National Money, or a Simple System of Finance

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Addressed by a Citizen of Washington

to the Congress of the

United States.

[ Thomas Mendenhall ]








To the Congress of the United States.


“Government is not to be strengthened by an assumption of doubtful powers; but by a wise and energetic execution of those which are incontestible.” CLINTON


YOU are legislating for a great nation; for a republic of probably the highest destinies of any that ever existed upon this globe: and your every act is of incalculable importance. View the extent of its territory; contemplate for a moment the unprecedented increase of its population, (doubling numbers in less than twenty-five years) and reflect on the effects of freedom upon such a people, in such a country. What a prospect is opened to your view!—How important are your functions; and how much more, of good or of evil, can a legislator effect in this than in any other country!—Just according to the soundness of the principles upon which he acts, and the correctness of the plans he adopts, is the utility which he effects for a long line of posterity.

What is a century in the age of a nation?—We are yet in our infancy; but yet, setting out with rudiments of improvement, derived from countries at maturity, our advancement is great in every thing important to the happiness of man. In less than a century we shall exceed one hundred millions in population!! and, if our improvements in science and the useful arts bear any proportion to our numbers, and if not put back by violations of the best principles of our political institutions, or by false and inadequate plans, we shall, doubtless, then be a people, to whom the nations of the earth may look up “for every thing respectable and honorable.” Looking into the history of other great nations, and observing the lasting influence of their primitive political institutions through every period of their existence, you cannot fail duly to appreciate, and constantly to bear in mind, the high responsibility of your trust. But the importance of your station is incalculably heightened, by a just estimate of the particular crisis in which you now stand.—The expectations of the friends of liberty, the hope of the philanthropist, and the eyes of the world, were not more anxiously turned to the Congress of eighty-nine than they now are to you. Every hour, every minute of your time is precious. You cannot weigh too well what you do: and yet you cannot act too promptly. There is enough that demands your attention. Act with decision: but do nothing to be repented of.

There is no subject of more essential importance than that of NATIONAL FINANCE; or any more immediately demanding your attention. In forming your system, let it be commensurate with, not only your present means, but your future prospects. Keeping ever in view the well established maxim, that “The wealth of a nation consists in its productive industry,” the legislative financier should manage for this thriving young people as a prudent industrious young farmer, having a good little farm near a good market, but without the means to stock it, should manage for himself; or as a young tradesman should do, who, having a good shop in a situation favorable to his business, only wants a small stock of materials to begin with; or, more truly, as a skilful iron-master should do, who, having a mine of good ore, with suitable site, and with abundance of fuel, convenient and cheap, only requires money to erect his works and put them once into notion. In either of these cages, what comparison is there between the sum required and the profits of the industry to which it gives activity, or with the consequent ability to refund?—Who doubts the propriety of making loans in such cases?—But the financier forms his plans far above the contingencies of one man’s life, the precarious tenure of which is, to an individual, so serious a consideration.

Fear not, then, to borrow money, if you make your financial system such as to encourage and facilitate productive enterprize amongst your citizens, at the same time that it provides for the government a revenue, adequate both to ordinary and extraordinary purposes. Your system must be calculated for peace as well as for war, or it is defective; and should be such as to admit of extensive application, in time of peace, of its surplus revenue to internal improvements. Let economy, by the means of well contrived checks and regular system, every where prevail, consistent with the public service, which must never suffer for the want of means.

Bottom your plan upon the national lands, a fund such as no other government possesses; those untold millions of acres, which, counting only on the same progress that hath, been made within our own time, will be settled even faster than is desirable; and will appreciate in a compound ratio. This fund, under tolerable management, will forever outgrow principal and interest of any debt with the public exigency, even in times of war, can require you to contract; and, in peace, a proper use of present means will always multiply future resources.

What an egregious error is it to decline borrowing, or to hasten to pay the loan any faster than the lender requires it! From only our natural increase of population and wealth, and the constant depreciation of money, what a bagatelle would be a debt of two hundred millions of dollars only fifty years hence! But when the compound increase from public monies, properly laid out on public improvements, shall be superadded, such a debt will sink into nothing.

