Small Notes.

The prohibition of small notes is a measure which is simple, but very important for the results it effects. The principle is that paper issues displace coin of equivalent denominations. If paper is issued for sums of $0 and above, it may be issued to the amount of the coins of that and higher denominations which the public require, and no more. If issued for $5, the paper may be increased by the amount of half-eagles, which the public formerly used, and no more. Therefore, if it is desired to use paper to a certain extent, but not to displace specie entirely, the simplest way to accomplish this is to limit the paper to a certain denomination, say $10. Then half-eagles, and pieces of $3.00, $2.50, and $i would circulate, and would form a. stock, which, in the absence of any usury law, might be drawn into bank in a crisis. At the same time, this restriction goes far to make convertibility genuine. Convertibility in the currency is like conscientiousness in a man—it has many grades, and is valuable in proportion as it is strict and pure. The prohibition of small notes does more than any other arbitrary rule to ensure convertibility. It also secures to the poor the use of a value currency for their exchanges, and to the whole community the same currency for the exchanges which are made for consumption. These principles were recognized in England in 1827, when the notes under £5 were abolished, and President Jackson's administration sought to put them in operation here. The Scotch banks still issue £1 and £2 notes, but they manage them very conservatively, and their example furnishes no argument. They seem to be such sagacious bankers as to need no limitations; therefore they do not need this one; but when limitations are needed, this is the simplest and most efficacious.

Such were the movements up to 1835, to which the subsequent developments must be traced as their origin. The lowering of the standard caused a rise in prices. The easy credit obtained in England for stocks and securities, the low rates for money here on account of the multiplication of small banks and increase of capital devoted to banking, the actual strong and great development of the country, combined to encourage a spirit of speculation and enterprise which, in this country, have never needed urging.