The Finance Minister,
The Currency,
The Public Debt.

Henry Charles Carey.


§ 1.  The Secretary’s theory in reference to the currency, as has been shown, is in direct conflict with his practice ;  the former most earnestly teaching that the need for circulating notes everywhere exists in the inverse ratio of the use of checks, drafts, and other machinery for economizing money of every kind ;  the latter, on the contrary, giving such notes in the direct ratio of the existence of that superior currency which, as the Secretary himself informs us, everywhere tends to supersede the note.  So too, as will now be shown, is it with reference to the public debt, his teachings being in the direction of maintaining inviolate the public faith, the tendency in the opposite direction of the public mind becoming, and that necessarily, more and more rapid as his policy is more fully carried out.  Like the boatman, be is always looking in one direction while rowing in another.

Seeing clearly that such is the present tendency, and correctly appreciating “the great interest and alarm excited by the doctrines recently promulgated,” the Secretary has, in his recent voluminous and most feeble report, devoted much space to a lecture on the absolute necessity for paying the debt in gold, both principal and interest.  Replying thereto, Congress might, as we think, with great propriety ask of him to show how far his own measures in the past had tended toward diminishing the amount of interest now to be paid ;  toward lessening the present burthen of the debt ;  toward increasing the general power to contribute to the revenue ;  toward strengthening the hands of that loyal portion of our people to which we had been indebted for suppression of the rebellion, and to which alone the holders of our public securities can now, or in the future, look with any confidence for disposition to carry into full effect the contracts of the war.  Admitting that this were done, let us now look to see what are the figures in relation to present burthens that must be given in the reply that would then be made.

In October, 1865, the total debt was $2,808,549,000, of which $1,162,000,000 were payable in gold.  The total interest was $133,000,000, of which $67,000,000 were gold, and $66,000,000 currency.  Admitting now that the character of the debt had remained unchanged, and taking the price of gold at 140, the quantity of lawful money to-day required for payment of interest on that amount of debt would not exceed $150,000,000.

In October, 1866, the debt, deducting money in the treasury, had been reduced to $2,551,000,000, of which the gold portion had been increased to $1,342,000,000.  Here was a large reduction and yet the interest paid thereon appears to have grown to $143,751,000, the gold portion of which must have been $78,000,000.  Estimating as before this gold at 140, it would amount to $109,000,000, adding to which the currency portion, $66,000,000, we obtain as the amount of lawful money then required for satisfaction of demands for interest the sum of $175,000,000.

In October last the debt had been further reduced, and then stood at but $2,491,000,000, the gold portion of which had grown to $1,175,000,000.  Almost three hundred millions less in quantity it now requires for the payment of interest, as stated in the report, page 43, no less than $152,515,640, being nearly $20,000,000 more than had been needed before reduction of the principal had been commenced.  Of this the gold portion is $105,000,000, being the equivalent of $147,000,000 lawful money.  Adding now to this the currency portion, say $47,000,000, we obtain as the total amount of lawful money this year required for satisfaction of claims for interest no less a sum than $194,000,000, being $44,000,000 more than had been needed when the debt, as stated by the Secretary himself, had been $266,000,000 greater.  Adding further the interest on these $266,000,000, we obtain $210,000,000 as the amount that would to-day be payable on the same amount of debt which bad existed at the date of the celebrated decree which announced “contraction” as being the order of the day ;  and by means of which confidence, public and private, has been so far destroyed, and the societary movement so thoroughly paralyzed, that the payment of even half of this enormous amount would be far more burthensome than would have been that of the whole on the day on which the Secretary entered on his most destructive career.

At the date of that mischievous and most unfortunate decree there were still outstanding compound interest notes, payable in 1867 and 1868, to the extent of $159,000,000.  The interest on these, so far as paid, may be estimated at $20,000,000 ;  and to that extent is the growth ;  of currency interest accounted for.  There is in this, however, nothing to account for the fact that the interest hereafter to be paid, all of it, in gold, stands at $130,000,000, or within $3,000,000 of the sum actually paid in the fiscal year 1866, when the debt stood at its very highest point.  We are thus presented with the fact that the Secretary proposes in the next fiscal year to divide among bondholders $130,000,000 of gold, now worth in lawful money more than $182,000,000 ;  whereas the amount of such money required at the time when the debt amounted to $2,808,000,000, had been but $150,000,000.  In all other countries the public credit improves with diminution of the need for loans.  Here, under our admirable system of finance, it seems, on the contrary, to deteriorate as the debt is more and more diminished.

The remarkable fact is thus presented, that precisely as the paralysis becomes more general—precisely as labour and all its products fall in price—precisely as lawful money becomes more valuable in the hands of those who hold it—precisely as it becomes less and less attainable by those who need to get it—precisely as taxation becomes more and more burthensome—precisely as these phenomena become more general throughout the land, the quantity of lawful money required for satisfaction of the claims of bondholders increases ;  the poor being thus made poorer while the rich are being made richer, and banks, bankers, and treasury agents building palaces, while mills and mines are being closed and working men and women deprived of power to obtain either the food or the clothing required by their families and themselves.

On an average the prices of labor and its products are at least a third less than had been the case at the date on which the Secretary announced to Congress and the people his determination to enforce “contraction.”  The $182,000,000 lawful money of to-day would therefore purchase almost as much as could have then been bought with $300,000,000.  As but half this latter sum, or $150,000,000, was then required, it is clear that the burthen of taxation for payment of interest has, except among the bondholders themselves, by means of the Secretary’s policy been fully doubled.  Hence it is that the cry has become so general for discharge of the principal in lawful money.  Hence it is that the word repudiation is now so freely used !  That it shall soon become universal all that is needed is that the Secretary shall be allowed by Congress to go ahead in the substitution of gold bonds for greenbacks, for compound interest notes, and for all other securities that make no demand for gold, whether for principal or for interest.

