Ideas for a Science of Good Government
by Hon. Peter Cooper, LL.D.
As this compilation of ideas from my intercourse and correspondence with statesmen, divines, scholars, artists, inventors, merchants, manufacturers, mechanics and laborers, may contribute to a Science of Good Government, based on a strictly national currency, tariff and civil service, see p. 212, I consider it my duty to transmit them to posterity in book form.
In our young country these three topics are of the greatest importance, and must be regarded as the foundation for all governmental superstructures. When this nation, numbering now fifty millions, can realize that before these three topics all others must dwindle into insignificance, she will have attained the highest degree of political wisdom. I have had much personal experience in practical business and money affairs for the last seventy years : over thirty years ago I learned finance with our veteran financier, Albert Gallatin, who was Secretary of Treasury under Jefferson and Madison. He was President of The New York Board of Currency, of which I was Vice-President. About that time I corresponded with Secretary Robert J. Walker on the tariff. Since then I have been engaged in large financial, manufacturing and educational operations, such as railroads, telegraph, Atlantic cable, iron, steel, Cooper Institute, etc. . . .
This varied experience and my daily reading enabled me to think, converse, speak and write on finance, tariff and civil service, which I tried to combine in this volume. Since the Rebellion broke out, I sent petitions and letters to Congress, to the President and his Cabinet, and raised my voice in favor of a strictly national currency, a protective tariff, and a wise civil service, as will appear in the following pages.
PETER COOPER.9 LEXINGTON AVENUE, NEW YORK,
PETITIONS, ADDRESSES, LETTERS
COIN AND PAPER CURRENCY.
PETITION TO CONGRESS, DECEMBER 14, 1862.
To the Honorable Senate and House of Representatives of the United States :
Your petitioner desires most respectfully to call and fix the attention of Congress on the unmeasured consequences, that now depend on a speedy adoption of a financial policy, calculated to maintain the force and power of the Government in its struggle for the nations life, and at the same time to give the required stability and facilities to enable the people to carry on to the best advantage all the agricultural, mechanical, and commercial interests of the country.
Your petitioner believes, that every other act of legislation dwindles into insignificance, when compared with an act, on which all business interests are more or less dependent, and connected with the honor and life of the nation itself.
In view of consequences and responsibilities so tremendous, your petitioner does most humbly pray, that no time should be lost in perfecting laws, that will embody the highest wisdom and virtue of an intelligent people, for the peoples benefit.
In the opinion of your petitioner the Constitution makes it the solemn duty of Congress to coin money and regulate the value thereof, of all that shall be known and used as money throughout the United States. The faithful performance of this duty by the Government will more effectually secure the rewards of labor to the hand, that earns it, and more effectually aid all the useful industries of the country, than any and all other measures, that can be adopted.
PETITION TO CONGRESS.
To the Honorable the Senate and House of Representatives of the United States :
Your petitioner, in view of the paralyzed condition of all the varied industries of our country, causing, as it has, an almost universal embarrassment by the shrinkage in values of all forms of property, thereby rendering it impossible to give the needed employment to suffering millions, who have nothing to sell but their laboryour petitioner desires humbly to represent, that in his opinion a single act of Congress, added to the lately passed financial law, will secure for the United States the best paper circulating medium, that our country or the world has ever seen.
To do this it is only necessary to set forth and declare, that the present legal tender money, now in circulation, shall never be increased or diminished, only as per capita with the increase of the inhabitants of the country, and that the Government shall receive the legal tenders in payment for all duties and debts, with an amount of currency equal in average value to the average premium, that gold has borne during the month preceding the maturing of all contracts.
To secure to our country a tool, as Bonamy Price calls money, of such inestimable value, and at the same time secure for our country a degree of stability in the operations of trade and commerce hitherto unknownto do this it will only be necessary for the Government to receive legal tenders in payment for all duties and debts, etc.
This plan will make it the interest of every man to bring and maintain the legal tenders on a par with gold in the shortest possible time. If this can be done it will give permanence and stability to that which measures all the property of the country, etc. . . .
There is no way, by which Congress can so effectually establish justice and promote the welfare of a nation as by securing for it a just and uniform system of money, weights, and measures.
I learned from my friend, Silas M. Stilwell,* who was the confidential adviser of Secretary Chase, at the time of our nations greatest peril, that he saw my petition in the hand of Secretary Chase, at the time when he was saying, that he had some fifty millions of bills audited, and not a dollar in the Treasury. In such a dilemma with the fact before him, that the first four loans, called for, were promptly taken up, and more money was offered at five and six per cent. than the call would allow them to take.
Mr. Stilwell stated, that he had labored with Secretary Chase for two or three weeks, trying to show him, that Treasury Notes, based on the credit of the nation and made receivable for all forms of taxes, duties, and debts, would be gladly accepted by the people, and that without a promise to pay gold.
Mr. Chase was determined, that no paper should be issued, without promise to pay gold and silver on demand. Mr. Stilwell labored for many days to show how interest could be used as a floating power for Treasury Notes with the Legal Tender principle as a forcing power, which would float an amount of Treasury Notes, that would meet all the expenses of the war.
This plan would have been, in effect, like the plan, recommended by Franklin and Jefferson. Benjamin Franklin says, that no plan has yet been devised, equal in all its advantages for a currency to Treasury Notes, made a general Legal Tender.
Having labored for many days to convince Secretary Chase without effect, Mr. Stilwell informed him, that he believed his services were at an end, and that he should leave that evening for his home in New York.
Mr. Stilwell informed me, that he had but just got home, when he received a telegram, begging him to come immediately back, as he had learned, that the banks had all failed to pay specie, as they had promised.
Thomas Jefferson unites with Franklin, and declares, That Treasury Notes, bottomed on taxes, bearing or not bearing interest, is the only fund, on which the Government can rely for loans ; and it is an abundant one for every necessary purpose.
The plan, recommended by Thomas Jefferson was and is in exact accordance with the imperative demand of a Constitution, expressly formed to establish justice.
