Mr. Samuel Sullivan Cox said:
Mr. Speaker: So many are the relations of the people to this Federal Government that every word, even of the humblest member, has as emphasis in matters of finance. On such subjects I find upon my files, as a member of the Committee on Banking and Currency, some two score of bills, Senate and House, pertaining to our fiscal affairs. It would be more gratifying to see this exhibition of congressional travail if the quality of the offspring was equal to the number. To these bills is to be appended the bill for funding, yesterday reported by and referred back to the Ways and Means. All these bills have two main objects: first, to increase the amount and alter the character of our currency; and second, fund the debt. These objects are not necessarily, either in their primary or incidental relations, of such near kinship as to be bound together like Siamese twins. But as gentlemen have so regarded them, in bills and debate, I propose to consider them together, even if in the process the formal ligature is severed.
The House instructed our committee to report $45,000,000 more of currency. What kind it did not, in its wonderful wisdom, instruct us. The bill was presented by the gentleman from Illinois, [Mr. Ingersoll.]
Mr. Ingersoll. The gentleman will allow me to make a correction. I introduced a resolution directing the Committee on Banking and Currency to report a bill increasing the legal-tender currency of the country to the extent of forty-four or forty-five million dollars. It was afterward amended so as to read "circulating currency."
Mr. Cox. Yes, sir; our committee could not tell for some time what sort of a currency we were to report. Some were for national bank currency, some for legal tender, and I was for gold and silver, as I am yet. Our committee found in their room a bill called Senate bill No. 378, for $45,000,000 and "coin notes," and to equalize the distribution of circulating notes. Many features of this bill are reported by the honorable chairman of my committee [Mr. Garfield] in his bill now under consideration. Our committee have reported for $95,000,000 of national notes for circulation, and have provided a funding system with new bonds, novel and untaxable.
While commenting on this bill I must refer to other cognate measures. I am opposed to the issue of any more national bank notes. If I could, I would repeal the present authorization and system. I would, since we must have paper for money, prefer the greenbacks, if redeemable, on principles of safety as well as economy. Of that hereafter. In all that l may say, my committee understand, as the House may, if it chooses, that it is my deliberate judgment, after much study, that all your measures, even your most matured, are mere makeshifts, cowardly, timid, halting devices to avoid the one "heroic remedy," which this Congress has not had the skill or courage to apply, to wit, resume specie payments. You owe it to the people to give them back their gold and silver. The Supreme Court have told you the legal relations of this question. Chambers of commerce and enlightened economists have given experience and philosophy to guide you. The history of the legal tender will show you a large account of broken promises, which you will have yet to pay. The people of both parties, who are not bankers or speculators, bondholders or gold gamblers, believe that preliminary to all relief, the sine qua non of all finance legislation is resumption. I am happy in having near me as a hearer Colonel Stebbins, of New York city, who was a prominent financier here in 1862, when the legal-tender act was passed. I think he gives me his acquiescence as well as his kind attention.
Gold and Silver.
You may tinker and tinker; you may expand or contract; you may crawl or jump; you may worry and work, but all your labor is in vain if you do not pursue the resolution which I had the honor to offer to an indifferent House on the 20th of December last. It is as follows:
"Resolved That among the evils growing out of the late civil war is that of an irredeemable paper currency; that it is one of the highest duties of the Government to secure to the citizens a medium of exchange of fixed and unvarying value; and that this implies a return to a specie basis, and no substitute for it can be devised; that it should be commenced now and reached at the earliest practicable moment."
I do not consider this resolution as peculiarly emphatic because it is copied from General Grant's annual message. You have disregarded about all that he recommended, including this; but this is a solution, because it represents the solid sense of the nation, which Congress and the President, in their schemes and jobs, seem latterly to ignore.
The other side of this House owe it to the nation to resume specie payments. You promised, and you broke faith. You passed a law against expansion and for a contraction of $4,000,000 per month. You began well; Mr. McCulloch recommended and you approved. Yet you had not the courage to carry out your law. You quailed before the elections. Ah ! you repealed the law.
The Currency, Gold Notes, etc.
The Senate bill (No. 378) from which the bill before us is taken, proposes to issue $45,000,000 of additional bank notes, and retire an equal amount of three per cent. Treasury certificates. Our bill also redeems and cancels these three per cents. This is objectionable, because it will increase the already redundant currency.
It is said that the withdrawal of the three per cents. will be tantamount to the issue of the new national bank notes, and therefore there will be no expansion; but this does not follow, because the banks will not be likely to retain $45,000,000 of their notes in place of the three per cents. They have at present a surplus of $48,000,000, and consequently can continue the same amount of circulation and yet have the requisite legal reserve. At present the banks, as they are drawing interest on a part of their reserve, readily hold a large amount; when they lose the interest on the whole of it they will not keep so large a surplus. Persons fully conversant with banking believe that such will be the result.
If this be so, then there would be an absolute expansion of the circulation. Under the Senate bill it will be $45,000,000.
But in addition to this, the effective currency would be still further inflated by the bank credits or deposits which the new banks would create. At the present time the national banks, with their $300,000,000 of circulation, grant discounts to such an extent that their deposits amount (October 9, 1869,) to over $523,000,000, and they were in July of last year $574,000,000.
If the new banks create as large a proportion of these credits or deposits, which are as effective in expansion as the notes themselves, and there is no reason why they should not, their deposits will amount to $78,000,000. This will increase the immediate liabilities of the whole banking system, as will be seen by the following statement:
Present circulation, (October 9) ...............$293,593,645
Present deposits ................................. 523,028,490
Immediate liabilities............................. $816,612,135
The banks hold of----
Legal tenders ............................... $85,810,022
Three per cent. certificates ...................... 45,845,000
Specie ................................................ 23,002,405
Immediate resources............................. $154,657,427
or nineteen per cent. of immediate resources.
When the new banks get into full operation the situation will be essentially as follows:
Present liabilities, as above ................. $816,612,135
New liabilities, currency ......... $45,000,000
Deposits ............................... 78,000,000
Increased expansion ,............................. $123,000,000
In the Senate bill, section four provides for a new currency; so does section seven of our bill. It is called "gold notes." We have already four legal currencies:
1. Gold amounting to ................................ $150,000,000
2. Gold notes ................ 40,000,000
3. Greenbacks ................................ 356,000,000
Fractional ......................................... 40,000,000
4. National bank notes ................. 300,000,000
Total ............................. $886,000,000
All the above is used in trade, or in paying duties and the interest upon the national debt. The bill under consideration provides for a description of currency heretofore unknown in this or probably any other country :
1. In that it establishes a national system of free banking.
2. That it is unlimited in extent, since the Treasury of the United States must issue notes to the extent of eighty per cent. upon any amount of bonds that maybe deposited by any company.
3. That while all the notes of the Government, except the gold notes, which are merely receipts for gold deposited, promise only paper in payment these promise gold.
4. That the Government guaranties that all the notes issued by these banks shall be paid in gold on demand, while it permits these banks to issue four dollars of its promises to every one dollar required to be held in gold.
