Competing Currencies

The Journal of Banking


“The History of A Little Frenchman and his Bank Notes,” has been extracted by us from a pamphlet published in this city [Philadelphia] in the year 1815.  At that time, as now, the banks were in a state of suspension, but then every body that chose made money out of paper, and notes for the fractional parts of a dollar took the place of silver change.  Without a knowledge of this fact, some passages in “The History of A Little Frenchman” will not be understood by readers in this vicinity.

The History of a Little French Man and his Bank Notes.


Travelling lately in a stage from the South, I fell in company with a little Frenchman of rather singular appearance and dress, who, contrary to the characteristics of his good humored nation, seemed animated by an inveterate propensity to grumble at every thing.  He never paid or received money without a vast deal of shrugging of his shoulders and other tokens of dissatisfaction, and whenever he handled a bank note, eyed it with a look of most sovereign contempt.  He talked English tolerably well, except when he was in a passion, when he sputtered French most vehemently.  His complexion and dress denoted him to be of the West Indies –the first being a sort of mahogany color, and the latter as follows, as nearly as I can recollect.  His hat was exceedingly high-crowned, and his little pigtail queue dangled from under it, like a rat’s tail.  He had rings in his ears –a coat with long skirts– cut nearly to a point, and reaching to his ancles –a white dimity waistcoat, and breeches, with gold buttons;  and he wore a watch with a chain and trinkets that reached half way down to his knee.  His appearance, dress, and, above all, his ill humor, excited my curiosity and induced me to inquire into his history.  The second day, having got a little acquainted, he let me into the secret of his dissatisfaction.

It seems the little man had arrived from Cuba, with about eight thousand dollars in gold, which by way of security he lodged in one of the banks at Savannah.  When he came to demand his money, he was told they did not pay specie, and he must therefore take bank notes or nothing.  Being an entire stranger, and ignorant of the depreciation of paper money, arising from the refusal to pay specie, and from the erection of such an infinite number of petty banks in every obscure village without capital or character, he took the worthless rags and began his journey northward.  Every step he proceeded his money grew worse and worse, and he was now travelling on to Boston with the full conviction that by the time he arrived there he should be a beggar.  It was in Philadelphia that he told me this story.  “Diable” exclaimed he as he concluded — “your banks ought to be called bankrupts– not one of them can pay their debts –or will pay them, which is the same thing– yet they pretend to make a distinction between the notes of one bankrupt and the notes of another.”  “Voila” said he, holding up a parcel of ragged dirty bills, pregnant with filth and disease –“Voila– it is like making a difference between the rags of one beggar and the rags of another.”

There was so much truth in all this that I did not care to deny his position.

Proceeding on our journey we stopped at Bristol, about 20 miles from Philadelphia.  The little Frenchman took something to drink at the tavern, and offered a bill issued by the landlord of the hotel where we had staid in the latter city, who, it seems, in order to be in the fashion, had also commenced Banker among the rest.  This note his brother landlord at Bristol refused to receive in payment.  The little Frenchman, not understanding the distinction made by a discerning public, between the rags of one bankrupt, and those of another, now gave himself up for a ruined man, supposing that he had at last got to the extreme verge of the circulation of his bank notes.  He seemed to behold the spectre [of] poverty full before him, and to contemplate his gold buttons, that I dare say had descended down to him through several generations, as a last resource against starvation.  He looked at me for consolation, with such a disconsolate shrug, such a glance of absolute despair, as would have touched the heart of even a bank director.

As well as I could, I explained to him the difference between a tavern-keeper’s note, and a bank note, and comforted him with the assurance that by the time he arrived in Boston, provided he met with tolerably honest brokers, his stock of notes would not be diminished more than fifty per cent.  The little man drew from his waistcoat pocket a great gold snuff box, opened it with extreme deliberation, took a long despairing pinch of snuff, and heaved the heaviest sigh I ever heard from one of his countrymen.

