William Berkey
The Money Question



IT is a common error, inculcated by the bullionists, to suppose that metallic coins alone are money, and that money is the same thing in all parts of the world.  Nothing could be further from the truth.  Population, commerce and trade have long since outgrown the world’s supply of the precious metals.  Every nation builds up a monetary system of its own, and no two systems are or can be alike.  The monetary system of a nation is an outgrowth of its civilization, precisely, as are its manners, its customs, its language and its government.  For example, Great Britain and France both use metallic coins and paper money, and yet the monetary systems of the two nations differ in almost every particular.  Several centuries ago the increase in population, trade and manufactures and the limited supply of gold and silver rendered it impossible for the people of Great Britain to secure a sufficient amount of coin to form an adequate medium of exchange.  The true nature and functions of money were but imperfectly understood, and no effort was made, on the part of the government of that kingdom, to remedy the difficulty under which the people labored in effecting their exchanges.  The people were obliged to do the best they could.  Exchanges of property and commodities thus came to be effected to a great extent by means of promissory notes, book accounts, and other devices of the credit system.  In the course of time the Bank of England was established.  Soon after it was established its managers conceived the idea of issuing bank notes, to be exchanged for the notes of individuals.  Merchants and others gladly availed themselves of an opportunity to substitute the notes of a responsible and widely known institution for the notes of individuals, which could only circulate in a limited sphere.  Bank notes were found to be capable of greatly facilitating the operations of trade, and became the chief medium of exchange of the nation.  Bank notes, it will be perceived, are purely an offshoot or development of the credit system, invented to remedy the want of an adequate medium of exchange.  In this manner a monetary system of a peculiar character has been developed in Great Britain, which has exercised a powerful influence upon the destinies of the people of that kingdom and also upon the rest of the world.  The monetary system thus developed in Great Britain, although based on specie, is made up almost wholly of credit.  The statement of Sir John Lubbock, given on page 48, shows that of 19,000,000, paid into his bank in a few days, only one-half of one per cent. consisted of coin.  Every dollar in coin in Great Britain thus becomes the basis of an immense superstructure of credit.  Gold coins are the legal tender money of the country, silver being a tender only for small sums.  As the exchanges of the country are carried on with a medium of exchange only a small percentage of which is coin, whenever a stringency occurs, or a want of confidence prevails, which inevitably happens as soon as the credit of the nation becomes fully inflated, everybody seeks to obtain possession of this small percentage of the circulating medium, which alone is a tender in payment of debts.  Coin consequently rises in value and is no longer a proper measure of other values.  In this respect at least its functions as money are totally perverted.  Money thus instituted is given a tremendous power over property and labor, and the whole tendency of the system is to make the rich richer and the poor poorer.  The system, however, is in accord with the views held by the aristocratic or governing class of Great Britain, and finds its champions in a school of political economists, who profess to believe, and strive to inculcate, the doctrine that it is natural and proper that poverty and want and disease and misery should be next door neighbors of wealth and unbounded prosperity.  It is due chiefly to this system of money that such great extremes of wealth and poverty are to be found in Great Britain.

France, like Great Britain, uses both coin and paper money, but money in France is instituted upon entirely different principles.  The policy of the French Government is to render money abundant and cheap, in order that the exchanges of the nation may be effected with the least cost possible, and that the productive ability of the people may be developed to the utmost extent.  The men who moulded the French system were wise enough to know that labor is the true source of wealth, and that the surest way to render the government powerful was to enable the masses to become prosperous.  This was not accomplished without a great struggle.  Colwell, in his work on The Ways and Means of Payment, says :  “ The system of public finance in France, once so cumbrous and awkward, so expensive and otherwise disadvantageous to the nation, has, during the past half century,1 under the able direction of Count Mollien, the Marquis D’Audriffet and other eminent men, under one such radical changes as have completely modified both its principles and its mode of operation.  These reforms were resisted, in every stage and with every weapon, by the parties (the money power) interested in maintaining old abuses.  The persevering efforts of honest and intelligent men for thirty or forty years overcame all opposition, and France now enjoys a financial system, in not a few respects, superior to any other nation.”  The people of France have the cash system and pay as they go.  The circulation of the country consists of about $1,200,000,000 in specie and about $500,000,000 of irredeemable legal tender paper money, issued by the Bank of France.  The London Standard of April 14, 1876, in commenting on the remarkable condition of the French finances, says :

“ The Bank of France at the present time occupies in the financial world a position more remarkable than has ever been held by such an establishment.  Its notes enjoy a forced currency and are a legal tender in all business transactions, yet those notes suffer no depreciation.  They pass from hand to hand for precisely the same value as gold.  A sufficient explanation of this fact may, perhaps, be found by some persons in the circumstance that the bank has accumulated in its coffers at this moment the greatest quantity of the precious metals that has ever yet been possessed by a single establishment.  That, however, does not really account for the undiminished credit of the bank.  For even in the agony of the last war, when the veteran armies of the empire were prisoner, in Germany, when Paris was closely invested, and one-third of the departments were occupied by the invader, the bank’s notes were at no greater discount than two or three per cent., and almost immediately rose to par.  It is, then, the admirable management of the bank, not the satisfactory nature of its reserve, which gives to it the confidence it commands.  It adds to the peculiarity of the position that, although the bank possesses a stock of gold and silver out of all proportion greater than is held by any other bank in the world, it does not propose immediately to resume specie payments.  And what is more remarkable still, nobody demands that it shall do so.”

A further examination of the monetary systems of other nations would disclose similar peculiarities and differences ;  in some gold is the only tender, in others silver ;  and in others gold, silver and paper.  In Austria, for example, silver pieces of the denomination of one and one and a half florins are a legal tender to any amount.  Gold is also coined into pieces of the denomination of four and eight florins (about $2 and $4), but as gold is not a tender, it is regarded as merchandise and fluctuates in value like other merchandise.  The Austrian system is modeled after the British system, silver forming the basis instead of gold, and it has proved there as elsewhere a perpetual source of disaster.

From these facts it is manifest that a people should be far more concerned about the manner in which their monetary system is instituted than about the material of which their money is made.  The chief function of money is to exchange property and commodities, and it should be instituted in such a manner as to enable this to be done economically and equitably, so that all classes may be duly rewarded in the distribution of the products of labor, according to their deserts.

People strive to accumulate wealth, and wealth, in its ordinary signification, consists of property and money.  As money, by virtue of its legal properties, is an equivalent for all kinds of property, its possession is eagerly sought, and hence it seems that people are seeking solely for money, which is not the fact.  Money is simply the means to attain the end, which is dominion over property.  Real value belongs only to property or products, and money is the legal medium by which it is represented, measured and exchanged, and hence money, properly considered, is simply a tool of exchange.

As has already been explained, the population, commerce and trade of the world has long since outgrown the supply of the precious metals available for the purposes of a medium of exchange.  Other forms of money are in use in all civilized nations.  The larger operations of trade, both foreign and domestic, are carried on almost wholly by means of paper devices or substitutes for money, which represent and are based on the value of the commodities exchanged.  Bills of exchange constitute the real “ money of the world”  The trade between different sections of the country, like the foreign trade, is carried on almost entirely by means of bills of exchange, checks, drafts, etc., and no one will say that it is not more economically and safely done than if it was carried on by means of gold and silver.  The volume and amount of the bills of exchange, etc., used are limited only by the exchanges to be made.  If any one were to suggest that bills of exchange, drafts, etc., whether foreign or domestic, should be limited in volume and amount by law, he would probably be denounced as a fool, and yet it is just as absurd and far more unjust to limit the volume and amount of the legal tender money to an amount, manifestly inadequate to effect the exchanges of the nation.

Money, by reason of its legal properties, under any circumstances, has sufficient power over property to enable it to perform all the essential functions of money, namely, to exchange and accumulate value ;  but to limit it in amount, as by selecting a rare and expensive material like gold, or by arbitrarily declaring by law, as in the case of legal tender Treasury notes, that it shall not exceed a certain sum, without regard to population, extent of country, or exchanges to be effected, is to invest money with an extraordinary power over property, labor and trade, as unsound in principle as it has proved ruinous in practice.


The issue presented to the American people, then, in the present crisis, is not between specie and paper money, but between two systems of money, both involving the use of paper currency.  No more important question could possibly arise, for upon its proper solution depends not only the present prosperity of the nation, but the welfare of the people for generations to come.  “Monetary laws,” says Kellogg, “are the most important that are enacted, for by these laws money is made the tender for debts and the medium of exchange for products.  All individuals are compelled to found their contracts for the necessaries of life upon the standard fixed by law.  However good the intention of the parties, their contracts will partake of the evil of the monetary laws upon which they are founded, and every law that goes to support the fulfillment of the contracts will partake of the same evil. * * The laws make money the foundation for all business contracts.  The value of this foundation is unjust and continually varying, so that parties in fulfilling their contracts are compelled to give either more or less than a just equivalent for their purchases.  The results of all contracts are as varying and unjust as their foundation.  The continual fluctuations in the value of money makes a sort of gambling system of all trade.”

The distinguishing features of the two systems of money, The Specie Basis or Bank Currency System and The Legal Tender Paper Money System, which are now presented to the American people for their adoption or rejection, have been duly explained in the foregoing pages.  It only remains now to bring them together, in order that the advantages and disadvantages of each may be fully discerned.


The specie basis or bank currency system originated with the Bank of England ;  it was introduced into the United States about the time of the Revolution, and has exercised a powerful influence upon the business and social relations of the people of the United States since that time.

