cates of free banking in the Senate pretend to be working for.
But the free-banking scheme, as proposed here, must also be looked at from another point of view. It has been argued that free banking, even without any effectual system of redemption, but carried on to any extent under our national-bank act as it now stands, will not lead to inflation, but rather operate in the direction of a return to specie payments. This view has been expressed on this floor; and it is supported by one of the staunchest and ablest advocates of specie payments in the journalistic world, a journal whose opinions on such questions are always entitled to the highest respect; I mean the Chicago Tribune. I shall request the Secretary to read the article I send to him, and I call upon the Senators who advocate free banking to listen to the reading, because the argument runs in their way.
The Chief Clerk read as follows:
Free banking does not necessarily involve currency inflation. If everybody who can deposit $100,000 in bonds at Washington is allowed to issue $90,000 in national-bank notes, this will not depreciate the currency. A paper currency is worth precisely as much as the money in which it is redeemable. The national-bank currency is redeemable in greenbacks. It is worth, then, just what greenbacks are. Now, if no more legal-tenders are set afloat, their value will remain just about what it is now. But if their value is unchanged, the national-bank notes redeemable in them will also have an unchanged value. So long, therefore, as the currency is increased by the issue of national-bank notes, and not of greenbacks, there can be no depreciation, and consequently, no inflation—for inflation, as the term is used nowadays, signifies an increase in the volume of the currency that causes depreciation, or, as its friends put it, “makes money cheaper.” Free banking would work in this way: If the banks set afloat more currency than the country could
