the national banks from drawing their full allowance. I have already said that I am not sufficiently acquainted with the pros and cons of the case to meet the apparent facts that bear upon it.

T. For the details and proofs of the Comptroller's calculation, I must refer you to his annual report of 1879-you will there find its conclusions thoroughly sustained.

The difference between the loans of these notes at 8 and at 6 per cent. may be averaged at, perhaps, one and a half per cent., but there are other items that so far diminish the profit on them as may possibly reduce it to nothing. The circulation ought to be charged with its proper share of the banks' expenses in the conduct of their business, and of the losses sustained by default of the borrowers. Now the total losses of the national banks in the last four years have averaged above $20,000,000 per annum; and the current expenses over $6,000,000. That one and a half per cent. net profit over the national taxation upon the circulation, the bonds being assumed to be reduced to four per cent., as they are rapidly being, will hardly cover losses, expenses, and the constantly declining market value of the bonds as they approach maturity, which last item of abatement of profit must also be considered as these bonds must be purchased by the shareholders at a premium which will be totally lost when they become payable, and are losing that premium all the while, until they shall be worth no more than their face value. What now has become of the alleged double interest so much complained of?

P. Assuming that banking profits proper must come from loans and discounts (excluding the investments in United States bonds and other stocks), I have been looking, since our last meeting, at the ratio that they bear to the circulating notes, as their means of business profits. Let me submit the results:

In October, 1879, 2048 national banks reported their aggregate loans and discounts at $878,503,097; their circulating notes, less the amount on hand or unused, $297,078,812. Thus the notes, active and outstanding, were but 33.8 per cent. of their loans and discounts, or say one-third of their profit-making means employed.

The average of the notes to the loans of the 6 years (1874-79), fell to 32.04 per cent., and of the half year ending 11th of June, 1880, they stood at 29.88.

But I was especially interested by the unlike employment of these notes by banks, situated as to their respective business communities. My examination shows that the larger the centres of business, the less is the proportion of notes used, and the largest institutions in the same localities, having the larger amount of deposits, usually employ the less amount of notes drawn from the Treasury, indicating that the promise of profit from their use is not, in itself, as inviting as might be supposed on the supposition that they are a means of deriving a double interest on the bonds deposited for their security. For instance:

The circulation of national bank notes by the country banks of Massachusetts is equal to 60 per cent. of their loans and discounts; while that of Boston is 31.2 per cent. The country banks of New York State, 45.4 per cent. ; that of the city, but 11.4 per cent. Of Pennsylvania, 54 per cent.; of the city of Philadelphia, 26.8 per cent. That of Maryland, 53.4 per cent.; of the city of Baltimore, 29 per cent. The State or country banks of Ohio, 52.8 per cent.; of Cincinnati, 27 per cent. The State of Illinois, 38.2 per cent.; of Chicago, only 3.34 per cent. There are further proofs in the same direction, or that the larger banks employ the less of this kind of currency. The Fourth National Bank of the city of New York has but 5.78 per cent. of its loans and discounts in notes of its own. The Chemical Bank has none at all; its loans and discounts amounting to upwards of 93 millions; its business is based upon its capital, surplus, undivided profits, and deposits, aggregating $14,616,835. The Fulton Bank of the same city employs none of its own notes; and the City Bank, also, has no notes outstanding; its loans and discounts are within a fraction of 7 millions, its deposits 9 millions. All the other banks of that metropolitan business city have only a very small percentage of their public accommodations in national bank notes of their own issue; aggregating and averaging only 11.4 per cent. of their loans and discounts as against those of the country banks of the State, which reach 45.4 per cent.

To the like inference, the several States of the Union which have a less active business exchange, have a proportionately greater national bank circulation. Their money medium being proportionately the greater to their means of settlement of balances.

Thus, the notes used in ratio to loans and discounts in West Virginia are 56.4 per cent.; in Georgia, 61; in Florida, 62; in Alabama, 76; in Kentucky, 63.6; in the District of Columbia, 93; and in Washington City, 58.2; or, in the District including the Federal City, 64 per cent.

Indeed, so well and generally is the use of the circulating note employed in inverse proportion to the wealth and business activity of the regions, that their rank night, other circumstances being allowed for, be estimated by their relative amount to that of the general credit system.

You have elsewhere said that the measure of fixed to floating capital in a nation, or state, or community, is the truest measure of its real wealth and grade of civilization. In the proportion of the circulating money medium to the total exchanges of a people's business, it seems to me that a like indication of their business prosperity may be seen. Or, as you have said, the more and more perfect organization of exchange values that is effected, money in form of coins and notes is the more and more eliminated, and credit is substituted for cash.