The fact that banks of issue have existed in the United States for over three-quarters of a century has led many to suppose that issuing and lending bank notes constitute the chief business of banks.  Issuing or lending bank notes, on the contrary, is a mere incident of the business of banking.  The great function of banking is the adjustment of payments, growing out of the exchange of property and commodities, by means of devices of the credit system, such as bills of exchange, etc.  Banking, as we have explained, is an agency of trade, second in importance only to money itself.  For many purposes of trade the means of payment afforded by banks are preferable to the use of cash, as where they obviate the necessity of transferring or retransferring money between individuals, localities and nations having mutual dealings.  The great error of the specie basis and bank currency system of banking consists in this, that the banks, not satisfied with furnishing the means of payment best adapted for carrying on the larger operations of trade, seek to compel the public to use the same means of payment (devices of the credit system) in all the operations of trade, although for many purposes cash is preferable to credit.  No dividing line can be established between the use of cash and credit, and it is manifestly but the part of wisdom to have money so instituted that commerce and trade can avail themselves of either cash or credit in such proportions as may be most advantageous.  If the circulation consists of bank currency this cannot be done, because bank currency is credit and not cash. 

“The banks of the United States,” says Colwell, one of the most conscientious as well as profound writers upon the subject of money, “are, properly speaking, dealers in credit.  So far as their capital is paid up in gold or silver, it is reserved as a security for their circulation.  It is a rare thing that a bank lends gold or silver.  Their business consists mainly in purchasing commercial paper—that is, the evidences of debt taken by men of business in the ordinary course of their affairs ;  in paying for that paper with bank notes, or with credits granted upon their books ;  in receiving upon deposit their own notes and claims or transfers upon other banks ;  in allowing a constant transfer of deposits, in the way of payment, among their customers and those with whom they deal.  The banks, then, are not lenders of money, though compelled to pay their obligations in money.  They are founded on the idea that an association of men, with a paid up capital, and a corporate existence, is entitled to a higher credit than individuals, and that the latter might find it greatly for their advantage to avail themselves in their business transactions of this superior credit.”  It is undoubtedly highly advantageous to individuals to be enabled to avail themselves of this superior credit in many of the operations of trade, but it is equally important that they should be enabled also to avail themselves of the use of cash in other operations.  Under the bank currency system cash does not circulate in the channels of trade, but bank notes, and these are continually being returned to the banks in payment of debts.

The following extracts from The Ways and Means of Payment, to which we are already so much indebted, will convey a clearer idea of the leading principles, which underlie the specie basis system, than we could otherwise hope to give.  It should be remembered that Mr. Colwell’s work was written prior to 1860 :

“ We have seen,” says Colwell, “ that the credit system rests upon the fact, that the business of purchasing and selling commodities is separated from the business of payments ;  and upon the further fact, that the commodities which men sell are made to pay for those they purchase.  So far as credits and payments are concerned it is the main object of every man to apply his credits to pay his debts ;  to employ what is due to him by others in discharging that which he owes to others.  The main agency in this is the banks.  It is well known that all the large transactions of business are made upon the credit of the parties concerned in them ;  that the great staples of the country, as well as foreign goods in large quantities, are bought and sold upon individual credit.  The market value involved in every transaction is expressed in money of account, and appears on the face of the bills of exchange and promissory notes which the purchaser gives, and the seller takes, as evidence of the debt incurred and credit given in each case.  These evidences of debt and credit, which represent, in various shapes, the market value of the commodities, foreign and and domestic, as they move in the channels of trade are the very articles in which it is the object and proper business of the banks to deal.  The parties to these evidences of debt, or this commercial paper, having delivered and received the commodities upon which the credits and indebtedness are alike founded, have the remaining duty of payment to fulfill.” * *

“ Men extensively engaged in commercial and industrial pursuits are, by the very nature of their business, both buyers and sellers—both debtors and creditors.  It is important to pay their debts, and realize their credits, with the least trouble, expense and waste of time possible.  When any two of them have mutual accounts against each other on their books, they compare and balance them :  of course debts so paid, and credits so realized, are as satisfactorily paid and realized as if gold had passed on each transaction.  So each man of business indebted upon promissory notes and bills of exchange, and holding such paper of others for debts due to him, is only desirous of applying his credits to his debts.  He never thinks of looking for gold or silver to effect a discharge of his debts, and as little does he think of exacting such payment from those who are indebted to him.” * *

“ The banks of the United States are the chief agencies in this mode of payment.  They offer the means and facilities of payment which the parties to this business paper require.  They receive this paper, having some months to run to maturity, and deducting interest for the time, give the parties bank notes, or a credit on their books for the proceeds.  This is not turning individual notes into money, it is simply turning them into promissory notes of the bank, or deposits ;  these being of higher credit, and fitted, from the manner in which they are issued, to be used as a currency or a medium of payment.  The real basis of the individual notes discounted by the bank is the commodities which the person giving the notes received.  These persons contracted debts to the several amounts of their notes, and against these debts they hold the purchased commodities.  They offer the goods thus purchased to the public, and expect, from their sale, to realize the means of paying the debts.  The discounted paper, therefore, exhibits on its face the true market value of the commodities purchased by it ;  and the bank notes, or bank credits, given for this individual paper have the same basis, with the added guarantee of the bank.  All bank notes and bank credits issued upon real business paper are virtually issued for commodities actually moving in the regular channels of trade.  The purchasers of these commodities expect to realize enough, by their sale, not only to pay for them, but a profit beside.

“ It is this process which is continually absorbing bank notes and returning them to the banks.  The sellers of goods receive the paper of the purchasers, and dispose of it to the bank, taking therefor bank notes and bank credits, the latter of which they employ in paying their debts, and the former pass into circulation in the retail business, and in this way soon reach the hands of the debtors of the banks, to whom they are always as valuable as the equivalent, or same nominal amount of gold or silver, and even more desirable, because they pay debts to the bank equally well, and with less trouble, expense and hazard.” * *

“ If the banks in any community have discounted notes to the amount of a million, averaging sixty days to maturity, granting credits therefor to the amount of $990,000, they will promptly give up any or all the notes going to make up the million, for a return of their credits to the amount.  The banks give nothing for the notes discounted but credits on their books :  what they gave for the notes they are willing to receive in kind for them.  The profits of the bank, being the interest, for which they issued no credits, must of course be paid when the notes are retired.  The main business of the banks consists, then, in purchasing commercial securities and evidences of debt, paying for them with their own notes and bank credits, and deducting the interest for their profit.  In doing this, they not only furnish a medium of payment in which these commercial securities can be discharged, but a currency which may be employed in the interval, before it is applied to the extinction of these debts.  What chiefly makes this currency available and effective is, that there is an active and urgent demand for it, to the whole amount due to the banks ;  that is, for more than all the banks have issued.  This demand is active, urgent, daily, unremitting :  the notes in bank are maturing daily, and the demand, therefore, never flags ;  every day has its payments, which are to be effected with money, or the issues of the banks.  The latter, in any community where there are banks of circulation, being the chief medium of payment, is the medium most in demand.

“ We have shown that, in all cases where the notes discounted by the banks were given by the makers of them for commodities of daily use and consumption, these commodities are immediately offered to the public for bank notes, or checks on bank deposits, as the proper fund with which to pay the discounted notes.  The commodities, by their sale, give origin to promissory notes ;  the promissory notes give rise to the bank notes and credits ;  these become, in their turn, a medium with which to purchase the commodities ;  and the bank notes and bank credits coming thus, by circulation, into the hands of the debtors to the banks, are returned to the banks in payment of the discounted notes.” * *

“ In cases where banks discount paper not given for property transferred at the time, it is, or should be, on well grounded confidence that the maker of the paper has the power or means of redeeming from the hands of the public an equal amount of the issues of the bank.  The banks being large holders of individual paper, either discounted or deposited with them for collection, they are of course constantly looked to for the means of payment ;  and a credit on the books of a bank, granted by the bank, or derived from another quarter, being all that is required, it is earnestly sought for that purpose.  Where there are many banks, and large transactions in business and upon credit, the movement of these payments in banks, and the consequent movement of bank credits or deposits, become far too complicated to be followed up by any process of analysis.  One great feature, however, must ever be prominent, and that the most effective of all in sustaining the present banking system ;  that is, that every debtor of a bank is an active agent in purchasing and returning to the bank its notes and credits ;  that the issues of the banks, whether notes or credits on their books, are more available, convenient and economical for these debtors, than the legal currency of coins.  They are more abundant, more easily obtained, and equally effective.  It is this which gives to bank notes and bank credits their efficiency and rapidity of movement.  The amount of the circulation of the New York banks averaged over $8,000,000 in 1857, and the deposits averaged over $87,000,000.  These constitute the medium in which the payments of the City of New York are chiefly made.  With these, there is a daily payment to be made of from $30,000,000 to $50,000,000, and they are quite capable of making that amount of payments each day, for both notes and deposits may be paid many times during the day.  It is very safe to assume that over $30,000,000 of city bank notes and deposits are paid each business day in New York.  There is a demand, then, upon these notes and deposits in every week, for payments, to the amount of $200,000,000, and in every month for $800,000,000.  This demand daily, weekly, monthly, constantly pressing upon a fund of bank notes and deposits, which may at no time exceed $100,000,000, is certainly active and pressing enough to keep up the value of a fund so much used, and so indispensable to the men who have $200,000,000 to pay every week.