It is in the power of Government greatly to hasten improvements in Agriculture, in Commerce, in Manufactures, in the application of the Sciences to the useful Arts and real comforts of life, and in all those institutions which go to lessen the misery, or increase the happiness of man. In all these, we shall probably very far outstrip all precedent; for that which, in other countries, hath been the growth of accident, may with us be the result of system. If the contracting of a debt shall accelerate this mighty progress towards human happiness, as it assuredly may, it will truly prove to us National Blessing, whatever it may have been to other nations, under far different circumstances.

But what is this project of a NATIONAL BANK, about which so much is said and written?—as if our political salvation depended upon it. If I were willing to admit that a bank might, under some circumstances, be made a useful part of a great Financial System, and that it may be desirable you had the constitutional power to establish one. it is no legs so as to a National University, a Board of Agriculture, of Commerce, and of the Useful Arts; and so it is as to Roads, Bridges and Canals; since all these objects, beside their own intrinsic importance, are nation.—But if this power be not expressly given in the great charter of the land, seek it not by implication. It is not given.—To assume it would be usurpation; and every species and degree of usurpation is of destructive tendency to the vital spirit of our government. That cannot be right now, which, a few years ago, was constitutionally wrong That it was so considered by a majority of republicans, both in and out of your honorable body, scarcely admits of doubt. Even many among of those who thought the institution desirable, rejoiced that it was put down, because this act of suppression was a triumph of principle, which, without a breach of public faith, might prevent the first example being pleaded as a precedent for similar inroads upon the constitution. But what do we now hear?—That that very example, and the weight of certain great names, ought to stamp as constitutional, that which, at two separate trials, trials in which patriots and republicans were pressed in vain, by weighty considerations of expediency, to act against their consciences, had been voted out upon the constitutional question. Those votes are of record; and, as well as the debates which preceded them and many solemn declarations in conversation, are remembered by thousands. Your political opponents are already chuckling at the idea of your turning about, upon this question; and are preparing to bestow their keenest sarcasms, should they have the occasion. But this cannot be possible. What confidence could ever be reposed in the political integrity of men, who could thus sport with honor and conscience, and set at defiance the opinions of the world? Of what use is the constitution, if not for times like the present, when some favorite object is to be accomplished, under plea of the public good, or the more specious plea of public necessity? I pray you, pause upon this question—for the sake of your country—of your own honor.


IN presenting to his distinguished fellow citizens his views of an important subject, the writer would bespeak their favorable attention, by declaring that he is one of those who, from the beginning, hath been a steady friend of the Government in its present form, and of the democratic administration of it; and that he considers it no bad proof of attachment to both, that he should attempt to guard them on their weakest side. From the shades of private life (where from choice be has continued) he beheld this magnificent structure start into existence, from the hands of the sages who framed it; he witnessed its critical examination and final acceptance by the nation; and hath been an anxious and delighted observer of it to the present time. He has seen it sustain unshaken, the billows of faction, and the storm of war; and, now that the mild sun-shine of peace has returned to gild its elevated summit, he trusts that there will be no want of care in its guardians to keep it forever in its pristine order and perfection.

Every political, nay, every human institution has a tendency to self-destruction; an intrinsic infirmity, which, if not watched with a jealous eye, may be made by the folly of weak, or the design of wicked men, to undermine the institution itself. After a full view and feeling experience of the infirmities of monarchy and aristocracy, our FOREFATHERS deliberately established a REPRESENTATIVE DEMOCRACY. Amongst the weaknesses of this system are: instability of public affairs, and plans of business, ever changing with the changes of men, and a certain love of novelty in the people, which being liable to be caught by false lures (thrown out to court favor or excite prejudice) often sets up, on slight or false ground, some man or some scheme, as the popular favorite of the day, whilst plans of intrinsic merit are neglected, and important public services are forgotten, or pass unrewarded;—frequent changes in the public functionaries, owing in no small degree to a mistaken parsimony, leaving the offices of the several departments with such slender salaries, as render it imprudent for men of moderate fortune to hold then long, whereby public business is retarded or badly done, not from the want of talent but the want of experience;—long protracted debates, which waste time and money, so as, not unfrequently, to let slip the crisis of action, which no future time can recall, and no sum can repair, lessening, upon actual experiment, the respect and attachment of our citizens to the government of their choice.

