Ideas for a Science of Good Government
Addresses, Letters and Articles
on a Strictly National Currency, Tariff
and Civil Service
1883

by Hon. Peter Cooper, LL.D.

COIN AND PAPER CURRENCY.



ADDRESS AT COOPER INSTITUTE, OCTOBER 19, 1876.


Mr. President, Ladies and Gentlemen :

We have met, my friends, to call and fix attention on one of the most important subjects, that has ever claimed the attention of the American people.

We, the Independent Party, hold it as an established fact, that the adoption of the Constitution by the people has made the coining of money, and regulating the value thereof—in connection with the fixing of a just and uniform system of weights and measures—the first and most important duty, enjoined by the Constitution on the Congress of the United States.  All must see, that justice could not be established, and the general welfare of the people could not be promoted, without making the money measure of the country as uniform and as unfluctuating, in its measuring power, as the yard, the pound, or the bushel measure.  All must see how utterly impossible it would be for our Government to regulate commerce with foreign nations, and among the several States, without a uniform system of money, weights and measures.

Our Independent Party are compelled to believe, with Thomas Jefferson, that the time has come, when “ bank paper must be suppressed, and the circulating medium must be restored to the nation to whom it belongs.”

In England the suspension of specie payment for some twenty-five years, during her Napoleonic wars, proved to be a great blessing, and made them the years of the greatest prosperity, known in the history of that country.  England’s attempt to return to specie payments “ brought with it,” as Sir Archibald Alison says, “ a greater amount of loss and suffering, than had ever before been brought on that country by all the wars, pestilence and famine, that had ever afflicted their land.”

The paralyzed condition of the industries of our country has resulted from the adoption of a similar effort to contract the currency of the country, in order to secure a promise from local banks, that they would pay specie on demand.  Thus far our Government seems to have disregarded the warning of Sir Archibald Alison, who said, that he feared America might adopt the unfortunate policy, which had brought such wretchedness and ruin on the people of England through an unwise attempt to enforce specie payments on a people, that had been compelled to use a paper currency for more than twenty years.  Our Government has, not only disregarded the warnings of Sir Archibald Alison, and all the history and experience of the past, but it has adopted a policy, such as we are compelled to believe has been pressed on us by men and nations, who have a direct interest to mislead and deceive us.

My views on this whole subject have been so fully set forth by the pamphlets and newspapers have spread broadcast over the country, that I will not detain you longer from the pleasure we shall receive by listening to our friends, who will address us.

I will only add, that it is greatly to be regretted, that our Government has not legislated for our country in accordance with the direct advice of Franklin, Jefferson, Calhoun and others like them.  If their warning voice had been heeded by our Government, our country would have been blessed, like France, with a sufficient volume of gold, silver and paper currency, made equally receivable by the Government and people for all forms of taxes, duties and debts.  National paper money should have remained equal to the amount, actually found in circulation at the close of the war.  That amount had become the people’s money, and could not be taken from them without a violation of that clause of the Constitution, which makes it the positive duty of Congress to establish justice, by every act of legislation, as the only possible means, by which the general welfare can be effectually promoted.

One thing is certain, that the national debts can never be paid by a governmental policy, that shrinks the currency destroys values, paralyzes industry, enforces idleness, and brings wretchedness and ruin to the homes of millions of the American people.  It is equally true, that Americans can never buy anything cheap from foreign countries, that must be bought at the expense of leaving our own good raw materials unused, and our own labor unemployed.  It should be remembered, that neither gold, silver, copper, nickel or paper are money without the stamp of the Government upon it.  The Constitution has made it the duty of Congress to coin the money of our country and regulate the value thereof, and fix a standard of weights and measures, as the only possible means, by which commerce can be regulated between foreign nations and among the several States.

PETER COOPER.



   

INTERVIEW WITH A HERALD REPORTER.


REPORTER—Mr. Cooper, what do yon think of the late letter of Mr. Reverdy Johnson, on the subject of the currency ?

Mr. COOPER—I think, that Mr. Johnson has there given some very wholesome truths, and for a man of his intelligence, he has made some remarkable mistakes.  He says truly, that “ the question of currency is now the most important one before the country.  It rises, or should rise, far above mere party contests.”

He adds, with great propriety, that “ the subject of currency affects the permanent welfare of every citizen—the prosperity of the country, and the reputation of the Government.”

He then adds, that “ it must be obvious to every reflecting mind, that a currency ought to be as far removed from fluctuations of value as possible.”

I believe, that Mr. Johnson is unquestionably right in saying that, “ with a currency, subject at times to a depreciation and at times to appreciation, the consequences can but be injurious ;  and the extent of injury will be in proportion to the changes of value.”

Mr. Johnson then states, what I believe to be an entire mistake, that “ the experience of the world has long since demonstrated that gold and silver alone constitute a safe currency.”

As to what control the Government has over money, this will find its best answer in the language of the Constitution, where it says, that “ CONGRESS SHALL HAVE POWER TO LAY AND COLLECT TAXES,—to borrow money, to regulate commerce,—to coin money and regulate the value thereof,” a most important function, and “ to make all laws which are necessary and proper for carrying into execution the foregoing powers, and all other powers, vested by the Constitution in the Government of the United States.”  These are necessary to “ establish justice and promote the welfare of the nation.”

REP.—But what are your views, Mr. Cooper, on this question of currency, in relation to the Government at the present time ?

Mr. C.—I think the currency question has been managed by the Government very much in the interests of the moneyed classes, and very poorly in the interests of the people.  Let us look at some of the facts.

In the year 1860, a civil war broke out in this country, which threatened the integrity and life of this nation.  At this time, the expenses of the Government increased very largely over its current expenses in time of peace.