5. That these notes form a mixed currency, which will, from its very nature, be constantly fluctuating in quantity, and, like the mixed currency existing before the war, be liable to cause great revulsions in the currency and business of the country.
6. That the issue of such notes will expand the present currency to an indefinite and unknown extent, making the general circulation still more redundant than it now is; for so far as the law is concerned, these banks may issue any amount they can succeed in getting out upon the indorsement of the Government, be it one hundred or one thousand millions.
To this new currency I object, then, because it would introduce an incongruous element into our present monetary system. These banks must and will, if they mean to make any profit by their peculiar system of banking, issue a much larger amount of notes than they hold of coin; and also they will create deposits in the same manner as other banks.
Suppose, these banks, then, get a circulation of $150,000,000, and deposits as large in proportion as the present national batiks, which are one hundred and sixty-seven per cent. on their circulation, they would have $400,000,000 of indebtedness, all payable in coin on demand, the Government guarantying the payment of all the notes, but not of the deposits. What would be the result in case of a panic or any suspicion of the solvency of these banks ?
Evidently the depositors having no security whatever except the ability of the banks would commence at once to draw out their deposits in gold. But as the banks would owe on demand $400,000,000, that is, for circulation and deposits, while according to law they need to hold for all this indebtedness only $37,500,000 of coin --twenty-five per cent. on their circulation-- it would be quite impossible for them to meet their engagements for a week, if even for a single day. Such is unquestionably the character of the new coin currency. That it will introduce an explosive element into the whole currency system of the nation is certain.
It is not a sufficient reply to this to say that these new banks will not extend their operations to the amount we have named; it is enough for us to know that the power is gramted to do it, and even more. We cannot safely assume how much or how little the new banks can get out of coin notes under the guarantee of the Government. Without supposing any extraordinary pressure or panic we can see what a pernicious influence these banks must exert upon the business interests of the country.
As things now are, our circulating currency is a fixed quantity; it is neither increased nor diminished by the operations of commerce or the laws of trade; but, with the introduction of these coin notes all this will be changed. If elasticity be an advantage, is it compensated for by what I shall hereafter show ? Sustained by only twenty-five per cent. of specie, four dollars of these notes must be taken in for every one dollar in gold paid out, and the banks will be compelled, in case of any call for gold, to withdraw their notes from use as fast as possible. Speculators will understand this fact, and will not be slow to avail themselves of the advantage it will give them. If they desire to raise the gold premium they have only to get hold of these notes and demand payment. For every dollar of these they can command they can contract the gold market to the extent of four dollars. Their power for operations will thus far be quadrupled; and if this kind of banks should become so numerous that a large amount of this currency is found in circulation they will be able to keep the gold market in a state of far greater perturbation than it has ever yet been, and consequently their chance for profitable corners will be better than ever before.
Another consideration is that the notes issued by these banks will circulate mainly in the cities and large commercial centers. They will not be wanted or used in the country, unless it be in the gold-producing States; consequently they will be always liable to a speedy demand for redemption in case of any gold movement. It has been urged that this issue of coin notes is demanded by California and the gold-producing States, since they do not use greenbacks, and gold is inconvenient as a circulating medium. This we cannot believe to be true, because such a circulation is forbidden in the most explicit and positive terms by the constitution of California, and cannot be introduced there except in utter defiance of the fundamental law of the State. Besides, if Californians or any others engaged in mining the precious metals wish for a paper circulation, the treasury at San Francisco will issue any amount of its circulating certificates or gold notes in exchange for their gold deposits, and the people can be thus supplied to the full extent of their wishes; so that there is not the slightest excuse for the issue of coin notes by the banks arising from any necessity in California. And further, there is not only no necessity for the issue, but it is directly and absolutely against the interests of all producers of gold, because every issue of substitutes for gold as currency reduces its value. Those engaged in mining have suffered greatly from the issue of paper substitutes, both in this country and Europe. Every extension of such issues depreciates the value of gold that is, raises the prices of all property for which the gold is exchanged. California has already suffered to the extent of many millions from this cause. The very last persons who can rationally desire the issue of fictitious money are those engaged in producing the genuine article. And here allow me to introduce a letter from a distinguished gentleman and banker in California, dated San Francisco, February 23, 1870:
"Your esteemed favor of 10th February is at hand, for which I am much obliged. The Senate bill which authorizes such a deluge of banks will be fraught with infinite mischief to the body-politic if it becomes the law of the land. You have rightly characterized it as a 'most shameful measure.' While the nation was struggling under the weight of responsibility, in waging war for its existence, measures were tolerated which even then seemed to be vast stretches of power. But in times of peace we have no excuse for such legislative usurpations. The principles of truth, equity, and justice cannot be trampled upon by a nation any more than an individual without certain retribution. You inquire whether Californians desire such legislation by the Federal Government. I say unhesitatingly the intelligent and honest portion of our citizens do not desire it. The vast majority do not desire it. There is, however, a reckless, irresponsible, and turbulent set among us, as you find in all parts of the country, who are ready to favor any measure that they suppose may bring them even temporary aid. We have speculators, rings, gamblers, and idlers, who are ready to shout for anything in the form of change.---[this was what a genuine hard-money man said, and this is what Garfield and other advocates of bank paper do not want to hear, much less enact into law: banks must not be allowed to issue circulating notes, not even if there is 100% gold reserve requirement (which idea enemy aliens in the 21st century try to float)]
"Fortunately, however, for California, her currency cannot be changed unless a majority of her citizens desire it. Her constitution positively forbids a paper currency. She has been taken into the Union by Congress with this constitution, and Congress has approved of this constitution, by her admission as a State, after a careful consideration of the same.
"Congress cannot amend this constitution. It is the work of the people of California. The present Legislature is two thirds Democratic, and hard currency by a greater majority even than the Democratic majority. It would take four years to amend the constitution even if the people wished to do it. Once in awhile there is an eccentric genius comes along, like George Francis Train, and tries to persuade the people that they are all wrong in measuring their values by the gold dollar, worth one hundred cents.
"The decision of the Supreme Court of the United States, holding that contracts made payable in gold coin of our mints are legal contracts, and can be enforced according to their tenor in courts of law, most thoroughly supports our 'specific contract law,' and will insure us a gold currency even if the constitution of California should be so amended as to allow a swarm of these hybrid paper-money makers to fasten their talons among our business men. They have had one of the national banks in Nevada, but that is now closing up its business. We are only twenty-one years old, and the population of San Francisco is estimated at one hundred and seventy thousand. But for our specific contract law we should have been floundering in all the troubles and bankruptcies of the States east of the Rocky mountains. We have passed through the war on the gold basis, and instead of finding fault with us for it, the nation should be proud that there is one bright spot that passed through such a fearful contest and preserved her honor and her currency untarnished. We have the best currency on the face of the earth, and it would be consummate folly to change it for one of the worst. You say truly, 'every dollar of paper substituted for gold as currency reduces the value of the real gold.' This is true as can be, and yet but an infinitesimal small fraction of our people, even of those who pretend to have given attention to the principles of finance, are able to understand it. It is this principle which renders it wholly improper to allow banks to issue notes for currency, even though they might by charter be bound to keep on hand dollar for dollar in coin for such issues. They would abuse the privilege and issue both paper and gold, being stimulated by the passion of avarice. But when the gold is in the United States Treasury no such duplicate use can be made of the money. The only question then remaining is as to the honesty of the guardians of the Treasury. While they are honest all would be well, but if they are dishonest I see no way but to come to the gold standard at once. I hope most sincerely, for the good of the country, the Senate bill will not pass."