“Monsieur,” said he “does the legislature of your country permit this system of swindling, this inhospitable custom, which falls so heavily on the traveller and stranger, to pass without censure or punishment ?  Is the privilege of coining money, one of the highest attributes of sovereignty, permitted thus to be exercised by bankrupts, and tavern-keepers, whose notes will either not pass at all, or pass under a depreciation, which increases in the ratio with the distance you are from the place of emission ?  In all civilized countries the counterfeiting of a circulating medium is severely punished.  And where is the difference, whether a man imposes upon me a fictitious note, or a note that he knows will not command the value expressed on the face of it ?  The one indeed is forgery, the other rank imposition, but the offence to the individual, and the injury to society, is of the same nature.”

“But,” said I, “it is supposed that every body knows the value of every species of bank paper as well as the credit of every individual who issues notes, and to be ignorant of such things, is only to suffer those consequences which naturally spring from ignorance in every circumstance and situation of life.”

“With merchants,” he replied, “whose business it is to make themselves acquainted with the course of exchange, the value of money, and the credit of individuals, ignorance of these things may indeed be blameable.  I however am no merchant, but a stranger, visiting your country, with objects having no connection with trade, and my first experience is that of imposition, practised by public institutions as well as private individuals, upon strangers, and apparently sanctioned by the government.  I have been taught, sir, that the first duty of a government is protection to its citizens;  the second, and one not less solemn, to guard the rights, the feelings, and property of the stranger.”

“And yet, sir,” answered I, “it would seem to be an unwarrantable interference with the rights of the citizen, or an association of citizens, to restrict them from making that use of the credit they have in society which seems to be warranted by usages that are analogous.  All persons are allowed to issue notes of hand in the common course of business, which pass according to the degree of credit enjoyed by the maker, and where is the difference between issuing a piece of paper, payable at some distant period, and one payable at sight ?  Government cannot interfere with the credit of the citizen, nor prescribe limits to public confidence in any circulating medium.”

“Your argument is somewhat specious,” rejoined the little Frenchman, “but though the analogy is pretty strong between the case of the note of hand, and the bank note, there is a difference, marked and definite, which destroys the application of your argument to the latter.  Men are, from their habits of business, accustomed, before they take a note of hand, to enquire carefully as to the credit of the person who is responsible for the payment, and before they receive it, must be satisfied as to that particular.  But it is different with regard to any circulating medium.  That passes from hand to hand without question or jealousy, and the inquiry is, not whether the makers are solvent, but simply if the note is genuine.  To strangers particularly your argument will not apply, for they are accustomed to do as they see others do around them, and for a stranger to refuse taking money which he saw every body around him receiving, would indicate either an uncommon degree of caution arising from ignorance, or an extraordinary deficiency of that liberal confidence, which is the usual accompaniment of an enlightened understanding.  It is competent,” continued he, “to all legislative bodies to curtail the issue of so great a quantity of paper as will depreciate its value, because they are the rightful guardians of the public credit, which always suffers in consequence.  Whenever this happens, the specie of a country ceases to circulate, and is hoarded up by the prudent and the suspicious.  The result is, that paper becomes the only circulating medium, and if it continues to be taken after its makers have stopped payment, it is taken at a depreciation, which will increase in proportion as public confidence is weakened, by the removal of the only check on the issue of paper;  that is, the responsibility to redeem it with specie.  I, sir, do not mean to throw out any insinuation against the character of any banking institution, but this I will say, that men never ought to be permitted to act without responsibility, where the temptation is so great to act without honesty.  And this applies with additional force to incorporated bodies.  Single men have an individual character to forfeit, but bodies of men have little check of this kind, there are so many to share the disgrace, that it falls but lightly, and one keeps the other in countenance.  Directors of banks are but men, and men, under present circumstances, exposed to great temptations.  It would be useful then to watch them, not so much because they are worse than others, but because they are more exposed to those temptations that so often prostrate the best minds, and overcome the strongest principles.”

How long the little man would have gone on I know not, but by this time we were at Trenton, where, some how or other, he got a note of twenty-five cents, drawn by the captain of the Steamboat, and another of the same amount drawn by some post-master in the neighborhood, notwithstanding, since the catastrophe of the tavernkeeper’s note, he had become extremely suspicious in receiving rags, as he called them.  He examined them with a look of profound sagacity, but being rather near sighted, and reading English with some difficulty, his care was generally thrown away, as happened to be the case in this instance.

