Public faith should be kept inviolate, but public justice should also be secured as soon as possible. Better far to pay a high rate of interest, if need be, than have so large a share of individual income, and consequently of ability to pay taxes, escape its proper responsibilities. This is desirable not only as a matter of policy, in removing a prominent cause of popular dissatisfaction, which may sooner or later endanger the security of the Debt itself but as an economical advantage to the country.

The effect of exempting the public debt from taxation may be illustrated as follows: A has an income of $1,500 derived from a salary, B has an equal income derived from coupons on the national stocks, A must pay taxes and of course must economize accordingly; B pays no taxes, and consequently has no occasion to save on that score. Now, as all national capital comes from the savings of the people, it can be seen at once, that if one-sixth the part * (in amount) of the tax payers are exempted from taxation, they are to an equal extent exempted from all necessity of saving.

We are aware that the holders of public stocks pay indirect taxes (customs, excise, &c.,) but so also does the man who has no interest in the funds. What we intend to say is, that so far as a man's wealth is invested in our taxed securities, in so far he has no motive to save arising from a taxation to which all others are liable. Looking then at its economical bearings merely, ought not all public securities to be included in the general schedule of taxation, both by the national government, and the states, cities and towns in which the holders reside?

CONSOLIDATION OF THE NATIONAL DEBT.

While this work is passing through the press, a proposition is made in Congress to consolidate the debt of the United States into a uniform 5 per cent stock, having thirty years to run, payable, interest and principal in gold.

It is, doubtless, desirable to effect such a consolidation, provided it can be done in an economical and proper manner, but the proposal to exempt the consols from taxation is quite another matter. We have already spoken of the invidious as well as unjust operation of a system which exempts from taxation one sixth part of the national resources, but since the proposal has been made, it becomes desirable, we think, to give the subject some further consideration.

We shall not dwell upon the political bearings of a measure sure to create abiding dissatisfaction-sure to be a most dangerous weapon in the hands of political aspirants, and certain to endanger eventually the security of the debt itself. We shall speak only of its economic bearings.

1st. The exemption of $3,000,000,000 from taxation for all National, State. County, Town, School District and Parish, purposes, will create a very considerable and influential class of persons, who, while they will have the legal right to vote appropriations for all public objects, will be under no obligation to pay a farthing of the amount raised; who while interested in having large public improvements made, will have no respon

It is, doubtless, far more than one-sixth part of the net national income, probably, at least one-fourth, or 25 per cent. A large share of the estimated 15 billions of aggregate wealth is of a character to escape taxation.

We

sibility for the expense of them; a class to whom it will be a matter of entire indifference how large the assessments may be, or how unwisely or wastefully the public finances may be conducted. Can any reasonable man think it expedient and proper to create such a class? Does any one doubt that its influence would be unfavorable to the public welfare? already exempt labor, to a great extent, from the burdens of State and Municipal Taxation, by limiting the poll tax to a fixed and very trifling amount, so that the poll tax-payer can vote any sum he pleases, with entire impunity. By exempting three billions of the national credit from taxation, it is now proposed to place capitalists, so far as they are owners of the public stocks, in the same favored position. That interest of the two parties will then be identical in regard to all public expenditures paid for by a direct tax on property, as State and Municipal charges generally are. Both can vote away money, and leave the unfortunate propertyholders to settle the bills. By the exemption proposed, government creates a great antagonism in the body politic. It grants a special and most important favor to one class, at the expense of others. It may be urged that the favor has been paid for, by the creditors of the government, in that they took the stock at a less rate of interest than they would have done had it been subject to taxation. But can government with any propriety make any such condition? Can it rightfully grant for any consideration whatever, a dispensation to one class of citizens from all pecuniary obligation to State, City and Town authority throughout the nation? Surely not, consistently with justice and equality, because in our community the favor granted may be worth one per cent, in another two. In one locality it may advance the general valuation one half, in another only onetenth, in one Municipality it may increase the general rate of taxation five mills on the dollar, in another twenty.

Can that be just and equal? And yet all taxation under a free government, must be seen to be clearly impartial and just, or the people will not submit to it.

