---Brigadier General Garfield had been fond and an active proponent of targeting and attacking civilians and their dwelling places and their food supplies. After the war against the South, James Garfield joined the House of Representatives.
"It is my clear conviction that the most formidable danger with which the country is now threatened is a large increase in the volume of paper money."
Increased government demand, facilitated by credit bubble (and not plenty of paper money), produced the war-time prosperity; it was the ending of this government demand and the burst of the credit bubble that produced the economic depression following the war (and not the withdrawal from existence Treasury notes and U.S. notes).
"I cannot but lament from my inmost soul that lust for paper money which appears in some parts of the United States; there will never be any uniform rule, if there is any sense of justice, nor any clear credit, public or private, nor any settled confidence in public men or measures, until paper money is done away." ---John Adams, 1786.
"That paper money has some advantages, is admitted. But that its abuses also are inevitable, and, by breaking up the measure of value, makes a lottery of all private property, cannot be denied." ---Thomas Jefferson, 1817.
"I maintain, Sir, that the people of this country are entitled, at the hand of this government, to a sound, safe, and uniform currency." ---Daniel Webster, 1837.
Financial Policy of the Country.
Mr. Garfield. Mr. Chairman, I am aware that financial subjects are dull and uninviting in comparison with those heroic themes which have absorbed the attention of Congress for the last five years. To turn from the consideration of armies and navies, victories and defeats, to the long array of figures which exhibit the debt, expenditure, taxation, and industry of the nation, requires no little courage and self-denial; but to those questions we must come, and to their solution Congresses, political parties, and all thoughtful citizens must give their best efforts for many years to come. Our public debt, the greatest financial fact of this century, stands in the pathway of all political parties and, like the Egyptian Sphynx, propounds its riddles. All the questions which spring out of the public debt, such as loans, bonds, tariffs, internal taxation, banking, and currency, present greater difficulties than usually come within the scope of American polities. They cannot be settled by force of numbers nor carried by assault, as an army storms the works of an enemy. Patient examination of facts, careful study of principles which do not always appear on the surface, and which involve the most difficult problems of political economy, are the weapons of this warfare. No sentiment of national pride should make us unmindful of the fact that we have less experience in this direction than any other civilized nation. If this fact is not creditable to our intellectual reputation, it at least affords a proof that our people have not hitherto been crushed under the burdens of taxation. We must consent to be instructed by the experience of other nations, and be willing to approach these questions, not with the dogmatism of teachers, but as seekers after truth.
It is evident, that both in Congress and among the people, there is great diversity of opinion on all these themes. He is indeed a bold man who, at this time, claims to have mastered any one of them, or reached conclusions on all its features satisfactory even to himself. For myself, I claim only to have studied earnestly to know what the best interests of the country demand at the hands of Congress. I have listened with great respect to the opinions of those with whom I differ most, and only ask for myself what I award to all others, a patient hearing.
The Hard Times.
The past six months have been remarkable for unparalleled distress in the commercial and industrial interests of half the civilized world. In Great Britain, the distress among the laboring classes is more terrible than the people of those islands have suffered for a quarter of a century. From every city, town, and village in the kingdom, the cry of distress comes up through every issue of the press. The London Times of December 11, says:
"Last winter the demands on the public were unprecedented. The amount of money given to the poor of London beyond that disbursed in legal relief of the poor, was almost incredible. It seemed the demand had reached its highest point, but if we are not mistaken the exigencies of the present season will surpass those of any former year in British history."
The London Star, of a still later date, says:
"Men and women die in our streets every day of starvation. Whole districts are sinking into one vast, squalid, awful condition of helpless, hopeless destitution."
From many parts of continental Europe there comes a similar cry. A few weeks since the Secretary of State laid before this body a letter from the American minister at Copenhagen, appealing to this country, for contributions for the relief of the suffering poor of Sweden and Norway. A late Berlin paper says "business is at a stand-still, and privation and suffering are everywhere seen." The inhabitants of eastern Prussia are appealing to the German citizens of the United States for immediate relief. In Russia the horrors of pestilence are added to the sufferings of famine. In Finland the peasants are dying of starvation by hundreds. In some parts of France and Spain the scarcity is very great. In northern Africa the suffering is still greater. In Algiers the deaths by starvation are so numerous that the victims are buried in trenches like the slain on the battle-field. In Tunis eight thousand have thus perished in two months. The United States consul at that place writes that on the 27th day of December two hundred people starved to death in the streets of that city, and the average daily deaths from that cause exceed one hundred. Our sadness at the contemplation of this picture is mingled with indignation, when we reflect that at the present moment, in the eight principal nations of Europe, there are three million men under arms at an annual cost of nearly a thousand million dollars, an expense which, in twenty years, would pay every national debt in Christendom; and this only the peace establishment ! While Napoleon is feeding fifty thousand starving Frenchmen daily from the soupkitchens of the imperial palace he is compelling the French Legislature to double his army. Whatever distress our people may be suffering, they have reason to be thankful that the bloody monster called the "balance of power" has never cast its shadow upon our country. We have reason, indeed, to be thankful that our people are suffering less than the people of any other nation. But the distress here is unusual for us. It is seen in the depression of business, the stagnation of trade, the high price of provisions, and the great difficulty which laboring men encounter in finding employment. It is said that during the past winter seventy-five thousand laborers of New York city have been unable to find employment. The whole industry of the States lately in rebellion is paralyzed, and in many localities the cry of hunger is heard. It is the imperative duty of Congress to ascertain the cause of this derangement of our industrial forces, and apply whatever remedy legislation can afford. The field is a broad one, the subject is many-sided; but our first step should be to ascertain the facts of our situation.
I shall direct my remarks on this occasion to but one feature of our legislation. I propose to discuss the currency and its relation to the revenue and business prosperity of the country.
Our Industrial Revolution.
In April, 1861, there began in this country an industrial revolution, not yet completed, as gigantic in its proportions and as far reaching in its consequences as the political and military revolution through which we have passed. As the first step to any intelligent discussion of the currency it is necessary to examine the character and progress of that industrial revolution.
The year 1860 was one of remarkable prosperity in all branches of business. For seventy years, no Federal tax-gatherer had ever been seen among the laboring population of the United States. Our public debt was less than 65,000,000 dollars. The annual expenditures of the Government, including interest on the public debt, were less than 64,000,000 dollars. The revenues from customs alone amounted to six sevenths of the expenditures. The value of our agricultural products for that year amounted to $1,625,000,000. Our cotton crop alone was 2,155,000,000 pounds, and we supplied to the markets of the world seven eighths of all the cotton consumed. Our merchant marine engaged in foreign trade amounted to 2,546,237 tons, and promised soon to rival the immense carrying trade of England.
From Peace to War.
Let us now observe the effect of the war on the various departments of business. From the moment the first hostile gun was fired, the Federal and State governments became gigantic consumers. As far as production was concerned, eleven States were completely separated from the Union. Two million laborers, more than one third of the adult population of the northern States, were withdrawn from the ranks of producers and became only consumers of wealth. The Federal Government became an insatiable devourer. Leaving out of account the vast sums expended by States, counties, cities, towns, and individuals for the payment of bounties, for the relief of sick and wounded soldiers and their families, and omitting the losses, which can never be estimated, of property destroyed by hostile armies, I shall speak only of expenditures which appear on the books of the Federal Treasury. From the 30th of June, 1861, to the 30th of June, 1865, there were paid out of the Federal Treasury $3,340,996,211, making an aggregate during these four years of more than 836,000,000 dollars per annum.
From the official records of the Treasury Department it appears that from the beginning of the American Revolution in 1775, to the beginning of the late rebellion, the total expenditures of the Government for all purposes, including the assumed war debts of the States, amounted to $2,250,000,000. The expenditures of four years of the rebellion were nearly $1,100,000,000 more than all the other Federal expenses since the Declaration of Independence. The debt of England, which had its origin in the revolution of 1688, and was increased by more than one hundred years of war and other political disasters, had reached in 1793 the sum of $1,268,000,000. During the twenty-two years that followed, while England was engaged in a life and death struggle with Napoleon, (the greatest war in history save our own,) $3,056,000,000 were added to her debt. In our four years of war we spent $300,000,000 more than the amount by which England increased her debt in twenty-two years of war; almost as much as she had increased it in one hundred and twenty-five years of war. Now, the enormous demand which this expenditure created for all the products of industry, stimulated to an unparalleled degree every department of business. The plow, furnace, mill, loom, railroad, steamboat, telegraph --all were driven to their utmost capacity. Warehouses were emptied; and the great reserves of supply, which all nations in a normal state keep on hand, were exhausted to meet the demands of the great consumer. For many months, the Government swallowed three millions per day of the products of industry. Under the pressure of this demand, prices rose rapidly in every department of business. Labor everywhere found quick and abundant returns. Old debts were canceled and great fortunes were made.
For the transaction of this enormous business an increased amount of currency was needed; but I doubt if any member of this House can be found, bold enough to deny that the deluge of Treasury notes poured upon the country during the war, was far greater than even the great demands of business. Let it not be forgotten, however, that the chief object of these issues was not to increase the currency of the country. They were authorized with great reluctance and under the pressure of overwhelming necessity, as a temporary expedient to meet the demands of the Treasury. They were really forced loans in the form of Treasury notes. By the act of July 17, 1861, an issue of demand notes was authorized to the amount of $50,000,000. By the act of August 5, 1861, this amount was increased $50,000,000 more. By the act of February 25, 1862, an additional issue of $150,000,000 was authorized. On the 17th of the same month an unlimited issue of fractional currency was authorized. On the 11th of July the same year an issue of $150,000,000 more was authorized. On the 17th of January, 1863, an issue of $100,000,000 more was authorized, which was increased $50,000,000 by the act of March 3, of the same year. This act also authorized the issue of one and two years' Treasury notes, bearing interest at five per cent., to be a legal tender for their face, to the amount of $400,000,000. By the act of June 30, 1864, an issue of six per cent. compound-interest notes, to be a legal tender for their face, was authorized, to the amount of $200,000,000. In addition to this, many other forms of paper obligation were authorized, which, though not a legal tender, performed many of the functions of currency.
By the act of March 1, 1862, the issue of an unlimited amount of certificates of indebtedness was authorized, and within ninety days after the passage of the act, there had been issued and were outstanding of these certificates, more than one hundred and fifty-six million dollars. Of course these issues were not all outstanding at the same time, but the acts show how great was the necessity for loans during the war.