“ That these sums are far within the actual daily payments of New York is apparent from the operations of the Clearing-house.  The amount cleared daily, in 1857, was over $200,000,000, and these clearings are but the balances on the transactions between the banks.  A vast sum of payments is made every day in the business of such a city as New York, which is in no way embraced in the transactions of the Clearing-house.  If we assume that the whole of the payments effected yearly through the agency of banks in the United States, is only ten times greater than the amount paid yearly in New York, we shall have an aggregate 400 times greater than the amount of the precious metals in the country ;  500 times the amount of the bank note circulation of the United States ;  400 times the amount of bank deposits ;  and 30 times the annual value of the whole productive industry of the country.” * *

“ In the great movements of industry and trade, goods and services pay for goods and services ;  the promissory notes, bank notes, bank credits, or other currency, which intervene, are devices of adjustment, and not the very payment ultimately aimed at.  Men give what they have to spare, to obtain what they desire.  If they do not, in the first instance, sell for money, and with that purchase what they want, they take a security or evidence of debt ;  they make their purchases upon their individual credit, and give evidences of debt.  The debt and credit extinguish each other in the banks, and the parties have, in substance, exchanged goods ;  all the rest is merely keeping and balancing accounts between them.  These securities are issued, in this country, to an amount not less than $1,000,000,000 every three months, in which period this amount continually runs off and is renewed, making $4,000,000,000 in the year.  Of this $1,000,000,000 of securities, the banks become the owners and collectors ;  and for half this amount they are under a constant engagement to pay money on demand.  To meet this engagement, the banks hold $60,000,000, against $500,000,000, or twelve per cent. of the amount.  Of course, absolute convertibility of all this fund of securities into specie, on demand, is an impossibility.  If all the gold and silver in the country, estimated at $250,000,000, were in the banks, it would be an impossibility.  It must, therefore, continue to be impossible ;  and hence arises one of the gravest difficulties connected with banks of circulation.

“ If bank notes, like checks upon banks, were confined in their use and circulation to those at whose special instance they are issued, and whose debts are to be adjusted by them, there would be less occasion for any public intervention or concern.  For the public have little interest, whether men thus mutually indebted discharged their debts by balancing accounts, by bank notes, or by checks on banks.  But the experience of a century and a half has shown that, where bank notes are offered as a currency, they are freely received, and soon become the chief medium of exchange.  It is almost invariably true that, wherever bank notes are offered as a currency, with even the slightest pretensions to regularity and security, they are accepted, and pass rapidly into general circulation.  This facility of converting bank paper into a currency is a strong temptation to resort to it, and accounts in part for the multiplication of banks of circulation in this country and elsewhere ;  but it has given rise, also, to that ceaseless jealousy with which this system of banking has been watched.  There is, perhaps, more ground for this jealousy than many friends of the system have been willing to acknowledge.  If the circulation of bank notes had been confined to the payment of the debts in which they originate, no more mischief could ensue than now arises from the employment of checks upon banks, which the parties using them are interested to keep within legitimate and safe bounds.  But as bank notes, wherever offered, secure a wide circulation, it is not enough to say, let people take them at their risk, as they take them at their discretion.” * *

“ We have said, and the figures we have adduced show, that convertibility of the notes and deposits of our banks is impossible, even when the banks are in the best condition.  And that this must continue to be the case, constituted as the banks of the United States are, is as certain.  The main feature of the business of these banks is the discount of notes maturing at a future time :  we have previously assumed that the average time to run, of the paper thus discounted, is ninety days, or one-fourth of a year.  They issue to the parties at whose instance these discounts are made, their notes payable on demand, or give them credit on their books for the proceeds, payable in like manner on demand.  The deposits of the banks are made up, almost altogether, from the notes thus issued, and the credits thus granted.  The circulation and deposits of 1856 amounted to $445,000,000, for which the banks, by this mode of doing business, became liable on demand ;  that is, they received from their customers claims on the public maturing in three months, and they become liable to pay a certain amount on demand ;  in the year 1856, for instance, in every three months, $445,000,000, and in 1857, in every like period, $500,000,000.  The paper discounted by the banks not being payable on demand would only be paid, and could only be demanded as it matured from day to day ;  whether the sums thus paid into the banks were eight or ten millions daily, it was all the banks could exact, and if the notes had not been discounted, the amount required to pay them would have been the same.  But the banks became liable to the payment of from $445,000,000 to $500,000,000 in any one day in 1856 and 1857—a position, stripped of the mists and prejudice which constantly surround it, which should be called, as it really is, stupendously absurd ;  and, in times of commercial revulsion, not less dangerous than absurd.” * *

“ Banks of circulation, however, here and elsewhere, are and continue to be placed under stringent legal obligations to pay their liabilities in coins.  If any law could compel them to do this, and still leave them power sufficient to carry on the business of banking with the same advantage to their customers and the public as at present, the currency they would furnish would indeed be the best attainable for circulation.  For a paper currency of sufficient amount, absolutely and at all times convertible, would combine almost every conceivable advantage.  The obstacle is, that such a convertibility is impossible ;  no legislation can accomplish it ;  the omnipotence of the British Parliament could not achieve it.  Even the unusual provision in the constitution of the State of New York, which denies the power to the Legislature of legalizing a suspension of specie payments, availed not in 1857, during the fearful panic of the hundred days.  This precaution about the notes did not extend to the deposits.  The banks suspended upon their deposits, which were ten times the amount of their notes.  They have since resumed, and have now $31,000,000 of specie to $90,000,000 of notes and deposits.  With this enormous and unusual accumulation of gold, payment on demand rests only on the forbearance of the people.  The depositors could bring the banks to a state of suspension in two hours.  Upon this state of facts, the common phrase that our bank circulation is based on gold and silver is absolutely untrue.  If our paper currency had no other basis than this very uncertain, insecure, and ultimately impossible convertibility, it could not be upheld for a week, nor even a day.  The real basis of out paper currency, that which does sustain it through extraordinary emergencies, is the individual promissory notes, and other evidences of debt, in exchange for which it is issued.  These must all be paid, or the debtors must fail or suspend.  The business men of the United States owed the banks, in 1856, the sum of $684,000,000 ;  and the banks were indebted, for their circulation and deposits, $445,000,000.  If we suppose that these debtors to the banks were 100,000 in number, owing an average of $6,840 each, all this mass of business men would be active agents in redeeming the issues of the banks, of which the average burden of each would be $4,450.  The products of the industry of a country being sold, individual paper being given therefor, and the issues of the bank being given for that individual paper, it is evident not only that the issues are based upon that paper, but it is equally evident that the commodities for which the individuals issued their paper have come into their hands, that they have these commodities to offer to the public for the notes in circulation, and for checks on the banks, with which to pay their debts.  The real strength of the banks is in this, that their business is founded on the trade and industry of the country ;  and all the business men, with the commodities of daily consumption in their hands, are under the strongest inducements to offer these commodities for the notes and deposits of the bank.

“ It must not, then, we repeat, be supposed that the basis of our paper currency is specie ;  the fact is, and must be, otherwise ;  that is no foundation to be relied upon, which must go with the first flood.  No superstructure like our banking system should be reared upon a quicksand.  We do not urge this as an argument against convertibility on demand, in the aspect of a check upon the banks.  It may be necessary or expedient, but cannot be so on the ground of its being the basis, or adequate security, of bank issues.  We should not make the concession even by implication, that $50,000,000 or $60,000,000 of gold and silver can be any proper basis for issues or liabilities of the banks to the amount of $445,000,000 to $500,000,000 :  it is a mere delusion, to regard the former amounts as sufficient to sustain a demand for the latter.” * *

“ We object, then, to a phrase so likely to mislead, as that of calling gold or silver the basis of paper currency, under the present constitution of our banks.  The obligation to pay on demand can be nothing more than a check on the abuse of banking, or a security to the public, and as such only should it be regarded and discussed.  If it be indispensable, it is upon the ground that no other adequate security is attainable.  We do not believe this, and regard this attempt to place the credit system on the back of our coinage system, as partaking of that caution and wisdom which would place a locomotive, for its best service, upon a one-horse cart.”


Under the specie basis system the money of the country is locked up in bank vaults as the basis of bank currency, and the business of the country is necessarily carried on with credit and currency.  The amount of credit and currency is limited, not by the amount of specie held by the banks, but by the amount of property and commodities moving in the channels of trade.  The cost of such a medium of exchange is enormous.  The amount of the loans and discounts of the banks during the year 1875 amounted, on an average, to nearly $1,000,000,000, the interest on which at 10 per cent. is $100,000,000.  The loans and discounts made outside of the banks doubtless exceed the loans and discounts of the banks, but assailing that they are the same ($1,000,000,000), and that the rate of interest averages 15 per cent. for the year, it would amount to $150,000,000, or in all $250,000,000 paid yearly in the way of interest.

But there is another method of arriving at an approximate cost of the system, which makes the amount much larger.  The clearings of the banks of New York city average about $20,000,000 daily.  Estimating the payments of the city of New York at $40,000,000 daily, and the payments of the whole country at five times that amount, or $200,000,000 daily, will give $60,000,000,000 for the year.  If this vast sum of payments costs the payers on an average 60 days’ interest, or say one per cent. on the whole amount, it will make the sum paid yearly under the credit system $600,000,000.  This vast sum is paid by the industries of the country.  With a medium of exchange occupying the channels of trade, unencumbered by interest, such as specie or legal tender Treasury notes, the greater portion of this enormous sum would be saved to the producing classes of the nation.  The interest paid for a medium of exchange furnished by the banks and for the use of credit rendered necessary by the bank currency system, is a burden upon production and trade, that can only be removed by the extinction of banks of issue and the substitution of legal tender Treasury notes for bank currency.