To the seventh section of this bill there is no reasonable objection. It seems to recognize the fact that no more than $300,000,000 of national batik currency should be issued; but as some States have an amount in excess of their share instead of an increased issue, a redistribution should be made, those having an excess giving up a share to those who are deficient.
This is what should be done, and the only objection in the present case is that by this bill the amount to be distributed is limited to $25,000,000, while it should contemplate a general and equitable division of the whole $300,000,000, since not more than $300,000,000 of bank currency can be maintained at par with gold when the greenbacks are withdrawn.
The general effects of the redistribution of the bank circulation would be that those States which gave it up would get a larger amount of actual reliable capital in exchange for mere bank credits, while those who received the circulation would be obliged to part with a larger amount of real capital for the sake of a bank credit circulation. To the business public who gave up there would be a gain, to those who received the circulation there would be a loss of actual reliable capital.
This general redistribution should be made-
1. Because it would be an act of justice. The present inequality is a flagrant wrong, apparent to everybody, and ought not to be suffered to exist. There is no apology for it.
2. Because it would be greatly for the interest of the banks themselves.
Conciliation is their true policy. They have many enemies already; they should be careful not to increase the number. This measure of an equal apportionment of existing circulation would disarm a great amount of opposition in those States now most disaffected.
The banks should recollect that they have no charters; that they were created by an act of Congress, the last section of which provides that it may be amended or repealed. At least I believe so.
Mr. Randall. You are right. I can quote the section.---[Sec. 65. And be it further enacted, That Congress reserves the right, at any time, to amend, alter, or repeal this act.]
Mr. Cox. My argument as to the favoritism shown to sections in circulation is not to be taken as an estoppel against my voting at any time to amend and repeal these national banking charters.
3. This should be done, because it will prevent the calamity of a further increase of banknote currency. The disaffected States would be satisfied and no harm done the country.
4. Because this redistribution will benefit the business interests of those sections from which the surplus is taken, Massachusetts is an example. Her reduction would be about nineteen millions. Should it be made, the $21,000,000 of bonds now deposited as security with the Treasury will be released, and the banks can sell them if they choose at a premium of about fifteen percent. They will thus obtain many millions of real permanent capital, which they now loan to the Government, and can hereafter loan to their customers, instead of $19,000,000 of mere bank credits in the shape of their own notes, which are liable to be called in. This difference is a great one, especially in times of pressure or panic, when bank credits, whether in the shape of notes or so-called deposits, are certainty liable to be withdrawn from businessmen at the very moment they need them most. The security of the manufacturing and mercantile public will be greatly promoted by such a change.
The less bank credit there is in any community the better. I do not now say the less bank capital. The States to which the bank circulation is removed will gain nothing but bank credits. What they will thus gain will be realized as follows: the merchants of Mobile, for example, may purchase stocks to the amount of $1,000,000. This will require $1,000,000 in real present capital, as the bonds cannot be bought on credit. The bonds so purchased may be deposited with the Secretary of the Treasury, and $800,000, under the present bill, received in notes for the same. These notes now be loaned to the public. One million has been taken away to purchase the bonds, and $800,000 is restored to the business community. But the bank, after having loaned all its notes, may go further and create deposits, that is, may discount business paper and pass the same to the credit of its customers. This it can do, if as successful as the present national banks, to the extent of one hundred and sixty-seven per cent. more than its circulation, say $1,333,000. The bank will then be drawing its interest on the bonds deposited---
say ............................................... $1,000,000
On its circulation ................................... 800,000
On about two thirds of its deposits, say ..... 1,000,000
From this is to be deducted whatever greenbacks, &c., the bank may hold as a reserve; but after making all allowances it will be seen that the stockholders of the bank will get larger dividends, and bank officers good salaries; and these are the parties especially benefited.
Bank credit, but neither capital or moneys, have been transferred from one portion of the country to another. If this be a fair statement of the case, it would seem that if this national system is not altogether uprooted there could be no objection to a complete redistribution of the bank circulation, and that it is highly desirable in order to give satisfaction, at least, to certain parties in those States which have not at present their proportionate share.
I object, then, to this entire bill. The first section enlarges a currency already redundant and makes it weaker and more detrimental to the country than it is at present. The second section supersedes the three per cent. loan certificates by substituting national bank notes, instead of which they should be absolutely withdrawn. They were never intended by Congress to act as currency, and the use made of them by the banks has always been unlawful and injurious to the country.
The eleventh section is of little consequence, as it merely provides for the removal of banks from one State to another, a sort of carpet-bag arrangement, a very unbusinesslike proposition that would never be thought of if the currency were in a normal condition.
But the seventh section contains the principal and by far the most objectionable provision of the entire bill. If enacted it would establish the most dangerous and explosive currency ever known in this or any other country, and, as I have shown, would involve the business of the nation in the greatest difficulties, and the Government which guarantied the payment of notes in gold for which only one fourth of the amount was held for their redemption, in the gravest and most humiliating embarrassments.
The remaining sections are only such as are necessary to carry out the previous provisions of the bill, and contain nothing of any practical importance. They neither add to or diminish our objections to the measures proposed. Taken together the bills, Senate and House, are but a clumsy attempt to evade the great questions at issue before the country, and amuse and occupy the public mind until the dominant party has been enabled to tide over the next congressional elections. These bills are the mere pretenses of doing what the Republican party has signally failed to do-- give us a standard and stable currency. What is needed is resumption of gold and silver. On or before 1872 the Democracy will bear its old banner to success for gold and silver. This is our only hope. Gold and silver ! The words trip pleasantly on my tongue. They are music to my ear. Gold and silver ! They are the legal tender of commerce and the Constitution --I had almost said, what once before I said, and I say it now reverently-- the legal tender of God Almighty, who has made it precious ! Is there no one here to recur to the traditions of the party ? Ah! I see that Pennsylvania has its ear open. [Judge Woonward bowed to the speaker; and Mr. Getz, of Pennsylvania, approached the seat of Mr. Cox, presenting him two gold twenty dollar pieces.]
Mr. Getz. Here is the Democratic currency which Pennsylvania loves and longs after. [Laughter.]
Mr. Cox. I hear its chink. I see its beauty, I know it is precious. [Laughter.] It reminds me of the better day of the Republic, when the people knew what they had to "deal with."
It would be improper to discuss the Senate funding bill now and here. But the principle of the Senate bill and the present bill (section three) is the same. Both provide for a smaller rate of interest of the public debt by a new system of bonds. As the bill yesterday reported by the Ways and Means Committee has the same idea substantially, I propose by way of illustration to refer to some of the provisions of the Senate bill which it proposes to displace. Three classes of bonds are authorized by the Senate funding bill which has been sent to the House, namely: $400.000,000 ten-forties at five per cent., $400,000,000 fifteen-twenties at four and a half per cent., $400,000,000 twenty-forties at four per cent.