The law which made the vast volume of United States notes a legal tender operated as an act of general bankruptcy. The man who loaned $1,000 in July, 1861, payable in three years, was compelled by this law to accept at maturity, as a full discharge of the debt, an amount of currency equal in value to $350 of the money he loaned. Private indebtedness was everywhere canceled. Rising prices increased the profits of business, but this prosperity was caused by the great demand for products, and not by the abundance of paper money. As a means of transacting the vast business of the country, a great volume of currency was indispensable; and its importance cannot be well overestimated. But let us not be led into the fatal error of supposing that paper money created the business or produced the wealth. As well might it be alleged that our rivers and canals produce the grain which they float to market. Like currency, the channels of commerce stimulate production, but cannot nullify the inexorable law of demand and supply.
From War to Peace.
Mr. Chairman, I have endeavored to trace the progress of our industrial revolution in passing from peace to war. In returning from war to peace all the conditions were reversed. At once the Government ceased to be an all-devouring consumer. Nearly two million able bodied men were discharged from the Army and Navy and enrolled in the ranks of the producers. The expenditures of the Government, which for the fiscal year ending June, 30, 1865, amounted to $1,290,000,000, were reduced to $520,000,000 in 1866, to $346,000,000 in 1867; and, if the retrenchment measures recommended by the Special Commissioner of the Revenue be adopted, another year will bring them below $300,000,000.
Thus during the first year after the war the demands of the Federal Government as a consumer, decreased sixty per cent.; and in the second year the decrease had reached seventy-four per cent., with a fair prospect of a still further reduction.
The recoil of this sudden change would have produced great financial disaster in 1866, but for the fact that there was still open to industry the work of replacing the wasted reserves of supply, which in all countries in a healthy state of business, are estimated to be sufficient for two years. During 1866, the fall in price of all articles of industry, amounted to an average of ten per cent. One year ago a table was prepared at my request, by Mr. Edward Young, in the office of the Special Commissioner of the Revenue, exhibiting a comparison of wholesale prices at New York in December, 1865, and December, 1866. It shows that in ten leading articles of provisions there was an average decline of twenty-two per cent., though beef, flour, and other breadstuffs remained nearly stationary. On cotton and woolen goods, boots, shoes, and clothing, the decline was thirty per cent. On the products of manufacture and mining, including coal, cordage, iron, lumber, naval stores, oils, tallow, tin, and wool, the decline was twenty-five per cent. The average decline on all commodities was at least ten per cent. According to the estimates of the Special Commissioner of the Revenue in his late report, the average decline during 1867 has amounted at least to ten per cent. more.
During the past two years, Congress has provided by law for reducing internal taxation $100,000,000; and the act passed a few weeks ago, has reduced the tax on manufactures to the amount of $64,000,000 per annum. The repeal of the cotton tax will make a further reduction of $20,000,000. State and municipal taxation and expenditures have also been greatly reduced. The work of replacing these reserves delayed the shock and distributed its effects, but could not avert the inevitable result. During the past two years, one by one, the various departments of industry produced a supply equal to the demand. Then followed a glutted market, a fall in prices, and a stagnation of business by which thousands of laborers were thrown out of employment.
If to this it be added that the famine in Europe and the drought in many of the agricultural States of the Union have kept the price of provisions from falling as other commodities have fallen; we shall have a sufficient explanation of the stagnation of business and the unusual distress among our people.
This industrial revolution has been governed by laws beyond the reach of Congress. No legislation could have arrested it at any stage of its progress. The most that could possibly be done by Congress was to take advantage of the prosperity it occasioned, to raise a revenue for the support of the Government, and to mitigate the severity of its subsequent pressure, by reducing the vast machinery of war to the lowest scale possible. Manifestly nothing can be more absurd than to suppose that the abundance of currency produced the prosperity of 1863, 1864, and 1865, or that the want of it is the cause of our present stagnation.
The Functions of Currency.
In order to reach a satisfactory understanding of the currency question, it is necessary to consider somewhat fully, the nature and functions of money or any substitute for it.
The theory of money which formed the basis of the "Mercantile system" of the seventeenth and eighteenth centuries, has been rejected by all leading financiers and political economists for the last seventy-five years. That theory asserted that money is wealth; that the great object of every nation should be to increase its amount of gold and silver; that this was a direct increase of national wealth.
It is now held as an indisputable truth that money is an instrument of trade and performs but two functions. It is a measure of value and a medium of exchange.
In cases of simple barter, where no money is used, we estimate the relative values of the commodities to be exchanged, in dollars and cents, it being our only universal measure of value.
As a medium of exchange, money is to all business transactions, what ships are to the transportation of merchandise. If a hundred vessels of a given tonnage are just sufficient to carry all the commodities between two ports, any increase of the number of vessels will correspondingly decrease the value of each as an instrument of commerce; any decrease below one hundred will correspondingly increase the value of each. If the number be doubled each will carry but half its usual freight, will be worth but half its former value for that trade. There is so much work to be done and no more. A hundred vessels can do it all. A thousand can do no more than all.
The functions of money as a medium of exchange, though more complicated in their application, are precisely the same in principle as the functions of the vessels in the case I have supposed.
If we could ascertain the total value of all the exchanges effected in this country by means of money in any year, and could ascertain how many dollars worth of such exchanges can be effected in a year by one dollar in money, we should know how much money the country needed for the business transactions of that year. Any decrease below that amount will correspondingly increase the value of each dollar as an instrument of exchange. Any increase above that amount will correspondingly decrease the value of each dollar. If that amount be doubled, each dollar of the whole mass will perform but half the amount of business it did before; will be worth but half its former value as a medium of exchange.
Recurring to our illustration: if, instead of sailing vessels, steam vessels were substituted, a much smaller tonnage would be required; so, if it were found that $500,000,000 of paper, each worth seventy cents in gold, were sufficient for the business of the country, it is equally evident that $350,000,000 of gold substituted for the paper would perform precisely the same amount of business.
It should be remembered, also, that any improvement in the mode of transacting business, by which the actual use of money is in part dispensed with, reduces the total amount needed by the country. How much has been accomplished in this direction by recent improvements in banking, may be seen in the operations of the clearing-houses in our great cities.
The records of the New York clearing-house show that from October 11, 1853, the date of its establishment, to October 11, 1867, the exchanges amounted to nearly one hundred and eighty thousand million dollars; to effect which, less than eight thousand millions of money were used; an average of about four per cent.; that is, exchanges were made to the amount of $100,000,000 by the payment of four millions of money.
It is also a settled principle that all deposits in banks drawn upon by checks and drafts, really serve the purpose of money.
The amount of currency needed in the country depends, as we have seen, upon the amount of business transacted by means of money. The amount of business, however, is varied by many causes which are irregular and uncertain in their operation. An Indian war, deficient or abundant harvests, an overflow of the cotton lands of the South, a bread famine or war in Europe, and a scare of such causes entirely beyond the reach of legislation, may make money deficient this year and abundant next. The needed amount varies also from month to month in the same year. More money is required in the autumn, when the vast products of agriculture are being moved to market, than when the great army of laborers are in winter-quarters, awaiting the seed time.
When the money of the country is gold and silver, it adapts itself to the fluctuations of business without the aid of legislation. If, at any time, we have more than is needed, the surplus flows off to other countries through the channels of international commerce. If less, the deficiency is supplied through the same channels. Thus the monetary equilibrium is maintained. So immense is the trade of the world that the golden streams pouring from California and Australia into the specie circulation, are soon absorbed in the great mass and equalized throughout the world, as the waters of all the rivers are spread upon the surface of all the seas.
Not so, however, with an inconvertible paper currency. Excepting the specie used in payment of customs and the interest on our public debt, we are cut off from the money currents of the world. Our currency resembles rather the waters of an artificial lake which lie in stagnation or rise to full banks at the caprice of the gatekeeper.
Gold and silver abhor depreciated paper money, and will not keep company with it. If our currency be more abundant than business demands, not a dollar of it can go abroad; if deficient, not a dollar of gold will come in to supply the lack. There is no Legislature on earth, wise enough to adjust such a currency to the wants of the country.
Relation of Currency to Prices.
Let us examine more minutely the effect of such a currency upon prices. Suppose that the business transactions of the country at the present time require $350,000,000 in gold. It is manifest that if there are just $350,000,000 of legal-tender notes, and no other money in the country, each dollar will perform the full functions of a gold dollar, so far as the work of exchange is concerned. Now, business remaining the same, let $350,000,000 more of the same kind of notes be pressed into circulation. The whole volume, as thus increased, can do no more than all the business. Each dollar will accomplish just half the work that a dollar did before the increase, but as the nominal dollar is fixed by law, the effect is shown in prices being doubled. It requires two of these dollars to make the same purchase that one dollar made before the increase. It would require some time for the business of the country to adjust itself to the new conditions, and great derangement of values would ensue; but the result would at last be reached in all transactions which are controlled by the law of demand and supply.
Increase of the Currency is Taxation.
No such change of values can occur without cost. Somebody must pay for it. Who pays in this case ? We have seen that doubling the currency finally results in reducing the purchasing power of each dollar one half; hence every man who held a legal-tender note at the time of the increase, and continued to hold it till the full effect of the increase was produced, suffered a loss of fifty per cent. of its value; in other words, he paid a tax to the amount of half of all the currency in his possession. This new issue, therefore, by depreciating the value of all the currency, cost the holders of the old issue $175,000,000; and if the new notes were received at their nominal value at the date of issue, their holders paid a tax of $175,000,000 more. No more unequal or unjust mode of taxation could possibly be devised. It would be tolerated only by being so involved in the transactions of business as to be concealed from observation; but it would be no less real because hidden.
Its Chief Burden Falls on the Laborer.
But someone may say, "This depreciation would fall upon capitalists and rich men who are able to bear it."
If this were true it would be no less unjust. But unfortunately the capitalists would suffer less than any other class. The new issue would be paid in the first place in large amounts to the creditors of the Government; it would pass from their hands before the depreciation had taken full effect, and, passing down step by step through the ranks of middle men, the dead weight would fall at last upon the laboring classes in the increased price of all the necessaries of life. It is well known that in a general rise of prices, wages are among the last to rise. This principle was illustrated in the report of the Special Commissioner of the Revenue for the year 1866. It is there shown that from the beginning of the war to the end of 1866, the average price of all commodities had risen ninety per cent. Wages, however, had risen but sixty per cent. A day's labor would purchase but two thirds as many of the necessaries of life as it would before. The wrong is therefore inflicted on the laborer long before his income can be adjusted to his increased expenses. It was in view of this truth that Daniel Webster said in one of his ablest speeches:
"Of all the contrivances for cheating the laboring classes of mankind, none has been more effectual than that which deludes them with paper money. This is the most effectual of inventions to fertilize the rich man's field by the sweat of the poor man's brow. Ordinary tyranny, oppression, excessive taxation, these bear lightly on the happiness of the mass of the community, compared with fraudulent currencies, and the robberies committed by depreciated paper."