When the business affairs of the country are in active operation, the whole amount of credit and currency available for the purposes of trade is in constant demand.  As trade increases the demand for credit and currency increases, until it becomes inflated to a dangerous extent, or a demand for specie may arise abroad.  In either event the banks are obliged to provide for their own safety, and the withdrawal from business men of the required amount of currency and credit produces a stringency, which inevitably leads to disaster.  The manner in which this happens is thus explained by Colwell :

“ It is not difficult to see what abundant food for panic there is in such a condition of things.  Persons in the United States have claims to the amount of $400,000,000 on the banks, payable on demand ;  these claimants know that the banks cannot pay in specie the fifth part of them, and often not the tenth part.  And although the specie is not what they need, or would ever have asked, yet they know that the banks may stop payment in an hour ;  that they will then be branded as bankrupt ;  and that they may thereupon be subjected to injurious and damaging legal proceedings :  panic becomes, therefore, inevitable.  Men in such circumstances feel themselves to be involved in a widespread, complicated calamity.  They fear the result, not only for the amount of their present deposits, and the bank notes they hold, but they tremble for other debts due to them, and are in equal dread about what they owe.  They know that if this machinery of the credit system is stopped, or seriously disturbed, debts cannot be paid.  The banks, under the influence of a panic, knowing that they can neither trust one another, nor the unreasoning public, for an hour, adopt what seems to them the only safe course ;  they receive in payment all their issues as fast as current payments return them, without, however, as usual, keeping up the currency, by fresh discounts.  If the payments at the banks amount in the United States, for each day, to $300,000,000, the withdrawal of the usual facilities at the banks by contraction, to the extent of even one-half, would rapidly absorb the stock of bank notes and deposits applicable to current payments, and of course make these payments daily more difficult, and finally, to a large extent, impossible.  High interest, such as eighteen, twenty-four or thirty-six per cent. per annum, supervenes in this hour of trial to check still further the circulation of that portion of the bank notes and deposits not absorbed by the banks.” * *

“ The contraction in New York, in the panic of 1857, is a specimen of what the banks are constrained to do, to save themselves.  They can only protect their coffers by refusing to issue the usual supply of currency.  The diminution of loans and deposits in the banks of New York stood thus in August and October, 1857 :

15th of August.........
19th of September.... ..
17th of October........

“ This exhibits a reduction of discounts, in one month, of $13,000,000, and the succeeding month of $11,000,000 ;  that is, $24,000,000 in sixty days :  in one month deposits ran down, under this operation, $17,000,000 ;  in the succeeding month, $23,000,000 ;  making, in the two months, a reduction in the chief medium of payment of $40,000,000.  The deposits were thus reduced nearly one-half.  It cannot be surprising that, under such a process of contraction, interest went up to between fifteen and thirty-six per cent., and exchange down to nine or ten per cent. below par.  What the banks did in New York was done, in a greater or less degree, in other cities ;  bankruptcy, ruin and destruction followed.  It is estimated that from five to six thousand failures occurred, involving an indebtedness of from $280,000,000 to $300,000,000, with a loss to creditors of more than $150,000,000.  But this loss bears no comparison with that arising from the depreciation of securities, and from the fall in price of real and personal property, which, judging from the results of estimates carefully made, cannot be less than $500,000,000, and may not improbably be twice that sum.  The loss sustained by the men who labor for their living is even more severe in its consequences, if not equal in pecuniary amount.  A million of men idle for six months involves a loss to the country of $150,000,000, besides the loss upon the machinery, shops, tools and factories, which stand idle when the workmen are unemployed.

“ The late panic has inflicted, in all its bearings and ramifications, a loss upon the country which may be variously estimated from $500,000,000 to $1,000,000,000.  No doubt the ill effects of the panic were much enhanced by the previous abuse of credit, and that a considerable portion of this devastation should be set down to that account.  With every allowance in that respect, we shall have a vast sum of loss to charge to the panic ;  and whether this sum be $400,000,000, or $800,000,000, matters not to our view.  The loss was, to great extent, unnecessary, cruel, terrible—a loss which has carried privation, distress and ruin to a million of homes.  For a time, at least, not yet passed, it reduced hundreds of thousands of the best people to a state of entire dependence, if not beggary.

“ What was the occasion of these dire calamities ?  The banks of the United States had a reserve of specie for several years previous to 1857, and during the first half of that year, amounting to somewhat over $50,000,000 ;  and of this, the banks in the city of New York held a little more than one-fifth.  To save this amount of specie, the banks contracted the currency one-half, denied the usual facilities upon their books, put up the rate of interest from twelve to thirty-six per cent., put down exchange upon England to nine or ten per cent. below par, reduced the revenue from customs to less than half the usual amount, drew a surplus of $20,000,000 of gold out of the public treasury, and drove the government to an issue of paper promises to pay its current expenses, deprived hundreds of thousands, perhaps millions, of their customary employment, caused some five or six thousand failures among men of business, and finally inflicted a loss on the country, in the depreciation of securities, in the reduction of prices and by insolvency, of several hundred millions.—Not to save this sum of fifty millions from being lost, sunk in the ocean, or thrown away, were all, these evils encountered, but merely to prevent it from passing into circulation among the people, or at the worst, to prevent it from being exported in payment of debts due in foreign countries.  Nine-tenths of the debts of the country are paid, as we have seen, by the agency of discounts and deposits, with some aid from the circulation of the banks ;  but the banks have been placed under such heavy penalties to pay all their liabilities in specie on demand, that when they are threatened with a panic, a commercial revulsion, or a heavy export of specie to foreign countries, they are compelled, like Sampson in the temple of the Philistines, to pull down the whole fabric of credit, public and private, about the ears of the people, to disturb and check the progress of industry in all its departments, to make bankrupts of their customers, and to sow pauperism broadcast in the field of labor.

“ This compelled policy of the banks, under the stringency of the laws which govern them, has been called paying specie.  But with how little propriety.  Instead of paying their liabilities with commercial promptness and the faithfulness of those who are discharging a legal and moral obligation, they resist it with all the power and weapons they can command.  In the struggles incident to this resistance, they strike down friends as well as enemies, and deprive the public of an amount of currency necessary to business, ten times greater than the specie they are unwilling to pay out.  And this is the convertibility so long aimed at, and to secure which so much legislation and so much thought has been expended !  This is the triumph of banks which pass through a season of panic and revulsion without suspending !—a triumph like the victory which leaves 100,000 dead bodies on the field of battle, which makes 10,000 widows, 50,000 orphans, and 200,000 paupers.”


With the clear and comprehensive analysis of the principles of the bank currency system, contained in the foregoing extracts from The Ways and Means of Payment, before us, it is not difficult to understand how public notes issued by the government can perform the functions of a medium of exchange.

The great object of trade is the exchange of commodities and services, and it is immaterial to the parties interested whether this exchange is effected by means of a medium possessing intrinsic value, or representative value, as long as it is done with equal safety, convenience and cost.

Public notes, like bank notes, are virtually based on commodities moving in the channels of trade.  There is a constant interchange of commodities and services on a vast scale going on between individuals, growing out of the necessities of government, Federal, State and local.  To effect this exchange a medium is required.  On the one side are the people, who are obliged to contribute out of their substance in proportion to their means towards the expenses of government.  On the other, there is a vast multitude of people to whom the government, Federal, State and local, is indebted for commodities and services.  The people possess abundant property and products desired by the creditors of the government, and the only problem to be solved is as to the manner in which the exchange can be equitably, speedily and economically accomplished.  This can be done, and as it is a matter in which the entire nation is directly interested, it is eminently proper that it should be done, through the instrumentality of public notes issued by the government.  Individuals engaged in trade employ the superior credit of banks to enable them to exchange commodities and services ;  and this superior credit of the banks, for reasons which have been fully explained, serves the purposes of money, in the interval between the time it is issued, in the form of bank notes, to creditors of the banks, until it is returned by the debtors of the banks.  In the same manner the superior credit of the government, issued in the form of public notes to the creditors of the government, performs the functions of money, until it is returned to the Federal Treasury by the debtors (tax payers) of the government.  The bank notes rest upon the credit of the institutions which issue them, and are a lien upon the assets of the banks, which consist of the property of the banks and of their debtors.  The public notes rest upon the credit of the government, and are a lien upon the whole property of the nation.  Thus far the analogy between public notes and bank notes is complete, with the advantage largely in favor of public notes, for two reasons :  in the first place, public notes constitute a more economical medium of exchange, because they do not bear interest, and in the second place their security is more ample.  There is not an objection to the use of public notes, as a medium of exchange, that does not apply with ten fold more force to the use of bank currency ;  while there are a great many objections to the use of bank currency, which cannot be urged against the use of public notes.  It is said by the bullionists and bankers that the “security, though ample, is too general and intangible for the purpose ;  and that the ‘whole property’ can only be reached and applied through the slow process of taxation.”  This is begging the question.  The process of taxation is going on constantly, and in point of fact the “whole property” of the people can be reached by a tax warrant much more speedily and certainly than the property of the banks and their debtors can be reached by process of law.

Again it is contended by the bullionists and bankers that a paper currency, in order to perform the functions of money, should be convertible into gold on demand.  It has already been sufficiently explained that this is impossible under the bank currency system, unless the amount of notes issued does not exceed the amount of gold held for their redemption ;  and in that event there is no need to issue any notes, for the public might as well use the gold.  Nothing can be clearer than that paper currency is used chiefly for the purpose of supplying the deficiency of money occasioned by the scarcity of the precious metals ;  and to issue paper notes to the amount of three, five or ten times the amount of gold held for their redemption, and say that they are convertible into gold on demand, is nothing more nor less than a fraud and a delusion, which inevitably leads to disaster.  There is but one way to make paper money equal to specie, and that is to clothe it with the ability to perform the same functions that specie will perform.  That this can be done is fully demonstrated by the instances referred to by Jefferson and Calhoun, and by the experience of the French people at the present time.  The partial legal tender paper money of the United States now in use fails to circulate at a par with gold, because it is not clothed with the same powers as gold.  That Treasury notes of the government, when made a full legal tender, will circulate at par with specie was clearly established by the “old demand notes” issued in 1861, which, after they were made a full legal tender, went up with gold to $2.85, as compared with greenbacks ;  and at the present time we find the currency bonds of the United States government quoted at a premium of three or four per cent. over gold bonds.


Much confusion arises in regard to the nature and functions of money, from the fact that people have been led to believe that gold, in some way or other, has been made a standard of value.  Such is not the fact, either theoretically or practically, as will be fully shown.