In fact, it became necessary for the Government to borrow money and place a large debt on the shoulders of posterity, in order to transmit unimpaired the priceless boon of free institutions, and a powerful and self-protecting Republic of States.  Now, a nation is not like a private individual, who, if he wants money, must go and borrow it of some one else, because he has no resource of his own, from which money can come, but only some security, which he may give, that the money will be returned.  A nation has always indefinite resources, on which to draw, and yet can give no LEGAL security for the payment of its obligations.  Money itself is a creature of law, and the sovereign prerogative of the State.  The Government can make anything a legal tender, and it is only a question of expediency what it shall make.  But it can give no legal security for payment of its debts ;  because a sovereign State cannot be sued, nor can you replevin on its property, except by war.  To be sure, a nation may borrow as a private individual from another, or from a corporation ;  but in doing so, it puts itself in a false position, and makes itself subject to the lender, as in any other debtor, to the extent of his debt—except that the creditor has no other resource for collection BUT TO TAKE ENTIRE CONTROL OF THAT GOVERNMENT, as respects its financial policy.  Therefore, the people and their interests may be shoved aside, for they become antagonistic to the class, which are the creditors, who naturally desire to make their loans at the least cost and the highest interest.  But, if the people themselves, in their solid interests and unity, as represented by a Republican Government, were both the debtors and creditors of all the public debt, then there would be no antagonism between the debtors and creditors.

REP.—But do you mean to say, Mr. Cooper, that a Government has no need, and should never borrow from individuals and corporations ?

Mr. C.—I think, that a Republic like ours, with its forty millions, with its enormous extent of unoccupied land, its wonderful resources, and its enterprising people—equally marvelous for their growth and the increase of their wealth, within the century—has no need to borrow from anybody.  Why should this people borrow, as a private debtor ?  If, in their sovereign capacity through the Government and under constitutional and legal forms, they can lay under contribution the whole property, and the services of every man, in protecting the lives and property of all, they certainly can issue tokens of this undoubted fact, in the shape of legal tenders ;  and these become, by this act of sovereignty, the money of the country, the measure and the means of exchanges.  The people, who give them, in their sovereign capacity, must take them in their private capacity, and again receive them, in their sovereign capacity, as the Government for taxes.  This makes their circulation and their use.  But the significance of these paper legal tenders is, that they are tokens of such service or material, rendered to the Government ;  and they are also promises to render an equal amount of money, service, or useful material in exchange, to the holder, by the Government.

The paid functions of Government, or the equivalent taxes form a just and adequate basis for the redemption of a paper currency, and furnish a better legal tender than gold or silver, for the domestic purposes of trade, if properly regulated by the Government ;  hence, I would demonetize gold and silver, except as mere tokens of value, and make Government paper, exclusively, the legal tender.

This is a very important proposition, in the discussion of national finances, and demands a clear explanation.

1st.  If a private note of hand or a bank-note is good in proportion to the known credit and resources of the individual or the bank, so is that of the Government, and in a superior degree, as the Government has a larger credit and more resources than an individual or a bank.

2d.  An individual or a bank pays its debts by means of its credits, or the valid claims either may have on others ;  so does the Government ;  and the valid claims of Government are all represented in rightful taxes, imposed for its proper functions and employments.

Government, on one side, is the giver of sound credit, represented by its paper ;  the validity and redeeming basis of this paper is in the fact, that the community is indebted to the Government in the shape of taxes for so much service and material, as may be necessary to carry on its proper function, and pay its officers for services, rendered to the public ;  this creates an obligation on the part of the public to receive Government paper for value received.  Thus the circulation is complete.  As the creditors of an individual or of a bank receive its paper and pass it to debtors, who in their turn pay their debts to the bank with its own paper, so the Government puts out its paper for service and labor, and redeems its notes by the taxes due.  This is the sort of legal tender and currency we need, as undoubted representative for value received, as gold or silver.  Regulated in volume by the amount of taxation, which the people are willing to bear, in order to support Government ;  for not a dollar of it can be issued, except for value received, and under the watchful guard of the whole machinery of Government.  Where, then, is the danger of inflation, except in time of war, or by a temporary wresting of the Government from the hands of the people ?  One of these contingencies is comparatively rare, and not without its compensations in the objects, attained by the war.  The other is a very remote and improbable contingency in a country like this—hardly worth taking into account in this argument.

On the other hand, bank paper is sure to be inflated sooner or later, without compensation, but with general loss or disaster.  For, if it is to be redeemed by specie, the paper cannot be kept within the limits of redemption and satisfy at the same time the demand for credit.  If a part of it becomes irredeemable, the whole of it becomes irredeemable at a blow.

But, if the paper merely represents credit, it is the real capital and claims or assets of the bank, which must support that credit ;  and the history of banking clearly shows, that the inevitable tendency is, that bank circulation gets in advance of its real capital or assets ;  because the assets are sure to fall greatly in the market, if they are brought quickly forward to pay its debts, as is the case in times of panic.  The sudden curtailment of its loans, from time to time, can alone keep up a system of banks, and this is sure to bring on ruin and panic in business.  Not so with a Government currency, regulated solely by Government taxes and dues.  It must be comparatively steady and unfluctuating as the taxes ;  and hence, the general credits, based on such a currency, cannot fluctuate enough to produce great inflations, in time of peace, and the consequent reactions and panics in business.

REP.—Why not ?  It seems to me, that Government paper may be subject to great inflations, as well as bank paper, and the expanded credits, that arise from such inflations, must suffer contraction, sooner or later, by a natural law ;  for the pay-day must come at last, and few, who are eager to borrow, can meet the payment.  Government paper may be inflated on a more gigantic scale than bank paper, as our last war proved.

Mr. C.—That was a war measure and was justified for the same reason as the war.  But the mischief did not arise from the expansion of the currency, which sent a vivifying influence throughout all our industries, and produced the most prosperous times this country ever had ;  but it was the contraction of the currency, which brought the distress ;  and this was neither necessary nor called for by any advantage accruing.

The eagerness, with which our currency was funded by foreign bondholders, was owing to the fact, that our Government gave such high rates of interest, as compared with other Governments, and promised both principal and interest in gold, when the paper, that bought the bonds, was at forty or sixty per cent. discount on the gold.  Was that patriotic or necessary ?  To pay so much of the debt of the nation before it was due, as Mr. McCullough boasted was his object, and to turn so large a part of the currency, which fed the industry of the people into bonds, which taxed that industry, was a very short-sighted policy for the Government to pursue.

REP.—But how is the Government always to keep its paper issues, in time of peace, on a par with the standard, adopted as a unit of value—so much weight of silver or gold, in the coin dollar ?  This standard gives meaning to the stamp on the paper, as equivalent to, or exchangeable for, so much value, as the number of dollars stamped on the paper, measured by the standard coin dollar.  This is a necessary starting-point in measuring values, as a certain length or a certain weight is to the yard-stick, or to the pound weight.