The amount of gold to be paid in the neat fiscal year, for various purposes will exceed $140,000,000.  To enable the Treasury to obtain that quantity our importations, allowing for frauds of various kinds, must exceed $400,000,000.  Adding to this interest payable abroad, travelling expenses and freights, we obtain a sum exceeding $500,000,000, and perhaps reaching $550,000,000.  Against this we have exports in the last fiscal year amounting in currency to $385,000,000, and in gold to $231,000,000, leaving little less than $300,000,000 to be paid, in either gold or bonds.

The day for the sale of bonds abroad is fortunately approaching its close, and with every step in that direction there must be diminished power to import foreign merchandise, accompanied by diminution of Custom-House receipts.  With each there must be diminution of treasury power for controlling prices, that diminution keeping steady pace with the increased necessity for gold growing out of a constant substitution of gold bonds for those whose demands upon the Treasury are limited to lawful money.  Such being very decidedly the tendency of affairs, the probability is great that the $130,000,000 required for the coming fiscal year will represent much more than $200,000,000 in lawful money ;  and little less than thrice the quantity of commodities generally that could, in the autumn of 1865, have been purchased with the $150,000,000 of lawful money that were then required for discharging all the claims for interest.

The late holders of 7.30 currency bonds are now receiving gold equivalent to 8.50 lawful money.  But for the interference of Congress, such would now be the case with most of the present holders of legal-tender interest-bearing notes.  Such it will be with all those whose notes cannot be included within the $50,000,000 of three per cent. certificates.  The perfection of modern financiering is, to all appearance, to be found in raising the rate of interest, in increasing the burthen of the public debt, and in annihilating the power of the people to contribute to the public revenue.*  The financial system that carried us through the war, looked, on the contrary, to reduction of the rate of interest, and to stimulation of the societary circulation.

Were it not for the Secretary’s profession of desire to maintain the public faith we should be much disposed to believe that, determined upon bringing about repudiation, he had arrived at the conclusion that the shortest road thereto lay in the direction of making the debt from day to day more burthensome.  Certain it is that had such been his wish, he could have chosen no better course of operation than that be has so consistently pursued almost from the hour that he was so unfortunately placed in the direction of the national finances.

§ 2.  Prior to the breaking out of the rebellion Congress had been accustomed to define very accurately the course to be pursued in the negotiation of loans and in the discharge of public debt, and to require that in all cases there should be the most perfect publicity in regard thereto.  With the war, however, there came, here as elsewhere, many changes, the exigencies of the case having made it necessary to leave very much to the discretion of the distinguished man who then, so honorably to himself, discharged the duties of the place now filled by Mr. Secretary McCulloch.  Peace having returned, it might have been supposed that his successor would gladly have sought, as far as possible, to relieve himself from responsibility, taking the orders of Congress rather than promulgating his own decrees.  Directly the reverse of this, however, he has, on every occasion, whether as regarded contraction or expansion, sale of gold or cancellation of greenbacks, negotiation of loans or discharge of liabilities, demanded to be invested with full authority, and has, with all his energies, resisted every effort at limitation of his powers.  Such having been, and such being now the case, there would seem to be propriety in showing, to some small extent, how power has been exercised in the past, with a view to proper understanding of what may be looked for in the future.

The last hours of the XXXIXth Congress were marked by the enactment of a law having for its object limitation of the Secretary’s contractive force.  To the end of compelling the banks to absorb the greenbacks then in circulation he had announced a determination to convert all the “ interest-bearing notes into five-twenty bonds,” and had already so far proceeded in the act that of the $217,000,000 issued there had remained outstanding, at the date of his report, less than $160,000,000.  Of these a large amount would become payable on the first of October 1867, and thenceforward to August, 1868, and it was greatly feared that while limited in his direct contraction of the currency to $4,000,000 per month, he might, indirectly, bring about one thrice greater in amount.  That be might be prevented from doing this Congress instructed him to issue three per cent certificates to the extent of $50,000,000, at the same time authorizing the banks to take and hold them, as they before had held the interest-bearing notes, as part of their reserve.  Such was the second act of congressional rebellion—the second repudiation of that financial system which looked to increasing the wealth and strength of the already rich while depriving those who had labour to sell of all power to provide food and clothing for their families and themselves.

Sullenly accepted by the Secretary, he, from the hour of its passage, persistently refused to give any public notice of his intentions in regard to execution of the law that had been thus enacted.  Would he issue the notes and thus prevent necessity for contraction ?  Would he refuse to issue them and thus compel contraction ?  Such were the questions that for the nearly seven months which passed between the second of March and the first of October 1867, occupied the minds of banks and bankers, borrowers and lenders.  As the day approached on which this important question must be determined, anxiety increased, and what were its effects is shown in the following statement of the rate of loans and discounts throughout September :—

Call loans
Loans on Bonds and Mortgage
A 1, indorsed bills, 2 mos.
Good indorsed bills, 3 and 4 mos.
Good indorsed bills, single names
Lower grades
Sept. 9
3 @ 4
6 @ 7
6 @ 6½
6½ @ 7½
9 @ 10
11 @ 15
Sept. 16.
4 @ 6
6 @ 7
6 b@ 6½
6½ @ 7½
9 @ 10
12 @ 18
Sept. 23.
7 @ —
6 @ 7
7 @ 7½
8½ @ 10
10 @ —
12 @ 20
Sept. 30.
6 @ —
6 @ 7
7 @ 7½
8½ @ 10
10 @ 20
12 @ 20

“ The stringent tendency of the money market,” says the Merchants’ Magazine, from which we take this table, “ causes a sudden realizing movement at the Stock Exchange, and stocks held at the beginning of the month with much confidence in a rise corresponding to the improved earnings of the roads, were sold at a decline ranging from 5@10 per cent.”

To calm the excitement then existing—to relieve the public mind—to save from bankruptcy hundreds of most useful citizens—to maintain in employment tens of thousands of working men and women—all that was then required was a single word from the Secretary to the effect that he meant certainly to obey the law ;  but, that word was never uttered.  Why was it not ?  Why had it not been uttered even six months earlier ?  Why had our whole people been kept so long in ignorance in reference to a matter of such vast importance ?

