But in this country the relation of redeemability does not act in the same way, because the two kinds of currency are in all essential particulars virtually the same. The only thing that makes them different is the provision of the national-bank act that the national bank is to lock up in its vaults a reserve in greenbacks amounting to 15 per cent., if a country bank, and 25 per cent., if a city bank, of its bank circulation.
Free banking, authorizing the issue of any amount of national-bank notes, only limited by the supply of United States bonds, would virtually permit an unrestricted issue of bank-notes without any system of practical redeemability, for the bank-notes would be only nominally redeemable in Government legal-tenders; while the two kinds of currency, being equally safe, performing the same office, and furnishing for that reason no inducement to prefer one to the other, are both equally irredeemable in fact, and form virtually one and the same system of paper money.
Suppose now that the enactment of such a free banking law results in a large increase of national-bank circulation, what will be the effect? The Senator from Indiana says it will only make things lovely, and not disturb values at all. Let us see.
What are the causes which produce the disturbance of values through an irredeemable currency? There are two. First, lack of popular confidence in the issuer of that currency; and, secondly, the relation the quantity of the currency bears to the actual requirements of the business of the country.
The first of these causes, the lack of confidence in the issuer, operated during the war, while the stability of our Government was still in question, and hence the fact that the fluctuations of the currency went far beyond the fluctuations that would have been caused by the relation