Mr. C.—That is very true.  It is necessary to have some substantial and recognized standard of value to start with, in money, whether it be coin or currency.  This standard, however, might be a pound of cotton of a certain fineness, or a pound of tobacco of a certain quality, as far as giving a standard value to the paper was concerned.  It is also true, that the paper must have some exchangeable value as money, as measured by a standard ;  and the Government cannot give it that exchangeable value, in any quantity, by merely stamping the paper as worth so much.  What we want is a peer money, made equal in exchangeable value to gold or silver of a certain standard.

Now the Government keeps its promise to pay in three ways :  First, by accepting these paper promises, as they may be called, for all taxes and dues to the Government.  Secondly, by compelling every individual to accept them in payment of all debts.  And finally, by redeeming them in that, which the holder of the currency shall accept as equivalent value, the Government Bonds, thus distributing burdens and benefits over the whole country.

REP.—But this is only compelling individuals to accept one token of debt for another.  How is the public debt to be paid at last, and how shall we get out of this vortex of promises to pay ?

Mr. C.—In one sense, there is no need to get out of this vortex ;  the planets move in a vortex ;  the whole of society, and the universe, as far as we see it, move in vortices.  This is the grand law of motion and circulation.  But circulation also signifies growth and ministers to it.  Parts of every circulating medium settle down to something solid, which makes a part of the organism, keeps up its integrity and adds to its growth.  The circulating medium of money settles down, at last, into something solid in interest and property, under the same law of conversion, that makes each drop of blood contribute to bone, muscle, or other organ of the body.  For instance, New York City is building a great series of piers and wharves for the accommodation of its present and future commerce and trade.  It is demonstrable, that these piers and wharves will pay in rents to the city, not only the interest, but the principal of all the money invested in twenty years.  The city issues its bonds for this work, which represent a certain amount of interest and principal.  But the city, not having the right to issue money, offers its bonds for sale to the banks, or to private individuals, which are henceforth alienated from the possession of the city, in order to get the money or currency to pay for labor and material in this public work.  You might ask, why should not the city keep these bonds in its own safes, and issue the money for current expenses on its own authority and credit ?  I answer :  Because that would be an act of too great a local sovereignty—though it is no more than is now virtually conceded to local banks.  Let the general Government, then, in its sovereignty, make such a currency, so based and secured, a legal tender.  Then, when this work is done, and begins to pay to the city rents, let the income be applied to the extinguishment of the bonds, as well as keeping it in repair.  This is what I mean by settling down a circulating medium or currency INTO SOLID MATERIAL and capital, organized into permanent use.

This makes a circulating medium, always expanding, and always contracting into a solid form.  The true design and highest function of currency and credit are to encourage and stimulate industry and enterprise in useful forms, and to promote the work by giving the very tools, with which it can be done.  It represents the material value of the products of labor in process and not yet complete, for which it provides merely the current wages or support, till the fruit of labor comes to maturity, when that pays for all.

REP—Mr. Cooper, what is your opinion of the present banking system ?

Mr. C.—Financial institutions are very useful, and will always be necessarry to carry on the commerce, trade and industries of the country.  They concentrate capital in financial centres, from which it is again distributed all over the country, where it is most wanted.  I regard a banking system, properly confined to the collecting and loaning out of the real capital, in aid of all useful enterprises, as a national blessing.  But, incidentally, banks do a great deal of mischief by doing business, in part, on a bad system and on false assumptions.  They often confound the distinction between credit and capital, and do business on credit without capital.  Credit must be distinguished from capital.  Credit cannot be borrowed or lent, it can only be given, or exercised by one mind toward another.  Capital is borrowed and lent, for it can be passed from hand to hand.  The one is very necessary to the other ;  for capital supports credit, and credit sets capital to work in multiplying capital ;  thus preventing the latter from waste and loss of it.  Credit and capital, therefore, naturally imply each other, and are necessary to a mutual existence.  It is death or disaster to both to separate them.  Financial troubles may come from the want of capital or credit, or both.

REP.—But how do you account for our present financial troubles ?

Mr. C.—Our present financial troubles, doubtless, began in the want of sufficient capital at command, to carry on certain great and small enterprises to successful issues, in which the parties asked more credit than there was capital to back it.  But when these parties failed, it gave a shock to credit ;  this paralyzed the active use of capital, and withdrew it still more from the support of credit, until a panic came.  For people did not know where or when this trouble would stop.  Like a crowd in a public building, the rush for escape, when there is an alarm given, bears no proportion to the danger ;  but it soon substitutes a far worse source of destruction and suffering in the panic.  And, as in this case, the trouble is soon relieved by opening wide the doors of egress, so, in financial panics and troubles, the true remedy is expansion of credits and capital, and not contraction.

REP.—But what have the banks to do with all this ?

Mr. C.—I have not, as yet, mentioned the chief source of our financial troubles and panics ;  it is the false system, which our financial institution mix up with what is true in them.  They rest much business on a false bottom, which may drop out at any time.  They lend their credit without sufficient capital to back it, and call it lending capital.  The old system of banks, which some are now anxious to renew, lent out three and five dollars in paper to one of gold, kept for redemption.  Their capital was to the credit they assumed as one to three, five, or more ;  consequently, when the capital, promised by the paper, was called for, as sooner or later it must be, so much of the credit came to naught, involving loss to the banks, not of their capital, but of their sham credits.  But these sham credits meanwhile had transferred a great deal of real property from the hands, to which the property belonged to those, who held the temporary credit.  This injustice and wrong come to the surface, at short intervals, in the shape of panics and financial distress.  The present system of banks, although not doing business on a specie basis, yet introduces a false bottom to business in another way ;  they do a large amount of business on their depositors’ capital.  If the deposits are called for faster than the bank can return them, the bank fails in its credit, but loses comparatively little.  The loss of real capital falls chiefly on the trusting depositors.  This system goes smoothly, transferring property and facilitating trade, till the capital, implied by the credit, is needed in substantial form.  The promise can no longer be put off ;  the payment is required ;  then the false props are all taken away, and financial ruin is the result ;  credit, given to brains, muscle, industry and enterprise, is one thing, and credit, given to actual products and estates is another ;  but still credit, based on either is a real credit ;  because brain-work and enterprise are just as real as the material products, to which they give existence.  But credit, based on mere assumption or supposition of capital, is not properly based.  It is a bogus credit, that looks like the real thing, but sooner or later fails entirely.