Mr. Stilwell returned at the request of Secretary Chase, who then asked Mr. Stilwell to write out the propositions he had made. On the urgent request of Secretary Chase, Mr. Stilwell wrote out his plan for the issue of Treasury Notes on the principle Thomas Jefferson had declared, was the only one, on which the Government could rely for loans.
Thomas Jefferson, in view of the banks, that then existed, declared that bank paper must be suppressed, and the circulating medium must be restored to the nation, to whom it properly belongs.
Secretary Chase was compelled by the overwhelming powers of a terrible war to finally consent to adopt the plan, written out by Mr. Stilwell ; and he says : he was forced to cut up small pieces of paper to circulate as money, based on the credit of the people, whose property it was intended to represent.
That paper was real fiat money, with the stamp of the Government on it, declaring its first issues as a full Legal Tender in payment of all debts, public and private ; and at the option of its owner convertible into a bond, bearing five and six per cent. interest for the amount so converted. There has been no day since when that money was not worth as much as gold.
During the last twenty years I have sent thousands of documents broad-cast over our country. In all I have written, I tried to make plain the fact, that the Government of our country has, by a train of unconstitutional, invalidating financial laws wrongfully taken from the American people, since our late war, more than seventeen hundred millions of dollars, that were actually paid by the Government for value received in the labor and property, that were used and consumed in the prosecution of the terrible war, through which we have passed.
It fell to my lot in the early part of my business life to learn an invaluable lesson from the disgraceful failure of the United States Bank.
I saw that bank, with its thirty-five millions of dollars capital, authorized to issue four dollars of paper for every dollar of their capital, and all in promise to pay silver and gold on demand. I knew, that such a bank, with its branches in every state, would be a power, that our Government could never control.
S.M. Stilwell, in his essay on banking, says : We, as a nation, have experimented with, and dealt in all kinds of credits from individual to national, etc. . . . We had private bankers, State banks, and twice we have tried national banks ; and all have proved unsafe and unsatisfactory.
The plain command, found in the Constitution to regulate commerce between the States, has been neglected by Congress ; and instead of binding the States together for commercial purposes, the money-power has been left to the separate States to be exercised under a doubtful construction of the organic law.
* Peter Cooper wrote this January, 1883 ; original preserved at Cooper Institute.
WASHINGTON AND ADAMS OPPOSED TO HAVE BANK OFFICIALS
OCCUPY SEATS IN CONGRESS.
On page 20 of the Journal of the United States Senate, first session of the Third Congress, commenced at Philadelphia, Pennsylvania, December 2, 1793, can be found the following resolution, offered on the 23d of December the same year, and passed by the United States Senate with but two dissenting votes, and signed by George Washington, President, and John Adams, Vice-President : ANY PERSON, HOLDING ANY OFFICE OR ANY STOCK IN ANY INSTITUTION IN THE NATURE OF A BANK FOR ISSUING OR DISCOUNTING BILLS OR NOTES PAYABLE TO BEARER OR ORDER, CANNOT BE A MEMBER OF THE HOUSE WHILST HE HOLDS SUCH OFFICE OR STOCK.
Yet, a late Congress was composed of one hundred and twenty bankers, ninety-nine lawyers, fourteen merchants, thirteen manufacturers, seven doctors, four mechanics, and not a single farmer or day laborer. This is agreeable to a statement made by Moses W. Field, M.C.
I think this law was invoked to prevent A.T. Stewart, the largest importer of foreign goods, from becoming Secretary of the Treasury.
Why should it not be enforced now to oust speculators from our Congress, where they are making laws in their own favor and against the interest of the people ?
The wise men ; who achieved the Independence, drafted the Constitution and established our Government, well knew that it was unsafe to trust the governmental law-making to bankers, usurers, or any one interested in such business. They knew it was morally impossible for persons, interested in money-lending, not to attempt to legislate in their own favor and against the good of the people.
I ever did and ever shall advocate a purely national currency, as long as I live, as the only remedy against periodic stagnation, caused by special legislation, suggested and voted by banking representatives and speculators in the seats of our Congress.
Washington and Adams tried to imitate the Master, in driving the money-changers out of Congress ; but as yet their legislation has not succeeded as Christ did nineteen centuries ago. We must hope the people will become so enlightened, as to expel them by an overwhelming vote.
Washington declared a fact, when he said, that In exact proportion as we either alloy the precious metals, or pour paper money into the volume of the circulating medium, just in that proportion will everything in a country rise, and labor will be the last, that will feel it. It will not benefit the farmer or the mechanic, as it will only enable the debtor to pay his debt with a shadow instead of a substance.
This was in answer to a letter from a member of the Maryland Legislature, asking Washingtons opinion as to the right of a State to issue paper money. He did not believe in contraction and inflation, that cause periodic panics.
PETER COOPER.NEW YORK, Sept. 30, 1871.
ARTICLE, DATING TO 1863-1867.
The nation, having found itself in a terrible war, and having exhausted all the means in its power to obtain gold and silver to meet the wants of the Government, our people were compelled to see the country overpowered by its enemies, or to resort to a kind of forced loan, drawing from the people by taking all forms of their property and labor and giving them in payment treasury notes, demand notes, and the several forms of bonds in the shape of a currency to obtain the necessary supplies to move and maintain armies, sufficient to save the life of the nation. When the great and good work was accomplished, a work, which gold and silver had failed to perform, then the amounts, so expended for that purpose, should have been regarded as the most sacred treasure of the country, and should have been made the permanent, unfluctuating measure of all values throughout our whole country for all coming time, and never to be increased or diminished, only as per capita with the increase of the inhabitants of the country.
To ordain and secure such an unfluctuating measure of all values for all property throughout the vast extent of our country, and make gold perform its proper function, would have been a compensation of more, than equal value to the country, to more than replace the whole cost of the war of the Rebellion.