Having hired a carriage to take ourselves and baggage to Brunswick, it happened that my companion was called upon to pay the toll at the turnpike gate.  For this purpose he took out the Steam-boat, and Post-master’s notes;  but alas! he had got just beyond the sphere of their circulation.  The driver of our carriage pointed his whip to a little brook about three hundred yards behind, and mentioned they did not pass beyond that, northward.  I have seen many men in a passion in my time, but none that came up to the little Frenchman, who, in addition to the loss of his money, suffered the pangs of mortified self love, connected with the idea of having been a dupe.  He began to sputter in a jargon of unintelligible French phrases, so closely treading on the heels of each other, and so jumbled together without any sort of connexion, that one would have thought a dozen Frenchmen were talking all at once, and each on a different subject, as I have sometimes heard them do, at a French café in New York.  After a while he seemed to recollect himself, shrugged his shoulders, sat down, took a pinch of snuff, and exclaimed– “La patience est amare, mais son fruit est doux” [patience is bitter, but its friut is sweet].  “Boutez en avant” [push ahead] said he to the driver, who understood no more French than one of his horses.

After a silence which lasted some miles he suddenly moved himself with the exclamation of Il vaut mieux tacher d’oublier ses malheurs que d’en parler.” [better to forget misfortunes than to speak of them].  But,monsieur, please to inform me what advantege can result to the community at large by the emission of this infinite variety of rags ?  On the contrary is it not in the highest degree pernicious to the interest of every class of people except bank directors and stockholders, who, by shaving the rest, manage to divide nine or ten per cent. per annum as I understand ?  Suppose for instance a men has an income stationary and independent of the usual contingencies of trade and accident.  Instead of receiving it in silver or gold, or paper equivalent in value, he now receives it in rags, and is obliged to give twenty per cent. more for every article he consumes.  And what advantage is there to counter balance this.

“A vast many, monsieur,” replied I.  “In the first place money becomes so plenty that it is hardly worth having, which is an excellent thing.  In the second place, people that had not a sixpence before, can become immensely rich by setting up a bank, and issuing paper money to any amount, which they may do without any danger, as nobody pays cash for their bank notes now-a-days.  “Eh bien ?” [How ?] said the Frenchman, with a look of curiosity.

“I will tell you, monsieur.  A number of persons in some little village of forty or fifty, or perhaps a hundred houses, get together, choose a president and directors, adopt some high sounding name, get a handsome copper plate, and strike off bills to the amount of half a million, establish a good understanding with some bank in the large cities to circulate their notes, and away they go with each as much money as he can stow in his saddle bags, to circulate it as fast as possible all over the country.  Nay, so very liberal are these gentlemen, that they will be infinitely obliged to any man who will borrow a few thousands from them.  In this way they drive their rags into circulation, the people get accustomed to see them, and the directors all at once become rich men.”

“Comment,” [Well] said the little Frenchman.  “I see how it is with monsieur the bank director and the stockholder.  Il en fait ses choux gras,[he makes his cabbage large– gets much by the process]  but what becomes of the farmer, the mechanic, and the men who receive salaries from government and who is to pay the notes thus issued ?  I do not find that one dollar in ten of paper money is represented by specie.”

“True,” replied I, “one half of these petty institutions have no more specie in their vaults than I have in my pocket.  Many of the directors are men of nominal, perhaps real estate, but then you are to understand, that they expressly stipulate that nothing but the funds of the bank shall be liable for the debts of the institution, and that all their private property is excepted.”

“The funds of the bank — le diable est aux vaches ! [The devils is among the cows — every thing is in confusion].  What ! have you not told me they have no funds but paper rags, and consequently cannot pay any thing else.  In what then do their funds consist ?

