The laws of New England, which were very severe upon the banks, had placed a penalty of 12 per cent. upon the annual interest payments of those persons who did not pay their notes. The natural result was a difference of value between New England and Pennsylvania, which measured the depreciation caused by paper in the latter district. As remittances on New England could only be made in hard money, the equilibrium of the banks was disturbed; they were not able to respond to the demands for redemption, and a suspension of payments by the banks of the United States, except those of New England, took place in August and September, 1814. THE PANIC OF 1814.--An agreement took place at Philadelphia between the bank and the chief houses allied with it to resume payments at the end of the war. Unhappily, the public did not demand the accomplishment of this promise at the time fixed, and the banks, led on by the thirst of gain, issued an unprecedented amount of bank notes. The general approbation brought about a still further increase in their number: the bank notes of the Bank of Philadelphia were at a discount of 80 per cent.; the others at 75 per cent, and 50 per cent., and metallic money disappeared to such an extent that paper had to be used to replace copper coin. The depreciation of fiat money raised the price of everything; this superficial occurrence was looked upon as a real increase, and gave rise to all the consequences that a general inflation of value could produce. This mistake on the subject of artificial wealth made landed proprietors desire unusual proceeds. The villager, deceived by a demand surpassing his ordinary profits, extended his credit and filled his stores with the highest-priced goods; and importations, having no other proportion to the real needs than the wishes of the retailers, soon glutted the market. Every one wished to speculate, and every one eagerly ran up debts. Such was the abundance of paper money that the banks were alarmed lest they could not always find an investment for what they manufactured. It thus happened that it was proposed to lend money on collateral, while the greatest efforts to bring about its redemption were being made. This state of things lasted till the end of 1815, when it was recognized that the paper circulation had not enriched the community, but that metallic money had enhanced. The intelligent portion of the nation comprehended that even where the estimated value of property had been highest, the true welfare of society had diminished. They learned too late the baleful effects of this circulation of paper money; the greater part of the States and cities had nothing to show for it.