The currency, so expended in saving the life of the nation, should have been considered of more value than gold itself ; because it performed a work, that was entirely out of the power of gold and silver to accomplish ; so that every dollar, expended in whatever shape, or whatever kind of value received, became as so much money, placed in the hands of the people, and would not only have enabled them to carry on the war, but to pay the entire debt of the nation without inconvenience, if the amount of the peoples money, found in circulation at the close of the war, had been allowed to remain as the tools of trade, the life-blood of commerce in their possession ; but by shrinking the currency and by taxing the people, and then taking their money to purchase bonds, that were not due for twenty years, when the people were more in need of their own means and the aid of Government, than ever before to enable there to provide for the disbanded army, that had no other means to live, or anything to sell but their labor ; by the shrinkage of the currency, all forms of labor were dried up. The source of all consumption and production was alike destroyed, and a general ruin spread far and wide over our country.
Had the original law, which made paper money receivable for all forms of duties and debts, and convertible into six per cent. interest-bearing bonds, been continued, we would not only have had all our bonds taken at home, but prosperity would have still smiled on our country.
As it is now, the Government has taken from the people the tools of their trade, and has used its power contrary to the interests of the people, in the purchase of bonds not due for twenty years, loading the people with taxes, destroying and breaking up the business of the country.
Nothing short of a compliance with the very first requirement of the Constitution will stay the torrent of evil, and restore prosperity again to our suffering people. The establishment of justice demands, that the people should have the same amount of currency continued, to enable them to pay the debts of the nation, that was required to enable there to prosecute the war.
The Government, having taken all forms of property and labor from the people, gave them treasury notes as an equivalent for gold, as long as they had it ; and when they had not the paper promise of the Government, legal tenders, receivable for debts, taxes,2 etc.
2 From Peter Coopers own handwriting, original preserved at Cooper Institute.
ADDRESS TO THE UNION LEAGUE CLUB, 1867.
Mr. President and Gentlemen of the Union League Club :
I find myself impelled by an irresistible desire to call and fix the attention of every lover of his kind and country on those appalling causes, that have so effectually paralyzed the varied industries of our people. Those causes have been sufficient to shrink the real estate of the nation to one-half the amount it would have brought three years ago ; and that without having shrunk at the same time any of the debts, which had been contracted by the use of money, authorized by the Government of our country. There is nothing, that can be more important, than to find out and remove the causes, that are bringing bankruptcy and ruin to the homes of millions of the most industrious men of our nation. The national policy, which has brought this frightful calamity on our people, should receive the most thorough investigation and the most decided action by the Government of our country. There is but one way of relief out of all this national trouble and sorrow. The people themselves must enforce upon the administration the obligations, laid down in the Constitution, to establish justice, and thus secure the general welfare of the nation. To do this, let us take it out of the power of States or Corporations to make, or unmake, the money of the country. It is the sole duty of the Government to coin money, as the Constitution requires. Let the Government itself, through its Administration, be restrained from meddling capriciously with the currency, and only under permanent laws and a well-understood and predetermined policy, always having reference to the good of the people.
Let us have a national currency, issued solely by the authority and supported in circulation by the taxing power and the solvency of our Government. Such a currency should be fixed in volume, as per capita, to the amount of the peoples money, actually found in circulation at the close of the war ; and it should be made as certain and as permanent in value in its measuring power as the yard, pound, and bushel, by its being made redeemable for all Government taxes and debts, except duties on imports. Our Government is bound by the requirements of the Constitution to make the necessary and proper law, as well as a legal tender money for all private debts. This currency must be always interconvertible with Government bonds at a low rate of interest, as compared with active investment. It should be a currency, which a bank or corporation cannot rightfully issue, enlarge, or contract in its own interest, and which cannot be taken from the hands of the people by the ever-shifting balances of commodities between nations, as is the case with gold and silver, when used as money. It will not be subject to any sudden contractions or expansions, but will be regulated by established law, based on scientific facts and principles of a just system of national finances. The treasury notes can be made just such a currency. This currency can always be kept on an average par with gold, or the currency of any other country, by the encouragement and the support, which it will give to the industry and the productiveness of the country. It will increase indefinitely the countrys exporting power. We will then pay our balances with other nations with our surplus products, and have but little occasion for the use of gold and silver to pay balances of trade. We can in no way become an exporting nation, except by stimulating our own productiveness, diversified and enlarged in every direction of human industry, in which our materials are as good and abundant as those of other nations, and the labor and skill are ready for use, if properly encouraged. For this purpose I believe it will be wise for us to remove all internal taxation, and rely solely on a sufficient revenue tariff to meet the expenses of Government. This subject is very much misunderstood or misrepresented by our own advocates of free trade. It is the surplus productions of foreign countries mostly, that reach our shores as imports, and it is also the surplus capital of the importers and foreigners, that is employed to bring them here. Hence it is but right to tax this surplus for the absolute wants of our own domestic industry and capital. This is precisely what a tariff accomplishes. It taxes the importer and foreigner chiefly, who must find a market somewhere, and those of our people, who will buy and use foreign products, which leave our own good raw materials unused, and our own domestic laborers unemployed. This is violating the first law of natureself-preservation. Let us take care of our own people here at home, as the first duty of our own Government. And let us not make the great mistake of the governing classes in France, England, and Germany, where the wages of the operatives and workingmen are reduced to a bare subsistence.
