borrowers from their overbearing creditors; and that the usurers were a numerous class at Rome, where also the Patrician houses were immense debtor-prisons. But in ancient times, when the chief source of wealth (aside from conquest and confiscation by the State) was the labor of slaves, and the principal exchanges were effected either by direct barter or the coined metals, the system of credit could not have been very complicated or general. As for the lending of money on interest, it appears to have been looked at askance by most of the ancients; and the prejudice against it continued, under the fostering care of the Church, far down into the Middle Ages. With the emancipation of the towns, however, with the splendid development of the Italian republics, with the noble commercial triumphs of the cities of the Hansa, credit was recovered from the hands of the Jews, and began a career of rapid and beneficent expansion. It was in an especial manner promoted by the magnificent prospects unfolded to colonial and mining enterprise in the discovery of the New World, by the stimulus and the facilities afforded to industrial skill by the researches of natural science, and by the emancipation won for all the activities of the human mind through the free principles of the Reformation. Thus, by degrees, credit came to intervene in nearly every operation of commerce and of social exchange, from the small daily dealings of the mechanic at the shop, to the larger wholesale transactions of merchant with merchant, and to the prodigious expenditures and debts of imperial governments. Credit by note of hand, credit by book account, credit by mortgages and hypothecations, credit by bills of exchange, credit by certificates of stock, credit by bank-notes and post-notes, credit by exchequer and treasury drafts, credit, in short, in a thousand ways, enters into trade, filling up all its channels, turning all its wheels, freighting all its ships, coming down from the past, pervading the present, hovering over the future, reaching every nook and affecting every man and woman in the civilized world.
Such is the extent of credit; but let it be remarked in connection, that, in all these innumerable and multifarious forms of it, in all the stupendous interchanges of Mine and Thine, the ultimate reference is to one sole standard of value, which is the value of the precious metals. The civilized world has adopted these as the universal solvent of its vast masses of obligation. It is assumed that some standard is indispensable; it is asserted to be the imperative duty of governments, if they would not make their exactions of taxes arbitrary, unequal, and oppressive,—if they would render the dealings of individuals mutual and just,—if they would preserve the property and labor of their subjects from the merciless caprices of the powerful, and keep society from reverting to a more or less barbarous state,—to supply a fixed and equable money-measure; and the majority of the governments have selected gold and silver as the best. As seemingly less changeable in quantity and value than anything else, as imperishable, as portable, as divisible, as both convenient and safe, the precious metals challenge superiority over every other product; and accordingly every contract and every debt is resolvable into gold and silver. From this fact, the reader will see at once the prodigious significance of those materials in the economy of trade, and the prime necessity that they should be not only uniform in value, but so equally distributed that they may be easily attainable when needed. Every change in their value is a virtual change in the value of the vast variety of obligations which are measured and liquidated by them; and every apprehension of their scarcity or disappearance, by whatever cause excited, is an apprehension of embarrassment on the part of all those who have debts to pay or to receive.
But it happens that this standard is not an accurate standard. It does not stand, while other things alone move, but moves itself; its value is changeable,—fluctuating from time to time according to the relation of supply and demand, and from place to place according to the perturbations of the trade of the world. Moreover, its very preeminence of function—the universality and the durability of its worth—renders it peculiarly sensitive to accidental influences, or to influences outside of the usual workings of trade. A great war or revolution occurring anywhere, the loss by tempests or frosts of an important staple, such as wheat or cotton, the fall and reaction consequent upon some great speculative excitement, are all likely to produce enormous drains or sequestrations of this valuable material. When the revolt of 1848 broke out in Italy, every particle of specie disappeared as effectually as if it had been thrown into the Adriatic or the mouth of Vesuvius; when the corn crop failed in England in 1846, the Bank of England lost ten millions of dollars in gold in less than nine days, and the country five times that in about a month; and in our own late experiences, with three hundred millions of gold among the people, we have seen it so put away, that no charm or bait could allure it from its hiding-places.
Need we go any farther, then, than these simple truths, to lay our finger on the primal fact which underlies all financial embarrassments and panics? The mass of the transactions in commerce rests upon credit; the solvent of that credit is gold; and gold has not only a sliding scale of value, but is apt to disappear when most wanted. While business is moving on in the ordinary way, it is more than ample for every purpose; but the moment any event arises, such as a rapidly falling market, inducing hurried sales, or a drain of specie, disturbing the general confidence, everybody gets apprehensive, everybody calls upon everybody for payment, and everybody puts everybody off,—till a feeling of sauve qui peut becomes universal.
If there were no currency anywhere but a metallic currency, this liability to sudden revulsions would still hang over trade, provided credit and paper tokens of credit continued to be the media of exchanges; and the instinctive or experimental perception of this truth, combined with other motives, is what has led men to their various attempts to provide a money substitute for gold and silver. Lycurgus, in Sparta, found it, as he supposed, in stamped leather; but modern wisdom has preferred paper. The degree of success attained by Lycurgus we do not know; but of the success of the moderns we do know, by some one hundred and fifty years of recurring disaster. There are some steeds that cannot be ridden; they are so fractious and intractable, that, put whom you will upon their back, he is thrown, and invent what snaffle or breaking-bit you may, they will not be held to an equable or moderate pace. And of this sort, judging by the past attempts, is Paper Money. All the ingenuity and efforts of the most skillful trainers of the Old World, and of the most cunning jockeys of the New, have been tasked in vain to devise an effective discipline and curb for this impatient colt. Paper Money either refuses to be ridden, and runs rampant away, or, if any one succeed in mounting him for a time, he performs a journey like that which Don Quixote took on the back of the famous Cavalino, or Winged Horse. In imagination he ascended to the enchanted regions,—but in reality he was only dragged through alternate gusts of fire and of cold winds, to find the horse himself, in the end, a mere depository of squibs and crackers.
Paper money has been issued, for the most part, on the one or the other of two conditions, namely: as irredeemable, when it has been made to rest on the vague obligation of some government to pay it some time or other in property; or as convertible into gold and silver on demand. But under both conditions it seems to have been impossible to preserve it from excess and consequent depreciation. Nothing would appear to be safer and sounder, on the face of it, than a money-obligation backed by all the responsibility and property of a government; and yet we do not recall a single instance in which an irredeemable government-money has been issued, where it did not sooner or later swamp the government beyond all hope of its redemption. No virtue of statesmanship is proof against the temptation of creating money at will. Even where there has been a nominal convertibility on demand of the bills of government banks, they have worked badly in practice. In 1637, for instance, the monarch of Sweden established the Bank of Stockholm; yet in a little while its issues amounted to forty-eight millions of roubles, and their depreciation to ninety-six per cent. In 1736, Denmark created the Bank of Copenhagen; but within nine years from its foundation it suspended redemptions altogether, and its notes were depreciated forty-six per cent. We need not refer to the extraordinary issues of French assignats, or of American continental money,—nor to the deluges of paper which have fallen upon Russia and Austria. During all these experiments, the sufferings of the people, according to the different historians, were absolutely appalling. One of these experiments of paper money, however, begun under the most promising auspices, and on a professed