If the Government does not require the banks to redeem their notes, either in gold or in bonds, or if it allows them to coin their deposits into loans, it gives them the privilege of giving others the use simply of the banks’ credit, far beyond their capital.  The banks have done too much of that business already.

REP.—What, then, would be your remedy for this false system of banking ?

Mr. C.—The true remedy for all these financial shams and pretences, that transfer the property of the real owners to those, who are mere financial agents, is to permit the banks to do business only on real money or legal tender, interconvertible with bonds.  This will convert all money into a safety fund, and make it unnecessary for banks to loan their deposits, which they can always fund in Government securities, and have them again on call.  But this system will expand the real credits, which the banks can give, based all on real capital, and make such credits equal to the wants of a new and expanding country like ours, with institutions, that stimulate the industries, enteprises and powers of this people beyond anything, that history can yet show of any people.

Some people mistake altogether, or put a false construction on transactions, called credit, which are not so strictly.  For instance, if you go to a bank or a broker and give your bonds, stocks, securities in mortgages, or any other shape, and borrow a certain amount on the same, that is not strictly giving and receiving credit ;  it is simply a sale of property, WITH AN IF.  For, if you fail to pay on a certain day, there will be transference of property, but no credit lost.  In fact, the man borrows the use of credit in the shape of money, but makes it good on his own property.  Therefore, the borrower himself gives the only foundation there is to that credit.  But, if the man is about to improve a farm, or build a factory, and borrows money to buy material or employ labor, which money can only be returned, if he succeeds in his enterprise, and produces a piece of property on the strength of that credit, which may return all that has been invested in it, THAT IS REAL CREDIT.  That money represents the credit or faith, given to an enterprise and a work in progress, which may result in some valuable property ;  but, if it does not, the credit is lost and both borrower and creditor are sufferers by the failure.  There is certainly a difference between borrowing money on the security of a tangible property, equivalent to the sum borrowed, and borrowing money on the faith of the powers, intelligence and capacity for work, which will create a piece of property, if given the credit and opportunity, which the money furnishes.  This last is the only credit, that the poor need, or can ask.  But it is essential in the world, and there ought to be no limit to such credit, except what is sufficient to set every man and woman to some useful work.

This makes credit in finance, like faith in religion, “the evidence of things unseen and the substance of things hoped for.”  This process is going on every day ;  for there can be no growth or development in society without it.  But now Governments, general and local, mix up their own credit, or seek altogether to sustain the public on private credit.  The sovereign authority of making this circulating medium of money, which ought to be backed by the highest, most permanent and reliable ability to pay, is thought safer by many, when the weight of responsibility is put upon private shoulders or those of corporations, than when it is resting upon the broad and secure basis of a nation, organized under Republican institutions “ by the people and for the people,” pledging its wealth and honor as a nation for the redemption of all debts, incurred for the public weal.

This enslaves a people, through the very machinery of free institutions and republican forms, to the will, the caprice, or the greed of particular classes of individuals, that control money.  The Government should never be a borrower, except of such labor and material as is necessary to public service.  This it must acknowledge by tokens of its own creation and stamp, and pay at maturity, by means of taxes on property, which this very credit has brought into existence, and, as it were, SOLIDIFIED into a permanent source of income, such as a great public work, or any form of fixed capital, or, still more, a nation’s life and prosperity, What I said New York was doing, and might do with regard to her public works ;  could be done by the Government on a far grander scale.

REP.—But, Mr. Cooper, I do not understand what you call “real money.”  Is not gold and silver the only real money, and all other forms merely representative of value ?

Mr. C.—No, Sir ;  gold and silver is not the only real money.  The precious metals are constituted money by the same authority, and for the same purpose, that paper may be employed as money.  Money is purely a creature of law.  All metals must be coined by authority, before they can pass as money ;  and the proof of this is in the fact, that the precious metal, stamped and made into money by one Government, will not pass as such under the jurisdiction of another.  Foreign coin is never a legal tender.  This being the case, we must look to something else as the essential characteristic of money, than the exchangeable value of the substance, of which it is made, which makes it a commodity in any market.  The value of money depends upon two conditions only, both of which are governed by law, and only one of which depends upon demand and supply, as to the values of pure commodities.  The first condition of giving value to money is to make it a legal tender for all private debts, and also the taxes and dues of Government.  This gives it a pure legal value, and makes it like a mortgage on property, and also like a note of hand, issued by the Government, and secured as well as redeemed by its taxing power and authority over the whole property of the country.  The second condition of value in money is, that it should be rentable, like any other capital, or bear some interest to the lender.  This can also be fixed by law, as in laws of usury.  But the Government can go further than this, in giving a legal value to its own legal tender in the shape of paper money ;  it can make this legal tender fundable at a fixed rate of interest, payable either in coin or in its equivalent paper.  The bonds of the Government thus give a secondary or vendible value to the paper money, which makes it like any other commodity, rentable, and of a market value.  This being a fact, it shows that, in all the proper qualities of real money, paper money can be made such by the Government that issues it, as gold or silver coin—it will pay all your debts and taxes, and also has a market value, because it is rentable or loanable.

REP.—But not abroad ;  you cannot send this money abroad.

Mr. C.—No, you cannot send any money abroad, except as commodity, vendible, which takes from it the character of money.  But this is an advantage in the use of paper money, which, being an indispensable measure of values at home, and a necessary means of exchange, should never be taken from the trade and domestic uses of one country to be exported as commodity to another.

REP. —How, then, shall we keep up its value on a par with that of other countries, so that we shall not be buying abroad with one standard of value, and selling at home with another ?

