"In the lowest depth, a lower deep--"
are very loud in their complaints. I was watching the swarming
multitude in Wall Street this morning, when one of these fellows was
declaiming against the banks for stopping specie payments, and "robbing
a poor man in such a _w_illanous manner," when one of the merchants, who
appeared to know his customer, said to him--"Well, as you say, it is
hard for a poor fellow like you not to be able to get dollars for his
notes; hand them out, and I'll give you specie for them myself!" The
blackguard had not a cent in his pocket, and walked away looking very
foolish. He reminded me of a little chimney-sweeper at the Tower
Hamlets election, asking--"Vot vos my hopinions about primaginitur?"--a
very important point to him certainly, he having no parents, and having
been brought up by the parish.
I was in a store when a thorough-bred democrat walked in: he talked
loud, and voluntarily gave it as his opinion that all this distress was
the very best thing that could have happened to the country, as America
would now keep all the specie and pay her English creditors with
bankruptcies. There always appears to me to be a great want of moral
principle in all radicals; indeed, the levelling principles of
radicalism are adverse to the sacred rights of _meum et tuum_. At
Philadelphia the ultra-democrats have held a large public meeting, at
which one of the first resolutions brought forward and agreed to
was--"That they did not owe one farthing to the English people."
"They may say the times are bad," said a young American to me, "but I
think that they are excellent. A twenty dollar note used to last me but
a week, but now it is as good as Fortunatus's purse, which was never
empty. I eat my dinner at the hotel, and show them my twenty dollar
note. The landlord turns away from it, as if it were the head of
Medusa, and begs that I will pay another time. I buy every thing that I
want, and I have only to offer my twenty dollar note in payment, and my
credit is unbounded--that is, for any sum under twenty dollars. If they
ever do give change again in New York it will make a very unfortunate
change in my affairs."
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A government circular, enforcing the act of Congress, which obliges all
those who have to pay custom-house duties or postage to do so in specie,
has created great dissatisfaction, and added much to the distress and
difficulty. At the same time that they (the government) refuse to take
from their debtors the notes of the banks, upon the ground that they are
no longer legal tenders, they compel their creditors to take those very
notes--having had a large quantity in their possession at the time that
the banks suspended specie payments--an act of despotism which the
English Government would not venture upon.
Miss Martineau's work is before me. How dangerous it is to prophecy.
Speaking of the merchants of New York, and their recovering after the
heavy losses they sustained by the calamitous fire of 1835, she says,
that although eighteen millions of property were destroyed, not one
merchant failed; and she continues, "It seems now as if the commercial
credit of New York could stand any shock short of an earthquake like
that of Lisbon." That was the prophecy of 1836. Where is the
commercial credit of New York now in 1837?!!!
The distress for change has produced a curious remedy. Every man is now
his own banker. Go to the theatres and places of public amusement, and,
instead of change, you receive an IOU from the treasury. At the hotels
and oyster-cellars it is the same thing. Call for a glass of brandy and
water and the change is fifteen tickets, each "good for one glass of
brandy and water." At an oyster-shop, eat a plate of oysters, and you
have in return seven tickets, good for one plate of oysters each. It is
the same every where.--The barbers give you tickets, good for so many
shaves; and were there beggars in the streets, I presume they would give
you tickets in change, good for so much philanthropy. Dealers, in
general, give out their own bank-notes, or as they are called here,
_shin plasters_, which are good for one dollar, and from that down to
two and a-half cents, all of which are redeemable, and redeemable only
upon a general return to cash payments.
Hence arises another variety of exchange in Wall Street.
"Tom, do you want any oysters for lunch to-day?"
"Yes!"
"Then here's a ticket, and give me two _shaves_ in return."
The most prominent causes of this convulsion have already been laid
before the English public; but there is one--that of speculating in
land--which has not been sufficiently dwelt upon, nor has the importance
been given to it which it deserves; as, perhaps, next to the losses
occasioned by the great fire, it led, more than any other species of
over-speculation and over-trading, to the distress which has ensued.
Not but that the event must have taken place in the natural course of
things. Cash payments produce sure but small returns; but no commerce
can be carried on by this means on any extended scale. Credit, as long
as it is good, is so much extra capital, in itself nominal and
non-existent, but producing real returns. If any one will look back
upon the commercial history of these last fifty years, he will perceive
that the system of credit is always attended with a periodical _blow
up_; in England, perhaps, once in twenty years; in America, once in from
seven to ten. This arises from their being no safety valve--no check
which can be put to it by mutual consent of all parties. One house
extends its credit, and for a time, its profits; another follows the
example. The facility of credit induces those who obtain it to embark
in other speculations, foreign to their business; for credit thus
becomes extra capital which they do not know how to employ. Such has
been the case in the present instance: but this is no reason for the
credit system not being continued. These occasional explosions act as
warnings, and, for the time, people are more cautious: they stop for a
while to repair damages, and recover from their consternation; and when
they go a-head again, it is not quite so fast. The loss is severely
felt, because people are not prepared to meet it; but if all the profits
of the years of healthy credit were added up, and the balance sheet
struck between that and the loss at the explosion, the advantage gained
by the credit system would still be found to be great. The advancement
of America depends wholly upon it. It is by credit alone that she has
made such rapid strides, and it is by credit alone that she can continue
to flourish, at the same time that she enriches those who trade with
her. In this latter crisis there was more blame to be attached to the
English houses, who _forced_ their credit upon the Americans, than to
the Americans, who, having such unlimited credit, thought that they
might advantageously speculate with the capital of others.
