Suspension of 1814.

In 1814 all the banks, save the New England banks, suspended. In the year 1815 the Pennsylvania banks increased their loans $10,000,000. Business was active and prices high. The merchants agreed to the suspension if specie payments should be resumed after the war. Small coin disappeared and tickets were used. Notes were depreciated from twenty to fifty per cent Importations, especially of articles of luxury, increased. Credit was great and expanding, prices continually rising.

The Secretary of the Treasury now began to be engaged in the money-market. He tried to get the banks to come to some agreement which should bring about a uniform currency, but he failed. He then ordered that taxes should be received only in specie, Treasury notes, or notes of banks which received Treasury notes at par. The banks received them at par when they were at or above par in the market, but not otherwise. The banks which took Treasury notes issued bills for them, so that the issues of the Treasury stimulated those of the banks. The notes of the latter when issued accumulated in the banks which did not take Treasury notes, so that the Treasury received the notes of debtor banks when it would not receive those of creditor banks. At the same time, while loans increased three per cent, on capital, there was $3,000,000 less mercantile discount, the rest being on governments, and the government Treasury held bank notes instead of Treasury notes. These bank notes would not pass thirty miles from the place at which they were issued. The paper prosperity was now in full tide (1815). Gouge quotes a pamphlet of Mr. Matthew Carey, in which he called this the “ golden age” of Philadelphia.

The ideas about money and currency which had prevailed in England in 1810 and 1811 now appeared here, as they always appear where paper money is in use. It was said that silver had risen (though the Pennsylvania Senate Committee say this notion was abandoned by the end of 1815), and that a dollar was an ideal unit. Dr. Bollman proposed a scheme for a National Bank to issue notes redeemable in six per cent. government stock, which would keep them from depreciation and tie them to a fixed value. State banks were to issue notes and redeem them in this paper. Carey said it was a “ magnificent” plan.

Madison recommended another national bank, but vetoed the first bill:—for a specie bank, as not adapted to the currency. Peace was ratified in February, 1815, and the Conservatives now held that a national bank was necessary to hold the State banks in check. They did not want it to begin under a suspension. A second charter was passed. The capital was to be $35,000,000.

There were immense importations in this year. The English merchants exported enormously after peace was declared, anticipating demand. These goods were forced to sale here as well as elsewhere. The prices proved unremunerative to the foreign owners, and also ruinous to the injudicious enterprises which, having been undertaken here under the protection of war, had taken permanent form. These were by no means so numerous or extensive as is sometimes asserted and generally believed, but there were such. This brought us the boon of our first strong protective tariff, though the average duties were only about thirty per cent, on dutiable. The principle of protection had been adopted in 1789, and the rates of duty, very low at first, had been steadily increased by successive enactments. The tariff of 1816 was avowedly carried as a realization of the “ American system,” but afterwards it came to be referred to, in the retrospect, as a British free-trade tariff.

The great importations gave the government a large surplus revenue. It had $22,000,000 nominal balance in the Treasury, but it consisted of bank-notes which could only circulate in a small district around their place of issue, and the places where the government was creditor and held the notes were not the places where it wanted to pay its floating debt. New seven per cent, notes were issued to pay the quarterly interest, and, to pay the interest at Boston, January 1, 1817, the government was obliged to borrow $500,000 of the United States Bank before it opened. Banks which were government depositories refused to pay government drafts, save for current expenses, and they controlled other banks because they held government deposits in the bills of the latter.