Mr. C.—That is no great hardship, compared to being left without sufficient money to do business and pay the wages of labor.  But the true remedy for this is to encourage industry in every way at home, so as to have a surplus of production in things, that can find a market abroad, and thus keep even the balance of trade, which keeps the money of different countries at a par value.  For this purpose nothing is more conducive than a good, sound currency at home, in sufficient quantities, at all times, to keep up all the exchanges and the payment of wages, needed for our own domestic industries, and to protect our own people from too great a competition with the cheap labor of Europe by a proper revenue tariff.  This is the commercial and financial sheet-anchor of any people.  A tariff taxes the surplus of other countries, which finds its way to our own markets for the support of the Government which protects, and in a manner furnishes that market.  It taxes chiefly the capital of the foreign manufacturer and the domestic importer of this surplus production ;  because they must find a market somewhere, and therefore sell at whatever rates they can get in competition with the industry at home, helped by the tariff ;  and it taxes the consumer, who will buy luxuries, that leave our own good raw material unused and our own domestic labor unemployed—for I assume, that nothing but what interferes with these, shall be subject to tariff.

REP.—But gold and silver have an intrinsic and inalienable market value all over the world ;  whereas your Government paper money—currency or bonds—has purely a legal value, and may be real to-day, but nothing to-morrow, depending entirely upon the stability of Government.

Mr. C.—So has all paper, representing true value and made the medium of exchange—a note of hand, a mortgage, or a bank-note—they all derive their virtual value from the law, that constitutes them representatives of value.  Yet modern commerce and trade cannot dispense with these and reduce all their transactions to barter, or to paying balances with gold and silver.  They assume the stability of Governments, without which neither property nor life are secure.  What security would gold give, if there was no Government to protect it ?  All these paper obligations, used as medium of exchange and having a market value, are based upon the faith, the property, and stability of individuals or corporations, with the further sanction of law.  We desire, as a medium of exchange a legal tender, that shall represent the whole taxable property of the country and the stability and faith of the Government.  It seems to me that, if a corporation can issue valuable paper, much more can a Government, backed by the resources of a whole people, do the same.

REP.—But how has the Government failed in its duty to the people ?

Mr. C.—The Government, during the progress of this war of the Rebellion, felt obliged to employ more service and material in the struggle for existence with a powerful foe, than it could pay from any immediate resources.  It felt obliged to borrow this material and service on credit.  It issued its bonds ;  but the Government went begging, as New York does, to private individuals and to corporations to furnish another credit, called money, for the purpose of paying current expenses.  The limited amount of this latter credit, which was at the service of the Government, made the bonds sell at great discount on their face.

GOLD was sought for, when there was not enough of this product of labor within reach to represent a tithe of the credit, sought by the Government.  Now, if the Government could issue one form of credit, why go begging for another ?

This occurred at last to some of those in authority, and paper money tokens were issued.  Under a patriotic impulse and faith in this nation, and its resources, some of these were made receivable for all dues of the Government, and others made convertible into 5-20 bonds at par—at the will of the holder.  This made and kept the currency nearly at par with gold, even in the DARK days of CIVIL WAR.  This will always keep the national currency equal in value to gold, provided it is the only paper in circulation, and the exclusive legal tender, and fully redeemed by taxes, duties and Government bonds, at the option of the holder.  The Government thus has a three-fold method of redeeming its paper, whereas the banks have but one method, and that is by specie.  This method must fail them, at times, because the specie will go out of the country, when the balances of trade are against us, in quantities sufficient to interfere with redemption.  “ Bank paper,” as Calhoun says, “ is cheap to those, who make it, but dear, very dear to those, who use it.”  Banks can never redeem their paper in specie, except in times of expanding credits, when very little specie is wanted.  During such times the banks secure themselves on real property, but the public is secured on the bank paper only in its promise to pay coin.  But this national currency was found to be far safer, than any private or corporation tokens of indebtedness, and threatened to supersede all other tokens of indebtedness as a currency.  Thus the great power and moneyed advantage, which the making of such tokens and the passing of them into circulation gave to private corporations, would be destroyed.  Those, who had personal interests involved, took the alarm ;  they regarded their vested rights infringed upon, and they had influence enough with the then existing administration and Congress to have that law repealed.  They represented, that gold would be drained from the country, and our purchasing power abroad reduced to nothing.

How should we get our silks, our wines and our cigars ?  The importers, brokers and money changers of all kinds, as well as the speculators in gold, would find their occupation gone !  It was in vain to tell these alarmists, that gold was one of the many products of industry, and those, who needed it must buy it at the market price, which no legislation could control, though it might falsify and interfere with the natural price of gold for a time.  That it was of small importance to the people at large, how much gold, measured as a commodity, a legal tender would buy, but of much greater importance how much bread could be got for the same money.  If paper is made a legal tender, under the same advantages as gold, that is, that it should always represent a real and exchangeable value in interest—bearing property, and receivable for all debts, public and private, the paper would then be on a par with gold as money.  No ! these parties understood, as they thought, THEIR OWN INTERESTS, and under specious, but false pretences and arguments, induced Congress to repeal the law, that made the currency of the United States receivable for all dues to the Government, and also the law, making legal tender notes fundible into Government securities at par.  The repeal of the law, permitting holders of legal tenders to convert them, at their option, into interest-bearing bonds, was the most cruel act of injustice, that was ever inflicted on the American people.  Thence have come most of the financial troubles and disasters, of which so much complaint is made at the present time.  Our bonds were rushed abroad to be exchanged for luxuries and for gold at sixty cents on the dollar, instead of being taken by our own people at par.

Millions of gold go abroad to pay interest to foreign bondholders, instead of being paid to our own people.

A policy of rapid contraction was then inspired into the Government ;  the necessities of war being over, further issues of bonds were made and currency was withdrawn, and all credits began to contract, as a natural and inevitable consequence.  This brought on one of those irrational conditions in human affairs, which we call a panic, that brought down credit at once to the zero point, and shrunk the value of all property.

REP.—But, Mr. Cooper, do you not think, that personal extravagance, rash speculations, and over-production generally have much to do with the present financial embarrassments ?

Mr. C.—In a restricted sense all these causes lie at the basis of much financial embarrassment.  But all of them put together will not account for the fact, that there are over two millions of workmen, operatives, and employees out of work at this time in this country, or on short allowance of work, who three years ago had ample employment.  Speculations ruin a few in financial centres and cause merely a change of ownership in property, and the loss of credit to those, engaged in such speculations.  Personal extravagance is chiefly confined to a few rich men ;  for most people care not or are unable to indulge beyond their means.