The first of October at last arrived, bringing with it an absolute necessity for announcement of the fact that the Secretary, having always regarded the act as “mandatory,” had then no power to avoid its execution.  At once the public mind was relieved, and men went on their way rejoicing in the belief that bankruptcy might be avoided without necessity for adding to the enormous sacrifices they had already made.

The Secretary professes to be deadly hostile to “ speculation,” yet here do we find him compelling nearly the whole societary world to give itself during many weary months to the work of “speculating” as to whether be would or would not comply with the provisions of a law that had been enacted with a view to limit his powers far mischief.  We say nearly the whole, it being scarcely to be supposed that there did not exist some one or more persons fully cognizant of the fact that he bad arrived at the conclusion that the law had been so worded as to leave to him no choice whatsoever ;  and that, for that reason, it must be carried into full effect.  Were there any such persons ?  If so, they were in possession of a secret worth very many millions.  Having seen the cards they could safely “ speculate,” doing this by aid of a studious silence on the part of an officer of the government who ought to have known that retention of so important a secret must inevitably have the effect of inducing suspicion that he himself had profited of the “speculation” he had so freely and so persistently denounced ;  and whose self respect should have taught him that, like Caesar’s wife, he was bound to be not only pure but unsuspected.

In the whole history of the government there can be found no single case in which a secret has been more perfectly, if even so perfectly guarded.  Down to the moment at which silence could be no longer kept the bank officers of this and other cities were kept, in ignorance as perfect as could have been the case had it been a decision of the French or English government that had been awaited.  That others, and those others in close relation with the treasury, were not so ignorant would seem to be fully proved by the magnitude of the purchases that, as generally understood, then were made.

Starting now from the day on which the public mind had been relieved, and the “speculators” had been thus placed in a position to realize large profits on their extensive purchases, we may now study the course of things from that date to the present time.  To that end the following table is submitted, showing—

I.  The total amount of currency in the treasury ;

II.  The amount thereof deposited in the banks ;

III.  The quantity of notes withdrawn from circulation by being placed in the various sub-treasuries ;  and

IV.  The gold on hand after deducting the gold notes then outstanding.

Total currency
On deposit
In Sub-treasury notes

Oct. 1.
Nov 1.

Dec 1.
Jan. 1.

The remarkable fact is here presented, that while the whole quantity of money, gold and paper, in the various sub-treasuries but slightly varies, the difference of proportions is enormously great, notes being withdrawn from circulation as gold is sold, and gold reappearing as paper is again permitted to go abroad.  Closely following the announcement that the three per cent. certificates were really to be issued, and at the very moment when the “speculators” of September had such substantial reason for desiring that money should be abundant, we find the sub-treasuries to have been entirely stripped of notes, while gold was being rapidly accumulated.  October passed, November now presents another change, gold being sold and notes to an enormous extent withdrawn ;  that withdrawal, too, made at the moment when large amounts were being called for at the west and south for removal of the crops, and the rate of interest being thus carried even higher than had been the case before the issue of certificates.

Call loans
Loans on bonds and mortgage
A 1, indorsed bills, 2 mos.
Good indorsed bills, 3 and 4 months
Good indorsed bills, single names
Lower grades
Nov. 1.
6 @ 7
— @ 7
7 @ 9
9 @ 12
11 @ 12
15 @ 25
Nov. 8.
6 @ 7
— @ 7
7 @ 9
9 @ 12
11 @ 12
15 @ 25
Nov. 15.
6 @ 7
— @ 7
7 @ 8
8 @ 12
11 @ 12
15 @ 25
Nov. 22.
7 @ —
— @ 7
8 @ —
8 @ 12
11 @ 12
15 @ 25
Nov. 30.
7 @ —
— @ 7
7½ @ —
8 @ 12
11 @ 12
15 @ 25

December now, as we see, presents another change, gold being piled up as notes are paid out, money being made again abundant, and “speculators” of the previous month being now again afforded opportunity to realize their profits.  What may have been the movement in the month that since has passed we have no present means of knowing ;  but, as motley is now permitted to abound, it may fairly be assumed that in that time little gold has been sold, and but few notes have been withdrawn.

Studying the facts above presented the reader must, we think, be forcibly reminded of the well-known game of the pea and the thimble, commonly known as thimble-rig.  Of those who play it there is allays one who knows exactly where the little joker may be found, and he it is who profits by the “ speculation.”  So, as it would seem, is it in all our present treasury arrangements, there being always some one who knows under which thimble the golden pea may certainly be found, and whether he may safely play the part of bull or bear ;  and hence it is that fortunes are being now so largely and so rapidly accumulated by all of those concerned in the various treasury manipulations.

§ 3.  The suggestion has been made by some evil minded persons that political reasons had had much to do with the extraordinary financial movements of September and October last, money having been made exceedingly scarce and men in thousands having been deprived of power to earn subsistence for their families and themselves, at the very moment when elections in the great central States were already close at hand.  What truth there may be in this none but the Secretary himself can certainly tell, but sure it is, that had he desired to produce general dissatisfaction he could scarcely have chosen any more suitable course of action than that here exhibited as occurring in the few weeks which preceded the second Tuesday of October last, as follows :—

Menaced suppression of $50,000,000 of legal tender notes :
Large sales of gold :
Temporary suppression of $9,000,000 circulating notes :
Contraction universal and crisis imminent :
Bears and money lenders rejoicing :
Mills and mines being closed, and working men despairing of both the present and the future.
Announced emission of $50,000,000 of three per cent. certificates :
Gold sales stopped :
Actual emission of $9,000,000 of circulating notes :
Inflation general, and fear of crisis removed :
Bulls and borrowers rejoicing :
Miners, manufacturers, and working men more hopeful.