The first may be sold by the Secretary for coin at not less than par, or be exchanged for five-twenty bonds now outstanding, and for no other purpose.
The second class may be disposed of at not less than par for coin, or be exchanged for any outstanding obligations of the Government bearing a higher rate of interest in coin, the proceeds to be used for the redemption of such obligations bearing interest in coin as may become redeemable.
The third class, the four per cents., may be disposed of either in the United States or elsewhere at not less than four per cent. for coin, or, at the discretion of the Secretary, for United States notes, (greenbacks,) or may be exchanged for any obligations of the United States outstanding; and the Secretary, if he thinks advisable, is authorized to issue a larger amount of four per cents. for any purpose therein or thereinafter recited than would otherwise be authorized by the act, provided there shall be no increase in the aggregate debt of the United States in consequence of any issues authorized by the act; and these bonds of every kind to be exempt from all taxation by State, municipal, or local authorities.
The sixth section of the bill provides that $150,000,000 shall be appropriated annually for the payment of the interest and reduction of the principal of the national debt.
The seventh section provides that all existing national banks shall substitute bonds averaging four and a half per cent. for those they now have on deposit at the Treasury to secure their circulation. This will compel the banks to take four and a half instead of six per cent. upon their bonds deposited to secure their circulation. The banks are further, by the eighth section, allowed to have only eighty instead of ninety per cent. of circulation, as heretofore, upon their bonds deposited.
The ninth section authorizes universal free banking, by providing that any banking association organized, or to be organized under the currency acts, may deposit bonds and receive eighty per cent. in notes upon them; provided, however, as the circulating notes are issued an equal amount of United States notes shall be destroyed; that is, greenbacks are to be replaced by bank notes. Such, in brief, is the Senate funding bill. Such, in principle, is the House bill.
Mr. Hooper, of Massachusetts. You do not mean the bill yesterday reported by the Ways and Means Committee ?
Mr. Cox. No, sir; I have not seen that yet in print.
Mr. Wood. Here it is.
Mr. Cox. I do not care to read it now. The bill I comment on is the Senate bill, from which the bill of my chairman [Mr. Garfield] is modeled. The bill of the Ways and Means Committee is very different, as I perceive by the newspapers; but the bill under discussion is very similar to the Senate bill.
My objections to such bills may be briefly stated. In the first place, I regard any action of the kind as out of place entirely until the currency has been restored to par, because the credit of the nation is not and cannot be such as to fund the debt at the lowest rate of interest until that is done. Second, there should be but a single rate of interest, and that a low one. There need be no resort to tricks or contrivances about the matter. One uniform rate of four and a half per cent., with the exemption from taxation now permitted, would secure the sale of the whole debt as soon as the credit and currency of the country were fully restored; and there need be no "agents" appointed in this Country and Europe, as the fifth section of the Senate act provides, to advertise the national stocks, like patent medicines, in the newspapers and journals of both continents.
Mr. Hooper, of Massachusetts. The Ways and Means have struck that out.
Mr. Cox. So much more credit to that committee above our committee. I say this with entire respect to the Banking and Currency.
Increased Bank Taxation.
The banks will, of course, object to that provision of the act which requires them to hold four and half per cent. bonds instead of six per cent. This is simply an additional tax upon their franchise. Congress has an undoubted right to impose this condition, because the act under which they exist expressly says that "Congress may, at any time, amend, alter, or repeal it;" and the question, therefore, is simply as to the justice and expediency of the measure. It is just, if the privileges granted to the banks are so advantageous that they are in consequence as well able to pay the additional tax, (equal virtually to one and a half per cent. upon their capital,) as other departments of trade are to pay theirs. As a matter of fact the banks, according to a late official statement, are now paying over ten per cent. annual dividends above all expenses, taxes, and charges, and are besides adding ten per cent. of their income annually to their "surplus fund," which already amounts to over eighty-six millions, most of which, has been accumulated in this way; and they have also "undivided profits" on hand of over fprty millions; in all, $126,000,000 in addition to their large dividends. Now, what department of trade or industry has for the last six years done, or is now doing as well ? Have farmers, merchants, manufacturers, or ship-owners made ten per cent. clear profits each year and added ten per cent. more of their annual income to their capital ? No one will pretend this, and therefore it is clearly equitable that the banks should bear the additional burden. They can pay the extra tax and yet be better off than any other important interest.
As to the expediency of the measure there seems no other doubt than that which arises from the form in which the additional burden is imposed, namely in that of a forced loan. It does not appear very dignified in the United States Government, nor will it add greatly to its credit, to compel its citizens who chance to be bank stock holders to take a loan at four and a half per cent. when six per cents. are hardly worth par. There will be no need of such an indirection when Congress takes the true, manly ground of meeting all its engagements promptly, by withdrawing its dishonored promises, now circulating in all sums, from ten cents upward, to the amount of $396,000,000, or bringing them to par with gold.
To the principle of free banking which the act contemplates I do not object, provided it be done with a sound currency. Nor do I object to free banking upon irredeemable paper at the present time, since all other banking is now done upon the same basis, and we may as well have free as restricted banks upon a depreciated currency; but I think that such will be the excesses, and such the terrible losses and derangement of all business affairs, which free banking with irredeemable paper will eventually inflict, that the people will finally be brought to repudiate tile whole idea of fictitious money, and insist upon gold and gold notes as their only medium of exchange and standard of value.
Varieties of Currency.
One thing is certain, the bill in question gives us a new variety of currency. We have four already-- greenbacks, national bank notes, the "gold notes" issued by the Treasury, and gold, which is used more or less in large mercantile operations, and exclusively used in California.
The currency bill now before this House furnishes a fifth variety, by providing for unlimited issues to be called "coin notes," because the banks issuing them are to keep on hand one dollar of coin to every four dollars of their circulation.
And now by the funding bill we have a sixth kind in the notes of free banking companies. Generically speaking, however, there will be but three kinds or species, namely:
1. paper, or exclusively credit currency, consisting of greenbacks, national bank notes, and the new notes proposed by the Senate funding bill.
2. A value, or specie currency, consisting of gold and the "gold notes" of the Treasury, the latter amounting now to $50,000,000.
3. A mixed currency, consisting of the "coin notes" authorized in the currency bill of the Senate, and composed of one part coin to four parts of paper or credit.
Such are the different species and varieties of currency proposed with which the American people are expected to carry on the largest production and the most extensive trade, in proportion to population to be found on the face of the earth; a currency of the most heterogeneous character, that cannot fail to do great injury to all the industrial interests of the country, especially to those of agriculture, the value of whose products are and always must be measured by gold.
Connection of Debt and Currency.
The funding parts of the bill is but a labored attempt to evade the immutable laws of currency and finance. It mixes up funding with banking, two things that have no natural connection whatever, to the prejudice of both, and the great detriment of important national interests.
Mr. Hooper, of Massachusetts. But the bill of the Ways and Means Committee does not. We cut out the currency features of the Senate bill.