“They consist,” said I, “in notes of hand of individuals, which they give the bank in exchange for its notes.  These are the only real capital of the bank, and are generally renewed at sixty days, for the accommodation of the bank and its debtor mutually.  For if the bank were suddenly to call for payment, about three-fourths of the debtors perhaps could not pay;  they would break, as it is called, and the bank would thus lose the only capital it can boast.  So you see, monsieur, the basis of all this enormous issue of paper bank notes, is only paper notes of hand.  This mutual caution between the bank and its debtors is exceedingly convenient and advantageous.  The debtors who amount to a very large portion of the merchants, circulate their bills for them, and give them all the currency in their power, for you will perceive, that if the banks were obliged to pay cash for their notes, they could not discount three times the amount of their capital, the people having discounts would of course be obliged to pay their notes, and the holders of bank stock be under the dreadful necessity of contenting themselves with legal interest for their money.”

“Ah hah !” said my companion, “I see it plainly enough.  But then monsieur will allow me to suggest, that this must at length come, “a l’extinction de la chandelle.” [extinguish the candle]  There will be an end to this at last;  and then who will be the loser, when you get to “cul de sac ?”

“Why, sir, the man that happens to be in possession of the rags, as you are pleased to call them.  He will go to the bank and demand payment: they will give him the choice of rags belonging to other banks, but no money.  That they must keep in their vaults, for fear it should go out of the country, as if it might not as well do this, as be buried where I believe it would puzzle the directors themselves to find it.  Well, he takes his rags, and goes to another bank, where he can get other rags, but no money.  They never covenanted, not they, to pay money for their notes, and when they promised to redeem a rag, with five, ten, or twenty dollars, they meant only that amount of other rags.  Nay some of them will point at the tenor of the promise in the note, which perhaps runs thus, as I have seen in some cases, “The President, Directors, and Company of ____ Bank, promise to pay to Peter Gudgeon, or bearer, Ten Dollars according to the articles of this association, and not otherwise.”  Now the articles of association thus referred, may, for ought I know, stipulate that he shall be paid in ten dollars worth of moonshine, or old rags, or in old Continental Dollars, or in bank notes, which, if things go on as they have done, much longer, will be of about equal value.”

The poor little Frenchman fell into a short reverie, and I dare say, thought of his pretty, bright, chinking, half-joes and doublons in the Savannah Bank.

“He will at last,” I replied, “come around and round to the old starting place, after being sent from one to another, and bandied about, like the pig in the story.  They will all be ruined together, and go one after the other.  The butcher will beg in to kill the ox –the ox will begin to drink the water –the water to quench the fire –the fire to burn the stick –the stick to lick the pig –but the pig wont go to school, until it is too late to profit by the lesson.”

“Oui” –ejaculated the little Frenchman, who, like Sancho, seemed to have a bundle of proverbs in his belly– “Oui– Pas à pas, on va bien loin — a barbe de fol on apprend à raire [step by step we can go a long ways]– a man who swallows rags at this rate must be un sot à triple etage[a triple blockhead] —a bon chat, a bon rat— a parcel of rogues playing on the credulity of a parcel of fools –n’emporte.” [No matter]

We now arrived at Brunswick, where we slept, taking the steam-boat the next morning for New York.  In paying my bill, I received from the master of the house, some notes which, when I offered them in the steam-boat, I found had depreciated three or four per cent. within a distance of one mile.  At this rate, thought I, before I get to New York they will be worth nothing.  So I called for plenty of wine at dinner, in order that my money might not be lost.  There was a genteel looking man who sat at table with us, and was very civil.  But as soon as my companion discovered he was a Bank Director, I thought he would have eaten him up.  He eyed him with infinite contempt –turned up his nose with a most petulant curl– took snuff at him with a look of most tremendous hostility — and repeated to himself– “Quel foutre !” [What a scoundrel!]

At New York the little Frenchman got specie, and bills of exchange on Boston for his bank notes, at a discount, I think, of twenty-two per cent., for nothing could induce him to touch any more of the “dirty rags,” which was the only name he condescended to call them by.  “Ah, Monsieur,” said he, “I don’t know what I have done to be thus murdered by cent per cent. — but a bon chien il ne vient jamais un bon os. [a good bone never comes to a good dog]”  I now see “le dessous des cartes, [now I see how the game is played]” and shall take care how I am caught again.”

I comforted him by showing how he could retrieve all his losses, by turning about when he had finished his business at Boston, and shaving his way back to Savannah, by which means he would turn the tables upon them all.  He was delighted with this idea, shook hands with me in high glee, and I never saw him more.

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