But, if ever this government is overturned, it will probably be through the undue influence of a MONIED ARISTOCRACY, the growth of which is favored no less by the peculiar bias of our people, than by their freedom of action. This is an influence truly dangerous in any country, but peculiarly so in a republic where it is not restrained by the counter-influence of hereditary privileged orders. Let us not foster or strengthen it by creating monied corporations—a sort of thing, which, like the Porcupine in the fable, gains power by petitioning, continues it by demands, and concludes with threatening all who oppose it. Above all, let us not do this through the exercise of doubtful or constructive powers, by the government: powers which were withheld by the patriots who founded it, from a full view of their fearful tendency.

The writer of this, having been present during the whole of the interesting discussion which was had in one of the state conventions, and having noticed the ablest productions, remembers the fears expressed by some of our best men, that it had a tendency to amalgamate, consolidate, or absorb the independent state sovereignties; the earnestness with which others endeavored to allay those fears; and the zeal with which they both proceeded to prepare amendments which should put the matter beyond dispute. And he has been accustomed to think, that points which engaged the earnest regard of such men as Patrick Henry, George Mason, John Tyler, and James Monroe, were no trifles. The most effectual of the means which quieted the apprehensions of those good men, was the provision, that all powers not explicitly given in the constitution were retained. With what grief of heart would not Henry have foreseen that even that provision, so plain, simple, and forcible, would by sophistry be eluded! The mind of Mason itself, so fruitful of gloomy forebodings, could not have anticipated that so few years would have sufficed to realize his predictions.

If, without special authority, Congress may establish a banking corporation, why not set up other trading companies with exclusive charters? But there is no such power: and none appears to have been intended. ‘Tis said, however, that this power having been once assumed and acted upon, and the judiciary having acquiesced in laws successively passed in pursuance of it, this precedent has stamped it with constitutional authority. Indeed?—Then there needs only a bold and wicked majority in the legislature, and a weak set of judges, entirely to change the constitution, without those forms so cautiously prescribed by the people themselves! than which no doctrine can be more monstrous. It is one that ill becomes the stubborn republicans, who combated the bank law at its first passage; and still less those, who overturned the midnight judges of a former administration, and who still deny the right of the judiciary to decide between a law and the constitution under which it was made!

Again it is asserted, that the government, having exclusive jurisdiction over this district (of ten miles square), may establish a national bank therein, as they have smaller ones in several instances. As to the precedent of usurpation it has no weight. Let us examine the right. If, under the power of exclusive legislation, they can in any case go out of that constitution from which they derive their own existence, why may not Congress establish here the inquisition of Spain, or any other institution to which they take a fancy? And if they may do so, how ill fated are the people of this district, under a government which, though exercising a paternal authority, as to the United States, may become a fearful tyranny as to them? This never was intended—nor can it rightfully be. Congress possesses no subjects of legislation not given in the constitution; consequently such subjects are common to this district with the rest of the union. The grant of jurisdiction over the seat of government is not despotic but exclusive: exclusive of what? Of the constitution? No, surely; but of state authority, which every where else exists.

But, what need is there of such forced constructions of implied or incidental power? Why risk this inroad upon the constitution which leads to the destruction of the republic itself? If the favorite object to be accomplished, be really the wish of the nation, why not entrust the nation with it, by asking of the people an amendment of the constitution, which shall convey a clear grant of the power to accomplish it? Are representatives, who are accustomed to bow with profound respect before their constituents, in the most ordinary exercise of their rights, (of election) afraid to entrust them with the exercise of this most important of their functions? And ought they not to apprehend, should they presume to exert this power without such grant, that the people would express their displeasure by displacing such agents, or that the states would interpose their authority (as on former occasions) to sustain the great dyke which preserves them from the deluge of innovation.


“To endeavor artificially to increase paper credit, can never be the interest of any trading nation.”


IT would be a task of no small labor, to review the several plans of a National Bank which have been presented to the public; but, indeed, it would be time and labor thrown away to examine them in detail. Suffice it to point out the defects of their prominent features. The constitutional right hath already been considered, and, I trust, has been satisfactorily shewn not to exist in the general Government. I will here touch briefly the question of expediency.

It is of the essence of all the proposed establishments, to increase the flood of paper credit which already overflows the country, and threatens to overturn the whole system of banks, if the wisdom of lawgivers should not be able to devise effectual means to stay its destructive course.

Most of the plans contemplate the usual employment of bank capital in discounting notes, &c. Why not let Government establish Commercial Houses and enter into all the speculations of Merchants? They both are attended with a risk perfectly unwarrantable for a nation to engage in.

