With these and other similar restrictions, as experience should develope their necessity, the public would be more effectually guarded against the imprudence of these institutions than they can be by the plan which has lately obtained public favor under the name of "free banks," by which those institutions are deprived of the power of creating a paper currency, but may obtain notes for circulation from the Government on depositing with the proper public authorities approved stock of the States to an equal amount, as eventual security for the redemption of the notes. It has been found by experience that the plan does not prevent the banks from suspending specie payments like the rest; and so far, they have failed in one of their most important objects. It is also well known that if, in consequence of the embarrassment of the banks, the stock pledged by them should be thrown into the market, it would sell greatly under par, and thus fail to redeem the notes for which it had been pledged. It must, however, be admitted that, in the reckless way in which bank charters have often been granted, and in which both the stockholders and directors have commonly performed their respective duties, this plan of banking affords some security against those very heavy losses which the public has sometimes sustained from those institutions.

That portion of the capital of a community which consists of money, though it is often denominated its circulation, more properly falls under the head of fixed than of circulating capital. It is not, like the former, consumed by a single use, but may exercise its useful functions again and again until it is worn out. It may, in its faculty of facilitating exchanges, be assimilated to wagons or other carriages used for transportation, and, like them, its wear and tear is the amount of its annual cost to the nation.

Some persons, in consideration of the frequent failure of banks to redeem their notes, and of the serious mischiefs to the community which thence ensue, would substitute banks of deposit for banks of circulation, to furnish a safe paper currency, since they have specie in their vaults for every note they have issued, and consequently their notes, thus certain to be redeemed, furnish the public with a paper circulation of equal value with gold and silver, and which can never depreciate.

To this proposition there is more than one objection. The first is that it would deprive the community of the advantage now enjoyed of the gain derived from the substitution of so cheap an article as paper for the precious metals, and which constitutes an important item of national economy. It is fair to assume that, if there were no bank paper in circulation, there would be a specie currency to nearly the same amount. Let us suppose the excess of paper to be 10 per cent. The amount of bank paper, thus reduced, would not be less than two hundred millions. To save this amount of capital, however expended, whether in productive or unproductive consumption, has always been considered a great national benefit; consequently, to surrender it, and retracing our steps by buying from other countries as much gold and silver as would supply the place of our present paper circulation, would be a far more serious injury. Even if executed very slowly and gradually, so large a demand for new capital would cause a pressure beyond endurance. It would have the same effect, for the time, as the annihilation of capital to the same amount as the substitution, and it would equally arrest useful enterprise, and paralyze every species of profitable industry.

But, in the next place, if the plan could be carried into execution, its promised benefits would not probably be of long continuance. In a bank of deposit, like that of Amsterdam, the specie would be steadily accumulating until, if not interfered with, it would amount to nearly the whole circulating currency of the country. But in this process it would always be exposed to more than one danger. When those who had the charge of this treasure (supposing them incapable of abstracting any of it for their own purposes), found that it had long lain idle and untouched, would be tempted to afford pecuniary relief to others, especially public bodies and corporations, as was done by the Bank of Amsterdam, under the delusive expectation that the money could be returned whenever it should be actually wanted. And though the managers of the bank should be proof against all such temptations, yet public sentiment itself might produce the same result; and, in any season of public difficulty or emergency, such as invasion, insurrection, or war, they might insist on making a part of the idle hoards of the bank active and useful in aiding the public treasury - in which case, the specie retained in the bank being still sufficient to redeem the notes returned to it, the bank of deposit would be converted into a bank of circulation, if it continued to exist, or its business was not altogether closed.

We have seen that the production of any commodity may be excessive, or, in other words, that its supply may exceed its demand. But while this is very practicable for one or several commodities, it can never be the case with all. Since commodities are purchased by commodities, the glut of some always supposes a deficiency of others. A general excess is, therefore, a contradiction, as has been well shown by Mr. Say in his theory of gluts.

Having now gone through the subject of production of what is necessary or useful to man, whether by agriculture, mining, fisheries, manufactures, or com merce, we will proceed to consider the destination of what has been thus produced.