Mr. Cox. Therein your committee has shown itself wiser than ours. You have, in other ways, eliminated the errors of the Senate bill. But the bill under discussion fails to discriminate between the funding and currency questions.
There seems to be a strange hallucination in the minds of our leading men, in Congress and out, that somehow or other there is an inseparable connection between the public debt and the currency of the country. But there is no natural or necessary connection between these two subjects as matters of legislation, and they ought never to be linked together, as in this bill, because both are thereby endangered. Some persons will vote against the whole bill because of its funding provisions; others because of its banking clauses, and thus it is very likely to be rejected.
But in truth, shorn of that section which compels the banks to exchange their present six per cents. for four and a half per cents., there is nothing of much consequence left, for it is a great stretch of credulity to believe that any of the bonds authorized will be voluntarily taken except, perhaps, a few of the five per cents. Neither the four nor the four and a half per cents. can find a market at present except by compulsion.
It is a misfortune to the country that the time of the national Legislature is consumed in the consideration of a measure promising no useful result. The whole scheme is premature. The time has not arrived when the work of consolidation should be attempted. Not a dollar of the public debt is pressing for payment; not a dollar is due except at the option of the Treasury; and therefore while the circulating notes which the Government does owe, but which the people have not the power to demand in specie or anything else, but are compelled to use instead of a sound measure of value --while such notes are forced upon the country by an arbitrary, unconstitutional law, is it not quite insufferable that Congress should waste its time in the discussion of an unwise and impracticable scheme for refunding a moiety of the public debt, especially when the scheme seems to be in the interest of a monster bank monopoly ? Is it not unpardonable that the attention of Congress should be taken up by an impracticable scheme of refunding half of the national debt, which nobody who understands the condition of the national finances and the true interest of the people wishes to have meddled with at all until the currency of the Government and the banks has been restored to par ? Therefore, I raise the banner again of the old Democracy for gold and silver. Or if we must have paper, give us a redeemable paper, give us the redeemable greenback ! That brings me to the great problem--
Gold and Silver
Seldom has a greater crime against the interests of property and the rights of man been committed than when Congress, in the early part of 1862, enacted that the notes of the Treasury should be a legal tender for all debts and obligations, except for custom-house duties and the payment of interest upon its bonds. A legal tender is a forced loan. Every man is compelled to accept it, whether he is willing to do so or not. Debts contracted to be paid in the equivalent of gold are discharged with paper worth far less than gold, and the creditor is robbed of the difference.
Such an act of despotism can find no justification, not even in the stern necessities of war. Whether such a justification existed when the present legal-tender act was passed I shall not now attempt to prove or disprove. It is sufficient to say that many if not most of the intelligent financiers of the country disbelieve that any such necessity existed, or that if it did so, it was wholly owing not to the war itself, but to the false and defective currency in circulation when the war commenced, and which caused a great part of the banks to suspend upon the mere threat of secession. How weak the currency was, and how little adapted to perform its proper functions in time of war, may be seen from the statement that while the immediate liabilities for their circulation and deposits January 1, 1861, amounted to $459,000,000, their specie was but $87,000,000, so that the basis was less than nineteen cents on the dollar. Yet with such a miserably deficient currency was the nation compelled to engage in the greatest military struggle in modern times.
But fromm whatever cause the evils of our present debased monetary system have arisen, whether from the stern exigencies of war or the false condition of the currency at its beginning, it is sufficient for us to know that the time has long since passed when there remains any occasion for its continuance. As a people we boast, and justly, of having the largest resources and the most effective industry of any country in the world, yet have to-day a currency which for the purchase of commodities exclusively made and consumed at home is not worth more than sixty-five cents on the dollar, a currency that inflicts the most enormous evils upon every industrial interest in the nation, but bears with special severity upon the laboring and productive classes. This I have had occasion to discuss in the Gold Panic Report. My reflection and observation since confirm the judgment then made.
That I do not exaggerate the extent of these evils and their baleful influence I hope to make apparent by a brief statement of some of their effects upon the different industries and occupations of the people, and by so doing prove that it is one of the highest duties of Government to provide at once a medium of exchange of unvarying value.
Gold and Manufactures.
That the manufacturing industry of the country has been greatly injured by a monetary system so defective will be clearly seen if we take into consideration the fact that the cost of production is increased by it to such an extent as in many cases to render it quite impossible to compete advantageously with foreigners who make their goods under a sound currency.
Mr. Allison. You are not now considering the tariff.
Mr. Cox. No; irrespective of the tariff just now.
At the present time the American manufacturer is compelled to carry on his operations with the poorest currency in the world, that is, the most depreciated, and consequently he cannot send his commodities to other markets than his own except at great disadvantage. This is shown most strikingly in the falling off in the export of our domestic manufactures for the last ten years. In 1860 they amounted to $47,000,000; in 1869 to but $42,000,000. Had our currency been sound the exports of the last year might have been, and, according to the rate of increase prior to the suspension of the banks, would have been $70,000,000.
As an illustration of the truth of this, we find that our exports of cotton fabrics in 1860 amounted to $10,934,796, while in 1868 they were but $3,479,324, a falling off of $7,355,472, equal to almost seventy per cent. With a sound currency and a reasonable tariff our manufacturers would drive those of Great Britain out of every market in the world.
Another case in point is that of furniture and other manufactures of wood, which amounted in 1860 to $3,406,058, and in 1868 to but $1,491,537, a falling off of some sixty per cent. This description of exports we used to send to Brazil and other countries, and receive in exchange hides and other commodities we are now obliged to buy with gold. The manufacturing establishments of the country have been increased to a greater extent during the last ten years than the increase of population; hence the foreign export being largely curtailed by the influence of our false measure of value, an important department of the national industry is depressed, and must continue so until goods can be made and sold under an equal standard of value.
Gold and Trade.
There is another most important class upon whom our unreliable currency presses with great severity, namely, those engaged in conducting the exchanges of the country, our merchants and traders. What calculation can those engaged in foreign commerce, for example, possibly make when the premium on gold is constantly fluctuating, when the rate may advance or recede ten or twenty per cent. in a few days ? What safety in importing goods when the premium on gold may fall before they can be got into market to such an extent as to cause a serious loss ? What safety in purchasing flour or cotton for shipment when the premium on gold may change before the articles arrive at Liverpool ? Under a state of things like the present, it is no matter of surprise that all the operations of trade become mere gambling adventures resulting favorably or otherwise according to the vicissitudes of a gold market manipulated by gangs of unscrupulous speculators, and "modified" by th einterference of the Treasury Department. [Laughter.]
What do we find as the result of all this derangement of the industry and trade of the nation ? Universal despondency and doubt. Nobody knows what to do, because nobody knows what the fluctuations of the gold market may be. Gold has been down to 107, because the Secretary of the Treasury was pleased to sell it at that rate. The premium is now about 15. What it may be a month hence depends mainly upon Mr. Boutwell and the surplus of gold at his disposal. On "black Friday," last year, it fluctuated through forty per cent. in a few hours. All eyes are turned toward Washington to learn what the future trade and industry of the country are to be. Why is this ? Of all places in the United States, Washington is the last to which business men ought to be obliged to look for direction; and it would be the last, but for the absurd intermeddling of the Government with the trade of the nation by injudicious tariffs, and with the currency, by making its paper a legal tender, and so flooding the country with its depreciated notes as to impair the standard of value and throw the whole trade and industry of the nation into confusion.