2d. Such an exemption will create a powerful influence against the payment of any thing but the interest of the debt. This can be readily seen, and hence we perceive another unfavorable effect from the proposed policy. The debt should be paid off as soon as practicable. It should not all be placed out of reach for thirty years, and exempted for all that time from contributing to its own discharge, unless we are prepared to resign ourselves to never ending taxation for the payment of interest.

In a sectional point of view, the exemption principle will be very unequal in its bearings. In the new States when capital is comparatively scarce and local taxation nominally heavy, its operation will be especially oppressive and odious. Every available dollar will be put into government bonds, unless it will command an excessive rate of interest on individual security. Will not this enhance the rate of interest, when capital is most scarce? If so will it not be most burdensome to those who can least afford to bear severe taxation and high rates of interest?

A third consideration is that the contemplated exemption has a direct and powerful tendency to cripple the industry of the country by absorbing a large proportion of its wealth into the debt of the government. If the national bonds should be relieved of taxation for 30 years, no more will go abroad for sale, and those now in Europe will be returned upon us.

Of that there can be no doubt. The difference occasioned by the exemption here, which does not attach to bonds held abroad will be so great as insure their return to the American market. That this will make the working capital of the country scarce and high, and thus greatly injure all the industry of the nation, especially that engaged in manufactures, is beyond a question.

The last consideration we shall name is, that the proposed measure is entirely unnecessary. Such a policy should never have been entered upon. It was bad financiering, even in the darkest hour of our national struggle, and is wholly inexcusable now.

But it may be replied, "the government cannot negotiate its loans at five per cent, unless the exemption is made." Very well then, promise six. It is far less essential what the rate of interest than the equality of that taxation by which the interest is paid. If one-sixth more interest is to be provided for there will be one-sixth more property on which to assess the tax that is to meet it; the burden upon the people is not increased, only equalized.

The British Government pursued a wise financial policy during its great contest with Napoleon. It consolidated its national debt, issued only three per cents and negotiated these on an average discount of about 41 per cent. Her exigency was great, but the United States is under no such extreme necessity. If a policy is adopted which commends itself to the capitalists of the world, American consols at a low rate of interest will, like the British, command money on the most favorable terms. But there must be no tricks, no subterfuges, no unjust exemptions, which sensible men well know are certain to breed public discontent and imperil the national securities. All must be fair, honest and just; the resources of the United States are ample and rapidly increasing, we only need a wise and faithful administration of them.

We have said there was no necessity for the proposed measure, but it would be well to decide fully and finally upon the policy of consolidation into one stock at one rate of interest, yet it is in no wise necessary to bind the Government to issue the whole amount, as proposed, in thirty years. The debt is not all due at this time; if a part, say 1,000 millions, were now authorized for thirty years, when that was taken up the expediency of issuing more on so long a time could be more judiciously decided upon than at present, besides, if only a part were now offered it would be taken with more avidity than if the whole were put at once on the market. Policy, therefore, as well as economy requires a limitation of the issue of 30 years bonds.

The proposal to save 30 millions per annum by issuing bonds at five per cent untaxed, instead of six per cent, in order to form a sinking fund, we regard as idle and delusive. The project never will be carried through. National Sinking Funds, have always failed of success, and in the nature of things always will; besides if such a fund were to be provided for, it could be done more advantageously without exemptions from taxation than with.

THE LONDON FINANCIAL PANIC-ITS CAUSES AND EFFECTS.

THE passed month has brought us news of one of the 'most disastrous panics within the experience of Europe. Lombard Street has been shaken to its foundations; firms that were supposed by the uninitiated to possess unbounded wealth, have been swept into bankruptcy, and multitudes reared in affluence reduced to poverty. It is stated that there never was such absolute consternation as in the London Stock Exchange on Friday the 11th of May, and in the city the excitement was almost indescribable, surpassing anything within living memory. The excitement which prevailed during the last panic of the kind, in the autumn of 1857, when the Western Bank of Scotland and four other great provincial banks stopped payment, with a great number of private firms, was not equal to the feeling of anxiety and suspense which appeared every where to exist. From about 10 o'clock in the morning, by which time the failure of Messrs. Overend, Gurney & Co. had become widely known, there was a marked influx of people, far beyond the ordinary community of business - men of all classes, and in Lombard Street, Birchin Lane, and the neighborhood of the Royal Exchange, restless crowds were collected during the whole day. For some hours in the height of the day Lombard Street and Birchin Lane, from both of which the premises of Overend, Gurney & Co. have an entrance, were all but impassable, and the services of an additional body of policemen were brought into requisition to facilitate the traffic and to maintain order. The prevailing excitement greatly increased when it became known that the English Joint Stock Bank in Clements Lane had temporarily suspended payment. In Bartholomew Lane, Lothbury, and Princes Street, there was also an unusual degree of bustle throughout the day. Altogether, for many reasons, the occasion and the day will, the accounts state, be long remembered in the city of London as the "Black Friday."