How the treasury action first above described was then regarded, is shown in the following paragraph from the Merchants’ Magazine of October last, and particularly in the sentences here italicized :

“ The money market during September exhibited the activity usual at the fall season.  The demand for currency, to move the crops at the West, has been unusually large, owing not only to the abundance of the yield, but equally to the high prices of breadstuffs and the anxiety of the farmers to realize.  The receipts of grain at the lake ports have been about double the quantity for the same period of 1866 ;  and the Western banks have been taxed to their utmost in satisfying the wants of the movers of this large amount of products.  The discounting and rediscounting of produce paper, and the withdrawal of the balances of Western banks have caused an outflow of currency, legal tender and bank, of probably fully $25,000,000 within the month ;  and at the close the efflux continued in undiminished volume.  The financial operations of the Government have also had an important bearing upon the course of the money market.  At one period its sales of coin and of bonds largely exceeded its disbursements in the purchase of seven-thirty notes, resulting in a temporary withdrawal of currency from the banks which, together with the westward drain, and the calling in of funds from some of the national depositories, had the effect of producing a very sharp stringency, and a full 7 per cent. rate on demand loans.  The city merchants have suffered inconvenience from this condition of things.  As the banks could employ their balances at 7 per cent. on call they have been indifferent about discounting, and have confined their operations in paper to the best of their depositors.  Large amounts of choice paper have been thrown upon the street at 7½ @ 9 per cent.;  while fair average names have sought buyers in vain at much higher rates.”

Looking only at the movement by which the elections had been preceded the political idea would certainly seem to have some foundation ;  but when we study the whole ground as above exhibited, and estimate the number of millions that might have been, and perhaps were, realized by parties, individual and incorporated, who had stood behind the scenes selling gold and heaping up greenbacks ;  gathering large commissions and controlling free of interest the public moneys ;  investing those moneys in bonds and stocks preparatory to the upward movement that must inevitably follow disclosure of the important and closely guarded treasury secret ;  the idea becomes in a high degree absurd.  Still more so does it appear when we take the month following the last of the fall elections, finding in November the “contractive” screw turned again and to such extent as in that short period to have converted into paper no less than $15,000,000 of treasury gold ;  all this, too, having been but the prelude to an “inflation” that, in the month directly following, converted into gold nearly all the treasury paper.  Seeing the vast pecuniary advantage that must have resulted from such manipulation of the public funds, none but the most maliciously disposed could possibly be led to find therein any evidence of the Secretary’s desire to interfere in mere politics.

The Secretary’s friends, including, of course, all those of both political parties who stand behind the scenes, justify this course of action, asserting it to be his duty to cause money to abound at intervals in order to obtain good prices for the gold bearing bonds he seeks to sell ;  and then to cause it to become scarce that he may obtain at low prices the paper-bearing securities he seeks to buy ;  a very comfortable doctrine, certainly, for those who know the precise moment at which they themselves may buy and sell.  Less comfortable, however, is it for that outside public which finds itself robbed at one moment by being forced to sell to the well-informed ;  and then again robbed at the following one by means of an artificial expansion of the causes of which, as well as of the contractive movement meant to follow, it is kept in utter ignorance.

At the great European gaming establishments, Baden, Homburg, and others, the laws of the game establish an advantage to the bank by means of which, notwithstanding occasional heavy losses, it must, in the long run, come out winner.  Outside of this all is fair, and players have not the slightest fear that dice will be cogged, that cards will be packed, or that well-informed employees will be found betting on their own private account.  Here, on the contrary, each successive treasury report furnishes evidence that the cards had been packed, while the rapidly accumulating fortunes of treasury friends and agents give proof conclusive that they, at least, bad not been kept in ignorance.

Desiring now to compare the Secretary’s practice with his theory we turn to his report for December, 1866, and there read as follows, the italics being our own :—

“ Under these circumstances, feeling sensible of the great responsibility of his position, the Secretary has deemed it safer and better for the county to act according to the dictates of his own judgment, carefully regarding the condition of the markets and of the treasury, rather than to take his direction from those who, however intelligent and able, were under no official obligations to the government, and might be less accurately advised in regard to the actual state of its financial affairs.  He has regarded a steady market as of more importance to the people than the saving of a few millions of dollars in the way of interest, and observation and experience have assured him that, in order to secure this steadiness in any considerable degree, while business is conducted on a paper basis, there must be power in the treasury to prevent successful combinations to bring about fluctuations for purely speculative purposes.”

Here, as elsewhere, the theory is excellent, but when we compare it with the practice, it is found that the last sentence of this passage would very accurately describe the latter had it told us that the treasury must have “power for the promotion of successful combinations to bring about fluctuations for merely speculative purposes.”

The Secretary bittbrly opposes all that “speculation” which manifests itself in the opening of mines, or the building of mills and furnaces.  Of all the financial ministers the world has yet seen, those alone excepted by whom Louis Napoleon has been surrounded, there is, nevertheless, none who has more favored that class of “speculators” which profits by causing the “fluctuations” he here professes himself desirous to prevent.

§ 4.  “ The debt is large, but if kept at home, as it is desirable that it should be, with a judicious system of taxation, it need not be oppressive.”—Report on the Finances, Dec. 1865.

Such was the Secretary’s Theory at the opening of the Thirty-ninth Congress, but little more than two years since.  Nevertheless, almost before the ink had dried with which it had been written, and certainly before there had elapsed even a single month, he had become most urgent with Congress to permit him to manufacture bonds expressly calculated for European markets.  Most wisely, permission was refused, Congress having been then of the opinion that the debt, if not “ kept at home,” must become “oppressive;”  and that it would become more and more unbearable as it became more and more the property of absentees, whether foreign or domestic.

One year later, in the Secretary’s Report of December, 1866, we find him addressing Congress in these words :

“ Our importations of goods have been increased by nearly the amount of the bonds which have been exported.  Not one dollar in five of the amount of the five-twenties now held in England and upon the continent has been returned to the United States in the form of real capital.  But if this were not a true statement of the case, the fact exists, as has already been stated, that some three hundred and fifty millions of government bonds—not to mention State and railroad bonds, and other securities—are in the hands of the citizens of other countries, which may be returned at any time for sale in the United States, and which, being so held, may seriously embarrass our efforts to return to specie payments.”