The fraud committed and the burdens imposed upon the people, in the case we have supposed, would be less intolerable if all business transactions could be really adjusted to the new conditions; but even this is impossible. All debts would be canceled, all contracts fulfilled by payment in these notes --not at their real value, but for their face. All salaries fixed by law, the pay of every soldier in the Army, of every sailor in the Navy, and all pensions and bounties would be reduced to half their former value. In these cases the effect is only injurious. Let it never be forgotten that every depreciation of our currency results in robbing the one hundred and eighty thousand pensioners, maimed heroes, crushed and bereaved widows, and homeless orphans, who sit helpless at our feet.
And who would be benefitted by this policy ? A pretense of apology might be offered for it, if the Government could save what the people lose. But the system lacks the support of even that selfish and immoral consideration. The depreciation caused by the over issue in the case we have supposed compels the Government to pay just that per cent. more on all the contracts it makes, on all the loans it negotiates, on all the supplies it purchases; and to crown all, it must at last redeem all its legal-tender notes in gold coin, dollar for dollar. The advocates of repudiation have yet been bold enough to deny this.
Depreciated Currency Stimulates Speculation and Over Trading
I have thus far considered the influence of a redundant paper currency on the country when its trade and industry are in a healthy and normal state. I now call attention to its effect in producing an unhealthy expansion of business, in stimulating speculation and extravagance and in laying the sure foundation of commercial revulsion and wide-spread ruin. This principle is too well understood to require any elaboration here. The history of all modern nations is full of examples. One of the ablest American writers on banks and banking, Mr. Gouge, thus sums up the result of his researches.
"The history of all our bank pressures and panics has been the same in 1825, in 1837, and in 1843; and the cause given in these two simple words-- universal expansion."
There still remains to be considered the effect of depreciated currency on our trade with other nations. By raising prices at home higher than they are abroad, imports are largely increased beyond the exports; our coin must go abroad; or, what is far worse for us, our bonds which have also suffered depreciation and are purchased by foreigners at seventy cents on the dollar. During the whole period of high prices occasioned by the war, gold and bonds have been steadily going abroad, notwithstanding our tariff duties which average nearly filly per cent. ad valorem. More than five hundred million dollars of our bonds are now held in Europe, ready to be thrown back upon us when any war or other sufficient disturbance shall occur. No tariff rates short of actual prohibition can prevent this outflow of gold while our currency is thus depreciated. During there years also, our merchant marine steadily decreased, and our ship-building interests were nearly ruined.
Our tonnage engaged in foreign trade, which amounted in 1859-60 to more than two and a half million tons, had fallen in 1865-66 to less than one and a half millions --a decrease of more than fifty per cent.; and prices of labor and material are still too high to enable our shipwrights to compete with foreign builders.
From the facts already exhibited in reference to our industrial revolution, and from the foregoing analysis of the nature and functions of currency, it is manifest:
1. That the remarkable prosperity of all industrial enterprise during the war was not caused by the abundance of currency, but by the unparalleled demand for every product of labor.
2. That the great depression of business, the stagnation of trade, the "hard times" which have prevailed during the past year, and which still prevail, have not been caused by an insufficient amount of currency, but mainly by the great falling off of the demand for all the products of labor compared with the increased supply since the return from war to peace.
How Much Currency is Needed ?
I should be satisfied to rest on these propositions without further argument, were it not that the declaration is so often and so confidently made by members of this House, that there is not only no excess of currency, but that there is not enough for the business of the country. I subjoin a table, carefully made up from the official records, showing the amount of paper money in the United States at the beginning of each year from 1834 to 1868, inclusive. The fractions of millions are omitted:
1834 ................... 95
1835 .................. 101
1836 .................. 140
1837 .................. 149
1838 .................. 116
1839 .................. 135
1840 .................. 107
1841 .................. 107
1842 ................... 84
1843 ................... 59
1844 ................... 75
1845 ................... 90
1846 .................. 105
1847 .................. 106
1848 .................. 129
1849 .................. 115
1850 .................. 131
1851 .................. 155
1852 .................. 150
1853 .................. 146
1854 .................. 205
1855 .................. 187
1856 .................. 196
1857 .................. 215
1858 .................. 135
1859 .................. 193
1860 .................. 207
1861 .................. 202
1862 .................. 218
1863 .................. 529
1864 .................. 636
1865 .................. 948
1866 .................. 919
1867 .................. 852
1868 .................. 767
To obtain a full exhibid of the circulating medium of the country for these years, it would be necessary to add to the above, the amount of coin in circulation each year. This amount cannot be ascertained with accuracy, but it is the opinion of those best qualified to judge, that there were about two hundred million dollars of gold and silver coin in the United States at the beginning of the rebellion. It is officially known that the amount held by the banks from 1860 to 1863 inclusive, averaged about ninety-seven million dollars. Including bank reserves, the total circulation of coin and paper never exceeded $400,000,000 before the war. Excluding the bank reserves the amount was never above $300,000,000. During the twenty-six years preceding the war the average bank circulation was less than one hundred and thirty-nine million dollars.
It is estimated that the amount of coin now in the United States is not less than $250,000,000. When it is remembered that there are now $106,000,000 of coin in the Treasury, that customs duties and interest on the public debt are paid in coin alone, and that the currency of the States and Territories of the Pacific coast is wholly metallic, it will be seen that a large sum of gold and silver must be added to the volume of paper currency in order to ascertain the whole amount of our circulation. It cannot be successfully controverted that the gold, silver, and paper, used as money in this country at this time, amount to $1,000,000,000. If we subtract from this amount our bank reserves --which amounted on the 1st of January last to $162,500,000, and also the cash in the national Treasury, which at that time amounted to $134,000,000-- we still have left in active circulation, more than seven hundred million dollars.
It rests with those who assert that our present amount of currency is insufficient, to show that one hundred and fifty per cent. more currency is now needed for the business of the country than was needed in 1860. To escape this difficulty, it has been asserted, by some honorable members, that the country never had currency enough; and that credit was substituted before the war to supply the lack of money. It is a perfect answer to this, that in many of the States a system of free banking prevailed; and such banks pushed into circulation all the money they could find a market for.
Relation of Currency to Financial Panics.
The table I have submitted shows how perfect an index the currency is, of the healthy or unhealthy condition of business, and that every great financial crisis, during the period covered by the table, has been preceded by a great increase, and followed by a great and sudden decrease in the volume of paper money. The rise and fall of mercury in the barometer is not more surely indicative of an atmospheric storm, than is a sudden increase or decrease of currency indicative of financial disaster. Within the period covered by the table there were four great financial and commercial crises in this country. They occurred in 1837, 1841, 1854, and 1857. Now, observe the change in the volume of paper currency for those years.
On the 1st day of January, 1837, the amount had risen to $149,000,000, an increase of nearly fifty per cent. in three years. Before the end of that year, the reckless expansion, speculation, and overtrading which caused the increase, had resulted in terrible collapse; and on the 1st of January, 1838, the volume was reduced to $116,000,000. Wild lands, which speculation had raised to fifteen and twenty dollars per acre, fell to one dollar and a half and two dollars, accompanied by a corresponding depression in all branches of business. Immediately after the crisis of 1841 the bank circulation decreased twenty-five per cent., and by the end of 1842 was reduced to $58,500,000, a decrease of nearly fifty per cent.
At the beginning of 1853 the amount was $146,000,000. Speculation and expansion had swelled it to $205,000,000 by the end of that year, and thus introduced the crash of 1854. At the beginning of 1857 the paper money of the country reached its highest point of inflation up to that time. There were nearly two hundred and fifteen millions, but at the end of that disastrous year the volume had fallen to $135,000,000, a decrease of nearly forty per cent. in less than twelve months. In the great crashes preceding 1837 the same conditions are invariably seen -- great expansion, followed by a violent collapse, not only in paper money, but in loans and discounts; and those manifestations have always been accompanied by a corresponding fluctuation in prices.
In the great crash of 1819, one of the severest this country every suffered, there was a complete prostration of business. It is recorded in Niles's Register for 1820 that in that year an Ohio miller sold four barrels of flour to raise five dollars, the amount of his subscription to that paper. Wheat was twenty cents per bushel and corn ten cents. About the same time Mr. Jefferson wrote to Nathaniel Macon:
"We have now no standard of value. I am asked eighteen dollars for a yard of broadcloth which, when we had dollars, I used to get for eighteen shillings."
Does the High Rate of Interest Indicate an Insufficient Amount of Currency ?
But the advocates of paper-money expansion answer us:
"It makes no difference what your reasoning may be, we allege the fact that there is great stringency in our money market, great depression in business, and the high rate of interest everywhere demanded, especially in the West, proves conclusively that an increase of currency is needed."
The relation of business to the supply of money and to the rate of interest, has never been so strikingly illustrated as in the financial and business history of Europe during the past two years. At the beginning of 1866 there was great activity and apparent prosperity in the business of Europe. It was a period of speculation and overtrading. About the middle of that year the depression commenced, which has continued and increased till now, when, the distress is greater and more widespread than it has been for a quarter of a century. From May, 1866, to the present time, the rate of interest in the principal money centers of Europe has been steadily decreasing. The following table, collated from the London Economist, exhibits the fact that the average decline in nine kingdoms of Europe is fifty per cent.:
Rate of Interest.
May, 1866. ... March, 1868.
per cent. ........... per cent.
London ............ 7 .............................. 2
Paris .................. 4 ............................ 1½
Berlin .................. 5 .............................. 3
Vienna .................. 7 .............................. 4
Frankfort ............ 6 ........................... 2½
Amsterdam ................... 6½ ........................... 3
Turin ...................... 6 .............................. 5
Madrid ................... 9 .............................. 5
Brussels ............................ 5 .............................. 2
Hamburg ...................... 7 .............................. 2
St. Petersburg .............. 7 .............................. 8
It will be noticed that the rate is lowest in specie-paying countries, and highest where there is a large volume of depreciated paper money, as in Russia, Spain, and Italy. But the important fact exhibited in this table is, that as commercial distress has increased, the rate of interest has decreased, and that the hard times have been accompanied with an abundant supply of money.
It would be as reasonable for an Englishman to assert that the distress and stagnation of business there has been caused by the plethora of money and the low rate of interest, as for us to claim that our distress is caused by an insufficient currency and a high rate of interest. There, as here, the distress is caused by over-production and over-trading.
England thought to grow rich out of our misfortunes, and, in her greed, overreached herself and brought misery and ruin upon millions of her people. As a specimen of her crazy expansion of business, witness the fact that in the years 1863, 1864, and 1865, in addition to all other enterprises, there were organized eight hundred and thirty-two joint-stock companies, with an authorized capital of £363,000,000 sterling. During 1866 and 1867, there were organized but seventy-one such companies, with an authorized capital of less than sixteen million five hundred thousand pounds sterling.
The Bankers' Magazine of London, for May, 1867, says that--
"In the vaults of the Bank of England, the Bank of France, and in Amsterdam, Frankfort, Hamburg and Berlin, there are £75,000,000; the rate of discount averages three per cent., and tending downward; yet in each and every one of these cities complaints of the scarcity of money were never more rife."