The idea of value is something that exists in the minds of the people independent of coins.  The unit of value, which is established by custom and education, whatever may have been its origin, is used abstractly.  When once a unit of value becomes fixed in the minds of the people, or in other words has passed into the “money of account,” it measures all values and is capable of measuring the value of gold and silver, the same as any other commodities.  “ The value of the unit, or beginning point, being once firmly fixed in men’s minds by constant use,” says Colwell, “remains there wholly independent of subsequent changes of price which may affect the specific article from which it took its rise.  Thus if it sprung from a coin, or a certain quantity of gold or silver, it becomes afterwards so independent of these as to be quite capable of expressing the changing prices of that or any other coin.  It is, then, a matter of fact that all commercial people keep their accounts, compute money, and express prices by the use of a money of account.  The naming a price with them is not naming a coin, or any specific quantity of gold or silver ;  but it is the employment of the denominations of the money of account, which all understand to express a price.  There is scarcely any mental operation more generally and constantly in exercise than that which is used to express prices.”  It was thus that the people of Great Britain came to keep their accounts in pounds, shillings and pence.  The unit of value with them had its origin in comparing values with the value of a pound of silver, which was divided into twenty parts denominated shillings.  This unit of value was changed by successive changes in the silver coinage, until about a century ago, since which time the unit of value in England has remained unchanged.  From about 1660 until 1816, the pound sterling had no corresponding piece of coin.  The English guinea had been intended to represent a pound, but it had not been properly adjusted, and, owing also to the fluctuations in the price of gold, it varied in value until 1717, when its value was fixed at twenty-one shillings.  In 1816, after much deliberation, it was decided to fix the weight of the sovereign at 5 pennyweights, 3 grains and 171-623 thousandths of a grain.  It is manifest that the whole difficulty was in establishing a coin whose value should correspond to the unit of value of the money of account, carried in the minds of the people.  The English sovereign has since been changed several times.  The people of the United States have undergone a similar experience.  Prior to the Revolution the money of account of the colonies was expressed in pounds, shillings and pence.  The unit of value, the pound, not only differed from the English pound sterling, but was different in different colonies.  The pound in the following named colonies varied from the present money of account in the United States as follows :

1—New England and Virginia, $3.33 or 6s. to the dollar.
1—New York and North Carolina, $2.50 or 8s. to the dollar
1—Pennsylvania and Middle States, $2.66 or 7s., 6d. to the dollar
1—South Carolina, 4.28 or 48., 8d. to the dollar

There were no coins in existence corresponding to these amounts.  These different units of value had their origin in various causes, which we will not stop to discuss ;  but when industry and trade had become sufficiently advanced they became fixed.  The trade of the colonies with the West Indies had introduced into the country a considerable amount of Spanish coins.  The names and values of these coins did not correspond to the money of account of the people, and their value was estimated in the money of account of the several colonies precisely as that of wheat, or any other commodity, was estimated.  In 1792 an act was passed by Congress with a view to establishing a uniform money of account throughout the country.  People reckoned in pounds, shillings and pence, and paid in Spanish dollars.  It will be remembered that continental money was payable in “Spanish milled dollars, or the value thereof in gold or silver.”  The Act of Congress of April, 1792, declared—“That the money of account of the United States shall be expressed in dollars or units, dimes or tenths, cents or hundreths, and mills or thousandths ;  a dime being the tenth part of a dollar, a cent the hundreth part of a dollar, etc.;  and that all accounts in the public offices, and all proceedings in the courts of the United States, shall be kept and had in conformity to this regulation.”  This is believed to be the first time that a money of account was ever established by law—moneys of account having in all nations grown up in the minds of the people.  The word dollar, however, expressed a value which was fully understood by the people, without any reference to a fixed amount of gold or silver.  The great difficulty consisted in fixing the amount of gold and silver that would be equal to a dollar.  By the same act a coinage of gold and silver was provided for ;  “Dollars, or units, each to be of the value of a Spanish milled dollar, as the same is now current, and to contain 371 4-16 grains of pure, or 416 grains of standard silver. * * Eagles, each to be of the value of ten dollars, and to contain 247½ grains of pure or 270 grains of standard gold.”  Other coins were to be in the same proportion.  It was then declared and established, that 371 4-16 grains of pure and 416 grains of standard silver, shall be current as money at the price of one dollar, the value of the unit of the money of account ;  and gold eagles and half eagles were made current in like manner.  The act further provides, “that the proportional value of gold to silver, in all coins which shall be current as money within the United States, shall be as fifteen to one, according to quantity in weight, of pure gold or pure silver.”

This attempt to fix the price of gold and silver by law proved a failure.  The price of gold as compared with silver was fixed lower, as it proved, than the market price, and the result was that gold ceased to circulate as money to any extent until 1834, when the amount of pure gold in the eagle was changed from 247½ grains to 232.  After the discovery of gold in California and Australia, gold depreciated in value, and silver, becoming the more valuable metal of the two, according to the standard established by Congress, deserted the channels of trade.  This was remedied, in a measure, by the act of 1853, which changed the coinage of silver about seven per cent.  The weight of silver half dollars was fixed at 192 grain, and the smaller coins in the same proportion.  The simple fact is, that gold and silver fluctuate in value like other merchandise, being governed entirely by the uncontrollable law of supply and demand, and it is about as absurd to attempt to fix, by law, an unchangeable price on gold or silver as upon a bushel of wheat or a day’s labor.

Sir James Stewart, in his work on political economy, says :

“ Money which I call money of account, is no more than a scale of equal parts, invented for measuring the respective value of things vendible. * * Money of account performs the same office, with regard to the value of things, that degrees, minutes, seconds, etc., do with regard to angles, or as scales do to geographical maps, or to plans of any kind.  In all these inventions there is some denominative taken for the unit.  In angles, it is the degree ;  in geography, it is the mile ;  in plans, it is the foot or yard ;  in money, it is the pound, livre, florin, etc.  The degree has no determinate length, so neither has that part of the scale upon plans or snaps which marks the unit ;  the usefulness of all these being solely confined to the marking of proportions.  Just so, the unit in money can have no invariable determinate proportion to any part of value ;  that is to say, it cannot be fixed in perpetuity to any particular quantity of gold or silver, or any other commodity.  The value of commodities depends upon circumstances—their value ought to be considered as changing with respect to one another only ;  consequently anything which troubles or perplexes the ascertaining these changes of proportion by the means of a general determinate and invariable scale, must be hurtful to trade ;  and this is the infallible consequence of every vice in the policy of money or coin. * * It does not follow, from this adjusting of the metals to the scale of value, that they themselves should, therefore, become the scale.”

It is of course denied by the bullionists that any such currency can be established, as will naturally conform to the money of account ;  but upon what other hypothesis can the success of the greenback, as a currency, be accounted for ?  During and since the rebellion the greenback has performed all the functions of money.  Gold in the meantime has ranged from par to $2.85.  If gold was the standard of value the price of all commodities would fluctuate with gold ;  but commodities rise and fall in price, as measured by the greenback, without reference to the price of gold (except articles on which duties are paid in gold.)  It is said, however, that now that matters have become settled the price of gold shows the depreciation of the greenback ;  and only recently a distinguished ex-United States Senator,2 in a letter to the Hon. S.S. Cox, proposed to change the unit of value (the dollar) from 100 cents to say 85, or the supposed present value of the greenback as compared with gold.  If gold coins and greenbacks were on the same footing, such reasoning might carry some weight, for there would be reason to believe that the money of account of the country had undergone a change ;  but until greenbacks are made a full legal tender, it is entitled to no consideration whatever.  If gold was only a partial legal tender and greenbacks were a full legal tender, greenbacks would probably bear a premium over gold, just as currency bonds bear a higher premium than gold bonds, because they possess a slight advantage over gold bonds in point of time.  The inconvertible inscriptions of credit of the Bank of Venice were at a premium of 20 per cent. over gold for centuries, simply because they were endowed with superior powers to coin ;  and for centuries these inscriptions of credit, conforming as they did by law to the money of account of the people, constituted an unvarying standard of value, by which all commodities, including gold, were measured.  The standard of value of the Venetians thus instituted changed only with the money of account of the country.

Gold, if not made a legal tender in payment of debts, performs the functions of a medium of exchange simply as an equivalent ;  but when made a tender it is invested with additional powers.  If the amount of gold put in a dollar is less in value than the money of account, injustice is done to the creditor ;  if more, injustice is done to the debtor ;  and when too much gold is put in a coin, it will cease, if there is any other tender, to circulate as money at all.  The fact is that the precious metals, considered in their true light, have simply come to perform, in the commercial world, the functions of an universal equivalent, and pass by weight, except when made a tender in the shape of coins ;  and are subject, in regard to price, to the same laws which govern other commodities.  At the present time silver is some two or three per cent. below par, while gold is about twelve per cent. above, as measured by the greenback.  This is due almost entirely to the character of the legislation which regulates the circulation of gold, silver and paper.