The theory here propounded is admirable, but what was to be its writer’s practice ?  Did this latter look towards’ bringing about a state of things that should enable the smaller holders among ourselves to retain the bonds yet remaining in their hands ?  Did it look to abolition of that great money monopoly in the creation of which the writer himself had taken so large a part, and by means of which the domestic market for bonds, as security for circulating notes, has been limited to little more than $300,000,000 ?  Did it in any manner tend toward lessening the power of foreign creditors over all our movements ?  Nothing of the kind !  Directly the reverse, the Secretary asked that

“ He should be authorized to issue bonds, not having more than twenty years to run, and bearing a low rate of interest, payable in England or Germany, to be used in taking up the six per cents now held abroad, and in meeting any foreign demand for investment that may exist.  The question now to be considered is not,” as he continued, “how shall our bonds be prevented from going abroad—for a large amount has already gone, and others will follow as long as our credit is good, and we continue to buy more than we can pay for in any other way—but, how shall they be prevented from being thrown upon the home market, to thwart our efforts in restoring the specie standard ?  The Secretary sees no practicable method of doing this at any early day, but by substituting for them bonds which, being payable principal and interest in Europe, will be less likely to be returned when their return is the least desired.”

Here, as everywhere, we find the Secretary’s practice to be in direct conflict with the theory so well presented in his report.  Finding this latter excellent, and having no faith whatsoever in the former, Congress again refused the permission for which be bad thus again applied.

Another year having now rolled round we are favored with a new report, containing not even a single word in reference to the exceeding dangers to be apprehended from the existence of a foreign debt for the mere interest on which there are now required sixty millions of gold dollars, and most probably a quantity greatly larger.  Equally silent is be seen to be in regard to his favorite idea of manufacturing bonds expressly calculated for captivating the fancies of the little capitalists of Continental Europe—theory and practice being, apparently, alike forgotten.  Not so, however, the whole scheme promptly reappearing in another shape, demanding $20,000,000 for meeting the expenses incident to carrying it into full effect ;  and threatening, like the celebrated horse of Amy Darden, to be ridden year after year into our legislative halls until, as in that memorable case, Congress shall, from sheer exhaustion, be led to grant the power for which the demand had been so persistent.

Meanwhile the Secretary has not failed to use all the power with which he had been, unhappily, invested ;  nor is he likely to do so in the future.  The foreign market requires gold-bearing bonds, and will take nothing else.  Seven-thirties cannot, therefore, go abroad.  So, too, is it with legal-tenders and compound-interest notes.  To fit them for exportation they must be converted into five-twenties, a work to be accomplished at any cost.  So well has it been accomplished that these latter have gone by tons weight across the Atlantic, and so rapidly as effectually to have prevented any rise of price, and to have caused a national loss of probably a hundred millions.

Common sense might have taught the Secretary that the more cotton, wheat, bonds, or any other commodity, forced upon the foreign market, the lower must be the price abroad and at home.  Equally might it have taught him that the more he increased the necessity for gold the higher must be its price.  Setting at naught, however, all its teachings, be has glutted Europe with the one, while so increasing his need for the other that be now dares not to do anything tending to prevent increasing the foreign debt.  Bonds must be sold that gold may be made to flow into the treasury through the custom-house ;  and any failure to find further foreign markets for securities must, and certainly will, be followed by failure to pay the gold interest the Secretary now so freely promises.

Those promises can be redeemed only on condition of an import of merchandise that, after deducting other demands abroad which constitute first mortgages upon our exports, leaves a balance of hundreds of millions to be paid in either gold or bonds.  The more we send of the latter the lower will be their price, and the higher will be the rate of interest ;  and yet, strange to say, the Secretary fancies that it is by means of travel in that direction we are to reach resumption !

With each new bond manufactured by the Secretary, in defiance of his own teachings, for exportation, it becomes more uncertain as to when, if ever, we shall resume the use of the precious metals.  With each it becomes more certain that the road in which he would have us travel finds its, termination in bankruptcy of the treasury, and final repudiation of the public debt.

§ 5.  Of the many lessons taught us by the war the most important was that from which we learned that the national strength had grown, and must continue to grow, with the growth of self-dependence.  Mining our own coal, smelting our own ores, and making, wearing, or using our own iron and cloth, swords and guns, ships and engines, but little difficulty was experienced in meeting the large demands of the government for labor and its products of any and every kind, accepting, in return, its promises to pay in money at a future day ;  doing all this too not only without the aid of British capitalists, but in direct defiance of their predictions that the debt thus being contracted neither could nor would ever be discharged.  For the first time in our history we found ourselves released from all dependence on foreign banks and bankers.

Throughout the war the societary circulation had been rapid to a degree never before known in any country of the world.  Labor had, therefore, been so productive as to have enabled thousands and tens of thousands of working men and women to accumulate little capitals ;  and so absolute was their faith in the public promises of future payment that they gladly placed their little earnings in the treasury, to be used for prosecution of the war.  Confidence of the people in their government so far begot confidence in each other that throughout the whole range of the loyal States it made itself manifest in the great fact, that in the rate of interest paid by poor and rich, by the weak and the strong, the owner of the little workshop and the proprietors of the great railroad, the man of the East and his correspondent in the West, there was a nearer approach to equality than bad here ever before been known.

With return of peace and the accession to power of the present Secretary it came, however, to be discovered that, however well-intentioned might have been his predecessors, their whole movement had been grievously erroneous and must be at once retraced.  Machinery of exchange had been too abundant, and the supply thereof must be contracted.  The community had become too largely indebted to its individual members, and the debt must at the earliest moment be diminished, preparatory to being, and at an early date, entirely discharged.  Lenders had been placed at a disadvantage as compared with borrowers, and needed now to have their grievances redressed.  That all this might be done—and done, too, at a time when States, counties, cities, and individuals were yet struggling under heavy burthens resulting from voluntary contributions to the extent of hundreds of millions—it was needed that prices should be everywhere diminished, taxes meanwhile being maintained at their greatest height ;  the Secretary thus demanding that the people’s candle should be burned at both ends, with a view, perhaps, to determination of the important question as to how long, under such circumstances, it could be made at all to last.