At the end of 1867, the same magazine, of a later date, says there were £23,500,000 sterling gold in the Bank of England, besides £14,000,000 of coin and paper reserves, but "not the slightest life in trade."
The London Times of December 20, 1867, says:
"We are now paying the penalty of wild speculation and overtrading. For eighteen months, all but the ordinary business of the country is at a stand still." * * * * * "Millions on millions are lying useless in the various banks of the country because the owners of the money cannot yet prevail upon themselves to trust it in any of the ordinary investments."
From these facts it is evident that those who attribute our hard times to a reduction of the currency will find themselves unable to explain the hard times in Europe.
We are constantly reminded that the country was prosperous at the beginning of 1866, before the currency was reduced, but is now in distress since the reduction, and these two facts are assumed to sustain the relation to each other of cause and effect.
Now, let it be observed that since January, 1866, the volume of paper currency has been reduced sixteen and a half per cent., but during the same time there has been an average decline in prices of not less than twenty per cent.; that is, eighty cents in currency will purchase as many commodities now as a dollar would two years ago; and there are eighty-three and a half cents in currency now to every dollar then. The gold value of our whole volume of currency in January, 1868, was but three and two thirds per cent. less than the gold value of the whole volume in January, 1866. The advocates of expansion should prove that there has been a reduction in the purchasing power of our currency before they deplore the fact.
Scarcity of Currency in the West.
That there is an apparent stringency in our money market generally, and a relative scarcity of currency in the West cannot be doubted. During the past winter, especially, it has been and still is very difficult in the West to obtain money on good business paper. The causes of this are to be found in the improper adjustment of our financial machinery and in the great uncertainty attending our financial legislation. It is a well-settled principle that a currency, not redeemable, tends to find its way to the money centers and stay there.
Most unfortunately for the interest of the country, the national banks have been allowed to receive interest on the deposits they make in the banks at the great money centers. Most of the country banks, therefore, send all their surplus funds to New York, and will not loan money unless they can receive a higher rate than is paid them there. For all practical purposes their notes are equal to greenbacks, and they are never called upon to redeem them. Thus we have a plethora of money in New York and a few other cities, and a scarcity in the country. We are financially in the condition of a sick man suffering with congestive chills; the blood rushes to the heart and leaves the extremities chilled and paralyzed.
The fluctuation of values, caused by the uncertainty of our situation, offers a great temptation to engage in stock and gold speculation, and hence men, who would otherwise be honest producers of wealth, rush to the gold room or the stock market and become the most desperate of gamblers, putting up fortunes to be lost or won on the chances of a day. These men pay enormous margins on their purchases and extravagant interest on their loans. There are tons of paper money at the great commercial centers, to which it flows from all quarters to meet the insane demands of Wall street. Recently a clique of these operators locked up $25,000,000 of greenbacks, and upon them, as a special deposit, borrowed $20,000,000 more for the purpose of creating a sudden stringency in the money market and placing gold and stocks at their mercy.
The vast amount of money daily loaned on call in Wall street, at a high rate of interest, shows how the currency of the country is being used. So long as the national Government takes no steps toward redeeming its own paper, so long will there be nothing to call the notes of the country banks back home; so long will there be no healthy and equal circulation of the currency.
If $200,000,000 more currency were now issued. I do not doubt that within two months there would be the same want of money in the rural districts that now prevails. The surplus would flow to the money centers, and the increased prices would make our condition worse than before. It ought not to be forgotten that while the capitalist and speculator are able to take advantage of fluctuations in prices, the poor man has no such power. The necessities of life he must buy day by day, whatever the price may be. He offers for sale only his labor. That he must sell each day, or it will be wholly lost. He is absolutely at the mercy of the market.
Inconvertible Paper Money has no Fixed Value.
But the most serious evil growing out of the condition of our currency is the fact that we have now no fixed and determinate standard of value. It is scarcely possible to exaggerate this evil. If a snow-ball, made at the beginning of winter and exposed to freezing and thawing, snowfall and rainfall, and weighed every day at noon, were made the lawful pound avoirdupois for this country during the winter, we can hardly conceive the confusion and injustice that would attend all transactions depending on weight. The evil, however, would not be universal. Linear, liquid, and many other measures would not be affected by it. But a change of the money standard reaches all values. No transaction escapes. The money unit is the universal measure of value throughout the world.
Since the dawn of civilization the science, the art, the statesmanship of the world have been put in requisition to devise and maintain an unvarying and, as far as possible, an invariable standard. For thousands of years gold and silver of a certain weight and fineness have been adopted as the nearest approach to perfection; but even the slight variation in value to which coin is subject from clipping and wear has brought nations to the verge of revolution. No one can read Macaulay's account of the recoinage in England, in the days of William and Mary, without perceiving how directly the happiness and prosperity of a nation depend upon the stability of its money unit. He says:
"It may well be doubted whether all the misery which had been inflicted on the English nation in a quarter of a century by bad kings, bad ministers, bad parliaments, and bad judges, was equal to the misery caused in one year (1695) by bad crowns and bad shillings." --Hist., vol. 4, Chap. 21.
To rescue the nation from the evils of bad shillings, Newton was called from his high realm of discovery, Locke from his profound meditations, Somers and Montague from their seats in Parliament, and these illustrious men spent months in most devoted effort to restore to the realm its standard of value. What could now be of greater service to our country than to direct its highest wisdom and statesmanship to the restoration of our standard ?
For three quarters of a century the dollar has been our universal measure. A coin containing 23.22 grains of pure gold, and stamped at the national Mint, has been our only definition of the word dollar. The dollar is the gauge that measures every blow of the ax; every swing of the scythe; every stroke of the hammer; every fagot that blazes on the poor man's hearth; every fabric that clothes his children; every mouthful that feeds their hunger. The word dollar is the substantive word --the fundamental condition of every contract, of every sale, of every payment, whether from the national Treasury or from the stand of the apple woman in the street. Now, what is our situation ? There has been no day since the 25th of February, 1862, when any man could tell what would be the value of our legal-currency dollar the next month or the next day. Since that day we have substituted for a dollar the printed promise of the Government to pay a dollar. That promise we have broken. We have suspended payment, and have by law compelled the citizen to receive dishonored paper in place of money. The value of the paper standard thus forced upon the country by the necessities of the war, has changed every day, and almost every hour of the day, for six years. The value of our paper dollar has passed by thousands of fluctuations from one hundred cents down to thirty-five, and back again to seventy. During the war, in the midst of high prices and large profits, this fluctuation was tolerable. Now that we are making our way back toward old prices and more moderate gains, now that the pressure of hard times is upon us, this uncertainty in our standard of value is an almost intolerable evil.
The currency, not being based upon a foundation of real and certain value, and possessing no element of self-adjustment, depends for its market value on a score of causes. It is a significant and humiliating fact that the business men of the nation are in constant dread of Congress. Will Congress increase the currency or contract it ? Will new greenbacks be issued with which to take up the bonds; or will new bonds be issued to absorb the greenbacks ? Will the national banking system be perpetuated and enlarged, or will it be abolished to enable the General Government to turn banker ?
These and a score of kindred questions are agitating the public mind and changing our standard of value with every new turn in the tide of congressional opinion. Monday is a dangerous day for the business of this country while Congress is in session. The broadside of financial resolutions fired from this House on that day, could have no such effect as it now produces if our currency were based on a firm foundation.
Observe how the people pay for this fluctuation of values. Importers, wholesale merchants, and manufacturers, knowing the uncertainties of trade which results from this changeable standard, raise their prices to cover risks. The same thing is done again by retail dealers and middle men, and the whole burden falls at last upon the consumer --the laboring man. And yet, we hear honorable gentlemen singing the praises of cheap money !
The vital and incurable evil of an inconvertible paper currency is that it has no elasticity --no quality whereby it adjusts itself to the necessities and contingencies of business.
Paper Money Delusions.
But there is one quality of such a currency more remarkable than all others --its strange power to delude men. The spells and enchantments of legendary witchcraft were hardly so wonderful. Most delusions cannot be repeated; they lose their power after a full exposure. Not so with irredeemable paper money. From the days of John Law its history has been a repetition of the same story, with only this difference: no nation now resorts to its use except from overwhelming necessity; but whenever any nation is fairly embarked, it floats on the delusive waves, and, like the lotus-eating companions of Ulysses, wishes to return no more.
Into this very delusion many of our fellow-citizens and many members of this House have fallen. Hardly a member of either House of the Thirty-Seventh or Thirty-Eighth Congress spoke on the subject who did not deplore the necessity of resorting to inconvertible paper money, and protest against its continuance a single day beyond the inexorable necessities of the war. The remarks of Mr. Fessenden, when he reported the first legal-tender bill from the Finance Committee of the Senate, in February, 1862, fully exhibit the sentiment of Congress at that time. He assured the country that the measure was not to be resorted to as a policy; that it was what it professed to be, a temporary expedient; that he agreed with the declaration of the chairman of the Committee of Ways and Means of the House that it was not contemplated to issue more than $150,000,000 of legal-tender notes. Though he aided in passing the bill, he uttered a warning, the truth and force of which few then questioned. He said:
"all the opinions that I have heard expressed agree in this: that only with extreme reluctance, only with fear and trembling as to the consequences can we have recourse to a measure like this of making our paper a legal tender in the payment of debts."
"All the gentlemen who have spoken on the subject, and all pretty much who have written on the subject, except some wild speculators in currency, have declared that as a policy, it would be ruinous to any people; and it has been defended, as I have stated, simply and solely upon the ground that it is to be a single measure, standing by itself, and not to be repeated."
"Again, sir, it necessarily changes the values of all property. It is very well known that all over the world gold and silver are recognized as money, as currency; they are the measure of value. We change it here. What is the result ? Inflation, subsequent depression, all the evils which follow from an inflated currency. They cannot be avoided; they are inevitable; the consequence is admitted. Although the notes, to be sure, pass precisely at par, gold appreciates, property appreciates -- all kinds of property."
This, I repeat, was the almost unanimous sentiment of the Thirty-Seventh Congress; and though subsequent necessity compelled both that and the Thirty-Eighth Congress to make new issues of paper, yet the danger was always confessed and the policy and purpose of speedy resumption were kept steadily in view. So anxious were the members of the Thirty-Eighth Congress that the temptation to new issues should not overcome them or their successors, that they bound themselves by a kind of financial temperance pledge, that there never should be a further increase of legal-tender notes. Witness the following clause of the loan act of June 30, 1864:
"Sec. 2." * * * * * "Proveded, That the total amount of bonds and Treasury notes authorized by the first and second sections of this act shall not exceed $400,000,000 in addition to the amounts heretofore issued; nor shall the total amount of United States notes, issued or to be issued, ever exceed $400,000,000, and such additional sum, not exceeding $60,000,000, as may be temporarily required for the redemption of temporary loan."
