Excerpt from The Finance Minister, the Currency, the Public Debt
§ 1. "In all the cities and towns throughout the country checks upon credits in banks and bills of exchange have largely taken the place of bank notes. Not a fiftieth part of the business of the large cities is transacted by the actual use of money, and what is true in regard to the business of the chief cities is measurably true in regard to that of towns and villages throughout the country. Everywhere bank credits and bills of exchange perform the office of currency to a much greater extent than in former years. Except in dealings with the government, for retail trade, for the payment of labor and taxes, for travelling expenses, the purchase of products at first hand, and for the bankers" reserve, money is hardly a necessity. The increased use of bank checks and bills of exchange counterbalances the increased demand for money resulting from the curtailment of mercantile credits." - Report of the Secretary of the Treasury on the State of the Finances for the Year 1867.
The Secretary here clearly recognizes the existence of two descriptions of currency, an inferior and a superior one - the former composed of notes which circulate on the faith of moneyed institutions, the latter of checks and drafts based on bank credits, and circulating on the faith of individuals. That this latter, being the superior one, tends to supplant the former, we are here assured; and that such is the natural tendency of monetary affairs is proved by all experience. The real need for circulating notes exists, therefore, always in the inverse ratio of the use of checks, drafts, clearing houses, and all other of the various contrivances for dispensing with the services of either the precious metals or the circulating note.
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