and it would oblige the issue of national-bank notes, if they are to remain at par with greenbacks, to stay within the limits prescribed by the possibility of actual redemption, made effectual by the establishment of assorting-houses. I throw this out as a suggestion to be considered by Senators.
In that way I think free banking might be kept from running into inflation, and I should be inclined to vote for it. But without such a provision free banking, in my opinion, will result in inflation; and I have shown that an inflation of virtually irredeemable national-bank currency will, first, not remedy the evils which are complained of in the West and South, but rather aggravate them; will not give them a larger amount of loanable money, but seriously reduce that amount; will not destroy what has been called the banking monopoly of New England and New York, but rather confirm and strengthen that monopoly; and, secondly, if a free-banking act such as is proposed, with an effectual system of redemption, leads to the establishment of many new banks of issue as desired, it will have its effect of inflating the currency just at the centers of speculation. All the evils of inflation will inevitably follow; that is to say, violent fluctuations of values, over-speculation and gambling on a larger scale than ever, until a new crash comes, which new crash will be the more disastrous the greater the inflation has been.
Now I desire to address a word to the Senate concerning the effect such a policy will have on the rates of interest. I said in my first speech on this subject that the inflation of an irredeemable currency will not reduce but will raise the current rates of interest; and that proposition has been questioned. The Senator from Illinois [Mr. Logan] went into a disquisition on the laws of demand and supply, and the Senator from Indiana [Mr. Morton]