Here is a solemn pledge to the public creditors, a compact with them, that the Government will never issue non-interest-paying notes beyond the sum total of $450,000,000. When the war ended, the Thirty-Ninth Congress, adopting the views of its predecessors on this subject, regarded the legal-tender currency a part of the war machinery, and proceeded to reduce and withdraw it in the same manner in which the Army and Navy and other accompaniments of the War were reduced. Ninety-five gentlemen who now occupy seats in this Hall were members of this House on the 18th of December, 1865, when it was resolved by a vote of 144 yeas to 6 nays--
"That this House cordially concurs in the views of the Secretary of the Treasury in relation to the necessity of a contraction of the currency with a view to as early a resumption of specie payments as the business interests of the country will permit; and we hereby pledge coöperative action to this end as speedily as practicable."
Since the passage of that resolution the currency has been reduced by an amount less than one sixth of its volume, and what magic wonders have been wrought in the opinions of members of this House and among the financial philosophers of the country ? A score of honorable gentlemen have exhausted their eloquence in singing the praises of greenbacks. They insist that, at the very least, Congress should at once set the printing presses in motion to restore the $70,000,000 of national treasure so ruthlessly reduced to ashes by the incendiary torch of the Secretary of the Treasury. Another, claiming that this would be a poor and meager offering to the offended paper god, introduces a bill to print and issue $140,000,000 more. The philosopher of Lewiston, the Democratic Representative of the ninth district of Illinois, [Mr. Ross,] thinks that a new issue of $500,000,000 will for the present meet the wants of the country. Another, perceiving that the national bank notes are dividing the honors with greenbacks, proposes to abolish these offending corporations and, in lieu of their notes, issue $300,000,000 in greenbacks, and thus increase the active circulation by over one hundred millions, the amount now held as bank reserves; and finally the Democratic masses of the West are rallying under the leadership of the coming man, the young statesman of Cincinnati, who proposes to cancel with greenbacks the $1,500,000,000 of five-twenty bonds, and with his election to the Presidency usher in the full millennial glory of paper money ! And this is the same George H. Pendleton who denounced as unconstitutional the law which authorized the first issue of greenbacks, and concluded an elaborate speech against the passage of the bill in 1862 with these words:
"You send these notes out into the world stamped with irredeemability. You put on them the mark of Cain, and, like Cain, they will go forth to be vagabonds and fugitives on the earth. What then will be the consequence ? It requires no prophet to tell what will be their history. The currency will be expanded; prices will be inflated; fixed values will depreciate; incomes will be diminished; the savings of the poor will vanish; the hoardings of the widow will melt away; bonds, mortgages, and notes, everything of fixed value, will lose their value; everything of changeable value will be appreciated; the necessaries of life will rise in value; the Government will pay twofold -- certainly largely more than it ought -- for everything that it goes into the market to buy; gold and silver will be driven out of the country. What then ? The day of reckoning must come. Contraction will follow, private ruin and public bankruptcy, either with or without REPUDIATION, will inevitably follow."
Real Cause of the Reaction.
The chief cause of this new-born zeal for paper money is the same as that which led a member of the Continental Congress to exclaim:
"Do you think, gentlemen, that I will consent to load my constituents with taxes when we can send to the printer and get a wagon load of money, one quire of which will pay for the whole !"
The simple fact in the case is that Congress went resolutely and almost unanimously forward in the policy of gradual resumption of specie payments, and a return to the old standard of values, until the pressure of falling prices and hard times began to be felt; and now many are shrinking from the good work they have undertaken, are turning back from the path they so worthily resolved to pursue, and are asking Congress to plunge the nation deeper than ever into the abyss from which it has been struggling so earnestly to escape. Did any reflecting man suppose it possible for the country to return from the high prices, the enormous expansion of business, debt, and speculation occasioned by the war, without much depression and temporary distress ? The wit of man has never devised a method by which the vast commercial and industrial interests of a nation can suffer the change from peace to war, and from war back to peace, without hardship and loss. The homely old maxim, "What goes up must come down," applies to our situation with peculiar force. The "coming down" is inevitable. Congress can only break the fall and mitigate its evils by adjusting the taxation, the expenditures, and the currency of the country, to the changed conditions of affairs. This it is our duty to do with a firm and steady hand.
Much of this work has already been done. Our national expenditures have been very considerably reduced, but the work of retrenching expenditures can go and should go much further. Very many, perhaps too many, of our national taxes have been removed. But if this Congress shall consent to break down the dikes, and let in on the country a new flood of paper money for the temporary relief of business, we shall see all the evils of our present situation return after a few months with redoubled force.
It is my clear conviction that the most formidable danger with which the country is now threatened is a large increase in the volume of paper money.
Our Past Experience -- Colonial Paper.
Shall we learn nothing from experience ? Shall the warnings of the past be unheeded ? What other nation has so painfully spelled out, letter by letter and word by word, the terrible meaning of irredeemable paper money, whether known by the name of colonial bills, continental currency, or notes of dishonored banks ? Most of the colonies had suffered untold evils from depreciated paper before the Revolution. Massachusetts issued her first bills of credit in 1690 to meet a war debt, and after sixty years of vain and delusive efforts to make worthless paper serve the purposes of money, found her industry perishing under the weight of colony bills equal in nominal value to $11,000,000, which, though made a legal tender and braced up by the severest laws, were worth but twelve per cent. of their face; and under the lead of Hutchinson, a far-sighted and courageous statesman, in 1750, resumed specie payment, canceled all her bills, and by law prohibited the circulation of paper money within her borders and made it a crime punishable by a fine of £100 for any Governor to approve any bill to make it a legal tender.
For the next quarter of a century Massachusetts enjoyed the blessings of a sound currency. Rhode Island clung to the delusion many years longer. More than one hundred pages of Arnold's history of that Colony are devoted to portraying the distress and confusion resulting from this cause alone. The history of every Colony that issued bills is a repetition of the same sad story.
The financial history of the Revolution is too familiar to need repetition here, but there are points in that history, of which an American Congress cannot be too often reminded. Nowhere else were all the qualities of irredeemable paper money so fully exhibited. From the first emission of $2,000,000, in 1775, till the last in 1781, when $360,000,000 had been issued, there appeared to be a purpose, perpetually renewed but always broken, to restrict the amount and issue no more. Each issue was to be the last. But notwithstanding the enormous volume reluctantly put in circulation, our fathers seemed to believe that its value could be kept up by legislation. They denounced in resolutions of Congress the first depreciation of these bills as the work of enemies; and in January, 1776, resolved--
"That if any person shall hereafter be so lost to all virtue and regard for his country as to refuse to receive said bills in payment, &c., he shall be treated as an enemy and precluded front all trade or intercourse with the inhabitants of these Colonies."
But they found before the struggle ended that the inexorable laws of value were above human legislation; that resolutions cannot nullify the truths of the multiplication table.
The bills passed nearly at par until the issues exceeded nine millions. At the end of 1776 they were worth seventy-five per cent. of their nominal value; at the end of 1777, twenty-five; at the end of 1778, sixteen; at the end of 1779, two and a half; and at the end of 1780 they were worth but one cent on the dollar. Four months later $500 in continental bills were selling for one dollar in specie. Peletiah Webster, in 1790, said:
"The fatal error that the credit and currency of continent money could be kept up and supported by acts of compulsion, entered so deep into the minds of Congress and all departments of administration through the States, that no consideration of justice, religion, or policy, or even experience of its utter inefficiency, could eradicate it; it seemed it kind of obstinate delirium, totally deaf to every argument drawn from justice and right, from its natural tendency and mischief, and from common justice, and even from common sense." * * * * "This ruinous principle was continued in practice for five successive years, and appeared in all shapes and forms, i.e., legal-tender acts; limitation of prices, in awful and threatening declarations, and in penal laws." * * * * * "Many thousand families of full and easy fortune were ruined by these fatal measures, and lie in ruins to-day, (1790) without the least benefit to the country or to the great and noble cause in which they were then engaged."
In summing up the evils of the continental currency, after speaking of the terrible hardships of the war, the destruction of property by the enemy, who at times during its progress held eleven out of the thirteen State capitals, Mr. Webster, who had seen it all, said:
"Yet these evils were not as great as those which were caused by continental money and the consequent irregularities of the financial system. We have suffered from this cause more than from every other cause of calamity; it has killed more men; pervaded and corrupted the choicest interests of our country more, and done more injustice than even the arms and artifices of our enemies."
But let it never be forgotten that the fathers of the Revolution saw, at last, the fatal error into which they had fallen, and even in the midst of their great trials restored to the young nation then struggling for its existence its standard of value, its basis for honest and honorable industry.
In 1781 Robert Morris was appointed Superintendent of Finance. He made a return to specie payments the condition of his acceptance; and on the 22d of May Congress declared "That the calculation of the expenses of the present campaign shall be made in solid coin;" and--
"That experience having evinced the inefficiency of all attempts to support the credit of paper money by compulsory acts, it is recommended to such Ststes where laws making paper bills a tender yet exist to repeal the same."
Thus were the financial interests of the nation rescued from dishonor and utter ruin.
Paper Money After the Revolution.
The state of the currency from the close of the war to the establishment of the Government under the Constitution was most deplorable. The separate States had been seized with the mania for paper money, and were rivaling each other in the extravagance of their issues and the rigor of their financial laws. One by one they were able, at last, to conquer the evils into which paper money had plunged them. In 1786 James Madison wrote from Richmond, to General Washington, the joyful news that the Virginia Legislature had, by a majority of 84 to 17, voted--
"Paper money unjust, impolitic, destructive of public and private confidence, and of that virtue which is the basis of republican government."
The paper money of Massachusetts was the chief cause of Shay's rebellion. The paper money of Rhode Island kept that State for several years from coming into the Union.
Nearly half a century afterwards, Daniel Webster, reviewing the financial history of the period now under consideration, said:
"From the close of the war to the time of the adoption of this Constitution, as I verily believe, the people suffered as much, except in loss of life, from the disordered state of the currency and the prostration of commerce and business as they suffered during the war."
With such an experience, it is not wonderful that the framers of our Constitution should have undertaken to protect their descendants from the evils they had themselves endured.
Provisions of the Constitution in Reference to Paper Money.
By reference to the Madison Papers, volume three, pages 1343-6, it will be seen that in the first draft of the Constitution there was a clause giving Congress the power "to borrow money and emit bills on the credit of the United States."