It is this ignorance or want of patriotism, that stands in the way of the public weal, both in the management of our finances and the adoption of a judicious tariff. The people alone can vindicate their rights, and secure their own welfare, by taking an intelligent and proper interest in the administration of their own Government. Let them require from this Administration a return to the principles of public justice and equal rights. Let the Government be required in some proper way to restore to the people the tools of their trade and commerce, which have been so unjustly and cruelly taken from them. Let there be provision made for the return of the whole of that currency, found in circulation at the close of the Rebellion, which was worked out and paid for by the people in the labor, material, and service, which they had rendered to the Government during our struggle for the nations life. It was a currency, which bad lifted the American people into a state of unexampled prosperity, never before known in this or any other country, and which can be restored to the people by the issue of treasury notes, paid out for the necessary expenses of Government, for the execution of great necessary international works, such as the Northern and Southern Pacific railroads, which, when made, will strengthen the bonds of the Union, and open a vast country, with its untold wealth, for the enterprise and labor of the people. I have sounded these notes of encouragement, warning, and advice time and again ; because I believe they are for the peace and happiness of our country. At my advanced age I have no personal ambition or motive left but the welfare of mankind, and the prosperity of my beloved country. If it were the last word I should utter with my dying breath, I should warn the people of this country against the insidious wiles of professed politicians, who are seeking for the spoils of office and the attractions of powermen, who are ready to lend themselves to all special and partial acts of legislation, if they can only advance their own individual interests. Such men oppose civil service ; because it will curtail their political patronage ; such men barter the rights, the prosperity, and even the bread of the people, in order to share in the spoils and the temporary gains, which are thrown into the hands of a few by a pernicious system of banking, of which the periodical panics of our country bear a frightful record. They are the natural outgrowth of the same injurious system.
My arguments will be confirmed by a reference to the facts, stated in the following letter in relation to the currency by F.E. Spinner, the former Assistant Secretary. Mr. Spinner says, that there was put in circulation, in all the forms of six per cent., five per cent., and 3.65 per cent., of legal tender money, $1,152,924,892, besides the seven-thirties, $830,000,000, which Mr. Spinner says were intended, prepared, and used as currency. This amount had been paid out as so many dollars, and had become the peoples money, which the Government was then and forever bound to receive from the people as legal tender dollars for every form of taxes, duties, and debts. The failure of the Government to do that duty has cost the nation thousands of millions of dollars. It will be recollected by many members of this Club, that we were favored on a former occasion by Prof. White, of Cornell University, with an account of the losses, sustained by the people of France by the use of assignats, authorized by that Government. I have always regretted, that my esteemed friend, Prof. White, had not gone far enough into the true history of the rise and progress of the assignats, to see that the injurious losses, occasioned by them did not arise from an improper action of the republican Government, but from the combined powers of the internal and external enemies of the Republic. This will appear by the following facts : The assignats of France were based on the confiscated property of the clergy and nobility, in which both the clergy and nobility had a deep interest, that led them to denounce the assignats, as based on theft and outrage. There was another royal party, which united in declaring, that their lands had been taken without any of the forms of law, and therefore the title still remained in the clergy. The parties all united in declaring, that the assignats were utterly without any basis to secure their redemption. The parties never ceased to agitate and war on the credit of the assignats. But finding the Revolution too strong for them, and that its cause was being so successfully strengthened by conquering the enemies of liberty and of the nation, that other nations were yielding to its power, that its armies were victorious, and that its principles, as developed by the Constitution and laws, were such as reason and humanity approved, history tells us, that all the enemies of the new French Government united in an effort to destroy the power of the new Government by circulating counterfeit assignats in every direction. The counterfeiting commenced in 1792 in Belgium and Switzerland, and was used extensively, as the best means of destroying the power of the Republic. It was found by the nobility that Belgium and Switzerland were too much in sympathy with the revolutionists to be trusted. They then extended their operations to London, where they found more scope and greater opportunities for uninterrupted work. History charges, that England lent her aid by allowing seventeen manufacturing establishments in operation in London, with a force of four hundred men, in the production of the assignats.
It was found that 12,000,000,000 of counterfeit francs had been circulated in France, when only 7,860,000,000 of francs had been issued by the Government, showing, that the danger of an over-issue was from the enemies of the Government, and not from the Government itself. The assessed value of the property, on which were based the 7,860,000,000 of francs, was, in 1795, 15,000,000,000, showing, that as long as the confiscation of property was maintained by the Government, the assignats had good security for their redemption.
It is more than probable, that we shall see again what are called prosperous times, when the banks have annihilated our greenback currency, and have substituted their own money, on the old and false pretense of a specie basis, which makes their money as good as gold, until the gold is really wanted. But I warn my countrymen, that this will be a baseless prosperity, that can only last while there are any securities or property, that can be pledged for loans, the loans themselves being puffed up under the conceit, that they are payable in gold ; then another crash will come, and we shall have the same scenes of desolation and suffering, that we have experienced as a people for the past three years.
I do most earnestly beseech the American people to see to it, that their chosen rulers are men, imbued with the spirit and letter of the Constitution, which, after a great struggle, was enacted to establish justice, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity.
TO PRESIDENT GRANT.
NEW YORK, December 10, 1873.
Honored and Respected Sir :
Allow me to say, that the millions of the unemployed people throughout our country look with anxious hope to our Government for the adoption of some plan, that will inspire confidence in those, who have the means, to give the needed employment, which alone can save those millions of the unemployed from the desperation of starvation, a condition, which they see rapidly approaching, and they have nothing to sell for their relief but their labor. It is fortunate for our country, that the Constitution has provided, that Congress shall have power . . . to lay and collect taxes, duties, imposts and excises, to pay the debts, and provide for the common defence and the general welfare of these United States.
There is nothing, that will so effectually relieve their wants, establish justice, and promote the general welfare, as a uniform system of money, weights and measures. There is nothing more important for the general welfare, than a uniform system in the value of money, as it controls all that is measured by the bushel, the yard, or pound. It measures as effectually the poor mans potatoes, as it does the rich mans robe.
Having been myself a working man through a long and laborious life, I feel for their condition and would gladly better it, if I could. At present, I believe, there is not less than a thousand persons depending for their bread on the business, carried on within the circle of our family.
Thus far we have been able to keep two rolling mills running, and also two mills for the manufacture of wire and springs, besides giving employment to some two hundred persons in the manufacture of glue, oil and isinglass.
We have four blast furnaces now blown out for the want of sale for the iron they would produce.
The mining of ore for these furnaces must soon stop, unless the furnaces can be put in blast. No one can contemplate the continuance of the present state of things, without a feeling of horror at the prospect.
I herewith send you a printed copy of a plan, that I sent in 1869 to the Senate and House of Representatives.