So it has been burnt until mines, mills, and workshops have to so great an extent been closed that hundreds of thousands of working-men, their wives and children, have been deprived of bread ;  their owners, meantime, having been wholly deprived of revenue.

So it has been burnt until the domestic consumption of cotton has been to so great an extent diminished as to force upon the country that, increase of dependence on foreign markets which has reduced its price to, less than the cost at which it could be reproduced.

So it has been burnt until confidence has so nearly disappeared that working-men, the really useful portions of society, find themselves compelled to pay thrice, even when not quadruple, the rate of interest.

So it has been burnt until long loans on individual credit have almost entirely given place to loans “on call,” on the security of government bonds.

So it has been burnt until our dependence on foreign banks and bankers has become more complete than at any former period.

So it has been burnt until the Secretary has become entirely dependent on imports resulting from the sale of bonds abroad for means with which to pay the daily growing interest on the public debt.

So it has been burnt until from almost the whole interior comes advice of entire inability to meet the just demands of city merchants.

So it has been burnt until the picture presented in all our cities has become that described in the following paragraphs cut from journals of the day :—

DESTITUTION IN PHILADELPHIA.—Unusual destitution is prevailing this winter among a class which has hitherto been comparatively free from want.  We refer to respectable mechanics with their families, and work-women of every kind, such as have never before needed alms.  Rev. Mr. Long, the Bedford Street missionary, whose specialty it is to relieve poverty, declares that the misery among the respectable poor, who are the last to beg, is heart-rending.  Those who are able and willing to contribute alms, which will be employed in the most judicious manner, may send them to this gentleman, No. 619 Bedford Street.  There is at present especial need in this severe weather for shoes and garments.
    “ The report of the NEW YORK ASSOCIATION for improving the condition of the poor, shows that during the month of January the number of the needy classes was greater than in the corresponding one of any year save January, 1855.  Great as is the present destitution, the Association fears it will become even greater, as the month of February is always found to be the most trying for the poor.  Compared with the past winter, there has been, up to the present time, a decrease of $5411 in its receipts.  This fact finds an explanation in the existing business depression, which not only causes increased want to be relieved, but contracts one of the main sources of that relief.  In addition to this cause, the Association has not been favored as usual with special donations ;  and, although no public appeal has as yet been made, it has become necessary to do so.  The total number of families assisted during the month was 4943, and of persons 18,123.  The amount expended in relief was $13,021.14, and the number of visits amounted to $8712.”
    The Boston Traveller says :  “ Such has become the increased demand for soup at the station-houses that it has been found necessary to procure sixty-gallon kettles instead of those holding only forty gallons, which were first put in use.  Yesterday several of our first men tested the quality of mutton soup provided, and pronounced it capital, and good enough for anybody.”

Such having been the results obtained, we may now, for a moment, study the Treasury process by means of which so disastrous a state of things has been produced.

Throughout the war, confidence being universal, capital was freely scattered through the country to the great advantage of farmers, miners, manufacturers, and working-men of every kind.  To compel its withdrawal and to raise the current rate of interest that confidence needed to be destroyed, and to that end it was required that we should have successive shocks, such as have already been described—gold being sold at one moment and paper withdrawn, the latter being again pushed out as the former was heaped up—until it should become manifest that none but the very rich could hope to prosecute their operations to a successful termination.  To what extent this system has been carried throughout the past half year has been already shown, and its effects in forcing capital back on the great centres of speculation are here described :—

“ The monetary irregularities connected with the arbitrary withdrawal of a large portion of the circulation caused the banks throughout the country to hold an ample amount of their funds constantly in readiness for sudden emergencies ;  and the suspension of the process, having removed these dangers, has left the interior banks free to employ an enlarged proportion of their money with their New York correspondents.  This accumulation of deposits, however, is to be regarded as indicating an unusual contraction of business operations, which is another of the injurious consequences of an unnatural process of contraction.”—Circular of Clews & Co., New York, Feb. 7.

The general alarm of September last, consequent upon large sales of gold, and refusal of the Secretary to give any public notice of his intentions in regard to the three per cent. certificates, caused a reduction of the deposits of the associated banks of New York, from 195 to 178 millions.  In October, when the Secretary gave out paper and heaped up gold, they rose again to $187,000,000.  Sales of gold and absorption of paper, in November, forced them down at the opening of December, to $174,000,000.  Giving out of paper and retention of gold carried them up again, until, on the 4th of January, they had reached $187,000,000 ;  and on the 1st of the present month, no less an amount than $213,000,000, or about $10,000,000 in excess of anything that had before been known.  Such have been, and such still are, the movements of a finance minister who professes himself opposed to “speculation,” and gravely asks for power to be used in preventing “ successful combinations to bring about fluctuations for purely speculative purposes.”

By all this somebody profits.  That the general public does not would seem to be proved by the following from the same Circular to which we have been indebted for the paragraph given above :—

“ In financial circles there is a very general feeling of dissatisfaction at the bearing of the public debt upon the rate of interest.  There is now held on this side of the Atlantic, about $1,400,000,000 of United States gold-bearing bonds, the larger portion of which yield interest equal in currency to 8 to 8¼ per cent.  This high rate of interest upon such an enormous aggregate of investments has a tendency to keep capital aloof from productive employments, and naturally compels borrowers to pay more for the use of money than they can afford.  The prevalence of high prices and the heavy taxation of products tend directly to reduce the net profits upon business ;  and, as an offset to this diminution of profits, money should be procurable at a proportionately lower interest.  But so long as the Government is paying such exorbitant rates, this desideratum is impossible of attainment.  Should this condition of things be long continued, the mercantile interest must be ultimately seriously impoverished, and the progress of the country retarded.”