On the 16th of August, 1787, during the final revision, Gouverneur Morris moved to strike out the clause authorizing the emission of bills. Mr. Madison declared that he voted to strike it out so as to "cut off the pretext for a paper currency, and particularly for making the bills a tender either for public or private debts." Mr. Elsworth "thought this a favorable time to shut and bar the door against paper money. The mischief of the various experiments which had been made were now fresh in the public mind and had excited the disgust of all the respectable part of America." Mr. Read "thought that the words, if not struck out, would be as alarming as the mark of the Beast in Revelation." Mr. Langdon had rather reject the whole "plan than retain the three words 'and emit bills.' "
The clause was stricken out by a vote of nine States to two. Twelve days later Roger Sherman, remarking that "this is a favorable crisis for crushing paper money," moved "to prohibit the States from emitting bills of credit, or making anything but gold and silver coin a tender in payment of debts." This clause was placed in the Constitution by a vote of eight States to two. Thus our fathers supposed they had protected us against the very evil which now afflicts the nation.
The Experience of Great Britain.
The doctrines which I am advocating in reference to the evils of an inconvertible currency are strongly corroborated by the financial experience of Great Britain. One of the ablest of English writers on finance thus sums up the history of panics and commercial distress:
"From the undue or unnecessary increase of the currency, which could not take place if the whole were metallic, we have the origin and sole cause of general speculation and overtrading, which proceed with its increase, and in their progress demand or require new additions to the circulation and credit; and from this consequent facility of obtaining credit, may far outstrip the actual increase of the currency, a state of things that cannot be prolonged beyond the safety of the bank, which again depends on the stock of her treasure. The issues are then contracted; this is followed by the contraction of the country circulation, credit is destroyed, and suddenly our market assumes the appearance of low prices, overproduction, or indefinite supply. If this principle is applied to the contraction of our currency in 1815 and 1816, with the low prices that followed; its extension in 1817 and 1818, and the general speculation, overtrading, and high prices that succeeded; and again to its contraction in 1819, 1820, 1821, and 1822, and the general complaint of abundance of foreign and home products, and low prices that continued through these year; and lastly, to the increase of the currency in 1824 and part of 1825 with the accompanying rage of speculation, overtrading, and high prices that followed, we see the establishment of the principle in all its forms." ---Mushet on Money, p. 182.
Necessity of a Settled Policy.
To review briefly the ground traveled over; we have seen that the hard times and depression of business which the country is now suffering was caused in the first instance by the great industrial revolution which grew out of the war, and that its evils have been aggravated and are in danger of being indefinitely continued by the unsettled condition of our currency and by the uncertainty of congressional legislation; that we have not now, and, without decisive legislation, cannot have a fixed standard of value, and therefore all trade and business are at the mercy of political sensations and business intrigues, the evils of which fall heaviest upon the laboring man; that the greatest financial danger which threatens us is that some of the schemes now before Congress may result in a large increase of irredeemable paper money, for which there can be no defense except such an overwhelming necessity as compelled Congress to use it, in the moment of supreme peril, to save the life of the nation; that history is full of warnings against such a policy; that during our colonial period, during the war of the Revolution, and after the war, our fathers tested and practically exploded the very theories now in vogue respecting paper money, and attempted so to frame the Constitution as to shield us from the calamities they suffered; and finally, that these views are fully confirmed by the financial history of England.
From these considerations it appears to me that the first step toward a settlement of our financial and industrial affairs should be to adopt and declare to the country a fixed and definite policy, so that industry and enterprise may be based upon confidence; so that men may know what to expect from the Government; and, above all, that the course of business may be so adjusted that it shall be governed by the laws of trade, and not by the caprice of any man or of any political party in or out of Congress.
What has the Fortieth Congress done in Reference to this Subject ?
Thus far, nothing has been done, except to abandon the policy which we have been pursuing for the past two years. By joint resolution of December 6, it was ordered that there should be no further contraction of the currency; but the Committee of Ways and Means not only did not indicate what policy they should recommend, but they gave no reasons for the measure they reported, nor did they allow any debate or question by others. I voted against that resolution, not because I was in favor of continuing without change the policy we were then pursuing, but because I believed, as has since been manifest, that a large party in this House intended not to stop there, but to make that resolution the first step toward inflation. Against that policy I made the only protest left to me, by voting against the first measure in the programme.
The Contraction Policy.
That contraction of the currency tended toward specie payments, few will deny; but that there were serious evils connected with it, is also manifest. The element of uncertainty was the chief evil. It was never known whether the Secretary of the Treasury would use the power placed in his hands, during any given month, or not; and the stringency caused by contraction was always anticipated and generally exaggerated. The actual contraction had far less influence on business than the expectation of it. In connection with this policy the efforts of the Secretary to keep the gold market steady, by sales from the Treasury, increased the uncertainty and led to a very general feeling that it was unwise to put the control of business and prices, to so great an extent, in the hands of any one man; especially of one so involved in the political antagonisms of the hour as the present Secretary.
The financial schemes and plans now before Congress are so numerous and so contradictory, as to give us little hope that any comprehensive policy can be agreed on at present. For myself, I have but little faith in panaceas, in remedies which will cure all evils; in any one plan which will reach all the difficulties of our situation.
Above all, it seems to me unwise to complicate the questions that are pressing for immediate solution, with those which refer to subjects not yet ripe for action. For example, I have not yet seen the wisdom of making the redemption of the five-twenty bonds --not one of which is payable for fourteen years to come-- a prominent element in our legislation at this time. In the midst of so many difficulties, it is better to do one thing at a time, and to do it carefully and thoroughly.
Plan for Restoring the Standard of Value.
On the 10th of February I introduced a bill which, if it should become a law, will, I believe, go far toward restoring confidence and giving stability to business, and will lay the foundation on which a general financial policy may be based, whenever opinions are so harmonized as to make a general policy possible.
As the bill is short, I will quote it entire, and call attention for a few moments to its provisions:
A bill to provide for a gradual return to specie payments.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That on and after the 1st day of December,1868, the Secretary of the Treasury be, and he is hereby, authorized and directed to pay gold coin of the United States for any legal-tender notes of the United States, which may be presented at the office of the Assistant Treasurer, at New York, at the rate of one dollar in gold for one dollar and thirty cents in legal-tender notes. On and after the 1st day of January, 1869, the rate shall be one dollar in gold for one dollar and twenty-nine cents in legal-tender notes; and at the beginning of and during each succeeding month the amount of legal-tender notes required in exchange for one dollar in gold shall be one cent less than the amount required during the preceding month, until the exchange becomes one dollar in gold for one dollar in legal-tender notes; and on and after the 1st day of June, 1871, the Secretary of the Treasury shall exchange gold for legal-tender notes, dollar for dollar: Provided, That nothing in this act shall be so construed as to authorize the retirement or cancellation of any legal-tender notes of the United States.
To all plans hitherto proposed it has been objected that the vast amount of public debt yet to be funded, and the still larger amount of private indebtedness, the value of which would be changed in favor of the creditor and against the debtor, made it impossible to return to specie payments without great loss both to the Government and to the debtor class.
I have no doubt that an immediate or sudden resumption of payments would prove a heavy shock to business and very greatly disturb the present scale of values. These objections are almost wholly avoided in the bill I have proposed, by making the return gradual; and the time when the process is to begin is placed so far ahead as to give full notice and allow the country to adjust its business to the provisions of the act.
By the 1st of December next, the floating and temporary debt of the United States will be funded, in accordance with laws already in operation; the excitement and derangement of business incident to a presidential election will be over, and we ought to be ready at that time, if ever, to take decisive steps toward the old paths.
I do not doubt that, in anticipation of the operation of this measure, should it become a law, gold would be at 130, or lower, by the 1st of December, and that very little would be asked for, from the Treasury, in exchange for currency. At the beginning of each succeeding month, the exchange between gold and greenbacks would be reduced one cent, and specie payments would be fully resumed in June, 1871. That the country is fully able to resume by that time, will hardly be denied.
With the $100,000,000 of gold now in the Treasury, and the amount received from customs, which averages nearly half a million per day, it is not at all probable that we should need to borrow a dollar in order to carry out the provisions of the law.
But taking the most unfavorable aspect of the case, and supposing that the Government should find it necessary to authorize a gold loan, the expense would be trifling compared with the resulting benefits to the country. The proposed measure would incidentally bring all the national banks to the aid of the Government in the work of resumption. The banks are required by law to redeem their own notes in greenbacks. They now hold in their vaults, as a reserve required by law, $162,000,000, of which sum $114,000,000 are greenbacks. Being compelled to pay the same price for their own notes as for greenbacks, they would gradually accumulate a specie reserve, and would be compelled to keep abreast with the Government in every step of the progress toward resumption. The necessity of redeeming their own notes would keep their circulation nearer home, and would more equally distribute the currency of the country which now concentrates at the great money centers, and produces scarcity in the rural districts.
This measure would not at once restore the old national standard of value, but it would give stability to business and confidence to business men everywhere. Every man who contracts a debt would know what the value of a dollar would be when the debt became due. The opportunity now afforded to Wall street gamblers to run up and run down the relative price of gold and greenbacks would be removed. The element of chance, which now vitiates our whole industrial system, would, in great part, be eliminated.
If this measure be adopted it will incidentally settle several of our most troublesome questions. It will end the war between the contractionists and the inflationists -- a war which, like that of Marius and Sylla -- may almost prove fatal to the interests of the country whichever side may prevail. The amount of paper money will regulate itself, and may be unlimited, so long as every dollar is convertible into specie at the will of the holder.
The still more difficult question of paying our five-twenty bonds would be avoided -- completely flanked by this measure. The money paid to the wounded soldier, and to the soldier's widow, would soon be made equal in value to the money paid to all other creditors of the Government.
It will be observed that the bill does not authorize the cancellation or retirement of any United States notes. It is believed that, for a time at least, the volume of the currency may safely remain as it now is. When the measure has been in force for some time it will be seen whether the increased use of specie for purposes of circulation will not allow a gradual reduction of the legal-tender notes. This can be safely left to subsequent legislation. It will facilitate the success of this plan, if Congress will pass a bill to legalize contracts hereafter made for the payment of coin. If this be done, many business men will conduct their affairs on a specie basis, and thus retain at home much of our gold that now goes abroad.
I have not been ambitious to add another to the many financial plans proposed to this Congress, much less have I sought to introduce a new and untried scheme. On the contrary, I regard it a strong commendation of this measure, that it is substantially the same as that by which Great Britain resumed specie payments, after a suspension of nearly a quarter of a century.
The situation of England at that time was strikingly similar to our present situation. She had just emerged from a great war in which her resources had been taxed to the utmost. Business had been expanded and high prices prevailed. Paper money had been issued in unusual volume, was virtually a legal tender, and had depreciated to the extent of twenty five per cent. Every financial evil from which we now suffer prevailed there, and was aggravated by having been longer in operation. Plans and theories without end were proposed to meet the many difficulties of the case. For ten years the Bank of England and the majority in Parliament vehemently denied that paper money had depreciated, notwithstanding the unanswerable report of the Bullion Committee of 1810, and the undeniable fact that it took twenty-five per cent. more of notes than of coin to buy an ounce of gold.