Over-production and undue importations seem to be the most plausible of the reasons, offered for the present financial embarrassments ;  because, when goods accumulate in merchants’ hands, and products multiply in the factories, mines and farms, without a corresponding demand and consumption, the most obvious cause or explanation is that there has been too much production and importation.  But have these been too much for the demand and consumption previously existing, or subsequently ?  The true law of supply, the stimulus, and reason for production, is demand ;  this comes first, and the former comes last in the order of nature.  There might be a production, that overtakes and passes an existing consumption in particular cases ;  but it is well also to examine, in a general way, whether any cause has paralyzed consumption.  Now, it has been seen, that the systematic and constant contraction of Government credits naturally induced the contraction of all other credits ;  this finally brought on a panic, that acted like a paralysis on all credit ;  this led inevitably to the stoppage of so much active industry and work, as to take away the PURCHASING power of a great many, and to stop a large part of the previously existing consumption and demand.  Hence, the over-production (so-called) has been merely an accumulation of products, due to UNDER-CONSUMPTION.  The proof of this lies in the fact, as I have said, of so many industrious people being thrown out of work, and in the statistics of the country, with regard to its exportations and importations the last few years.  In this connection the opinion of President Grant, as expressed in his annual message of 1873, is important.

REP.—But how would you have prevented this sad condition of things from coming on ?  It appears to me it arose naturally out of the irredeemable nature of the currency.  Gold and silver have always been regarded as the currency and money of the world.  A man, that is in debt, naturally desires to get out of it as soon as he can.  Why, then, should not a nation exercise economy or contraction for the same end ?

Mr. C.—Because contraction in finance is not the same thing as economy in private life.  Contraction in the finances of a country means the stoppage of a certain amount of the industry and exchanges, going on in the nation by reason of the contraction of the credit, by which these are sustained.  It means factories stopped, men thrown out of work, and distress of families for want of the means to buy bread.  NOW, THIS IS ALL WRONG, and it arises out of a false financial system, not adapted to the wants of a people, whose wants and powers are all the time expanding, by reason of a natural increase in the population, and by our possession of a new country of unlimited natural resources, which yet need to be developed by the EXPANSION, and not the contraction of the credit, which capital gives to labor.

But, I grant you, there is a contraction on the side of debt in the finances of a country, which is always desirable.  It is in that SOLIDIFYING process, which I have already described, that turns currency into fixed capital, as the blood is deposited into bones, flesh and organism.  The bond, and the currency, based on it, must be paid and destroyed as evidence of that debt, as soon as value received for them can be turned into some permanent source of industry and capital, like the stone wharves and piers of the City of New York.  But new credits must ever spring up, which are the incipient condition of new improvements, public and private, and all fixed forms of capital.  There must always be expansion enough in the currency to set all the capacity for useful labor in the country to work.  This is the only limit to the expansion of credits.  Gold and silver ceased long ago in the history of the world to serve as an adequate representative of all those exchanges, which are going on in the civilized world, and which it is the proper function of money to represent.  Coin has long called to its assistance paper of credit, both private and public, not merely to represent coin as money, but to represent other real property and ESPECIALLY THE CURRENT DAILY LABOR OF THE WORLD’S INDUSTRIAL CLASSES, whose aggregate wages any day could not be paid BY ALL THE COIN IN THE WORLD.  France uses gold, silver and paper, all as legal tenders, and keeps them all busy to satisfy her industrial and financial wants.  But France could not get along a single day with the coin alone, which is within its borders, or with paper, that merely represented coin as currency.  This being the fact, as every one ought to know, who talks on this subject, it is a most preposterous claim, that coin alone can serve as legal tender, or paper always convertible into coin.  You may adopt the legal fiction, that all legal tenders should be convertible into coin at the will of the holder, but you cannot carry out this in fact ;  and the failure to carry it out at any given time, for any cause, may produce a panic with all its disasters.

REP.—But what would you have the Government do in reference to its present policy ?

Mr. C.—The course is plain.  Let the Government issue, not only all the legal tenders, but all that passes in the shape of money—all should have the image and superscription of the Government, whether it be coin or paper.  Let the Government start from a fact, that there has been and is now, through its instrumentality and necessities, so many millions of legal tenders and bank paper or currency set afloat, which, with the Government bonds now out, represent so much credit, resting on the honor and ability of the Government to pay, but furnishing also the basis for a great amount of credit in the financial system of the country.  On this the country has been depending, and with this it has been at work, in all its industries and trade, since the credit paper came into existence.

The Government has no right to take away these tools, that have set so much work on foot, from the people.  It is not justice.  Suppose a man has engaged another in the enterprise of building a house or factory, by promising to furnish all the tools, and by giving a certain valuation of rent for it, when it is finished.  Then at a certain stage of the process of erection, the proprietor takes away a part of the tools necessary to finish, the work, and, moreover, diminishes the valuation of both work and material.  Would not that be considered a great act of injustice, especially, if the builder had no remedy in law against the proprietor ?  Now, this is precisely what the Government has done to the industrial part of the nation, with the additional injustice of compulsion in its dealings with the people, who are not the moneyed and the governing class.  The Government, during a time of great exigency, issued millions of credit paper, on the strength of which the people willingly furnished labor and material to carry on a war of self-preservation against rebellion and disruption.  But not only that, the people began to build up the country on the strength of this same credit paper ;  they set on foot new enterprises, built railroads, factories, and opened new mines and farms on the same credit, and by the facilities for paying labor and material, which, this Government currency afforded.  After the war was over the Government began to contract this currency, and to tax the people, in order to buy its bonds before they were yet due ;  which policy contracted credit so much the more ;  and it has continued to pursue systematically a policy of contraction ;  for the purpose, as alleged, to resume specie payments on this currency.  The people do not want specie ;  they want the credits already given them, not to be withdrawn ;  they want their labor and material, freely given to save the country, or to build it up, to be valued by the same standard as that by which it was measured, when they began to work.  The moneyed class obviously want scarce money and high rates of interest.  This gives them more power and less expense.  But the advantage of the whole people, including this very moneyed class, if their interests were rightly understood, is to have credit easy to the industrious, the honest, and the enterprising, and the interest of money more nearly equitable.