Gold, then, performs the functions of a medium of exchange by reason of its intrinsic value ;  and public notes and bank notes perform the same offices by reason of their possessing representative value, not of gold, but of property and commodities, including gold.  (It will be observed that in using the words “public notes,” Treasury notes are referred to, not as a legal tender, but as a device of the credit system, the same as bank notes.)  The bank note virtually represents the commodities moving in the channels of trade, which brought it into circulation, and rests upon the credit of the institution which issued it ;  in like manner the public note virtually represents the property or commodities levied by the government to defray its expenses and discharge its obligations, and is backed by the credit of the government and the entire property of the nation.  It was in this sense that Calhoun asked,

“ Why not use its own credit (the credit of the government) to the amount of its own transactions ?  Why should it not be safe in its own hands, while it shall be considered safe in the hands of eight hundred private institutions, scattered all over the country, and which have no other object but their own, private profit ;  to increase which they extend their business to the most dangerous extremes ?  And why should the community be compelled to give six per cent. discount for the government credit, blended with that of the banks, when the superior credit of the government could be furnished separate, without discount, to the mutual advantage of the government and the community ? ”

Public notes issued by the government for the purpose of effecting the exchange of property and products constantly taking place between the people on the one side and the creditors of the government on the other, should naturally conform to the money of account in which they are stated, and would undoubtedly do so if founded upon sound principles.  The nation possesses abundant property and products of almost every description, subject to the demands of the government ;  and the government unquestionably possesses the ability to command every dollar’s worth of property and products belonging to the nation.  The credit of the government, therefore, should be beyond question, and its paper should represent and command property and products to the exact amount stated on its face.  A note of the government is virtually an order given by the people collectively upon themselves, payable in property and products.  To make this order payable in precious metals, when the people have no precious metals, or only a very limited amount, is to render it impossible for the people to comply with the order, and compel them to dishonor the public credit.  A law making public notes payable in diamonds of a certain degree of purity and weight would be considered very oppressive, as well as absurd, and yet it is upon precisely the same principle that the public note is made redeemable in gold.  The public note will command property and products, if properly instituted, to the precise amount inscribed on its face, and gold coins can do no more.  The creditor of the government wants property and products, and the tax payer must have money (public notes) to pay his taxes.  It is this that, in the first instance, gives circulation to public notes.  The tax payers constitute a vast army of agents engaged in selling commodities for public notes, with which to discharge their obligations to the State, just as the debtors of the banks form a large body of agents engaged in collecting bank notes to hay their debts in bank.


People cannot be compelled to part with their property for money, but public policy requires that some equivalent of property should be established as a tender in payment of debts, and this equivalent is styled money.  To the creditor it should be immaterial whether this equivalent possessed intrinsic or representative value, provided it commanded property to the amount attached to it by law.  A dollar’s worth of gold, when coined and declared the only tender, is endowed with great advantages over all other kinds of property, as well as over the public note which represents property.  Creditors can refuse to take property or public notes, at no matter what valuation, but gold coins they are obliged to take at the price fixed by law.  Hence it is that a public note, which represents property to the amount inscribed on its face, and should command property of any kind, including gold, will not command gold.  The gold has been transformed into money by being made a legal tender.  Gold being clothed with special powers over property, as well as over the public note, comes to be in great demand, and, as it is limited in amount, is absorbed by capital, to be used as an instrument to control property and public notes ;  its functions as a medium of exchange are thus capable of being perverted, and the object of the legal tender law is consequently also perverted, greatly to the injury of society and of the public credit.

The public note is intended to perform the functions of a medium of exchange for the exchange of all kinds of property, including gold, and should, therefore, be made a legal tender.  If any commodity is to be made a tender, it should be such a commodity as the people possess or can readily acquire at its market value.  The great object of trade is the exchange of property, not property for money or money for property ;  and money which is designed to effect this exchange should be instituted in such a manner as to form an unvarying representative and measure of value, conforming to the money of account of the nation.  But if money is made of a commodity, it will rise or fall in value according to circumstances, and will render trade uncertain, or, as Kellogg aptly expressed it, will make a gambling system of all trade.

The responsibility of furnishing a medium of exchange, or declaring what shall be a tender, rests with the Federal Government.  It is a matter of vital importance to the nation, individually and collectively, to have money so instituted as to clog the production and exchanges of the nation as little as possible.  In this advanced age credit is everywhere used in trade, when credit can be used to exchange products more advantageously than a medium of exchange, possessing intrinsic value.  It is not only eminently proper, but it is a matter of public advantage, therefore, for the government to use its own credit, at least to the extent of its own operations.  To do this its notes should be made a full legal tender, otherwise the people can repudiate individually what they have done collectively, which inevitably works injustice to the creditor of the government, and impairs the credit of the nation.

The bullionists assert that a paper money, not redeemable in gold, issued by the government, can possess no value ;  and that it virtually consists of bits of paper with figures and words printed on them ;  and political economists are found so shallow, or worse, as to adopt this theory.  If this is true, then are all the paper devices of civilization, by means of which property is held or exchanged, a fraud and a delusion.  But public notes are not simply bits of paper, to be issued to an unlimited extent.  Every dollar emitted by the Federal Government in payment for property, services, or in discharge of its obligations, costs the people precisely one dollar in property or products, to redeem it and return it to the public Treasury.  When public notes, representing commodities moving in the channels of trade, are issued by the government to the extent of its own transactions and are made a legal tender, they conform to the money of account of the nation, and become the measure of all values, the standard of all payments and the basis of all money contracts ;  they, therefore, perform all the offices of money, and pass into general circulation.  They are paid out by the government for property or services at their face value ;  being a tender they pay debts at their face value ;  and in the end are returned to the Federal Treasury in the shape of taxes, in lieu of property, to the amount inscribed on their face.  No evidence of debt or device of the credit system ever devised possessed greater elements of strength and security than the public note of a rich and powerful nation, made a legal tender and issued to the extent of its own transactions.  The notes of the Bank of France, as we have seen, although not redeemable in specie, circulate at par to the amount of hundreds of millions of dollars, when made a legal tender and backed by the credit of the people.  Who will say that the revenues of the United States are not as certain as those of France, or that the ability of the American people to produce wealth does not equal that of the French people, or that the Federal Government is not as stable as the French Government ?  The French people are uncertain as to whether they will be living under a monarchical or a republican form of government in ten years from to-day, and yet we see, at the present time, $500,000,000 of inconvertible notes of the Bank of France, made a legal tender, circulating at par, on the credit of the government ;  while in the United States the notes of the government, not exceeding $400,000,000 in amount, circulate at a depreciation, as compared with gold, of over twelve per cent.  This is clearly the fault of legislation—making the notes of the government only a partial tender, when in order to conform to the money of account of the nation, they ought to be made a full tender.


The question as to how much money a nation needs has led to a great deal of mystification.  A nation evidently needs a sufficient amount of money to enable it to effect its exchanges in the most economical manner possible.  As has been explained, many of the operations of trade, especially of a large character, can be conducted most speedily, economically and safely by means of the devices of the credit system, such as bills of exchange, notes, checks, etc.;  while, on the other hand, in other operations cash is an almost indispensable agency.  By cash is meant money, such as gold or silver coins, or public notes, made a legal, tender in payment of debts.  There should, therefore, be a sufficient amount of money in circulation to enable those engaged in exchanging property or services to avail themselves of either cash or credit, or both, in such proportions as may be most advantageous.

Under the bank currency system, money, as we have seen, scarcely circulates at all.  The medium of exchange consists of bank currency, which is used as a substitute for cash.  Bank currency bears interest, and it, therefore, constitutes a very expensive medium—far more expensive than gold or silver, or legal tender public notes, which bear interest only when used as capital in individual transactions.  The volume of bank currency is regulated, not by the wants of trade or the exchanges to be effected, but by artificial circumstances ;  and it frequently happens that bank currency, as at the present time, will desert the channels of circulation almost entirely, because industry cannot afford to pay the tax which it entails upon the community.

The precious metals can be obtained only by digging them out of the ground in localities where they exist, or by exchanging products for them at their market value ;  and when obtained can be retained in the country only by importing commodities to a less amount than are exported.

Legal tender public notes, like bank notes, can be issued to an unlimited amount ;  and the only question to be considered is as to the amount which the government ought to issue.  It is perfectly clear that the government ought issue, at least, an amount sufficient to conduct its own transactions with the people.  This amount is based on commodities moving in the channels of trade (between the tax payers and the creditors of the government), as certainly and as securely as any commercial paper or bank currency was ever based on commodities, to which they owed their origin.  The revenues of the government, for example, amount to about $300,000,000 a year.  This requires an exchange of property or products to that amount.  How much money will it take to effect this exchange ?  Who can tell ?  The public note, when issued by the government to effect this exchange, passes into circulation and performs the offices of a medium of exchange, not only for the purposes of the government, but for the trade of the nation.  Its offices are limited, therefore, not by the immediate transactions of the government, but by the exchanges or trade of the entire nation.  It follows, then, that the amount of public notes put in circulation by the government should be limited only by the exchanges of the nation.  This theory, as to the amount of money required by a nation, is fully recognized and endorsed by political economists, who stand high with the bullionists.  Professor Bonamy Price, in the quotation given on page 236, says :  “ A cart transfers weight ;  money, ownership ;  and all the world knows that the cartage to be done determines the number of carts,” etc.;  and again, in speaking of the amount of bank notes that will circulate, he says :  “ The answer is the same as that which has already been given to the parallel question respecting coin.  So many bank notes as the public has a distinct want for will circulate, and no more.  It is the universal law of all commodities in use, the law of demand and supply.”

Money should be instituted in such a manner that the amount in circulation will conform to the wants of trade, otherwise it will not prove an unvarying standard of measure and payment.  If money is scarce and interest is high, all exchanges become difficult and expensive ;  property and products depreciate in value ;  wages fall and production is diminished.  On the other hand, if money is redundant, it will depreciate in value, and property, products and wages will appreciate in value in a corresponding ratio.  In either event, money fails to conform to the money of account of the nation, greatly to the derangement of all values, and especially of exchanges of property founded on contract.

It is far better, however, for a nation that money should be too plenty than too scarce, for when money is scarce production languishes, wages are low, and idleness prevails ;  but when it is too plenty capital alone suffers ;  and it is better for the interests of the nation and of society that capital should be idle than labor.  In the one instance (if capital is idle), people are deluded with the idea that they are much better off than they really are, because property rules at high figures ;  and in the other (if labor is idle), the masses are much worse off than they ought to be, because property and labor are at a great discount ;  individuals are brought to want ;  the public revenues are cut down ;  the expenses of government become oppressive ;  and demoralization is rife.