All this mischief has been done. The past cannot be recalled, but the Representatives of the people should demand that an end should be put to all this and that the proper remedy be at once and rigorously applied. Remedial measures have been too long delayed already. The happy moment when the work should have been earnestly begun was at the first session of Congress after the close of the war. Then the country was in a good condition for the accomplishment of the object. The merchants were well prepared to meet the gradual fall upon their stocks which would have necessarily taken place, for they had made immense profits during the war and exnected and could well afford to suffer the shrinkage upon their stocks. They had no fear of heavy losses upon their debts, because they had but comparatively little due to them, as trade during the war was mainly carried on by cash transactions. The manufacturers, too, like the merchants, had made large accumulations and were ready to meet that reduction of prices they had the good sense to know must inevitably come, and for them the sooner the better, since the sooner would they be able to resume a regular and profitable business.---[Yes; in uncertain war times, business was carried without the good offices of bank-credit, for cash !!! how much more so could in peace business be conducted on cash basis, without fiscal agents and their credit and paper notes ?]
The farmers, too, were in a good condition for resumption, for the prices of their staples were very high, owing to an extraordinary demand from abroad and the deficiency occasioned by the destruction caused by the war at home. They were to a remarkable extent out of debt, and in the best possible shape for meeting any change which might occur in the price of their products. As a general fact, the agricultural class were desirous of a speedy return to specie payments. The whole country was expecting some decisive policy on the part of the Government that should secure a return to the specie standard; but what was done ? After much delay Congress enacted that the Secretary of the Treasury, who well understood the financial condition of the country and desired a gradual but efficient contraction, might reduce the currency by withdrawing greenbacks at the rate of $4,000,000 a month; but as soon as the work was commenced speculators in all parts of the country took the alarm, knowing that the contraction policy would put an end to their vocation, and through the agency of the press and the lobby brought such a powerful influence to bear upon Congress that the operation of the law was suspended, and the country has drifted on to the present moment, when resumption is tenfold more difficult than four years ago; because the speculation interest is tenfold more powerful than then, and has in its favor the influence of more than sixteen hundred banks with their $400,000,000 of capital.---[McCulloch did not reduce currency, he only reduced the amount of government issued currency while leaving bank issued currency alone, in fact bank-currency increased as Treasury notes and United States were removed from existence; Culloch & co. did not want return to coin payment, they wanted bank paper !!]
Gold and Ship-Building.
Ship-building, it is hardly necessary to state, has been nearly annihilated since the expansion of the currency. Great complaints are made, with good reason, against the exorbitant rates of duty charged by our tariff upon articles that enter into the building of ships; but were all these duties removed to-morrow the business could not possibly flourish until the currency is brought to par with specie, for the reason that labor would still be so much higher in currency than it is in other countries in gold that foreigners would continue to undersell us, while in the mean time our ship-builders will be out of employment. No mechanics before the war were better paid than these --none, perhaps, have lower wages now; indeed, most of them have none at all, except as they engage in other occupations; and it may be asserted with entire positiveness that no considerable improvement can be expected in ship-building until we have an honest currency. Let my friend from Maine [Mr. Lynch] remember this !
Much has been said and written since the assembling of the present Congress upon the depression of our commerce and the decline of American shipping interests, and many propositions for its relief have been made in the shape of bounties, exemption from taxation, and drawbacks upon materials used in the construction of vessels; but none of these remedies will be found at all adequate to meet the necessities of the case. It is a sound currency that above and far beyond all other things the shipping interests of the country demand and must have, or they can never flourish. In all the relations of foreign commerce we come into direct competition with those who produce under a sound and unvarying standard of value. Ships built on the Clyde or the St. John are built at gold prices, and of course are produced at a much lower rate than we can build them under a currency which inflates the cost of materials and labor fifty to seventy per cent. We can never compete with foreigners under such circumstances, and it is quite useless to try. So long as our present debased currency exists our only wise policy is to give up all attempts to recover our former greatness as a commercial nation.
Gold and Wages.
The theory was announced by an American writer on finance some twenty years since that wages never rose as soon nor to as great an extent as commodities under an inflation of the currency. That theory has been fully confirmed in the experience of the last ten years.
As the expansion occasioned by the issue of greenbacks and national bank notes was carried forward prices rose with great rapidity and to an enormous height, but wages advanced slowly and have never attained an elevation equal to that of commodities.
This is a matter of general observation, and has been shown very conclusively by Mr. Wells in his annual reports of the last two years. From these it appears that the laboring classes suffer a constant loss from the use they are compelled to make of a depreciated currency. If we were to affirm that the laborers of the country on an average lose at least the value of one day's work in every week in consequence of this state of things, it would be quite within the truth. Such a loss is a very heavy one for those who earn their daily living by their daily toil.
Gold and the Agricultural Interest.
But of all the great departments of our national industry that of agriculture is, as we all know, by far the most important, from the number of persons it employs and the amount of value it produces; and upon this, above any other department of production, a depreciated currency inflicts the greatest amount of injury and injustice. That this statement is unexaggerated will appear from a careful examination of the manner in which the surplus of all our agricultural products (and that surplus is large and constantly increasing) must be disposed of.
More wheat is annually raised in the United States than is needed for home consumption, and hence, the surplus must find a market abroad. Whatever it is worth for exportation will be the value of the whole crop, since there cannot be two prices for the same article, one for the home and another for the foreign market. The value of wheat will be its gold value for exportation plus whatever the premium on gold may be. If wheat is worth one dollar per bushel in gold to send to Liverpool, and the existing premium is fifteen per cent., the price of wheat will be $1.15, because at that rate it can be advantageously exported instead of gold. Wheat in fact, when reckoned in our present currency, bears a premium as truly as gold, and the farmer gains the existing premium in the price of his wheat. Of this there can be no doubt, and therefore the question fairly arises whether it is not for his interest to have such an expansion of the currency as will cause its depreciation to so great an extent that there will be a large premium on gold, since the larger the premium the higher the price of his wheat.
Certainly it would be to his interest, provided the currency he receives is just as good for his use in the purchase of commodities, the payment of taxes and debts, as it would be if it were not depreciated; or, in other words, if there were no premium on gold, for then he will gain the difference. If, on the other hand, in consequence of the existence of a depreciated currency, he has to pay a greater advance in price for all he buys, if the taxes are raised in greater ratio than the price of his wheat, if the debts he has contracted are larger than they would otherwise have bean, then, notwithstanding the advance of his wheat he may still be a loser. The following example will illustrate our point with sufficient clearness.
Suppose, as before, that the farmer has gained twenty per cent. on the price of his wheat by the premium; that is, he sells one thousand bushels of wheat for $1,200 instead of $1,000, making a gain of $200. Having got his money, what will he naturally do with it ? He will purchase such articles as he needs for himself and family, and will expend his money for farming tools, mowing and reaping machines and the like; for a wagon, it may be, or carriage and harnesses; for painting and repairing his buildings, for furniture for his house, for groceries and other merchandise.
