AMERICAN FINANCE.

New Zealander, Volume XVIII, Issue 1719, 30 August 1862, Page 4

AMERICAN FINANCE.

[From the " Timet,” June2.\]

The destiny of America is either to undergo an enormous financial disaster, or to found on the ruins of the old a new school of political economy. Her present system of finance is entirely irreconcilcable with the principles of what Mr. Carlyle delights to call “ the dismal science,” and cither that dismal science or the present state of things in America must be overthrown. The world is not wide enough to hold them both. Every mail that reaches us from America, though it brings with it abundant proof of the very sensitive nature of the New York stock-market and the upward tendency of gold, is filled also with reproaches addressed to us by the American press for doubting the stability of a state of things which has obtained the support of the people of the United States, which still commands their unlimited confidence, and has certainly been able to maintain itself and the war, of which it is at once the parent and the offspring, in a manner quite unexampled in the history of the world. The American press does not, indeed, give itself the trouble to refute the reasoning by which its English contemporaries seek to prove the instability of the vast fabric of credit which has been reared in the United States; tiicy content themselves with an appeal to facts: —“ You talk of depreciation. Look at our share list. See how we have been able, without embarrassment to anybody, and to the great gain and advantage of many well-deserving citizens, to raise our army from 17,000 to 700,000 men, to create a flotilla which has blockaded the coasts and swept the rivers of a continent, and to carry on war on a scale of which the world has hitherto seen no example. You talk of depreciation and discredit. The confidence of the public in our slock is inexhaustible. We have just issued £30,000,000 sterling of inconvertible notes, and are about to issue £30,000,000 sterling more, most of the latter being for small amounts, and destined to displace the use of silver even in the transactions of ordinary life. We have discovered u vast mine in our own confidence and our own ingenuity. Let the States of the Old World embarrass themselves with the gold and silver, and chill the martial ardour of mankind by the imposition of taxes; America scorns such antiquated expedients, lias she not paper and a printing press ? Docs not promising to pay do just as well as paying, and and cost much less? Franco may repine at, her deficit of £40,000.000, England may murmur over her Army and Navy Estimates, Austria may evince uumistakeablo tendencies towards bankruptcy, but America smiles at the weakness of old and enfeebled States, and is able to dance under burdens which bow the heads of the old and decripit nations of Europe to the very earth.”

What are wc to say to all this? We have but our old-fashioned creed and our Old World experience. Let us, ns some palliation for the errors into which wo are so confidently alleged to hare fallen, state a few of the doctrines which have reduced us to this pitiable state, and draw upon us the general contempt of the papers that enlighten and represent the public opinion of America. We have, then, wo freely confess it, up to the present time always believed that wealth is the accumulated result of human labour; that the wealth of a nation is the aggregate of the wealth of its individual citizens; and, consequently, that a nation is rich in proportion as it is laborious and parsimonious, and poor in proportion as it is idle and extravagant. We have always believed that a nation’s credit was in proportion to its wealth, and that it is impossible, for any long period, to found credit on any other basis. We have always supposed that nobody would bo willing to exchange wealth except for wealth, either in possession or prospect. Wo thought money meant gold and silver, or paper, ns their representative, convertible at any time into gold or silver; and wo have ventured to hold that paper not convertible into gold or silver, though it may circulate without depreciation up to a certain point, is in itself worthless, and exposes the nation that put its trust in it to the most dreadful calamities. We have further observed that there are some uniform features which mark every financial crisis. There is an unreasonable confidence in*some particular kind of investment, and there is, from some cause or other, cither from the indiscreet operations of Banks or from some other inflation of the circulating medium, or from undue individual credit, a great facility of obtaining the means for such purchases. These are in the main, expressed briefly, the principles which have led ns to doubt the stability of American finance, and wo confess, even now, after their triumphant refutation by the New York press, and the severe censures which have fallen on ourselves, wo cannot but , think they have a considerable plausibility. w my turn to the stfU§ of things m have found