I think you will agree with me in the opinion that, if the plan for regulating the currency, then presented, could have been adopted, it would have saved us from the ruinous panic, through which we are now passing, and would have secured for our country the resumption of specie payments in the shortest possible time, and that without doing violence to any of the great interests of our country. If this plan could even now be adopted, it would do more to inspire confidence and revive the trade and commerce of the country, than any of the plans, that have been proposed. The whole people will soon come to understand, that there is no form of wealth, that can be made more secure than a legal tender paper currency, that shall only be allowed to increase as per capita, with the increase of population. . . .
When such a currency is provided and made as secure as a bond and mortgage on the whole property of the country, it will not be long before it will be found, that the principal value of gold and silver will be to make purchases and settle balances with foreign countries. . . .
With an ardent hope, that the best means may be adopted to secure the highest welfare of the nation,
Yours with great respect,
3 From Peter Coopers own handwriting, preserved at Cooper Institute.
PETITION TO CONGRESS.
Gentlemen :The bill for the refunding of the 637,000,000 of five and six per cent. bonds, falling due during the year 1881, that are yet unprovided for, is attracting very great attention and exciting much interest among the people in all parts of the country.
The question of most importance to the people, in relation to this bill, is not the one as to how this part of the debt shall be refunded, but as to how it shall be paid.
There are evidently two interests involved in the discussion of the question ; one of these interests is that of the masses of the people, who have the debt to pay, and the other that of bondholders and bankers, who are to receive the interest and the principal to be paid. The people want to be relieved from the burden of interest and debt, in the shortest time and at the least possible expense, whilst the holders of the bonds evidently want their claims perpetuated as long, and to obtain as much as possible out of it.
Is it not the positive duty of Congress to legislate for the greatest good of the greatest number ? I fear they are consulting far too much the interests of the small number of bondholders, who want the debt perpetuated, and not those of the masses, who have the burden of debt to bear.
The bankers want the bonds, coming due, refunded into those bearing as high a rate of interest as they can obtain, and having a long time to run, on which, under the National Banking Act, they can secure 90 per cent. in bank notes, which are just as valuable to them as the money they invest in the bonds. By this means they are able to obtain a double interest out of the people on about every dollar of the debt thus refunded ; one on the bonds they buy, and the other on the bank currency they receive from the Treasury, which they loan to the people.
Now, I ask you as intelligent men, why should not the Government issue its currency for the benefit of all the people in the form of Treasury notes, made receivable for all forms of taxes, duties and debts, and as Thomas Jefferson said, bearing or not bearing interest, as the case may be ; and which, he said, constituted an ample fund for every contingency, that may arise. These notes may be redeemable in coin or receivable at Post Office Savings Banks, where a rate of interest is paid, that will keep them at par with coin. Why not use this currency to buy gold and silver bullion and coin it, and with this coin, and with the hundreds of millions now idle in the Treasury, pay off the bonds, falling due as fast as possible, and thus stop the interest on them, and relieve the people from the debt entirely ?
Do you not think, that United States Treasury notes, thus issued, would be just as valuable for currency, as are the notes of the National Banks ?
Cannot the Government keep its notes at par with coin, as easily and more permanently than can the National Banks ? Cannot the Government, by the taxing power it possesses, command nearly all the gold and silver bullion, and does it not have the absolute control of the coinage of such bullion, and by these means will it not be able to redeem its notes in coin with greater certainty, than the banks can their notes ?
The Secretary of the Treasury, on page 15 of his last annual report, informs us that the amount of United States notes, presented for redemption for one year prior to Nov. 1, 1880, was only $706,658 ; while the amount of coin, or bullion deposited in the Treasury, Assay Office, and the mints, during the same period, was $71,396,535.67 ; and that those deposits of coin and bullion were paid for in United States notes and silver certificates. From these facts it must be self-evident to all, that the people prefer Treasury notes to coin, and that there is a demand for $101 of Treasury notes to $1 of coin.
Do not these facts also show, that the people prefer the legal tender Government Treasury notes to either gold or silver coin, or to any other kind of currency ?
Secretary Sherman, on page 14 of his last annual report, also says :
United States notes are now in form, security and convenience, THE BEST CIRCULATING MEDIUM KNOWN.
Ordinarily the superior convenience of these notes will, as at present, make a greater demand for them than for coin.
The United States note, to the extent that it is willingly taken by the people, and can, beyond question, be maintained at par in coin, is the least burdensome form of debt.
Secretary Sherman tells us also, that with the notes now in circulation, The public saves over seven millions of annual interest, and secures a safe and convenient medium of exchange, and we have the assurance, that a sufficient reserve in coin will be retained in the Treasury, beyond the temptation of diminution, such as always attends reserves, held by banks.
Now I ask you, gentlemen, if these statements of Secretary Sherman, who is regarded as one of the ablest and soundest financiers of the world, are true, what possible objection can there be to replace the present notes of the National banks with United States Treasury notes, as was recommended by the late John R. Williams, President of the Metropolitan Bank of New York City some years ago ? If the people prefer these notes to coin ; if they are the best currency ever issued ; if they save interest on the public debt ; if they are readily maintained at par with coin, why not have all our paper currency in United States Treasury notes, instead of bank notes ? There is not the slightest doubt in my mind but that, if the Government should issue its Treasury notes, made receivable for all forms of taxes, duties and debts, and at the option of the Government made redeemable in coin, or received at Post Office Savings Banks, it could issue an amount equal to the whole $637,000,000 of bonds now due, and the people would give coin or an equivalent in coin, in labor or in any property they have to dispose of, for every dollar of such notes issued.
While members of Congress are spending days and weeks, discussing the question, as to whether the bankers will buy 3 or 3½ per cent. bonds and Treasury notes at par, the people stand ready to take these Treasury notes at par, even if they bear no interest whatever.