REP.—What, then, Mr. Cooper, would be your specific remedy for the financial troubles, which involve the country at present ?  What would be the policy you would recommend for the action of Congress ?

Mr. C.—At present Congress has devised no better plan for the financial policy of the country than this.  Congress has passed a law, that specie payments for all currency shall be resumed in 1879, and to provide for this, it has authorized the Treasurer of the United States to withdraw currency, until the present volume shall shrink from four hundred to three hundred millions ;  and he is further authorized to sell bonds at 4 or 4½ per cent. interest, to the amount necessary to get the specie wherewith to resume payments.  As the 5 per cent. bonds, outstanding, are only at par now, I think the prospect is very poor for selling the 4 or 4½ per cent. without ruinous discounts and large addition to the debt of the nation.  If the banks also are made to do business and issue their notes only on a specie basis, instead of bonds as now, it will shrink their currency so as to bring another panic.

But, if the banks are allowed to give credits, secured by Government bonds, why should not the Government itself do the same ?  If it will hurt the banks, cripple and curtail so much their resources for giving credit, why is not such a policy objectionable as to the credits given by the Government ?  But here is precisely the point of departure of the moneyed class from the people at large.  They wish to monopolize, not only private, but all public credits.  All credits under the sanction and provision of law and the Government ought to be public credits, for which the Government alone should be held responsible.  Such is any paper currency now, even if it is not legal tender.  Nothing but a legal sanction can pass a bank-note into the circulation to the country.  The credit of the bank is indorsed by the Government, in order to be regarded as good.  The Government, under the present system, often borrows its own indorsement !  But the first point of departure I would have from this whole system of finance is, that everything, gold, silver, or paper, that passes into the circulation of the country, as money, should have the Government’s image and superscription upon it, and should be issued and controlled entirely by the Government, so that there shall be no legalized money, directly or indirectly, belonging to private corporations.  This is a part of that special and class legislation, that I have always contended against, as the bane of Republican institutions.

Now, I would have Congress repeal this last act of contraction of the people’s credits in the shape of currency, while it is an expansion of credits to the moneyed class, in the shape of bonds.

I would have Congress pass an act, which should make all currency that of the Government alone ;  and, of course, I should abolish the present bank currency, giving these institutions the option of doing business only on legal tenders ;  these they may secure at any time, by simply giving up to the Government an equivalent amount of Government bonds, whose interest thereafter stops, until bought up again by legal tenders.  This will extinguish the interest-bearing debt of the country in part, by one not bearing interest.

Secondly, to start all fairly and justly, I would have Congress pass an act, restoring the currency in volume to the condition, in which it was at the close of the war, or soon after ;  when, peace being declared, the whole nation sprang to the arts of peace with the energy of war ;  when they took these very credits, which the necessities of Government had furnished, as the price of the nation’s life, and began to build up the country still more securely in the wealth and products of myriad-handed industry ;  when their hopes and their faith were stimulated to new life by this mighty credit, poured into the circulation of the country, and all the property of the country and its products were measured and exchanged by the new standard ;  when none were found idle, except the shiftless and those, who sought idleness ;  when no factory stopped its production for want of consumers, for all were consumers, because all were producers.  I would have all that currency restored to the country, and not withdrawn or contracted by taxing the property of the country to pay it ;  but allowed to remain, till it had produced its equivalent by the industry and products, which it brought into existence.

I would have this whole volume of currency made as permanent and invariable a measure of property and exchange as possible, by neither increasing nor diminishing its volume by any arbitrary law ;  but rather use the agency of Government to keep at its present stated volume, by issuing it again with one hand for labor, service and bonds, while it received it with the other as currency.  I would have this specific volume of the currency, from which we shall now start, henceforth and forever, never diminished at all, and only increased as per capita, very gradually and imperceptibly, as statistics shall show, and a rule of increase founded thereon, as the exchanges and the population of the country increase.  And this would be virtually equivalent to making the currency a permanent and unfluctuating standard of values ;  for it would keep it in the same ratio or relative measure to all the property of the country and the increase of its population.  I would thus make the stated volume of currency, which has been forced upon the country at one time, but which now threatens the most unhappy consequences, if it be withdrawn—I would make this one volume an unvarying measure for all time, by giving it an expansion by rule and statistical treasure of slow application, and such as would never derange prices or permit fluctuations.  I would not increase the bonded debt of the country either, except by rule and statistical measure ;  but I would change its form from the present high rate of interest, and from so large a portion payable in gold to foreigners, into a debt of equitable rate of interest, and payable to our own citizens.

REP.—But how can this be done without repudiation and dishonor to the country ?

Mr. C.—No vested rights can stand in the face of the public welfare ;  common and statute law recognizes this principle.  Hence, all vested rights can be repealed by the law-making power, that conferred them.  Under this principle, private property can be taken for public use, and all corporate rights can be abolished, that stand in the way of the public welfare—but never without proper compensation to the parties, that may be losers ;  and of this, the public administration must appoint the means and provide the regulations.  But I propose to change the character of the bonded debt by a voluntary process.

First.  Whoever needs currency must give up the Government bonds for it.  The compulsion here is in making every one do business and pay debts in legal tenders ;  and the principle for their use exclusively is, that the public welfare admits of no other money.

Secondly.  Whoever desires to fund the currency shall receive bonds at a lower rate of interest than that, which legitimate business now gives, but which is higher than the average yearly increase of the whole property of the country.  This I would fix upon as the interest of the bonds ;  it is now about three per cent.

There is an element of compulsion here ;  but as the whole country pays the interest on the public debt, it seems but just, that only that amount of interest should be paid, which the increase in the public wealth justifies, and no more.

REP.—But how will you prevent the too rapid funding of the currency, and keep it at a steady volume, as you propose ?

