Effects of Contraction of Currency and Falling Prices.

All at once a reaction commenced. Before the close of the seventeenth century prices began to fall and trade to languish. The cause was not difficult to discern; the placers of America had been exhausted, the islands and shores of the Orient had been plundered of their stores of silver and gold, and the level of prices, and the extension of commerce demanded an annual addition to the stock of the precious metals, which reef-mining, though stimulated by negro slavery and the lash, was unable to supply. To stay the fall in prices and the dangerous consequences, the various states of Europe resorted to various measures, Holland, England and France adopted unlimited and gratuitous coinage, Russia and Sweden resorted to copper monies, and the British American Colonies to land bank notes, but the current supplies of the precious metals continued to bear an inadequate proportion to the stock of money. The latter fell relatively to exchanges, and with it "prices" and trade. This gave rise to the emissions of notes of the banks of Stockholm, England, and France, measures which at that period proved so unsuccessful that they were followed by a renewed "fall of prices" by collapses, turbulence, and political revolutions, the plunder of Continental Europe by Napoleon, a redistribution of the precious metals, and the close of the reef-mines of Spanish America. When the sword terminated this period of turmoil, disasters, and excesses, it left the States of the Western Hemisphere weak in resources, loaded with debt and unjust burdens, and a shackled trade. The only remedy offered them was the adoption of convertible bank notes upon an improved basis, and the greed with which they resorted to the panacea proved the violence of the disease.

From the peace of Paris, 1814, to the bankruptcies of 1835-45, the convertible bank note system grew to such vast dimensions that when the inevitable crisis came it went to pieces with a crash, that even at this distant date is not wholly unfelt. "Prices" then resumed their downward tendency, commerce rapidly shrank, invention paused, and one misfortune followed another.