If the $345,000,000 of bank notes, now in circulation, are withdrawn, and Government Treasury notes issued to take their places, and these Treasury notes used in cancelling the bonds referred to, over $20,000,000 of annual interest could be stopped at once. Or, if these notes were used to pay for labor and material in the construction of public works, they would complete three lines of double track railroads from the Atlantic to the Pacific, and build fifty first-class ocean steamers, which the people could have for use at the bare cost of running expenses.
Is it right for the Government to donate to bankers so much money, which, if given to the people in payment of public improvements, would add such enormous sums to our national wealth, or if used to cancel the bonds, would relieve the people from such a burden of interest ? If the paper notes in circulation were all in Treasury notes, and these notes were used as here directed, the industries of the country would be so stimulated, that the annual revenues of the Government would provide funds for cancelling the public debt as fast, as it becomes due, as is now readily being done by France, under her admirable system of public works.
Herewith I enclose a printed slip, which contains some very important facts and figures, embodying my views in reference to the funding and payment of the National debt. I will thank you most sincerely if you will give them your most careful consideration. The truths they contain can be verified from the records of the Treasury Department, and by any skilled accountant.
You will discover, by verifying these figures, that by substituting Treasury notes and using the idle coin in the Treasury and the $100,000,000 of annual surplus revenues of the Government, that the public debt can all be cancelled in about eight years at a saving to the people of $894,000,000 over the sum required, if this portion of the debt is refunded into twenty-year bonds, as has been proposed.
I believe that, if the policy here indicated is adopted by Congress, that its members will be entitled to the gratitude of the whole country, and by relieving them from the burden of a National debt, and greatly promoting the National industries, they will make this the most prosperous nation on the face of the globe.
One of the great benefits to be derived from the use of United States Treasury notes in place of bank notes, will be that it will give the people a volume of currency, which will be uniform, and which will not be subject to inflation and contraction, as bank currency has always been. It is a principle recognized by all writers on political economy, that other things being equal, the volume of currency determines the prices of all property, and that, where that volume is inflated or contracted, prices are increased and diminished in a like ratio. Under the present National Banking Act, the bankers have the power to inflate the currency to within about 10 per cent. of the entire bonded debt or to $1,600,000,000, and then contract it as much as they choose. You can imagine how disastrously such expansion and contraction must work upon the business of the country, and what enormous profits the bankers, who have control of the volume of currency, are able to realize by using the power the people thus place in their hands. With all our paper currency in United States notes, no such inflation and contraction could possibly take place. No bill, affecting the volume of currency, could be passed, except after the most careful consideration and thorough discussion by the wisest men in the National councils, and by the press and people of the entire country. While under the present National banking system, a few bank presidents, in some back parlor, can inflate or contract the currency to the extent of hundreds of millions of dollars, without the people knowing anything about it, until many of them find themselves on the verge of bankruptcy.
If our paper currency is all in Treasury notes, the volume can be so regulated by Congress as to bear a uniform relation to the wealth of the nation, and be increased per capita as the population and business of the country increase, and the contraction of such volume be forever prevented, and the purchasing power of money be made as uniform as the measuring power of the yardstick or pound weight.
Such a currency would, not only give the people uniform prices, but unparalleled prosperity in all departments of business. It would lessen crime, promote virtue and make us a free, happy and intelligent people.
Let me entreat of you, gentlemen, to do one thing for the people, before you adjourn, if nothing more : ATTACH A CLAUSE TO THE REFUNDING BILL, MAKING IT OBLIGATORY UPON THE SECRETARY OF THE TREASURY TO ISSUE UNITED STATES TREASURY NOTES TO TAKE THE PLACE OF THE NOTES OF ANY NATIONAL BANK, THAT MAY RETIRE ITS CIRCULATION.
Every serious contraction of the currency works disastrously to business, and, if a 3 per cent. refunding bill is passed, the banks, many of them, are threatening to retire their circulation. A clause of this kind would obviate any difficulties, that might arise from such a course, and would place the business interests of the country beyond the power of banks to materially disturb them.
Yours with great respect,
ARTICLE IN THE NEW YORK TRIBUNE, NOVEMBER 21, 1874.
SIR :I have read the able and most interesting letter, lately published in The Evening Post by my honored and respected friend, the Hon. Charles OConor. That letter brought to my recollection a conversation, held with a distinguished lawyer of this city, some forty years ago. In that conversation the counsellor was exceedingly severe on Gen. Jacksons war on the United States Bankan institution, that he regarded as an indispensable means to promote the general welfare of the nation. I saw, that the counsellor had entirely overlooked the frightful evils, brought on the country by the paper money, issued by that bank during the first four years of its operations, when it was found to have issued $40,000,000 of paper money, and had in its vaults only $300,000 in gold to redeem it. When this fact became known the President had to flee for his life. Langdon Sheves, a distinguished gentleman from Charleston, was invited to take his place as President of the bank. A council was then held for five days, when it was determined to curtail their accommodations 20 per cent. per month, by which means they barely saved the bank, and literally ruined all, who were in debt by the shrinkage of all values throughout the country to less than one-half the amount, that property had sold for under the inflation of prices, caused by the enormous amount of paper promises to pay gold, that had been in circulation.
This should be sufficient to show the ruinous policy of allowing anything to be used as a money measure of the value of property or labor, that has not in it the evidence in real value of gold actually dug, or a mortgage on the whole property of the country to secure its final payment.
After the counsellor had completed his severe censures on the policy of Gen. Jackson, I ventured to say, that I would, if he had no objection, give my opinion of what would be a true financial policy for a new nation. I then said, that I would suppose a case to illustrate and bring near home what appeared to me a true financial policy, that a nation unfettered by debt should adopt.
In order to find out where we have drifted, I will now ask you to go with me through the rise, progress, and development of two nations. To do this I will ask you to suppose, that two separate, independent, intelligent colonies had arrived, one on this island and one on the Jersey shore, with only their implements, intending to live on what they could find or get out of the ground by their labor. Suppose the river was the dividing line between them, such a people would soon find, that the exchange of commodities in kind, one with another, was attended with a great expense of time and labor. An intelligent people would look for some means of relief from the labor of carrying heavy materials to places, where they were not wanted for immediate use, in order to be exchanged or bartered in kind for things indispensable to their wants.