It is said, however, that, in any event, the amount of public notes issued by the government should not exceed the annual revenues of the government ;  otherwise they will become redundant.  Why limit the amount by the revenues of a year, instead of a shorter or longer period ?  This is illusory.  The public note performs the offices of a medium for the entire trade of the nation, and to limit its issue to an amount corresponding to the exact amount of the immediate transactions of the government would be similar to limiting the amount of bills of exchange used in trade to the exact amount of property to be exchanged.  It is possible that a less amount of public notes would suffice to effect the exchanges of the nation ;  it is probable that a larger quantity would be required.  Whether the public notes issued can be redeemed in the revenues of the government in one, two or three years, is a matter that will not effect their value in the slightest degree, as long as their security is undoubted and their use is required in the channels of trade.  This has been abundantly demonstrated by the greenback, both during and since the war.

It is idle, therefore, for people to speculate as to how much money should be issued by the government with a view to fixing the amount by law.  As already suggested, innumerable contingencies are constantly arising which will cause the amount required to vary.  How much is needed can never be known until money is properly instituted, and then people will not care to know.  Some idea may be formed of the vast character of the exchanges constantly taking place in the nation, when we reflect that the annual product of industry, agricultural and manufacturing, in the United States exceeds $6,000,000,000 a year, and that this mighty mass of products is exchanged many times and in many forms.  All that can be safely said is that money, the principal tool by means of which these exchanges are effected, should be commensurate in amount with the work to be performed.

When money becomes too plenty, or, as it is termed, redundant, prices go up, property enhances in value, and wages become high.  This is detrimental to trade, works injustice to creditors, and impairs the public credit, if public notes constitute the money of the nation.  It is, therefore, a matter of almost as much importance to the public that money should not be redundant as that it should not be too scarce.  How is this to be remedied ?  Public notes are issued by the government for property or services, and are returned to the Treasury in the shape of taxes.  An increase in the rate of taxation would soon relieve the nation of any redundancy in the currency, just as bank currency is returned to the banks under similar circumstances.  But in this connection another question arises, which has an important bearing upon the subject, and that is the question of interest.


The price paid for the use of money or its substitutes is termed interest.  When money possesses intrinsic value, as in the case of gold coins, the value of the metal of which the coin is made is one thing, while the rate of interest which the coin will bear is quite another.  The fluctuation in the price of the precious metals bears no relation to the fluctuation in the rates of interest of money.  The price of gold depends upon the laws of demand and supply, which govern the commerce of the world ;  but the rate of interest of money, as money is now instituted, is regulated by causes of a local character.  Gold may not vary a fraction in the markets of the world, and yet money and its substitutes may, at the same time, be in such demand for the purposes of trade as to command exorbitant rates of interest.  It then fails to constitute an unvarying measure of value or standard of payment.  A dollar that will command 12 per cent. interest is a very different thing from one that will only command 6 per cent.  To make money an unvarying measure of value and standard of payment, it is necessary that it should bear a uniform rate of interest.

That money should bear interest is not only legitimate, but essential to the performance of its functions as a medium of exchange.  Money represents value and should be able to accumulate value ;  otherwise it would not be accepted in exchange for property.  But, as has been suggested, its power in this respect should be uniform, in order that it may prove an unvarying measure of value and standard of payment.  It has long since been discovered that usury laws are in vain, because they are not based upon sound principles.  But money can, and ought to be so instituted as to command only a uniform rate of interest, proportionate to the profits of labor.  Money, by reason of its legal tender property, naturally possesses a command over property and labor, and if it is instituted, as at present, so that it can be made to command any rate of interest that can be extorted by capital, its functions are not only perverted, but it is enabled to rob labor of its entire profits.

On the other hand, if legal tender public notes are issued by the government in excess of the wants of trade, they will lose the power of money to accumulate value, and then functions as money will be totally perverted, greatly to the disadvantage of the nation and to the injury of the public credit.  It is, therefore, as necessary to provide against a redundancy, which will lead to such results, as it is to issue public notes to supply the want of a medium of exchange.

Inflation, in the sense in which the word is now used, is undoubtedly an evil, second perhaps only to contraction.  The application of the term, however, is limited by the bullionists to an over issue of public notes, which leads to error and confusion.  Public notes, if properly instituted, do not depreciate in value when over issued, because the people do not possess sufficient property to redeem them, but because the excess is not required for the purposes of trade, and they, therefore, fail to accumulate value.  It is not on account of the weakness of the credit of the people that public notes under such circumstances fail to circulate on a par with the money of account, but because of their redundancy.  This is evident from the fact that bonds bearing interest, which rest upon the same foundation (the public credit) can be issued to a much greater amount, than public notes.  An excess of public notes is not, therefore, strictly speaking, an inflation of public credit, but simply a superfluous amount of money, an evil which can easily be remedied.  But it is otherwise with bank currency.  Then it is not money that becomes inflated, but it is credit, in all its forms, that becomes expanded.  This is real inflation, and is far more dangerous to the interests of society than a redundancy of money, because it inevitably leads to commercial crashes and money panics.  The advocates of the specie basis or bank currency system are, therefore, the real inflationists of the nation.  It is possible, as the law now stands, to issue bank currency to the full amount of the bonded indebtedness of the country, about $1,700,000,000, and all that is wanting to call that amount of bank currency into circulation is an opportunity.  The loans and discounts of the banks in 1875 amounted to about $1,000,000,000, which indicated the amount of credit used for the purposes of trade at that time.

Bonds of the government bearing interest can be issued to a larger amount than public notes, because the ability of the public note to accumulate value is limited to its use as a medium of exchange ;  while the amount of bonds, which can be issued depends upon entirely different considerations.  Public notes will not seek investment in a bond as long as they are needed in the channels of trade.  During the war $500,000,000 of 5-20 bonds, with which greenbacks were convertible, were in the market for over a year and the Secretary of the Treasury was unable to dispose of more than $25,000,000.  The reason is obvious.  The greenbacks were needed for the purposes of trade, and could accumulate value more rapidly in the production and distribution of wealth than a six per cent. gold interest bond ;  and it was not until the channels of circulation were amply supplied with a medium of exchange that the 5-20 bonds could be sold.

We have already suggested that a redundancy of money (legal tender public notes) could be remedied by increased taxation ;  but it may happen, as was the case during the war, that taxation cannot be resorted to, to the extent of the wants of the government, or the necessities of the occasion, without producing distress and defeating the ends of the government.  It then becomes necessary to employ the credit of the government in another form—in the shape of an interest bearing bond.  This bond or evidence of indebtedness represents property or products, payable in the form of money in the future ;  while the public note represents property in the process of exchange between the tax payer and the creditor of the government, and is virtually payable in the present.

When money (legal tender public notes) becomes redundant, it is manifest that there are more notes in circulation than there is property or products moving in the channels of trade to be exchanged through their instrumentality, and consequently more than the exchanges growing out of the transactions of the government will justify.  Taxation must be increased to increase the transactions between tax payer and creditor ;  or, if that is inexpedient or unnecessary, the form in which the government credit is issued must be changed, that is, the public note, not bearing interest, issued in excess of the wants of trade, must be converted into a bond bearing interest ;  or in other words, as the government note is no longer payable in the present, it must be made payable in the future, and justice requires that it should bear interest (accumulate value), just as the public note, when not redundant, was capable of accumulating value, and this, as is obvious, can only be done in the form of a bond.

A bond, inter-convertible with the public note of the government, is capable of performing a two-fold service ;  it will prevent a redundancy of public notes, and it will regulate the rate of interest which money will command.  When public notes become redundant and are unable to accumulate value, the excess would naturally seek investment in an interest bearing bond ;  and when money (public notes) is able to accumulate value more rapidly in production and trade, and interest rises, the interest bearing bonds of the government would again be converted into money, and thus the equilibrium would be restored.

Money thus instituted could not do otherwise than conform, in value, to the money of account of the nation, and, in amount, to the wants of trade.  It would then always circulate on a par with money of account—a dollar note would mean a dollar, neither more nor less, and would always command a dollar’s worth of property ;  interest would not vary a fraction for any length of time ;  and money would prove, what it is designed to be, an unvarying standard of measure and payment.  Under such a system of money the exchanges of the nation could be effected economically and equitably, and capital and labor would each secure a due share of the products of industry ;  and commercial crashes and money panics could not possibly occur.

The amount of interest which an inter-convertible bond should bear is a matter of detail which can be settled fully only by experience.  Interest on money, as has been suggested, should be in proportion to the profits of industry, otherwise capital will be enabled to reap more than its due share of the profits of labor.  The average rate of increase of wealth in the nation is estimated at about 3½ per cent.  Capital is entitled to a proportionate share of this increase, and hence the rate of interest of money should not exceed greatly, if at all, the average increase of wealth.  For the sake of convenience in computing interest it is suggested that a bond bearing interest at the rate of one per cent. a day on $100, or 3.65 per cent. per annum, should be issued.  This, as well as other details, can only be settled by experience.  The important point is the institution of a monetary system based on sound principles, and its details can be safely left to the government, if its affairs are placed in the hands of capable and trustworthy men, in sympathy with the wants and interests of the nation.

It is urged by many who are favorable to the use of the public credit, in the shape of public notes, that a bond is not an essential part of the legal tender paper money system ;  that it would be absorbed by capital, and in the end would constitute a burden upon the nation.  This is borrowing trouble.  The public notes of the government would not be funded in an interest bearing bond as long as they could accumulate more value in production and trade ;  and, when funded, they would return to the channels of trade as soon as their services were required.

The inter-convertible bond plan is greatly derided by the bullionists and their tools, who do not fail to misrepresent the principles upon which it is based in every way possible.  The public note is treated by them as simply a promise to pay money, and upon this hypothesis it is not difficult to prove that it is a very worthless piece of paper.  The public note, as has been sufficiently explained, is a representative, not of money but of property, and as the great object of trade is to exchange property and not money, it is far more important that the public note should represent property than money (gold coins).  The amount of property in the country is estimated at $40,000,000,000 ;  the amount of gold at $100,000,000.  It is to exchange this $40,000,000,000 of property that money is required and not the $100,000,000 ;  and to base the public credit on $100,000,000 of gold, when it should be based on $40,000,000,000 of property, is in utter violation of the plainest principles of the credit system, to which all paper devices for the exchange of property, whether public or private, belong.

