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Commonwealth constitution, to decide questions of this sort or to refer them, if it pleases, to the Privy Council. But this court had not been organized, and the federal authorities would not permit a direct appeal to the Privy Council as desired by the state. Therefore, New South Wales, as regards these duties, had no recourse in law that the Commonwealth government was bound to recognize. Matters came to a crisis after the recent tariff of August, 1907, was imposed. This tariff levied a duty of 30 per cent. (British manufacture, 25 per cent.) upon wire netting, which is extensively used in Australia for rabbit protection. The New South Wales government had a large amount of such netting ordered for public use

a in protecting its crown lands and neighboring properties from rabbit invasion, when the tariff went into effect. The state authorities refused to pay the new duty,-wire netting had previously been free or subject to but nominal rates,-and seized by force the netting consigned to them. The federal authorities appear to have made no resistance, tho, had they been informed beforehand of the design of the local government, there might have been an acute crisis. The matter is now in the way of compromise, pending a decision on the constitutional aspects of the question, and the duty on wire netting has been reduced by parliament.

As a revenue producer, the former federal tariff was a success, and the new one is expected to be equally satisfactory. The actual collections under the old tariff, during its last year of operation, exceeded $45,000,000, and a gross revenue of about $52,000,000 is expected from the new tariff the present year. This will be nearly double the aggregate collections under the tariffs of the different states at the time the constitution was adopted.

1 During the last six months of 1906 the customs revenue was $18,939,448; during the corresponding six months of 1907, the new tariff having been in force since August 8, the collections were $23,420,668.

Nothing is more dangerous than to predict the future fiscal policy of a government, especially when that government is separated by half the circumference of the earth from one's own. But it seems likely that protection has come to Australia to remain for an indefinite period. The growing labor party favors this policy, and there are a host of special interests growing up dependent upon a continuance of that policy for their existence. The constant demand for new revenue, in order to carry out the various social programs of the progressive or radical reformers,—as one chooses to dub them,—will make it difficult to reduce duties. Federal old-age pensions, likely to come within a few years, will absorb public money, perhaps even more thirstily than our army pensions. A transcontinental railway will require funds. It has been proposed to have the federal government assume the state debts; and, tho under the Braddon proviso, interest upon them is now indirectly paid from customs revenues, the operation of transfer may be expected to add to federal burdens. Finally, the spirit of nationality is seeking expression in an Australian navy and increased expenditures for defense. Australia, like America, has a Japanese scare. There is even in view the possibility of a federal capital, a new city to be built by the Commonwealth as a home for its government, tho this prospect is frequently obscured by financial discouragements. With all these demands upon its pocket ahead, the federal government is likely to rely upon import duties for a large

a revenue and to continue protection.

VICTOR S. CLARK.

DEPARTMENT OF LABOR,

WASHINGTON.

THE NATIONAL GOLD BANKS.

SUMMARY.

I. The national banks on a greenback basis from 1863 to 1879, 602. -Attitude of different sections of the United States towards banking and currency in 1870, 603.-Pacific States continued on a gold basis, 604.-II. The Gold Bank Act of 1870 authorizing gold notes, 608.-Intended for foreign traders in East and to introduce national banking system into Pacific States, 609.—III. The gold banks in California, 612.-Promised success, 1872 to 1875, 613.–Panic of 1875 discredited the gold notes, 615.-Decline of the gold banks, 617.IV. Further causes of the failure of the system, 619.—Analysis of the law and of banking under it, 620.

I.

The national banking system was established during a time of suspension of specie payments, when the United States legal tender notes had driven gold and silver from circulation. These legal tender notes, or greenbacks, formed the medium of exchange; and all bank issues were based upon and redeemable in them. By 1868 the national banks had largely displaced the State banks, and their circulation bad completely displaced the State bank circulation. The national bank-notes, being redeemable in greenbacks, circulated at par with greenbacks, and followed them in their fluctuations up and down. The actual business standard was a depreciated paper, and the national bank-notes were paper based on paper. Gold was still used, however, for three classes of payments. Duties on imports were required to be paid in coin; interest on the public debt was paid in gold; and foreign payments were necessarily made in gold.

In 1871 the various sections of the United States showed marked differences in regard to their financial condition

and their currency and banking facilities. The national bank laws of 1863 and 1865 had provided for apportionment of the circulation among the States in proportion to their population and capital.' But under another law of 1865, which provided that, in the organization of national banks, preference should be given to existing State banks making application before July 1, the distribution had become very unequal. By 1868 the $300,000,000 circulation authorized by law had been claimed, but an undue proportion had been taken out by the Eastern States. The New England States had over onethird of the total, and New York and New England together had over one-half. In 1870 the New England States had more than 104 million dollars of national bank circulation, tho by apportionment based on the census of 1870 they were entitled to less than forty million; New England and the Middle States together had nearly 231 millions, tho entitled to only about 156 millions; while all of the South and all of the States west of the Mississippi River, taken together, had less than twenty-three million, tho entitled to more than 114 million.

The West, the debtor section of the country, which had been in Jackson's day the enemy of banks and the advocate of hard money, now became notoriously the champion of cheap money, the home of the inflation movement, and the birthplace of the Greenbackers. The impoverished South joined with the West in the demand for more money. Their demands during the years 1865 to 1875 were for a greater share of the national bank currency, as well as for the issue of greenbacks. Further demands came from these sections for the replacement of the national bank circulation by an additional issue of greenbacks, and for free banking, which meant, in its extreme form, the removal of all restrictions on the business and issues of the national banks. So insistent was the demand for more currency that unauthorized "shinplasters” were issued in many places in the South and the West. These were in various forms. Alabama issued certificates receivable for all State dues, but in a form suitable for circulation as money; cities, savings-banks, and business corporations issued similar certificates; and some of the railroads even issued circulating notes in the guise of railroad tickets.

1 The law of 1864 had omitted this provision of the previous law, and it was re-enacted in 1865 in the form of an amendment. Act of March 3, 1865; Statutes at Large, 38 C., 2 s., Chap. 82.

? This was the law levying a 10 per cent. tax on the issues of State banks, and the provision mentioned above was to enable the existing State banks to become national banks. Statutes at Large, 38 C., 2 S., Chap. 78, Secs. 6 and 7.

California and the Pacific States, however, were an exception to what has just been said of the Western demand for paper currency. In these States the gold standard and actual gold payments were maintained throughout the period of suspension. While the business of the rest of the country was on a paper basis, payments in California, like foreign payments, were on a gold basis; and local prices and payments in the State were in gold. Local customs and laws had from the first opposed the introduction of any kind of paper money in these States. This opposition to the use of paper currency arose chiefly from the fact that California was a gold-producing State. From the time of the early mining settlements gold dust and gold coin had been the only currency. It may also be attributed partly to the fact that the mass of the early settlers in the State were of the old Jackson Democracy, and they had the hostility towards paper money and banks of issue deeply rooted in their minds. These early settlers

1 Comptroller of the Currency, Finance Report, 1872, pp. 96 and 97; 1873, pp. 108 and 109.

2 The migration to California in 1846-48 was mostly from the frontier States and largely of Southern stock. This was the type which made up the hard-money, anti-bank party of the time. It was natural that these settlers should prefer coin

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