Many insisted that paper was a better standard of value than coin. Some denounced the attempt to return to specie as unwise; others as impossible. William Cobbett, the famous pamphleteer, announced that he would give himself up to be broiled on a gridiron whenever the bank should resume cash payments; and for many years kept the picture of a gridiron at the head of his Political Register, to remind his readers of his prophecy. Every phase of the question was discussed by the best minds of the kingdom in and out of Parliament for more than ten years; and in May, 1819, under the lead of Robert Peel, a law was passed fixing the time and mode of resumption.
It provided that on the 1st of February, 1820, the bank should give, in exchange for its notes, gold bullion in quantities not less than sixty ounces, at the rate of 81s. per ounce; that from the 1st of October, 1820, the rate should be 79s. 6d.; from the 1st of May, 1822, 79s. 10½d.; and on the 1st of May, 1823, the bank should redeem all its notes in coin, whatever the amount presented. The passage of the act gave once more a fixed and certain value to money; and business so soon adjusted itself to the measure in anticipation, that specie payments were fully resumed on the 1st of May, 1821, two years before the time fixed by the law. Forty-seven years have elapsed since then, and the verdict of history has approved the wisdom of the act, notwithstanding the clamor and outcry which at first assailed it. So plainly does this lesson apply to us, that in the preface to one of the best histories of England, recently published, the author, who is an earnest friend of the United States, says:
"It seems to me that no thoughtful citizen of any nation can read the story of the years before and after Peel's bill of 1819, extending over the crash of 1825-26, without the strongest desire that such risks and calamities may be avoided in his own country, at any sacrifice. There are several countries under the doom of retribution for the license of an inconvertible paper currency; and of these the United States are unhappily one. This passage of English history may possibly help to check the levity with which the inevitable 'crash' is spoken of by some who little dream what the horrors and griefs of such a convulsion are. It may do more if it should show any considerable number of observers that the affairs of the economic world are as truly and certainly under the control of natural laws as the world of matter without, and that of mind within."
This testimony of a friend is worthy our profoundest consideration. I will make no apology for the length to which I have extended these remarks. The importance of the subject demanded it. The decision we shall reach on this question will settle or unsettle the foundations of public credit, of the public faith, and of individual and national prosperity. The time and manner of paying the bonds; the refunding the national debt; the continuance or abolition of the national banks, and many other propositions, depend for their wisdom or unwisdom on the settlement of this question. I know we are told that resumption of specie payments will increase the value of the public debt, and thus add to the burden of taxation; and we are told, with special emphasis, that the people will not tolerate any increase of their burdens; that they demand plenty of money and a return of high prices. But, sir, I have learned to think better of the American people than to believe that they are not willing to know the worst and to provide for it. I remember that after the first defeat at Bull Run many officers of the Government thought it not safe to let the people know, at once, the full extent of the disaster; but the news should be broken gently that the nation might be better able to bear it. Long before the close of the war, it was found that Cabinet and Congress and all the officers of the United States needed for themselves to draw hope and courage from the great heart of the people. It was only necessary for the nation to know the extent of the danger, the depth of the need, and its courage, faith, and endurance were always equal to the necessity. It is now, as ever, our highest duty to deal honestly and frankly with the people who sent us here, in reference to their financial and industrial affairs to assure them that the path of safety is a narrow and rugged one; that by economy and prudence, by much patience and some suffering, they must come down, by slow and careful steps, from the uncertain and dangerous height to which the war carried them, or they will fall at last, in financial ruin more sudden and calamitous than any yet recorded in the history of mankind.
For my own part, my course is taken. In view of all the facts of our situation; of all the terrible experiences of the past, both at home and abroad; and of the united testimony of the wisest and bravest statesmen who have lived and labored during the last century, it is my firm conviction that any considerable increase of the volume of our inconvertible paper money will shatter public credit, will paralyze industry and oppress the poor; and that the: gradual restoration of our ancient standard of value will lead us, by the safest and surest path, to national prosperity and the steady pursuits of peace.
Mr. Ashley, of Ohio. I move that the committee rise.
The motion was agreed to.
So the committee rose; and Mr. Van Horn, of New York, having taken the chair as Speaker pro tempore, Mr. Lawrence, of Ohio, reported that the Committee of the Whole on the state of the Union, having had under consideration the state of the Union generally, had come to no conclusion thereon.
And then, on motion of Mr. Allison, (at four o'clock and forty minutes p.m.,) the House adjourned.
Atlantic MonthlyFebruary, 1876.
The Currency Conflictby James A. Garfield
In the autumn of 1862 I spent several weeks with Secretary Chase, and was permitted to share his studies of the financial questions which were then engrossing his attention. He was preparing to submit to Congress his matured plans for a system of banking and currency to meet the necessities of the war, and this subject formed the chief theme of his conversation. He was specially anxious to work out in his own mind the probable relations of greenbacks to gold, to the five-twenty bonds, to the proposed national bank-notes, and to the business of the country. One evening the conversation turned on some question relating to the laws of motion, and Mr. Chase asked for a definition of motion. Some one answered, "Matter is inert; spirit alone can move; therefore motion is the spirit of God made manifest in matter." The secretary said: "If that is a good definition, then legal-tender notes must be the devil made manifest in paper; for no man can foresee what mischief they may do when they are once let loose." He gravely doubted whether that war-born spirit, summoned to serve us in a dreadful emergency, would be mustered out of service with honor when the conflict should end, or, at the return of peace, would capture public opinion and enslave the nation it had served. To what extent his fears were well founded may be ascertained by comparing the present state of the public mind in regard to the principles of monetary science with that which prevailed when our existing financial machinery was set up.
More than a million votes will be cast at the next presidential election by men who were school-boys in their primers when the great financial measures of 1862 were adopted; and they do not realize how fast or how far the public mind has drifted. The log-book of this extraordinary voyage cannot be read too often. Let it be constantly borne in mind that fourteen years ago the American people considered themselves well instructed in the leading doctrines of monetary science. They had enjoyed, or rather suffered, an extraordinary experience. There was hardly an experiment in banking and currency that they or their fathers had not fully tested.
The Currency Doctrines of 1862.
The statesmen of that period, the leaders of public thought, and the people of all political parties were substantially unanimous in the opinion that the only safe instrument of exchange known among men was standard coin, or paper convertible into coin at the will of the holder. I will not affirm that this opinion was absolutely unanimous; for doubtless there was here and there a dreamer who looked upon paper money as a sort of fetich, and was ready to crown it as a god. There are always a few who believe in the quadrature of the circle and the perpetual motion. I recently met a cultivated American who is a firm believer in Buddha, and rejoices in the hope of attaining Nirvana beyond the grave. The gods of Greece were discrowned and disowned by the civilized world a thousand years ago; yet within the last generation an eminent English scholar attested his love for classical learning and his devotion to the Greek mythology by actually sacrificing a bull to Jupiter, in the back parlor of his house in London. So, in 1862, there may have been followers of William Lowndes and of John Law among our people, and here and there a philosopher who dreamed of an ideal standard of value stripped of all the grossness of so coarse and vulgar a substance as gold. But they dwelt apart in silence, and their opinions made scarce a ripple on the current of public thought.
No one can read the history of that year without observing the great reluctance, the apprehension, the positive dread, with which the statesmen and people of that day ventured upon the experiment of making treasury notes a legal tender for private debts. They did it under the pressure of an overmastering necessity, to meet the immediate demands of the war, and with a most determined purpose to return to the old standard at the earliest possible moment. Indeed, the very act that made the greenbacks a legal tender provided the effective means for retiring them. Distressing as was the crisis, urgent as was the need, a large number of the best and most patriotic men in Congress voted against the act. The ground of their opposition was well expressed by Owen Lovejoy, of Illinois, who, after acknowledging the unparalleled difficulties and dangers of the situation, said, "There is no precipice, there is no chasm, there is no possible bottomless, yawning gulf before the nation so appalling, so ruinous, as this same bill that is before us."
Of those who supported the measure, not one defended it as a permanent policy. All declared that they did not abate a jot of their faith in the soundness of the old doctrines. Thaddeus Stevens said, "This bill is a measure of necessity, not of choice. No one would willingly issue paper currency not redeemable on demand, and make it a legal tender. It is never desirable to depart from the circulating medium which, by the common consent of civilized nations, forms the standard of value."
In the Senate the legal-tender clause was adopted by only five majority. The senators who supported it were keenly alive to its dangerous character. Mr. Fessenden, chairman of the committee on finance, said of the bill, "It proposes something utterly unknown in this government from its foundation: a resort to a measure of doubtful constitutionality, to say the least of it, which has always been denounced as ruinous to the credit of any government which has recourse to it; ... a measure which, when it has been tried by other countries, as it often has been, has always proved a disastrous failure." With extreme reluctance he supported the bill, but said the committee was bound "that an assurance should be given to the country that it was to be resorted to only as a policy; that it was what it professed to be, but a temporary measure. I have not heard any man express a contrary opinion, or, at least, any man who has spoken on the subject in Congress. ... All the gentlemen who have written on the subject, except some wild speculators on currency, have declared that as a policy it would be ruinous to any people; and it has been defended, as I have stated, simply and solely upon the ground that it is to be a single measure standing alone, and not to be repeated. ... It is put upon the ground of absolute, overwhelming necessity."
Mr. Sumner, who supported the bill, said, "Surely we must all be against paper money, we must insist upon maintaining the integrity of the government, and we must all set our faces against any proposition like the present except as a temporary expedient, rendered imperative by the exigency of the hour. ... A remedy which at another moment you would reject is now proposed. Whatever may be the national resources, they are not now in reach except by summary process. Reluctantly, painfully, I consent that the process should issue. And yet I cannot give such a vote without warning the government against the dangers from such an experiment. The medicine of the constitution must not become its daily bread."---[Charles Sumner was a leading radical reconstructionist and he wanted the united States reorganized under the firm control of a central government; greenbacks were means to that end, and for that reason he supported the legal-tender clause; he also voted for the national currency bank act --indicating that he had no objection whatever to paper money, as long as it was bank-issued paper money]
Such was the unanimous sentiment which animated Congress in making its solemn pledge to return to the old path as soon as the immediate danger should pass. The close of the war revealed some change of opinion, but the purpose of 1862 was still maintained. December 18, 1865, the House of Representatives resolved, "That the House cordially concurs in the views of the Secretary of the Treasury in relation to the necessity of a contraction of the currency with a view to as early a resumption of specie payments as the business interest of the country will permit; and we hereby pledge cooperative action to this end as speedily as practicable." This resolution was adopted on a call of the ayes and noes, by the decisive vote of one hundred and forty-four to six.