Who, then, does profit by all these contrivances for raising the rate of interest—for improving the condition of those who live without labor and for destroying public and private credit ?  The answer to this question is found in the fact that there are always certain persons who know exactly when to buy and when to sell, and who do buy and do sell at precisely the time when profit is certain to result therefrom.  For the benefit of such persons, and not that of the people at large, is, to all appearance, the Treasury now administered ;  and if such a course of administration shall not have the effect of bringing about final repudiation of the debt, it will need to be recorded as one of the most wonderful facts in financial history.

How all this affects the general power to contribute towards payment of either principal or interest of the debt, may be understood by those who study the following figures, representing the state of the Treasury at the opening of the year, and on the first of the present month :—

On deposit [estimated]
In Sub-treasury
$ 25,770,000
$ 2,770,000
$ 91,176,000
$ 25,578,000
$ 2,578,000
$ 71,440,000
With no diminution whatsoever of the debt there is, as here is shown, an actual loss of $20,000,000 in the means with which to meet it.  Deducting this from the payments of the month, $42,700,000, we obtain as the actual revenue less than $2$,000,000, or the equivalent of $270,000,000 for the year ;  and even that obtained at the cost of sacrifices on the part of tax payers that find no parallel in any portion of our financial history.  Seeking compensation therefor, the unhappy sufferers must be content to find it in the fact that to banks, bankers, and Treasury agents the system has proved so largely profitable that they now propose to establish in Washington a journal charged with the especial duty of advocating that policy under which the many are being deprived of bread, while the few become daily richer ;  that one under which the burthen of the debt increases with every hour ;  that one which tends to carry us forward, and with daily increased rapidity, towards final repudiation.

§ 6.  “ The Secretary of the Treasury holds despotic power over the material interests of the country, and it is now known by the disclosures made, beyond truthful denial, that the authority he holds has been used, ignorantly or by design, to promote private ends at public cost.

“ It is an error to suppose that the Secretary is deprived of the power of contraction or inflation of the currency.  He may sell bonds or gold at his pleasure, privately ;  collect the proceeds of sale in currency, withhold it from circulation, and thereby reduce it temporarily, as certainly as if the notes were cancelled ;  and then, by payments from the Treasury, inflate again.

“ Prior to the war, the uniform practice of the Government was to offer to public competition the bonds of the United States, and awarding them to the highest bidder.  Then no secretary would have dared to sell bonds without special authority, and by public sale.  The employment of brokers was unknown, and transactions, such as have been reported, would have insured prompt inquiry and condemnation.

“ The exigencies of the war appeared to justify another course of action, and many thoughtful and experienced men saw its dangers, and warned the public of the threatening peril ;  but they warned in vain, and that which was intended to be only temporary, became the established practice, and the prevalence of a remarkable and unaccountable apathy in regard to the financial interests of the country, doubtless protected the officials and their friends from the investigation which now is being instituted.  Encouraged by the indifference referred to, and stimulated by the hope of vast additional gains, the famous ‘Sherman Funding Bill’ was conceived ;  a scheme doubtless the product of much thought and of many minds, fertile in expedients, and skilled in the art of applying language to conceal and not express their thoughts and designs.”

In the views thus expressed by the able author of an anonymous paper just now published nearly all will now fully coincide.  Entire as was its confidence in the integrity of the then finance minister, and fully as that confidence has been justified by the fairness and openness of his conduct throughout the war, Congress certainly, and greatly, erred in granting to any one, however honest or however able, an exercise of power so absolute as was that granted to Mr. Chase.  Necessity alone could at all have justified such a course of action.  With the close of the war that necessity ceased, and thenceforth should there have been a change the most complete, publicity being enforced and the finance minister of the day, be he whom be might, being thus freed from the suspicion that must necessarily arise when hundreds of millions are negotiated with a privacy so perfect as to have given no little color to the charge that millions, if not even tens of millions, had been made so to pass into the hands of the negotiators as almost entirely to defy detection.4

Mr. Chase and his immediate successor courted publicity ;  whereas, their successor, the present Secretary, so entirely avoids it that, outside of a certain magic circle, few pretend even to guess at the shuffling of the cards till the game has throughout been played, and the winnings bagged.  The former always used words calculated to “express,” and not to “conceal their thoughts and designs”—never saying black when they really meant white.  With the latter all is different, his teachings and his practice being uniformly in conflict with each other, black meaning always white, and vice versâ, as will now be shown.

Professing publicly a desire to prevent inflation and stigmatizing as “inflationists” all who fail to see the public advantage that is to result from building up the fortunes of banks, bankers, treasury agents, and all others within the ring, we find him privately injecting tens of millions into those great centres of speculation in which single millions do more toward producing the inflation he affects to deprecate than could be done by tens of millions of legal tenders given to the Centre and the West :

Professing publicly a desire to bring about financial stability we find him privately exchanging millions and tens of millions of gold for the “paper money” he so much dislikes ;  and then again as suddenly, and as privately, reconverting millions of this greatly despised “ paper money” into gold :

Publicly professing a desire to prevent “speculation” he is constantly and privately engaged in bringing about the changes desired by speculators, so well succeeding that the chill and the fever now follow each other with a rapidity wholly unparalleled in our financial history :

Publicly professing a desire to prevent “successful combinations to bring about fluctuations for purely speculative purposes,” the chief business of the Treasury now, to all appearance, consists in privately organizing such combinations :

Publicly professing a desire to keep the debt at home, the private arrangements all tend towards compelling small holders to part with their little property, and thus to furnish the bonds required for foreign markets, and for facilitating those imports by aid of which, alone, the Secretary can at all hope to obtain the gold whose payment he now so freely promises.

The regular recurrence of this opposition between theory and practice may, perhaps, be attended with some disadvantages ;  but, on the other band, it has the recommendation that when we desire to know what it is that the Secretary means privately to do we need only to seek for the apposite of that which publicly be recommends as proper to be done.