They would leave the banking corporation in the situation of a gigantic monopolist, almost without control for the period of its chartered privileges, or would set the dangerous example of making the Government enter into the inspection and management of private concerns. Both are objectionable on solid ground. It needs but a glance of thought, and a very little experience, to perceive that a large Bank, making discounts, may (and probably will) be used for party purposes; and no men, especially the executive Government, ought to be entrusted with the use of such an engine, which might, in bad hands, be employed for the purposes of bribery or other undue influence.

The Treasury Plan, as do most others, seems to regard a specie capital and the issue of specie as the grand panacea, which is to restore to instant health the sickly system of the country. In truth, it may be necessary to their very life that the ordinary banks should have a large specie capital. But in forming a national system of Finance, you, gentlemen, should divest yourselves of the prejudices derived from the establishments of the old world; and, only profiting by the errors and the blunders of great men, adapt your plan to the actual situation of your own country. You will then not fail to perceive, that the financial scheme of England (the production of necessity or of chance, not of enlightened choice,) is but a system of splendid ruin to the comfort and happiness of the great majority of that people; that the boasted Sinking Fund with which their great financier, Mr. W. Pitt, deceived himself and amused that nation, is a bubble, an ignis fatuus, continually illuding the grasp of its silly pursuers. You will see that nothing but the productive industry of her people bas enabled that nation to sustain the extraordinary exertions of recent times; a fund which we possess in its full vigour, flushed with the ardour of youthful hope, strengthened by the conscious possession of real freedom, and unclogged by endless taxes on its products. But, to sustain this industry for ages to come, we have millions of acres of public land, which will develope endless resources to us, though in other hands, for the want of the same unshackled freedom, they proved a useless burthen; the gloomy haunts of wild beasts, or of the more ferocious savage of the wilderness. And you will, I think, conclude with me, that it is best that “we should manage our own affairs in our own way.”

The truth is, that you possess the most ample power, and the most adequate means, to establish the finances of this nation upon the most solid foundation, in a manner perfectly consistent with every provision and every guard of the constitution.

Money, to become a universal medium in trade, and one, which will not depreciate in value to the injury of the holder, must have indisputable security in convertible property, and must never be increased beyond its real demand.—To effect this:

1. Let Government, by law, create a stock by loan, of any convenient amount, say twenty millions of dollars, redeemable within years, laying taxes to the amount of the interest of such stock.

2. Let the Treasury Department issue notes of convenient size, founded on this stock, in payment of its expenses, not exceeding the amount of the loan.

3. Establish in all the principal towns branches of the existing Loan Offices, for receiving these notes in payment of taxes, for the purchase of public lands, and of the stock aforesaid.

4. Let the said stock, when thus sold, be regularly funded every six months, bearing interest after the time of funding.

5. Let a sufficient portion of the ordinary revenue be regularly appropriated as a sinking fund, to pay off this funded stock as it becomes due.

6. Confine the coinage of money almost wholly to small change.

Thus would a wide and useful circulation take place, of money founded on the credit of the Government and the property of the Nation; and the advantages of this system are:

That, being convertible at pleasure into lands or stock, and being received in payment of all public dues, it would rather appreciate than depreciate, in comparison with any other medium; for it would never be increased beyond what is proper, because when it should begin to be too plentiful it would be thrown back upon the Government, and thus find its level. It would speedily become the common standard of all other money; and every Bank in the United States would be under the necessity of keeping a portion of it.

If (as probably would be the case) twelve millions of these notes should be kept afloat, the United States would derive (that is, save) an annual interest of seven hundred and twenty thousand dollars

It would not interfere with the arrangements of the different banks in the several states, but rather benefit all whose views are correct.

The national lands will be brought into the market no faster than the actual demand for them requires; consequently at prices gradually increasing.

The nation will at all times be left in the capacity to make an extraordinary effort, without present distress or future injury, should circumstances demand it.

Freed from the dangerous influence of monied corporations, the Government will display its mild genius, in the most beneficent effects, with that wholesome influence which property belongs to it; and will always possess a disposable fund for the promotion of useful and important works.

A few only of the maxims of writers upon this subject have passed unchanged through the crucible of experiment, amongst which is this, that the territory and industry of a people are the parents of their wealth; and upon this maxim is bottomed the foregoing plan of national money, which will be the true representative of that wealth.