in America, and sce whether, if 'these. principle h e true, there was noli enough to jastifytheirapphcation. We saw a great country too ■ recently settled oyer a great part; of its surface to admit of any great accumulation of capital in the hands of its population. We saw that population flinging aside a highly productive industry, in order to lead a life divided between an inert consumption and the active and *astjeful destruction of the capital of the country.. We observed that the persons thus withdrawn from : the production and accumulation to the consumption and destruction of capital were rewarded for this wasteful application of their energies at an enormous rate, the pay of a private soldier being equal to that of an officer in an European army. We conceived that this great destruction of wealth, attended with this vast increase of expenditure, must be destructive to the national credit, and, in fact, the mere prospect of it, before the process of destruction and expenditure began, had that effect; but when the contest grew warm and the passions of mankind were fairly aroused the credit of the country improved. We observed that while the expenditure was estimated at £1,000,000 sterling a day, but tvas probably at least double that amount, the people availed themselves only of their credit, and did not take, and have not up to the present moment, taken upon themselves any burden whatsover. We knew that military success was one thing and financial security another, and we thought taxes would be a better security for revenue, and consequently for payment of the interest, than victories. We had besides, and have still, the very gravest doubts as to the ability of the Central Government to enforce upon so many almost independent States the payment of a heavy amount of taxes. We thought we saw reason for believing that the West, poor and warlike, would think it had done enough in breaking the long line of the Confederates, and would refuse to bear its share in the heavy general burdens, and we were confirmed in this view by remember how very light is the taxation to which America has hitherto submitted, and how totally new and unprecedented is the notion of the payment of a direct tax to to the Central Government. We had also great misgivings—first, as to the power of the North to subdue the South, and then, supposing that feat accomplished, as to the possibility of raising any revenue from that exhausted territory, or of reducing establishments imperiously required to keep down a population annexed by the sword and chaffing under the feelings of subjection and degradation. Such was our view of the financial position of America. With the exception of the absence of taxation, most of these evils were inevitable, and not on that account the less real or the less formidable. But to these inevitable evils the Government of the United States, with, so far as we can see, the unanimous assent and approbation of the people and the Legislature, has seen fit to add other evils of its own creation. The disorder of the financial departments has rivalled the peculations and irregularities in the departments of expenditure. The revenue has been raised, some of it by the issue of stock, and a good deal by the circulation of certificates of indebtedness, to the amount of which there seems to be no check whatever. The Government has, besides, issued its promises to pay to the amount of £30,000,000 and seems to contemplate the issue of £30,000,000 more. The Banks, determined not to be outdone in the race, are all issuing inconvertible currency, at the rate, it has been computed, of two dollars for every one issued by the Government. This enormous creation of a fictitious circulating medium, neither valuable itself nor convertible imo anything else that is valuable, coincides with a point of time at which trade is at a standstill, manufacture is paralyzed, agriculture is deprived of its needful hands, and commerce is stagnant. There is no legitimate use for all this vast creation of money, but Government has found for it an employment. It has created vast quantities of worthless stock, and it has created vast quantifies of worthless counters to gamble with. The whole activity of the nation, which ought to find a legitimate development in the promotion, production, and accumulation of wealth, is employed in purchasing the right to become creditors of a ruined Stats with the worthless imitation of money. We cannot regard this as a sound, and we do not believe it will be a permanent, condition of affairs. The whole basis rests on credit, and that credit on the strangest and most unlikely suppositions. It is not likely that millions of inconvertible money, issued in rivalry of each other by the Stale and the Banks, will create a currency proportionate only to the wants and necessities of the country. Should a depreciation commence, it will require still larger issues to carry on the business of the State, and these issues will aggravate the depreciation which caused them. As soon as capital can find other outlets, it will naturally be withdrawn from gambling in public securities, and a fall of prices must ensue. This also has a tendency to increase itself, and the wish to realize, when once expressed, is very apt to be contagious. We have seldom seen a financial position so full of peril. Its worst faults are aggravated by political difficulties, and are sure in their tarn to react upon them. This is no time lor triumph or self-gratulation, unless it could be shown that wealth can be created without labour and money made to circulate without value, that people will be inclined to trust when there is little chance of their being paid, and that the credit of a country is increased the more her resources are wasted, her industry neglected, and her commerce reduced. We cannot doubt that the state of the United States is one which ought to produce serious alarm, instead of empty boasting and exultation.