Mr. C.—This too rapid funding is, I think, a groundless fear, considering the low rate of interest given.  Because, in a country like this, so active, so enterprising, and so full of new resources, the opportunities and the solicitation for safe investments are far greater than in the old country, and would naturally tend to draw money from funding ;  so that the calls for currency would be equal, if not superior, to the applications for funding.  But as the Government controls the whole matter, it can keep an even hand by allowing neither the funded debt nor the currency to increase beyond a certain ratio to each other.  As the currency was received, it might be paid out again for service, material, or bonds ;  as the bonds were received, they could be paid out again for service, material, or currency.  Thus the whole of the circulation between bonds and currency could be kept even.

This great bonded debt of the country would really become the refuge and security of the widow and the fatherless, and those poor and ignorant people, who cannot invest their little savings in legitimate business, even through others, because they cannot trust them, and have no ability to watch the safety and protect the use and return of their money.  The public debt would become the poor man’s Savings Bank, instead of being as now, the exchequer of the rich, and the means of pampering wealth and idleness.  Benevolent institutions, churches, and college endowments would seek it, for the same reason, because of its perfect safety ;  and even the same funded interests of Europe would seek investment in this country for security, and would gladly pay gold for all the bonds they could buy, at a little higher interest than their own countries could afford.

REP.—But what about the gold all this time, which is now very much mixed up with this question of finance, because it is so universally the legal tender of civilized nations ?

Mr. C.—It might be a part of our legal tender still.  France makes gold, silver, and paper, all legal tenders ;  why cannot we ?  But, if any one wants gold as a commodity, let him buy it as any other commodity, at the market price.  Let such exchange or currency or any other commodity for gold, as suits their convenience and the state of the market, which no Government can control without tyranny and interference with private rights.  That whole subject will take care of itself, and the whole circulation of the world will naturally mingle and interchange with our national circulation, as the outer air mingles and interchanges with the air of the room, if passages are left free.

REP.—I understand you, then, Mr. Cooper, that you regard this whole contest about the currency as a conflict between the vested rights of the whole moneyed class and their interests, but ill understood, and the rights and interests of the whole people ;  that you regard the whole legislation of Congress on this subject, with little exception, as made in the interests of class, special and partial legislation, which has been, thus far, the bane of our Republican institutions ;  because, under forms of law, it sacrifices the people to classes of special privileges ;  and I understand your present remedy for all the present evils and all the future, which are likely to occur from our system of finance, is, that Government alone issue all currency and whatever circulates as money, and makes this currency interconvertible with bonds, which the Government can control, and not with gold, which it cannot control ;  and further, that the Government start in the present emergency, from precisely that volume of credits in currency and in bonds, that was set afloat by the irresistible necessities of the war for the Union ;  that this volume should be sustained substantially as it was soon after the close of the war, when it rose to its maximum ;  and be made the measures of all values, and the means of exchanges for all coming time—subject only to the slow increase of volume, which statistics shall justify as the increase of population, and its ratio, per capita, to the currency.

Mr. C.—That is precisely as I propose ;  and my efforts to bring this subject before the public are heartily seconded by many able gentlemen.

REP.—But it appears to me, Mr. Cooper, you place great power in the hands of the Government by such a policy.  It may lead to enormous speculations and peculations on the part of individuals and officials.  Politics will become a trade more than ever, because of their close connection with finance, commerce and moneyed institutions.  Some administration may ride again and again into power, and overthrow finally all the free institutions of the country with a great flood of currency, which it can manufacture in unlimited quantities by a slight change in the laws, that Congress may be induced to enact at any time.

Mr. C.—It would require almost a treatise on republican government to answer all your objections, and then you could not be answered, if you had no faith in free principles and democratic forms, and in the paternal functions of a Government instituted “ by the people and for the people.”  The slave-holders of our country had to learn this lesson at last, and I do not know any vested rights in property so enormous, or so intelligent and well organized resistance as slavery brought to bear upon the free institutions of this country.  And yet the slave-holding portion of this country will find itself the greatest gainer by its losses.  They lost in the conflict, chiefly through the might of truth and justice, which will be their great gain.  We shall have many conflicts, doubtless, between the people on one side, and moneyed, social, or religious classes organized with certain claims and even vested rights ;  but never again so great a conflict as the slave-holders brought about.  I think the Union and the Republic may be regarded as safe for a long time to come.  The people can and will control this Government in their own interest in the future, as well as in the past, precisely in proportion as they can be made conscious of their power and their rights.  The forms of the Constitution and laws are all favorable to them now, but their understanding is darkened by bad counsels.  The Government is already, and ought to be in a still larger measure, paternal.  It should aim constantly to “ establish justice,” and organize love and right into law.  If we can teach the people justice and truth, they will see to it that the “ Republic suffers no detriment.”  There is nothing that I can perceive in the policy I advise, that will place any uncontrollable power in the hands of any Administration or Congress.  If the law will not protect the people’s rights, let provisions of the Constitution be resorted to.  Let us have a civil service, that will make office under Government more of a professional and regular occupation than of trade and bargain for place and patronage.  Let the United States embody in their Constitution, as has the State of New York, that there shall be “ no special, partial, or class legislation,” and make its laws on the currency conform to this provision of the Constitution.

The question of the currency is of boundless importance to the American people.  The stability of our Government will depend on a wise settlement of this momentous interest.

The American people will never allow this subject to rest, until it is safely moored to that sure foundation of the eternal principles of truth and justice, on which our fathers placed the Constitution of these United States.

Our fathers meant, that the Government should be of the people and for the people.  They intended to embody the wisdom of simplicity into law, and make it a shield of protection for the unsuspecting masses of the people against those, that are resorting to all forms of art to obtain property without labor.  The framers of the Constitution would never have recommended one kind of money for the issues of the Government, and another for the people.

Under the circumstances, in which our Government was placed at the close of the late war, they should have taken the advice of their most venerated member, Benjamin Franklin, who said that “ paper money, well-founded, has great advantages over gold and silver, being light, and convenient for handling in large sums, and not likely to be reduced by demand for exportation.”

“ On the whole,” he says, “ no method has hitherto been found to establish a medium of trade, equal in all its advantages to bills of credit made a general legal tender.”

If I have done, or can do anything to restore the tools of trade to the American people, to enable them to work out the salvation of our country from the present paralyzed condition of trade and commerce, I shall regard it as a treasure that “ moth and rust cannot corrupt,”—one that will brighten, while life, thought and immortality endure.