Again it is asserted that the inter-convertible note and bond is simply paying one paper debt with another.  If the public note was simply a promise to pay money this would be true, but the public note, properly understood, is not a promise to pay money, but is a representative of property to the amount inscribed on its face, which the government is entitled to demand and receive forthwith from the people, and in this sense was described by Calhoun as a “promise to receive,” and not a “promise to pay.”


How the paper money of the government is to be put into circulation is a matter worthy of consideration, especially as friends of the system, with the best intentions in the world, have frequently allowed themselves to be led into error by failing to carry the principles of the system to their logical results.  As the public note represents property and products which the government is entitled to demand and receive forthwith, in the way of taxation, to the amount inscribed on its face, and is virtually based on such property or products in the process of transfer from the tax payer to the creditor, just as other devices of the credit system are based on commodities moving in the channels of trade, it is clear that it (the public note) should only be issued by the government for property or services.  If the government should issue public notes without reference to the ability of the nation to respond in property and products in the way of taxation, as for example, to pay off the public debt in paper money, when a corresponding amount of property and products could not be transferred at the same time to the creditors of the government, would, as is manifest, be a gross infraction of the principles upon which the legal tender paper money system is founded.  The creditors of the government are paid in property or products, and the public note must not only represent such property, but must be able to command it, which can be done only to the extent to which the people are able to respond in the way of taxation.  Hence it is idle to talk about liquidating the public debt with paper money, or any other kind of money, any more rapidly than the people are enabled to produce wealth (property and products), which can be applied to that purpose.

It has already been explained that the amount of money which the government can issue is limited, not by the amount of the transactions of the government for any specified time, but by the transactions of the entire nation, which are constantly varying in amount.  But when the channels of circulation are supplied with a medium of exchange no more public notes can be used ;  it is essential, therefore, that their emission by the government should go hand in hand with taxation.


Debt, whether individual or national, is inconsistent with true independence, and the payment of the national debt at the earliest day practicable should never be lost sight of for a moment.

If the bonds of the United States are payable in lawful money, it is then possible to redeem them in property or products, in which they should be redeemable, as rapidly as the nation can produce a surplus of products, but if made payable in gold, which does not circulate in the channels of trade, their redemption is rendered well nigh impossible.  If forced resumption takes place the public debt of the United States may be regarded as permanent, and its increase inevitable.  The experience of England in this respect is worthy of note.  At the close of the Napoleonic wars in 1815 the producing forces of England were in full exercise, and the revenues of the government were enormous.  England immediately began to reduce her public debt ;  but the money power interfered and resumption was decreed ;  and the liquidation of the public debt ceased.  When the Rebellion ended in the United States production ran on, owing to the abundance of money in circulation, to a marvelous extent, and the Federal Government was enabled to reduce the public debt some $500,000,000.  But the policy of contraction soon curtailed production, the revenues of the government began to decline, and the payment of the public debt practically ceased.  It remains now to return to specie payments to render it permanent, and to accomplish this end the money power is exerting its best efforts.  It is to the advantage of the money power to have nations involved in debt, as well as to have money scarce ;  in this way governments and nations are rendered subservient to capital.

No event in modern times has spread such alarm among the money kings of the world as the adoption of legal tender paper money by the people of the United States.  None know better than the money kings that if the system is adopted in its entirety, it will ultimately release the masses from the bondage in which they have been held for ages by capital, and hence the bitter opposition with which the system meets.  For several hundred years past commerce and trade have been engaged in a constant struggle to cheapen money, the tool of exchange ;  but it was not until the United States made the public note a legal tender that any progress was made, except in the use of substitutes for money, which were controlled entirely by bankers and money lenders.  When the American government began to issue legal tender paper money, the money kings of the world perceived the necessity of taking measures to reverse the tendency of affairs, and they organized not only to destroy legal tender paper money, but also to demonetize silver, in order that they might be able to maintain their rule.  That an organized conspiracy exists to demonetize silver for the purpose of increasing the power of money, is evident from what has occurred in Europe and in America within the past few years.  Silver has been demonetized in England, Germany and Holland, and practically in France and in the United States.

No country in the world produces so much gold and silver as the United States, and yet the people of the United States are unable to retain it in the country.  The same condition of affairs prevailed prior to the war, when we had the specie basis system of money, so that the inability of the people to retain gold and silver cannot be charged to the use of public notes.

The simple fact is that gold and silver cannot be retained in the country until the producing forces of the nation are sufficiently developed to enable the nation to export more than it imports ;  and in the second place gold and silver and paper money will not all occupy the channels of circulation at the same time, unless they are all clothed with equal powers as money.

If specie circulation is desired, therefore, it can only be attained by making gold, silver and the public note equal legal tenders ;  then, as soon as the nation is able to retain the precious metals, they will occupy the channels of trade as a matter of course.  The bullionists and bankers themselves are compelled to acknowledge that forced resumption will not give specie circulation, but they say it will fix prices at a gold standard.  This, as has been fully shown, is not only a delusion but a barefaced fraud.  The notes of banks of issue, which the public will be obliged to use, cannot be maintained on a par with coin, if redeemable only in coin, unless the banks can retain the coin to redeem them, and to say that the banks can retain specie in the country, when the nation cannot retain it, is absurd, as well as contrary to experience.

The only way in which the people can hope to reduce and eventually liquidate the public debt, is by the adoption of a system of money, such as has been described, which will give industry free development, and enable the nation not only to largely increase its production of wealth, but to render it available when produced.


Those who desire to fully understand the money question can only hope to do so by always keeping in view the fact that the great object of commerce and trade is the exchange of property and products, and that money is designed to be simply a tool to accomplish that end.  Money is nothing more than “one of man’s own inventions, a contrivance which he has himself devised for rendering an indispensable service to the practical life of every civilized people.”3  Its institution is a governmental duty, and as political sovereignty in the United States, theoretically at least, resides in the people, it is incumbent upon them to take hold of this question and compel their servants to dispose of it in such a manner as will best subserve the interests, not of a single class, but of the entire nation.  Thus far almost the entire course of Federal legislation has been controlled and directed by the few, in utter disregard of the rights of the many and of the honor of the government, and especially was this the case during the late Rebellion.  Eulogies, it is true, are frequently heard from servile or subsidized sources of the patriotism of capital during that trying period.  They are utterly false.

“Not a patriotic act can be found in its history.  It neither volunteered its services nor submitted to a draft.  Its support of the government was purchased at the highest price ever paid by a bleeding people.  It was in truth a traitor to the existence of the Union—a baser traitor than he who fought to destroy it upon the field of battle.  It hid itself from danger, and sold its assistance only for enormous pay, while the rebel soldier offered his life on the field of battle for nothing, except his devotion to an erroneous principle.  While the soldiers of the North, too, were freely going to the front by the million, the capitalists, who now trample upon them and their children, were allured from their safe retreats in the midst of their hoarded treasures only by vast golden bribes.  Neither in law or in equity, neither in the sight of human courts or courts divine, have they any claim upon the forbearance or gratitude of the American people.”

And then, not content with the vast gains wrung from the people in the hour of their extremity, they perfected a plan, to quote again from the same eloquent champion of the people’s cause,4

“ to hold the bonds of the government as a foundation for banking.  The wealthy classes were unwilling that the government should deal directly with the people and furnish them with a cheap and safe currency.  They insisted upon standing between the government and people.  They insisted upon becoming the ‘middle men’ in the matter of furnishing a circulating medium ;  and the profits that have accrued to them as such ‘middle men’ and have been paid by the tax payers, are without a parallel in the history of any other financial system upon the face of the globe. * * A government policy which thus taxes its people in order to fulfill a plain duty to them, can only be properly characterized as legalized robbery.”

Since the war every energy has been directed by the money power towards the destruction of the greenback and a return to the specie basis system of money.  The machinery of the government is in its hands, and it is now aiming to control the two great political organizations of the country, in order that it may consummate its purposes.  The issue has been forced upon the nation by the bullionists, the bondholders and the money lenders, whose tools are to be found in every party convention and caucus held in the country.  The crisis has arrived, and the masses must arise in their majesty and assert their rights, or liberty in America will be a mere phantom.  It is not from kings or emperors that the American people need fear the loss of liberty, but from a moneyed aristocracy, whose hand now rests heavily upon the nation.  The question is one of paramount importance, involving as it does not only the present welfare of the people, but the well being of the nation for many generations to come.  It is a question, too, in which the downtrodden masses of other nations have a deep interest, for, if the money power is able to accomplish its designs in free, republican America, where else can the people hope to escape its bondage ?

The contest will undoubtedly be bitter, surpassing in that respect the memorable contest between the money power and the people under the lead of General Jackson in 1832, but “the flower safely is only plucked from the nettle danger.”  The political organizations of the country are no longer faithful exponents of the popular will, nor can they be until the money changers are driven from their temples.  The people must regain control of their party machinery, or be led like sheep to the slaughter.  But it is to be hoped, in the language of Jackson’s farewell address touching the same subject,

The paper-money system and its natural associations --monopoly and exclusive privileges-- have already struck their roots too deep in the soil, and it will require all your efforts to check its further growth and to eradicate the evil. The men who profit by the abuses and desire to perpetuate them will continue to besiege the halls of legislation in the General Government as well as in the States, and will seek by every artifice to mislead and deceive the public servants. .... It is always in your power to see that the wishes of the people are carried into faithful execution, and while the people remain uncorrupted and incorruptible, and jealous of their rights, the government is safe, and the cause of freedom will continue to triumph over all its enemies.”

1 This was written prior to 1860.

2 Hon. Edgar Cowan, of Pennsylvania.

3 Currency and Banking, by Bonamy Price.

4 Hon. D.W. Vorhees.