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instruct the workmen how to operate the machinery. The Pawtucket mill was a success from the start, and thus Samuel Slater inaugurated a new industry and one destined to absorb much of the capital and entrepreneur ability of New England. The water frame was patented in 1791. Other improvements and inventions followed in quick succession. American manufacturers were so enterprising, and American laborers proved so intelligent, that the origi

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nal disadvantages were rapidly overcome, and the manufacture of cotton cloth of the coarser grades was soon established on a firm basis.

Dewey,

Regulation of the Currency. - There could be no real Bolles, II, Bk. I, industrial prosperity without an adequate supply of money, Ch. VIII. and the attention of Congress was early called to the necessity of providing a medium of exchange that should have stable and uniform value. The bills of credit, thoroughly discredited by the close of the war, had dropped out of circulation. The supply of metal money was insufficient

98-105.

Annals of

Congress,
1780-1791,
II, 2112-
2141.

Hamilton's
Works,

I, 275-325.

to effect business exchanges even at the trade centers. The specie brought in during the war was of varying standards and denominations. English shillings and sovereigns, French crowns, Spanish reals and pieces of eight, passed current, to the endless confusion of traffic. The reviving trade with Havana brought in considerable silver, and the Spanish dollar was the coin most frequently handled. This came, by consequence, to be the unit of value in most general use, and by 1790 had superseded the English denominations.

When Hamilton, the financier of Washington's cabinet, was called upon to submit to Congress plans for a new coinage system, he suggested the dollar as the most convenient money unit, since it was familiar and popular. He recommended that both gold and silver be declared legal tender in exchange, since, though gold was the more stable metal, the supply was insufficient to provide the needed volume. The Coinage Act of 1792 established a bimetallic currency, both metals being coined freely at the mint in the ratio of fifteen to one. The silver dollar was to contain 371.25 grains of pure silver, while 24.75 grains of pure gold went to the making of a gold dollar. The latter denomination was actually coined only in multiples, i.e. eagles, half eagles, and quarter eagles. For fractional currency, the decimal system, suggested by Jefferson, was adopted, the smaller denominations being coined in copper.

The available supply of metals, gold, silver, and copper, was so far short of the money need of the country that a paper substitute was a physical necessity. The power to "emit bills of credit and make them legal tender in payment of debt" was not conceded to the Federal Government by the Constitution. A clause conferring such authority failed to pass in the Constitutional Convention by a vote of nine states to two. Bank notes issued with sufficient guarantee of redemption might, however, be made to serve the purpose. Hamilton proposed that the Federal Government meet the actual currency needs of the country by establishing a national bank author

Ch. VII.

Hamilton's

Annals of

II, 2082

2112.

ized to issue a credit money on safe business prin- Bolles, ciples. The solvency of the bank was to be guaranteed II, Bk. I, by the investment of four fifths of its $10,000,000 capital in government bonds paying six per cent interest. Re- Works, demption of the notes was to be secured by the main- 1,59-155. tenance of a specie reserve equal to one third the issue. The great model for such a credit money was the Bank of Congress, England, but the method had been successfully tried by 1789-1791, the Bank of North America in Philadelphia, the Bank of New York in that city, and the Massachusetts Bank of Boston. The business advantages of a national as compared with a state bank were emphasized in Hamilton's report. The sale of stock would afford a safe investment for idle capital, the property of women, minors, etc., the country over. Out of the accumulation of small capitals, the bank could make loans to business men, thus enabling them to set upon enterprises otherwise impossible. The notes might not, as the Constitution was then interpreted, be given legal tender value, but being redeemable in specie on demand and receivable for taxes at par, they would serve all the purposes of money. The national bank issue would be a welcome addition to the volume of the currency and would, Hamilton believed, ultimately supersede private bank issues, since the redemption of the national bank notes was guaranteed by government bonds, and since they would pass current in all parts of the country and facilitate exchange between distant sections.

The Bank of the United States was chartered in 1791. The whole stock was immediately subscribed, and the bank was opened for business in December of that year. The results were all that Hamilton had anticipated. The special demand for government bonds brought these certificates up to par and placed the credit of the United States on an assured basis. The national bank notes, convertible beyond question, were everywhere received as equivalent to specie, and the issues of the more dubious state banks were speedily discredited. The success of this

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