But all these have been advanced in price by some seventy per cent. above what they were in 1860. He pays his taxes, but finds them as much higher as other expenses, for the good reason that all expenditures for roads, bridges, school houses, and public improvements now cost seventy to one hundred per cent. more in consequence of the depreciation of the currency. If we suppose that all the foregoing items have on an average been advanced only sixty per cent., which is a low estimate, then $1.60 of the currency will bring only as much as one dollar before there was any premium on gold. If we divide the $1,200 by 1.60 we have $750 as the sum of real money which the farmer has got for his wheat; in other words, he has got no more commodities for his $1,200 than he would have have got for $750 when the currency was at par with gold, making a loss of $450. But from this we must deduct the $200 he gained by the gold premium; yet he will still lose $250, a loss equal to two hundred and eight bushels of his wheat, or more than one fifth of the whole.
Such is the real position of the wheat growers of the West and the cotton planters of the South, and it is this which creates so much dissatisfaction. It is not merely that the farmers generally have to sell at lower prices than before the war, but that the currency in which they are paid is worth to them for the purchase of such things as they must buy only about sixty to seventy cents on the dollar.
This state of things, bad as it is, so far from growing better, is certain to grow worse until the currency is made what it should be, equal to gold. The high prices that ruled during the war will never return, and it is, therefore, of great importance to the farmer that he be able to buy as low as he will be obliged to sell; and that he can never do till the specie standard is restored, and that can never be while the currency is so redundant as at present.
It is of the utmost importance that those engaged in agriculture should understand the manner in which they are plundered by a defective currency, for as soon as they see this and demand a remedy they are sure to get it, since they form the great mass of the voters of the nation, and Congress must enact any law they desire for the restoration of a sound measure of value.
It matters little to the farmer in what particular branch of production he is engaged, whether grain-growing or stock-raising, every department of agricultural industry will eventually suffer alike. At present corn is much higher in proportion than wheat; and pork, beef, and other meats are higher than breadstufs; but this is a temporary difference occasioned by the war, the destructive effects of which, as far as cattle are concerned, have not been yet overcome; but the time is near at hand when all farm products will find a general level, and the price of all will be alike determined and influenced to the same extent that wheat now is.
Gold, how Restored.
If such, then, be the indisputable "evils" inflicted upon every industrial interest in the nation by an irredeemable and fluctuating currency, must, in the language of the resolution offered to the House, be "one of the first duties of the Government to secure to the citizens a medium of exchange of unvarying value." There can be no doubt on this point, and as a matter of fact there is no dispute in regard to it; but the great question at issue is, how and when shall this be done ? The first inquiry is how shall the desired object be accomplished ? Here we find a wide difference of opinion.
If the currency can be restored only by contraction, as has been insisted, in what form shall that contraction take place ? Here we come to the important question. Redemption may be reached in one of several ways.
I am not, as a critic and a Democrat, here to make plans. Without approving, however, I make some suggestions. They are not my plans. They are for the other side to consider.
First, Congress might enact that the national banks withdraw their notes at the rate, say, of $15,000,000 per month, and in twenty months their whole circulation would be taken in, leaving greenbacks as the only circulation. In that case the greenbacks would form the paper circulation of the country, and would probably be nearly at par with gold, the contraction having been sufficient perhaps to bring them to that point.
There are several considerations in favor of such a measure. In the first place, Government having the circulation, say, of $350,000,000, would gain the interest upon it, amounting, at six per cent., to $21,000,000. So much would be saved annually to the people in taxes, and the saving would be to that full amount if the currency was at par with gold.
A second consideration is that if the currency should be found deficient in quantity the requisite additional amount could be issued by the Treasury; or, if redundant, which would be indicated by its not being of the same value as specie, the surplus might be taken in. The whole matter of circulation would be just where most on the other side think it ought to be-- under the control of Government.
A third consideration is that, should it be thought best, the Treasury might continue to issue its gold notes, that is, its certificates for gold deposited, in the manner it now does, to any extent desired, withdrawing an equal quantity of greenbacks at the same time, until the whole circulating medium of the country consisted of the equivalent of specie, and thus a currency would be furnished having the convenience of paper and the security and reliability of gold. The Government would then act merely as the custodian of the money of the country, receiving its coin and becoming responsible for its safe-keeping.
Second. Contraction might be brought about, should Congress authorize the funding its own notes at a given rate per month, say ten or fifteen millions. In the course of two or three years, according to the rate of reduction, all the greenbacks would be withdrawn, and the $300,000,000 of national bank notes would be the only paper in circulation.
Third, or lastly, it has been proposed that Congress authorize the issue of compound-interest notes, like those formerly in use, at the rate of $10,000,000 per month, convertible at the end of two years from date into ten-forty bonds, five per cent., and as fast as they were put in circulation a corresponding amount of greenbacks should be destroyed. By this plan, with the constant tendency to hoarding, a very gradual and almost imperceptible contraction of the currency would be effected without the possibility of a panic or any severe pressure in the money market. These are not my plans. I suggest them for you, gentlemen, who are bound to give us back what you took away, our gold and silver ! [Laughter.]
The Near Approach of Specie Payments.
Much pains are taken in certain quarters to induce the belief that the country is rapidly approaching specie payments by the natural course of events. "The credit of the nation," it is said, "is rising, the premium on gold has fallen, the national bonds are nearly at par with specie, and the Government and banks are on the very eve of resumption." Such is the language of a large part of the press, such are the declarations often made by those who propose to lead the public sentiment of the country; yet there is no truth in the inference from admitted facts in relation to the fall of the premium on gold, and the rise of the national bonds, that the restoration of the currency is near at hand. Nothing can be further from the truth. This popular delusion has already done immense mischief. The business of the country has been to a great extent paralyzed by the vain expectation that but a few days or weeks at most were to elapse, before the whole money question would be settled. Those who accept this doctrine will, of course, transact as little business as possible until the anticipated day has arrived. In the mean time trade must languish.
The value of property has fallen to the extent of several hundred millions since September last, wholly in consequence of the decline in the gold premium caused by the operations of the Treasury and the false expectations it has occasioned. So great a greater decline in business and shrinkage in the value of property was never experienced in the same length of time in the past history of this country; and all for what ? For the improvement of the national credit ? Not at all, for every intelligent man knows that the fall of gold is the mere result of an arbitrary movement on the part of the Secretary that in no way benefits the nation. For the restoration of the currency ? Not in the least, for as far as the condition of the country is concerned, resumption is no nearer now than it was twelve months ago. For the benefit of trade and manufactures ? Certainly not, for both are greatly prostrated by it. Has it been for the benefit of the laborer and mechanic ? Ask them whether there is a better demand for their services at higher wages, in consequence of the flurry about gold.
No Substitute for Specie.
My resolution says that no "substitution can be devised" for gold and silver. There is in truth but one single and simple remedy, the restoration of the currency to par with coin. All attempts to evade this alternative are, and in the nature of the case must be, entirely futile.