If an intelligent community should find gold and silver, that could be obtained with great labor, they would see that gold and silver were durable, malleable, and easily put in forms, convenient for a circulating medium. In order to make it a just means to measure all forms of labor, such a community would employ one man to dig gold and silver, and another to dig corn and potatoes ; and when the man had put his silver and gold in convenient forms for currency, they would see the great advantage they would obtain by exchanging the days labor of gold and silver for the days labor of corn and potatoes, and all other articles, that embodied labor.
This form of currency would circulate from hand to hand, carrying with it the evidence of labor actually performed. The whole community would be delighted with their improvement, as the wear and tear of such a currency would be so small and the saving in labor so great. Such a community would naturally grow and prosper, until their number would so increase, as to make it necessary to send their gold and silver to distant places at great hazard and expense. An intelligent community, instead of sending gold to New Orleans to buy sugar, would naturally establish a safe place of deposit for gold here, and then send an order to New Orleans, that would cause the gold to be delivered to any one holding that order. The order would be more valuable to the man in New Orleans, who wanted something from New York, than the gold itself ; such an order as this would save the expense and risk of sending the gold in both directions.
As it happened in olden times, when it is said that the sons of God (or the sons of good) came together, that Satan (in the form of selfishness) came also among them, so it has unfortunately come to pass in our country ; these men were not satisfied with the advantages, gained by drawing bills on gold deposited, instead of sending gold backward and forward from one distant place to another.
These artful, selfish persons, whose proper business it was to earn their living by digging gold, and putting it into forms convenient for currency, found that they were working just as hard as the men, who were digging corn and potatoes. These men saw promises to pay gold on demand, passing freely from one hand to another. The cunning man, whose business it was to dig gold, says to his weak-minded neighbor : You see, that those paper promises are just as good as gold, as the people buy everything they want with them ; if you will join with me, we will get a charter, that will enable us to get our corn and potatoes with much less hard labor. They at once apply for a charter for a bank. If objections should be made to giving them one, such objections are quieted by giving those, who object an interest in the stock.
In this way pictures, called money, encouraged by legislative acts, with all the other forms of special, partial, and class legislation, have filled the mind of the people with false hopes of living without labor, and have thus made paper money the grand demoralizer of the nation.4
I wish you to keep the supposition in view of two independent Governments, only divided by a river. Bear in mind, that one of these Governments continued the use of gold and silver, and drafts on the deposits of gold, while the Government on the opposite side of the river chartered banks, with the power to pour paper money, promising to pay gold on demand, into their circulating medium. The natural consequence of pouring paper money into our circulation would be to raise the prices of all forms of property and labor under the Government, that issued paper money.
The prices of everything, having been raised on one side of the river, the people would naturally go to the cheap labor Government on the other side of the river to buy what they required. This trade would go on as long as their banks continued to pay specie on demand. It would not be long before the people, that inflated their currency with paper money, would find, that their trade was going over to the Government, that continued to measure all their property and labor by a gold standard. That Government would undersell the Government, that had raised the prices of all property by their use of paper money. The people in the Government of inflated currency would soon ask for a tariff to protect them against the cheap labor on the opposite side of the river, and in proportion as their prices of all labor and property increased in cost, they would find an excuse to ask for more banks and paper money, as we have done. In the course of time men would go to the banks and demand gold in large quantity, when it would be found, that the banks had promised to pay gold on demand, when it was entirely out of their power.
The men, who ought to have been digging gold, had got their corn and potatoes for paper promises without work, and as paper money was easily made, they were enabled to buy finer houses, more costly furniture, and live more expensively, and thereby tempt their neighbors to borrow these paper promises to pay gold, and give mortgages on their property, in order to live in the same style and course of extravagant expenditures as their neighbor the banker.
Finally, peremptory demands would be made for gold, as they were on the old United States Bank, when it had issued $40,000,000 in paper, having but $300,000 in gold to redeem it. A paper currency, when made a mortgage on the whole property of a new country, should never be allowed to exceed the amount of gold and silver, that would circulate, if there was no such thing as paper money allowed, unless it becomes absolutely necessary to increase it to save a nations life.
In the course of my argument with the counsellor, I endeavored to show the terrible power, that the old and the new United States Bank, with its branches, had exerted in every State. I believe it can be shown, that such a bank, with its branches in all the States, would spread a net of temptations through the community, too great for poor human nature to bear. It would do this even with a good man in the control of the main bank. The good man would see, that as the banks increased their loans, prices would rise, and people increase their expenses of living, until the good president would feel it his duty to contract their accommodations, in order to check their extravagance. Such a president would be tempted to say to himself, I certainly have a right to buy or sell with the property, that I had before I was made president of the bank. He therefore sells out all he wishes at the high prices, and tells his friends they had better sell, as they will be able to buy everything cheap, as soon as the bank withholds the accommodations, on which their customers depend.
The same temptation to make a fortune out of the ruin of their customers was presented to the president of every branch bank in every State. As soon as an order was received from the mother bank, directing branch banks to curtail bank discounts, the presidents of all the branch banks would then be tempted to sell all they could before commencing to refuse discounts, in compliance with the order of the mother bank ; as they would be sure that all property would fall in proportion to the extent of the contraction of the discounts, on which the general business was dependent. As soon as it was believed, that property had fallen to the lowest point, all the presidents and the directors of the mother bank and its branches would, not only buy property with the means they had before they were made presidents, but those of them, who were very anxious to make a fortune in a short time, would use their opportunity in buying up property on credit, at the ruinous rates, at which it would have to be sold to settle the claims, held by the bank. The presidents and their friends would feel perfectly safe in buying with money and credit, knowing as they would, that property would again rise rapidly as soon as bank discounts could be freely obtained.
I think you will agree with me in opinion, that Gen. Jackson was right in doing all, that was possible to put an end to an institution, that was building up a moneyed aristocracy on the ruin of the best and most enterprising men of the nation.