To us it becomes a matter of great interest to examine into the causes of this strange excitement, and to inquire how, if possible, similar trouble can be avoided. There is a disposition to imagine that, because England maintains a commanding position among the commercial nations, she has some peculiar virtue in her monetary system; and some contend that this excellence centres in the conservative regulations imposed upon her central banking institution, the Bank of England. To us it appears that a candid examination of the phenomena of English panics would show that these opinions are very wide of the truth. There are defects in her present monetary system, and it remains for the future to remedy them by devis. ing a better.

The causes of the present panic may be said to be commercial, financial, and political. And first, the trade of England has been, for some time, in an inflated condition. The inflation may be traced back to the outbreak of our own civil war. The suspension of the American supply of the great staple of British commerce, cotton, produced a stealy and large advance in raw cotton, and in the value of cotton goods; and this rise in prices realized, for Liverpool and Manchester, an enormous extra profit upon their trade. The limitation of the United States supply of the staples of food also had the effect of increasing the costs of living,

which ultimately resulted in an advance in the price of labor, and, consequently, in the cost of products generally. The important rise in the price of cotton caused a sympathetic advance in wool, flax, and silk, and, consequently, in the value of all fabrics made from those materials. Nor is it to be overlooked that the enhanced cost of manufactures was supported by a large increase in the demand for goods from those countries which sent to England enlarged supplies of cotton. Here, then, was the basis for a commercial inflation-an abnormally high range of values. This condition of affairs could not prove permanent; and the close of our war, with a consequent large increase in the supply of cotton, was the beginning of the collapse from this expansion. The reactionary process was naturally attended with a desire, on the one hand, to carry stocks of goods and commodities rather than sell them at low prices, and, on the other hand, with an indisposition on the part of the banks to make free advances upon property which they saw must be realized upon at a loss. This opposite course between lenders and borrowers naturally weakened confidence and prepared the way for panic.

The commercial derangement proved to be the parent of a financial inflation. In 1861 and 1862, large amounts of manufacting capital in Lancashire was thrown out of employment. At the same time, large accumulations of money were realized from the rise in the price of cotton and cotton goods. This surplus capital settled into the reservoirs at London, and the financiers of that city were not backward in devising means for employing it. As there was no use for it in connection with existing commerce or industry, except at very low rates of interest, a host of new conpanies, chiefly of limited liability, were created; the object of some being trading, others mining, others contracting, others for promoting remote foreign enterprises, but the majority being what are known as finance companies. Not one in ten of the new institutions arose naturally from the presentation of legitimate openings for such enterprises; but, in a large majority of instances, the companies were formed by artful "promoters" merely for the purpose of taking up idle capital for speculative purposes, at a time of unusual confidence in financial circles. By a well known system of keeping up false appearances, and by "managing" their shares on 'Change, a certain degree of confidence was won over to these companies; the banks were induced to discount their paper freely; and deposits were attracted into the hands of the finance companies. This glittering show of prosperity continued until the essential rottenness of the concerns could be no longer concealed, when the banks began to treat them shyly; insinuations against their credit were whispered on 'Change; the whispers were loudly echoed by the "bears" to depreciate their shares; and, as embarrassments thickened around them, one after another failed, until nearly the whole list became discredited upon the market. Though the business done by very many of these companies was radically rotten, yet it was large in amount; so that it was felt in financial circles that their failure must compromise many firms. The new institutions fostered very naturally the commercial inflation; and the two being twin births, they were also destined to expire together.

Both commercial and financial affairs were thus in a state to excite general mistrust and apprehension. In this condition of affairs all the signs of an extensive war, of such a war as has not been waged in Europe since