Looking thus always one way while rowing in another the Secretary furnishes a subject for “speculation” the like of which the financial world, here or elsewhere, till now, has never seen—a whole people “speculating” as to how it is that the cards are being shuffled.  Detectives innumerable hover about his path, at one moment announcing that 10-40s are being smuggled into circulation, and at the next that offers for millions of the same had been privately refused.  Closely following public efforts at stimulating offers of 7-30s comes the announcement that the Secretary had privately ceased to purchase.  On one day we learn that gold had been gradually smuggled out ;  while on the next it is suggested that, determined to hold the gold operators in check, the Secretary has determined to make no further sales.  These things may, or may not, be true, but there is always one set of men that certainly knows, and that gains by all the movements, those looking to contraction as well as those by means of which “inflation” has so frequently, so privately, and so profitably to the ring, been brought about.

In thus privately arranging for so many hundreds of millions, and thus exposing himself to suspicions so injurious, the Secretary may, perhaps, be misled by the belief that he is rendering public service, and that, Curtius like, he is sacrificing himself for his country’s good.  If so, it being wholly wrong to accept such sacrifice, Congress should at once prohibit private arrangements of any kind whatsoever, and insist on the most perfect publicity being given to every financial operation, large or small.  By so doing it would relieve the Secretary as regards the future, but what of the past ?  Must be forever be exposed to charges of the malevolent to the effect that he had been prompted by private reasons to the enormous changes above described as having occurred in the past half year ?  Assuredly not.  Congress would seem bound now to afford him opportunity for showing that in all those extraordinary movements he had proved himself as pure as had been either of his distinguished predecessors.  Justice would seem to require that he should, too, be allowed the fullest opportunity for showing that there is not the slightest reason for the belief, now so universal, that the exits and the entrances of the Treasury are so carefully guarded as entirely to prevent effectuation of any public arrangements in regard to disposal of the public revenues.

The financial despotism now here established cannot be paralleled in any civilized country of the world.  Determined to maintain it in its full effect, and utterly careless, apparently, in regard to reputation, the Secretary has resisted with all the force of eloquence and, of patronage, every attempt at limitation of his power, or at restoration of publicity in his course of operation.  Congress has, however, now rebelled, having prohibited further reduction of the greenback currency, and provided for deposit in the sub-treasuries of nearly all the public moneys.  So far it has done well, but further steps are needed.  The Secretary ought to be instructed to furnish greenbacks to the banks in payment of the many millions that the interest-bearing notes exceed the 50,000,000 of three per cent certificates.  The effect of such a measure would be only that of causing the banks to retain their reserves in notes not bearing interest.  It would make little, if any, addition to the currency, while it would save the annual $2,000,000 of gold that would otherwise be required for payment of interest on the five-twenties with which the Secretary proposes that they be replaced.  It would, too, greatly limit his power to manufacture gold bonds for exportation, than which there are few things to be so much dreaded.

Further, the Secretary should be forbidden to make any farther sales of gold, and should be thus deprived of all power for disturbing the money market in the way that has been above described.  For this there are however, other and important reasons as will readily be seen by those who mark the fact that the sale abroad of bonds is steadily declining, and with it the power to purchase that foreign merchandise to whose import, alone, we are to look for the gold required for payment of interest on the bonds the Secretary has already so profusely manufactured.  The day is now near at hand when custom-house receipts must fail to meet the gold demand ;  when the small amount that thus far has been boarded will be greatly needed ;  and, when the value of the declarations now being made in regard to perfect maintenance of the public faith will be severely tested.  What is the present tendency of affairs is shown in the fact that Pennsylvania sixes, payable principal and interest in lawful money, are preferred, at equal prices, to treasury obligations that are payable, principal and interest, in coin that now sells at 140 ;  and that, without a total change of system, must at no distant date command a very much higher price.5

What the country now needs is restoration of that confidence of our people in each other, and of the whole body of the people in the honest management of their financial affairs, which so fully existed down to the date at which the present Secretary entered upon their management ;  both of which have now so entirely disappeared.  To that end it is indispensable that Congress resume the control that so fully existed before the war, dictating orders and not accepting them, as has recently been so mach the case.  Let that body tell the Secretary what to do and how to do it ;  let it prohibit, under heavy penalties, such private arrangements as have been above described ;  and there will be then reason for hoping that the day may yet come when a people who thirty years since paid oft, at par, a debt bearing but three per cent. interest, may cease to be compelled to beg for money in all the markets of Europe, gladly paying for the use thereof little less than thrice that rate.

* The most efficient and persistent advocate of the Secretary’s plans for raising the rates of interest is found in the New York Tribune, whose teachings of the day on which we write are as follows :—
    “ The Secretary of the Treasury, if he has any surplus, should use it in paying off $46,244,780 of compounds, and $23,265,000 of three per cent. certificates—together $69,509,780 ;  and if he has no surplus, should sell six per cent. gold bonds enough to pay them as they mature.  Congress and the Secretary should lose no time in undoing the financial blunder made during the rebellion.  The first step should be the funding of every currency obligation with gold-bearing bonds, leaving nothing to be cared for next December but its ‘due-bills,’ called legal tender.”

** This is the amount that was on deposit on the last day of October, whereas the quantity in the treasury is for the first of November.  This may, perhaps, account for the fact that the former appears to be somewhat in excess of the latter.

These are estimates, there being no published account of later date than October 31st.  The amount appears, throughout the year, to have varied between 22 and 25 millions.

4 “ The administration of the Treasury Department under Secretary M’Culloch reminds one of the rebuses which appear in certain ambitious periodicals, with the provoking note—‘ Solution in our next.’  It is a perpetual rebus which keeps us all guessing wildly day and night, until the appearance of the next monthly exhibit from the Department puts us out of our pain by furnishing the solution.
    “ Everybody guessed the rebus for May.  The blunder of the Department was so enormous that nobody needed to wait for the June statement to learn that thirty millions of gold had been thrown away at 15 @ 20 per cent. below the market, and that somebody had thereby realized a neat little profit of three or four millions.”—Harper’s Weekly.

5 Seven-thirties convertible into gold six per cent. bonds sell at 107½, State bonds, payable in 1881, commanding 108½ to 109.