The Government is entirely independent in its position in relation to its bonds, and without the slightest occasion to change or pay a single one of them except at its own option. Why, then, should it be regarded as necessary to resumption on the part of the Government or banks that the debt should be reconstructed by the issue of new obligations ? There is no necessity or apology even for anything of the kind as far as the currency is concerned; and the pretext that the rate of interest may thus be reduced is an idle one, because the debt cannot be refunded to the best advantage of the country until the public credit is restored, and that can be done only by making its notes equivalent in value to gold.
By forcing the present banks to take part of these bonds, and inducing the formation of free-banking institutions, with liberty to issue inconvertible currency upon the pledge of United States stocks, a part of the national debt may doubtless be worked off at a lower rate of interest than it now bears; but this can only be done at a great disadvantage to the nation; because if to issue these new free banking notes the greenbacks must be called in to make room for them, as is proposed, the country will gain nothing, for the new banks will have the use of the notes instead of the Government. Bank notes will merely be substituted for greenbacks, and the banks will get the interest upon them. What advantage this will be to the people is not easily perceived, nor how it will hasten the resumption of specie payments.
Another project for restoring the currency is by forcing down the premium by the sales of gold until the greenbacks shall be at par with specie. This has been attempted, and by the aid of favoring circumstances of a temporary character the premium has been reduced from 33 to 10.7; but what has this to do with the restoration of the currency ? If by this coercive process the premium could be entirely removed, neither the banks nor the Government could safely resume specie payments, because both together have only some $126,000,000 of gold, and owe, on demand, all payable in coin, more than thirteen hundred millions. They have less than ten cents on the dollar with which to meet their engagements; and hence, if they commenced the redemption of their notes and deposits they would soon be compelled to suspend.
The assumption that when gold and greenbacks are at par the people will not want the gold is a false one. Gold will be demanded very fast if $1,300,000,000 may be called for on demand, when everybody knows that the banks and Government together cannot furnish more than some $125,000,000. We need not doubt that most men will be shrewd enough to know that as soon as the gold reserve should be exhausted, as it would speedily be, gold would again bring a premium, and those who held it would make a a profit.
Nor is the often-broached project of issuing bonds and purchasing specie in Europe entitled to the least regard. All the countries of Europe put together could not part with $200,000,000 of specie without deranging their whole monetary system and causing general panic. The Bank of England, by far the ablest moneyed institution in the world, does not keep on an average over $100,000,000 in specie. How, then, could she spare any considerable quantity to us ? A call for $25,000,000 would cause an instant rise in the rate of interest to two or three times its usual rate.
So of any banking institution on the continent. Not one of them could stand any considerable drain of gold, for the good reason that they keep on hand no more than they need for their own immediate operations; and to meet the daily wants of their own customers. Besides, if it were possible to introduce two hundred millions of gold by such a process, it would all go back to Europe again if our currency should continue as redundant as at present. Gold will not, for by the laws of trade it cannot, remain in a country where there is a redundancy of what passes for money. That we may rely upon. Nor is the assumption true that it is more for the interests of the people that the circulating medium remain as it is, rather than be gradually contracted until at par with gold, because population and business are both constantly enlarging, and therefore the country will eventually grow up to it, any more worthy of regard.
Could we be assured that Congress would not permit any further enlargement of the currency for the next thirty years, and that the general prosperity and progress of the nation would be uninterrupted, we should at the end of the present century arrive at that point when there would be no redundancy in the monetary circulation; but everybody knows that no such reliance can be placed upon the national Legislature in relation to this matter. Nay more, does not everybody see, from present indications, that it will be nearly impossible to prevent further expansion ? Besides, if we could have such an assurance, would it be wise and economical for the people of the United States to go on for a third of a century with a currency wanting in the most essential element, namely, that of being a correct and invariable standard of value ?
The bill before us is but one of the many thousands of schemes which never fail to appear as remedies for disorders of the currency. Thus was France deluged with tracts and speeches after she had left the safe anchorage of specie payment and embarked upon the uncertain sea of paper money. Thus was England troubled with writings and schemes till she resorted to payment of specie. Thus was our own country vexed and annoyed during the era of the Continental Government; and now, as the members of this House can testify, the desk of every public man in the country groans with the weight of pamphlets on this subject --essays, speeches, dissertations, propositions, and Heaven knows what else, each of them professing to provide a certain remedy for the financial evils we are suffering under.
What was the result in France after all this quack advice ? A return to specie payment. What was the result in England ? A return to specie payment. What was the result after our own Revolution ? A return to specie payment. What has been the result in the many South American States which have tried nearly every phase of these dreams of ideal currency ? A return to specie payment. And what is obviously, both for good sense and experience, the only remedy for the evils which we now endure ? A return to specie payment. Gold and silver, give us them, and all will be easy. The only question should be, how shall it be effected ? Without attempting to solve this question, it may be of sufficient utility at the present moment to say the onus is not on Democrats. Yours, Radicals, is the responsibility ! Whatever means are resolved upon they must prove utterly abortive unless the expenditures of the Government are largely and speedily diminished. And in this regard, if you require a Democratic plan, I cannot do better than to quote from that valuable and comprehensive document, the annual message of Governor John T. Hoffman, of the State of New York, transmitted to the Legislature on the 4th of January, 1870. On the subject of the general finances, in recapitulating his indictment against the financial policy of the present Administration, he says:
"That it is one which fails either to strengthen the public creditor to diminish the people's burdens, that it keeps values uncertain and unstable, and thus baffles business foresight, and exposes the country to the constant chances of disastrous commercial panics. That it threatens to withdraw from the people what is now in use as money before providing a substitute. That it seeks to exert a control over the gold market. That it suggests no method of meeting the legal-tender promises. That it purchases at a premium bonds which the Government is under no obligation to pay for nearly fifteen years. That, forgetting that a contract cannot be made by one party alone, it assume, that the rate of interest on our bonds can be lowered at the will of the Government. That it indulges the strange fallacy of supposing that the holder of six per cent. bonds, the marketable value of which is less than par in gold, can be persuaded to voluntarily exchange them for bonds bearing a lower rate of interest, and only to be obtained at par; and that redeems its legal-tender notes at a price fixed by itself, which is to be less than the amount expressed upon their face."
In fine, I adopt the stalwart, earnest, honest language of the Democratic Governor of New York in his last message, which I read as the conclusion of his message and of my remarks:
"The earliest practicable return to the hard money of the Constitution is, therefore, desirable, as being, in every way for the interest of the people; but this return should be made wisely, by a process which will not cost needless suffering, under a declared and fixed policy, intelligible to the whole country, and which will insure that the change, when it comes, shall be permanent. A rash attempt would, by its failure, make our condition worse than it is now. But no time should be lost in adopting measures which shall lead by prudent steps to the attainment, at no very distant day, of a result to which, sooner or later, we must come.
"If the Federal Government does not try to accomplish an early return to the use of gold and silver, without spreading ruin among the people, it fails in its duty; if, with its abundant revenue, it cannot devise a method of doing so, it fails in wisdom."
In the spirit of this message and of Democratic principles, I, for one, even though alone here to-day, hold aloft the banner emblazoned with gold and silver !