One of the most singular affections of the human mind is a proneness to
excessive speculation; and it may here be noticed that the disease for
(such it may be termed) is peculiarly English and American. Men, in
their race for gain, appear, like horses that have run away, to have
been blinded by the rapidity of their own motion. It almost amounts to
an epidemic, and is infectious--the wise and the foolish being equally
liable to the disease. We had ample evidence of this in the bubble
manias which took place in England in the years 1825 and 1826. A mania
of this kind had infected the people of America for two or three years
previous to the crash: it was that of speculating in land; and to show
the extent to which it had been carried on, we may take the following
examples:--
The city of New York, which is built upon a narrow island about ten
miles in length, at present covers about three miles of that distance,
and has a population of three hundred thousand inhabitants. Building
lots were marked out for the other seven miles; and, by calculation,
these lots when built upon, would contain an additional population of
one million and three-quarters. They were first purchased at from one
hundred to one hundred and fifty dollars each, but, as the epidemic
raged, they rose to upwards of two thousand dollars. At Brooklyn, on
Long Island, opposite to New York, and about half a mile distant from
it, lots were marked out to the extent of fourteen miles, which would
contain an extra population of one million, and these were as eagerly
speculated in.
At Staten Island, at the entrance into the Sound, an estate was
purchased by some speculators for ten thousand dollars, was divided into
lots, and planned as a town to be called New Brighton; and had the whole
of the lots been sold at the price for which many were, previous to the
crash, the original speculators would have realised three million of
dollars. But the infatuation was not confined to the precincts of New
York: every where it existed. Government lands, which could only be
paid for in specie, were eagerly sought after; plans of new towns were
puffed up; drawings made, in which every street was laid down and named;
churches, theatres, hospitals, rail-road communications, canals,
steam-boats in the offing, all appeared on paper as if actually in
existence, when, in fact, the very site was as yet a forest, with not a
log hut within a mile of the pretended city. Lots in these visionary
cities were eagerly purchased, increased daily in value, and afforded a
fine harvest to those who took advantage of the credulity of others.
One man would buy a lot with extensive _water privileges_, and, upon
going to examine it, would find those privileges rather too extensive,
the whole lot being _under water_. Even after the crisis, there was a
man still going about who made a good livelihood by setting up his plan
of a city, the lots of which he sold by public auction, on condition of
one dollar being paid down to secure the purchase, if approved of. The
mania had not yet subsided, and many paid down their dollar upon their
purchase of a lot. This was all he required. He went to the next town,
and sold the same lots over and over again.
To check this madness of speculation, was one reason why an act of
Congress was passed, obliging all purchasers of government lands to pay
in specie. Nevertheless, government received nine or ten millions in
specie after the bill passed. Now, when it is considered what a large
portion of the capital drawn from England was applied to these wild
speculations--sums which, when they were required, could not be
realised, as, when the crisis occurred, property thus purchased
immediately fell to about one-tenth of what was paid for it--it will be
clearly seen that, from this unfortunate mania, a great portion of the
present distress must have arisen.
The attempt of General Jackson and his successors, to introduce a specie
currency into a country which exists upon credit, was an act of folly,
and has ended in complete failure. [See note 1.] A few weeks after he
had issued from the Mint a large coinage of gold, there was hardly an
eagle to be seen, and the metal might almost as well have remained in
the mine from whence it had been extracted. It was still in the
country, but had all been absorbed by the agriculturists; and such will
ever be the case in a widely extended agricultural country. The
farmers, principally Dutch, live upon a portion of their produce and
sell the rest. Formerly they were content with bank bills or Mexican
dollars, which they laid by for a rainy day, and they remained locked up
for years before they were required. When the gold was issued, it was
eagerly collected by these people, as more convenient, and laid by, by
the farmers' wives, in the foot of an old worsted stocking, where the
major part of it will remain. And thus has the famous gold-currency
bill been upset by the hoarding propensities of a parcel of old women.
[See note 2.]
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Note 1. One single proof may be given of the ruinous policy of the
Jackson administration in temporising with the credit of the country.
To check the export of bullion from our country, the Bank of England had
but one remedy, that of rendering money scarce: they contracted their
issues, and it became so. The consequence was, that the price of cotton
fell forty dollars per bale. The crop of cotton amounted to 1,600,000
bales, which, at forty dollars per bale, was a loss to the southern
planters of 64,000,000 of dollars.
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Note 2. A curious proof of this system of hoarding, which immediately
took place upon the bank stopping payment, was told me by a gentleman
from Baltimore. He went into a store to purchase, as he often had done,
a canvas shot-bag, and to his surprise was asked three times the former
price for it. Upon his expostulating, the vendors told him, that the
demand for them by the farmers and other people who brought their
produce to market, and who used them to put their specie in, was so
great, that they could hardly supply them.