This conversation ended as we alighted from the cars, when the counsellor caught me by the arm and said, that he had never seen the subject in that light before. He then agreed with me, that all efforts to get something for nothing are a mistake, if not a species of fraud.
I have, with much hesitation, ventured to address you this letter, as my humble effort to call and fix the attention of the American people on the causes, that have led to the widespread political corruption, that now threatens with destruction all that we hold dear as a nation. I know you will agree with me as to the necessity of finding out the causes of the evils we deplore, before we can hope for the relief, that all should desire.
The great corrupting sin of our country and the world has always been an eager effort to get the property of others, without giving an equivalent in any form of useful labor. To accomplish this purpose, our fathers commenced our history by getting the Indians land without giving them anything of real value, and in the main drove them from their homes by force. . . .
The fact that our General Government failed to prevent the individual States from issuing what were to all intents and purposes bills of credit, in the shape of pictures called money, and a still further inflation of the currency became necessary to save the nation. Inflation and war have raised the prices of all labor and property, and have made all regular business a game of chance, instead of a sure reward of honest labor.
We may well say with the poet :
Tis greatly wise to talk with our past hours,
And ask them what report they bore,
And how they might have borne more welcome news.
All can now see, how wise it would have been for the United States Government to have insisted on its right and duty to put its stamp on everything in the shape of gold, silver, copper, nickel, or paper, that has ever been allowed to circulate as money. Could this have been done, it would have borne for us more welcome news, than the present state of our currency and country now presents.
I have endeavored to show the train of evils, that have been entailed on our country by the failure of the Government to coin money and control all that has ever been allowed to circulate as money, as everything, so allowed to circulate as money, should have been based on a gold value, and made as secure as a good bond and mortgage on all the property of the country could make it. I will now attempt to show, that paper money has enriched the wealth of the country, while at the same time it has demoralized the people by having introduced a false balance in trade.
This seeming advantage will continue as long as we are able to induce the people of cheap labor countries to continue to bring us their persons, and give us their gold in exchange for our lots, our land, and our labor at the highest valuation, that we have set on them. The lots and land they have bought at our high prices and now occupy, have more than doubled the value of all the real estate of our country ; and this has enabled our people to grow rich more rapidly and live more expensively, than any other people in the world. In proof of the above, I will state, that since I have lived in the upper part of the city, I had the offer of eighteen acres of land, bounded by the Fifth Avenue, Twenty-first Street, and the Eighth Avenue, for eleven thousand dollarsland that would have sold two years ago for some fifteen millions of dollars. Unless our Government act wisely in the future, our fall may be as rapid as our rise has been great. The true object of all good government should be to find out and do those things for a people, which the people, in their individual capacity, cannot do for themselves.
The unfortunately vacillating policy, adopted by the Government in relation to the money of the country, in the course of efforts to arrive at specie payments, has already shrunk the value of all property and labor to an amount equal to all the money, spent in the war of the Rebellion. There is nothing, that will revive the fallen prosperity of our country and enable people to pay their city, town, and National debts but a wisely and well-arranged revenue tariff. It is the only means, that will enable us to pay the nations debts. This was made clear by events, that took place in our own country between the year 1834 and 1842, when our tariff, which had just paid off our old National debt, was repealed. By this repeal our mills were stopped, as they now are ; our furnaces closed ; lands fell to half price ; the Sheriff was at work ; States repudiated their debts ; the United States were unable to borrow money at home or abroad, and bankrupt laws were passed by Congress. The tariff system was again tried in 1842, and in less than five years the production of our country, in iron alone, rose from two thousand to eight thousand tons ; prosperity became universal and the public revenues greater than ever. In 1846 the Free Trade policy was again tried by repealing the tariff, and notwithstanding the enormous amount of gold, found in California, money was as high as ever ; iron came in and gold went out. In 1857 the culmination was reached, and a crisis of ruin came on, when the Treasury was nearly bankrupt. In three years immigration fell below the number, that arrived twenty-eight years before.
In Mr. OConors letter he recommends, that our Government should adopt, not only Free Trade, but direct taxation, as the policy of our country. The old confederacy of thirteen States attempted to maintain their Government by direct taxation and failed. That failure was due to the fact, that the several States then neglected to provide their quota of taxation for the General Government. But the presence of a multitude of tax-collectors, and the personal contact of each with the farmer and mechanic, as claimant of dues to a remote interest, like that of the General Government, has always been regarded as a great nuisance by the common people, and has made the tax-gatherer in all ages a dreaded visitor. A good reason why a well-arranged revenue tariff of specific duties, raised from the smallest number of articles, that will produce the required amount, is more safe than direct taxation may be inferred from the fact, that Dr. Franklin says : The American people, under the old Colonial Government, were so immoderately fond of the manufactures and superfluities of foreign countries, that they could not be restrained from purchasing them.
When the several States and the General Government of our country shall abolish all unwise and unnecessary laws, and cause all that remain to be so plain, clear and positive, that no man could long hold office under them without a faithful performance of the duties, enjoined by the law ; when we, the people, determine, that we shall have honesty, intelligence and integrity in all places of public trust, and adopt a civil service to secure it ; when a faithful discharge of duties, useful to the public, shall secure a continuance in place and a suitable pension, when worn out in the public service ; when these privileges are secured to the people, we may then hope for a Government, that all can honor, respect and obey ; it will then be a Government in harmony with the letter and the spirit of the Constitution, under which we live.
Lastly, let me say, that there can be no proper guarantee for the safety or perpetuity of our free institutions, till honesty and capacity shall be considered higher claims to office, than party fealty and services ; and when the officers and representatives of our General and State Governments shall have no other object in administering their respective functions than to establish justice and promote the general welfare of the nation.
4 Mr. Yonge, in his History of Banking, says, that one sum of $30,000 started three banks in one day. The money was rolled into their banks, until they could swear, that they had $30,000 in bank, and then rolled out and sent to start another bank, and so on, until three banks were started in one day.