T. In making the general statements and the inferences from facts which I believe support them, I do not submit them to the exact figures of statistical reports. In them you find more of bookkeeping rules than of practical issues; and, they are, besides, subject to many modifications of their apparent footings and balancings. You were, perhaps, surprised to find that Chicago had but 3 per cent. of its loans in its outstanding bank notes, while Boston had above 31, and New York City had 11.4. The explanation, probably, is that Chicago sold its deposited bonds when they were commanding a high premium, and depended upon its deposits for its current cash, while the two other cities had their own reasons for a larger use of or reliance upon their note circulation. Figures are not responsible for the facts which they seem to represent; and, especially, they do not support all the deductions which inexpert people draw from them. With the required allowances, I think your investigation of the bank reports fully sustains your conclusion that the circulation of the national banks, where they have other profitable resources, is not an attractive investment, and that it is mainly used only by the institutions which have compara

tively small deposits to work upon. You will doubtless have observed that the smaller banks in the principal cities have a circulation of outstanding notes greatly larger in proportion to their business dealings than those which have a higher standing with the people. Conditions are always to be considered, outside of arithmetical results. I have no doubt that twice two make four, but it is equally certain that the doubling of an excise or impost duty does not yield a double revenue. Our Congress has time and again ventured upon that solution of the tax problem and always failed of the expected product, sometimes by subtraction, sometimes by multiplication, under the rules of arithmetic, with uniform disappointment. Just as some people imagine that an increase of money issued must increase its quantity for use—which is a similar mistake.

CHAPTER XIX.

INTERNATIONAL TRADE.

D. I am glad that we have reached the subject of commerce. The discussion of its topics threatens less friction with the authorities than we have had up to this time. The pervading philanthropy of international association in business affairs has an obvious tendency to make "the whole world kin." Its ministry in the distribution of nature's beneficence, which is partial in allotment, as if for the very purpose of compelling interchange and effecting a virtual partnership in the cultivation and interchange of the products of all regions, climates, and capabilities of the earth,—must meet the aspirations of a universal brotherhood, and tends as far towards communism and coöperation as can be made to work smoothly in the plan of universal association.

P. Oratory and poetry, impassioned by universal benevolence, concur in regarding the commerce that brings distant nations, and, unlike tribes of men, into familiar, reforming, and ameliorating mutuality of influence upon each other, as a civilizer, educator, wealth-producer, harmonizer, and organizer of the world's social and industrial interests.

T. Between you, you have drawn a sufficiently correct copy of the usually highly colored picture of all the virtues of international trade, paraded in solid column, and in full march upon all the evils of the five quarters of this disordered globe, with the millennium in purpose and perspective; civilization chivalrously devoting itself to the redress of all the ills of barbarism, and to the happy reformation of all the inequalities in the conditions of the more advanced nationalities, the armies of trade spreading the tidings of great joy to all peoples,-cosmopolitan philanthropy bearing peace and goodwill to all men!! "How beautiful upon the mountains [and the seas] are the feet [and fleets] of them that bring good tidings, that publish peace!!" (Isaiah lii. 7.)

But allow me to call your attention to some of the facts of this history-a very different picture, truly. The North American Indians have not prospered in their international trade. It does not seem to work well among parties in greatly unequal conditions. Hunters do not improve their hunting-grounds by trade with those who cultivate theirs. That may be owing to the utter incapability of the savage; but, among a people much less unequal by qualification for the strife, how is it? A member of the British Parliament lately said, "Some of the finest tracts of land in India have been forsaken and given up to the untamed beasts of the jungle. The motives to industry have been destroyed. Go with me to the northwest provinces of the Bengal Presidency, and I will show you the bleaching skeletons of 500,000 human beings who perished from hunger in the space of a few short months; yes, of hunger, in what has been called the granary of the world. Famines have continued to increase in frequency and extent under our sway for more than half a century." Foreign trade in this case shows no signs of benefits conferred upon the weak by the strong. Here it seems the divine order is reversed. The angels of traffic do not minister unto the heirs of salvation. Under the influence of international trade Turkey has become "the sick man of Europe." The Portuguese, once the masters of maritime commerce, as you fondly call it, have changed places with their former victims. In the language of Mr. Cobden, "Turkey and Portugal have become a burden and a curse to England." And how have Ireland and the West Indies fared?