It will be free from several objections that apply forcibly against the precious metals, as a medium in trade: 1st. That they are often (sometimes owing to scarcity, but more frequently to the want of confidence in the funds which they represent) not to be had in sufficient quantity: 2d. That in time of war the, are liable by improper means to be taken out of the country, to the great embarrassment of the Government and of individuals: 3d. That they are inconvenient from their weight; 4th. Their value changes as they become scarce or plenty, and they are liable to be adulterated by base mixtures, besides being counterfeited as paper may, and much more easily.

But the precious metals (so called) have another disadvantage, the exposure of which exposes also one of the errors of theorists which has lingered behind its kindred mists, long since driven to the shades by the light of experience, that intrinsic value constitutes an essential requisite of a circulating medium. Luckily for us, the short history of this republic, from the days of continental paper money, to the bank paper of the present day; and the actual state and condition of our citizens, (from the frontier settler, who trades for all he wants without seeing a dollar, or even a bank note, once a year, to the luxurious bank-director of a commercial city, whose whole notion of wealth and credit is founded in cash) furnish a fund of practical knowledge which cannot fail to set us right in this matter, even if the experience of the old world did not confirm as it does, our theory. It was only the defect of the systems on which it was issued which seemed to make intrinsic value necessary to money; for as such it really has no value but as a representative of something else. As Bullion, Gold and Silver have intrinsic value, with other articles of trade, founded in their use or capacity for use; but this very circumstance is the cause of taking them out of circulation when most wanted.

What was it that made our continental money and the French assignats so soon become good for nothing? It was that they represented nothing; and wanted the requisite of being convertible into something useful, at the option of the holders.

What vas it that enabled the Bank of England to stand its ground, when the Government was compelled to adopt the bold and almost unprecedented measure of suspending the issue of specie; and what has kept up our numerous small fry of banks under similar circumstances?—Will any one pretend that it was the expectation of the receivers of the bank paper, that they would get cash for them?—No; for very many who received our bank notes believed that they never would be paid in specie; and not a few feared the ultimate failure of these institutions. In England it was, with some, a confidence in the Government, and with others a knowledge of the necessity of supporting it, for their own sakes, which kept up their bank notes, superadded to the influence of general consent or acquiescence, which, with us chiefly operated to the same effect; but, in both instances, a prevailing cause was the daily experience of every one, that, owing to that consent, (grounded in the necessity of the case) he could herewith procure the things he wanted. But there was still a deeper ground or reason, known to those who are most in the secrets of such matters, and whose opinions have a prevailing weight, namely, that all the old banks held a substantial real estate, whether they could command specie or not. What was it that recently lowered the price of Bullion in England and brought back the rate of exchange in her favor, when yet the Bank has not resumed specie payments?—.Simply this, that the termination of her long warfare renewed the activity of her artizans, and strengthened the credit of her funds. What is the real condition of our frontier men? Have they no comfort, no traffick, no independence? If they have all these, without money, what is the source of them? Why was it that a late order of the Treasury Department, respecting Treasury notes, had the immediate effect of raising their value?—Simply that it converted them to the most useful purpose.

Every one knows the value of a mortgage upon improved or improvable real estate of good title. But why will mortgages not serve the purposes of trade? Only because they are inconvenient. and want notoriety: both which objections are removed in the case of national lands represented by national money.

‘Tis known that diamonds are so plentiful in some of the Portuguese dominions, that, if the exploring of their mines were not under restriction, those minerals would cease to be precious: and the same will be the case with Gold and Silver when, at no remote period, the mines of the new world shall be worked to their full extent. But no such objection lies against money when made to represent the national wealth, which is constantly increasing with our population.

To the foregoing I shall add another consideration, that, under the above plan, a very moderate issue of money can be made to answer the purposes of Government, and that without a premium to brokers or stock-jobbers; whereas it is apparent (and experience shews) that no bank can accommodate the Government to the extent of its need, in time of war.

Finally, I express my entire belief in the practicability of the system here proposed, which may be brought gradually into use without injury to any existing establishment. And the government has it fully in its power, from the receipt of Gold and Silver by the ordinary revenue, to accommodate the prejudices of those who prefer them, until the advantages of this plan shall become generally known and understood; and until, as will certainly be the case, THE NATIONAL MONEY SHALL bear an agio, and BE RECEIVED IN PREFERENCE TO EVERY OTHER MEDIUM.


Washington, February 1,1816.