The last ten years have witnessed such a change of sentiment as seldom occurs in one generation. During that time, we have had a Babel of conflicting theories. Every exploded financial dogma of the last two hundred years has been revived and advocated. Congresses and political parties have been agitated and convulsed by the discussion of old and new schemes to escape from the control of the universal laws of value, and to reach prosperity and wealth without treading the time-worn path of honest industry and solid values. All this recalls Mr. Chase's definition of irredeemable paper money.---[so what happened between December 1865 and 1875 ? what made the people learn a lesson the hard way ? ....]
The great conflict of opinion resulting from this change of sentiment finds expression in the cries of "hard money" and "soft money" which have been so constantly echoed from State to State during the last six months. Following these as rallying-cries, the people are assembled in hostile political camps, from which they will soon march out to fight the presidential battle of 1876.
The recently invented term "soft money" does not convey a very precise notion of the doctrine it is intended to describe. In fact, it is applied to the doctrines of several distinct groups of theorists, who differ widely among themselves, but who all agree in opposing a return to specie as the basis of our monetary system. The scope of these opinions will be seen in the declarations which recent public discussions have brought forth.
(1.) Most of the advocates of soft money deny that political economy is a universal science. They insist that each nation should have a political economy of its own. In pursuance of this opinion, they affirm that our country should have a standard of value peculiar to itself, and a circulating medium which other nations will not use; in short, a non-exportable currency. The following quotation will serve as examples.
W.D. Kelley:--"Beyond the sea, in foreign lands, it [our greenback currency] fortunately is not money; but, sir, when have we had such an unbroken career of prosperity in business as since we adopted this non-exportable currency ?"
Henry C. Baird's motto:-- "Money should be a thing of or belonging to a country, not of the world. An exportable commodity is not fitted to be money."
Benjamin Butler:-- "I desire the dollar to be made of such material that it shall never be exported or desirable to carry it out of the country." (Cooper Institute, N.Y., October 15, 1875.)
The venerable Henry C. Carey, under date of August 15, 1875, addressed a long letter to the chairman of the Detroit Greenback Convention, in which he argues that this country ought to "maintain permanently a non-exportable circulation." He says, "This important idea was first promulgated by Mr. Rauget, thirty-six years ago."
I will quote one other financial authority, which shows that the honor of this discovery does not belong to Rauget, nor to the present century. In his work entitled, "Money and Trade considered: with a Proposal for Supplying the Nation with Money," published at Edinburgh, 1705, John Law says:--
"If a money be established that has no intrinsick value, and its extrinsick value be such as it will not be exported, nor will not be less than the demand for it within the country, wealth and power will be attained, and will be less precarious. ... The paper money herein proposed being always equal in quantity to the demand, the people will be employed, the country improved, manufacture advanced, trade --domestic and foreign-- carried on, and wealth and power attained; and [it] not being liable to be exported, the people will not be set idle, etc., and wealth and power will be less precarious."
The subsequent experiments of Law are fitting commentaries.
(2.) They propose to abandon altogether the use of gold and silver as standards of value or instruments of exchange, and hold that the stamp of the government, not the value of the material on which it is impressed, constitutes money.
"I want the dollar stamped on some convenient and cheap material, of the least possible intrinsic value, ... and I desire that the dollar so issued shall never be redeemed." (Hon. B.F. Butler, Cooper Institute.)
"A piece of pig-metal is just as much money as a piece of gold, until the public authority has stamped it, and said that it shall be taken for so much. ... Suppose, then, that instead of taking a bar of silver or a bar of pig-metal, the government of the United States takes a piece of paper, called a greenback, and says that this shall pass for a legal tender in the receipt and expenditure of government dues, and in all the transactions of the people. Suppose this government to be a government of good standing, of sound credit, and responsible for its paper. This dollar thus stamped, instead of a piece of metal being stamped, is to all intents and purposes equivalent to a silver dollar when it has been made such by the government of the United States." (Campaign speech of Governor Allen, Gallipolis, Ohio, July 21, 1875.)
"The use of gold or other merchandise as money is a barbarism unworthy of the age. " (Wallace P. Groom, New York.)
"The pretense of redemption in gold and silver is of necessity a delusion and an absurdity." (Britton A. Hill, Missouri.)
"The government can make money of any material and of any shape and value it pleases." (Hon. O.S. Halsted, New Jersey.)
(3.) They are not agreed among themselves as to what this new soft money shall be. They do agree, however, that the national banking system shall be abolished, and that whatever currency may be adopted shall be issued directly from the treasury, as the only money of the nation. Three forms are proposed:--
First. The legal tenders we now have, their volume to be increased and their redemption indefinitely postponed. The advocates of this form are the inflationists proper, who care more for the volume than the character of the currency.
Second. "Absolute money;" that is, printed pieces of paper, called dollars, to be the only standard of value, the only legal tender for all debts, public and private, the only circulating medium. The advocates of this kind of "money," though few in numbers, claim the highest place as philosophers.
The ablest defense of this doctrine will be found in a brochure of one hundred and eighteen pages, by Britton A. Hill, published in St. Louis during the present year and entitled Absolute Money. The author says (page 53):--"If such national legal-tender money is not of itself sovereign and absolute, but must be convertible into some other substance or thing, before it can command universal circulation, what matters it whether that other substance or thing be interest-bearing bonds or gold or silver coin ? ... The coin despotism cannot be broken by substituting in its place the despotism of interest-bearing bonds."
Third. A legal-tender note not redeemable, but exchangeable, at the will of the holder, for a bond of the United States bearing 3.65 per cent, interest, which bond shall in turn be exchangeable, at the will of the holder, for legal-tender notes. In order that this currency shall be wholly emancipated from the tyranny and barbarism of gold andsilver, most of its advocates insist that the interest on the bonds shall be paid in the proposed paper money. This financial perpetual-motion is regarded as the great discovery of our era, and there are numerous claimants for the honor of being the first to discover it.
Mr. Wallace P. Groom, of New York, has characterized this currency in a paragraph which has been so frequently quoted, that it may be fairly called their creed. It is in these words:-- "In the interchangeability (at the option of the holder) of national paper money with government bonds bearing a fixed rate of interest, there is a subtle principle that will regulate the movements of finance and commerce as accurately as the motion of the steam-engine is regulated by its governor. Such PAPER MONEY TOKENS would be much nearer perfect measures of value than gold or silver ever have been or ever can be. The use of gold or other merchandise as money is a barbarism unworthy of the age."
(4.) The paper-money men are unanimous in the opinion that the financial crisis of 1873 was caused by an insufficient supply of currency, and that a large increase will stimulate industry, restore prosperity, and largely augment the wealth of this country. Hon. Alexander Campbell, of Illinois, a leading writer of the soft-money school, thinks there should now be in circulation not less than $1,290,000,000 of legal-tender notes. (North-Western Review, November, 1873, page 152.)
John G. Drew, another prominent writer, insists that "as England is an old and settled country, and we are just building ours," we ought to have at least $60 per capita, or an aggregate of $2,500,000,000. (Our Currency: What it is, and what it should be.)
No doubt the very large vote in Ohio and Pennsylvania in favor of soft money resulted, in great measure, from the depressed state of industry and trade, and a vague hope that the adoption of these doctrines would bring relief. The discussion in both States was able; and, toward the close of the campaign, it was manifest that sound principles were every day gaining ground. Important as was the victory in those States, it is a great mistake to suppose that the struggle is ended. The advocates of soft money are determined and aggressive, and they confidently believe they will be able to triumph in 1876.
It ought to be observed, as an interesting fact of current history, that the soft-money men are making and collecting a literature which cannot fail to delight the antiquarian and the reader of curiosities of literature. They are ransacking old libraries to find any
"quaint and curious
Volume of forgotten lore"
which may give support to their opinions. In a recent pamphlet, Henry Carey Baird refers to Andrew Yarranton as "the father of English political economy." The forgotten treatise which is now enrolled among the patristic books of the new school was published in London in 1677, and is entitled "England's Improvement by Sea and Land. To outdo the Dutch without Fighting, to pay Debts without Moneys, and to set at work all the Poor of England with the Growth of our own Lands."
The author proposes a public bank, based on the registered value of houses and lands, "the credit whereof making paper go in trade equal with ready money, yea better, in many parts of the world, than money." He was perhaps the first Englishman who suggested a currency based on land. On pages 30-33 of his book may be found his draft of a proposed law, which provides "that all bonds or bills issued on such registered houses may be transferable, and shall pass and be good from man to man in the nature of bills of exchange."
The writings of John Law are also finding vigorous defenders. Britton A. Hill, in the pamphlet already quoted, devotes a chapter to his memory, compares him favorably with Leibnitz and Newton, and says, "John Law is justly regarded as one of the most profound thinkers of his age, in that he originated the first fundamental principle of this proposed absolute money." The admirers of "father" Yarranton should see to it that the outdoer of the Dutch is not robbed of his honors by the great Scotsman.
English history is being hunted through to find some comfort for the new doctrines in the writings of that small minority who resisted the Bullion Report of 1810 and the resumption of cash payments in 1819, and continued to denounce them afterwards. History must be rewritten. We must learn that Mathias Attwood (who?), not Lord Liverpool, Huskisson, or Peel, was the fountain of financial wisdom.---[Garfield did not want to know that Mathias Attwood was a member of Parliament in 1819; in 1832 he was called before the Select Committee on the state of Agriculture as expert witness to testify as to what was and was not said in Parliament before the Act of 1819 was passed (Robert Peel's resumption of specie payment); at the time he and the banker Baring, warned of the consequences, that the fall in prices would be at least 25% and may be as much as 50%; future bore them out.
Doubleday, whom no English writer has thought it worth while to answer, is much quoted by the new school, and they have lately come to feel the profoundest respect for Sir Archibald Alison, because of his extravagant assault upon the Resumption Act of 1819. Alison holds a place in English literature chiefly because he wrote a work which fills a gap in English history not otherwise filled. In 1846 he wrote a pamphlet entitled "England in 1815 and 1845; or, a Sufficient and a Contracted Currency," which the subsequent financial and commercial events in his country have so fully refuted that it has slept for a generation in the limbo of things forgotten. It is now unearthed, and finds an honored place in the new literature.
As a specimen of Alison's financial wisdom, we quote the following (pages 2, 3 ): "The eighteen years of war between 1797 and 1815 were, as all the world knows, the most glorious and, taken as a whole, the most prosperous that Great Britain has ever known. ... Never has a prosperity so universal and unheard-of pervaded every department of the empire." He then enumerates the evidences of this prosperity, and prominent among them is this: "While the revenue raised by taxation was but £21,000,000 in 1796, it had reached £72,000,000 in 1815; and the total expenditures from taxes and loans had reached £117,000,000 in 1815." Happy people, whose burdens of taxation were quadrupled in eighteen years, and whose expenses, consumed in war, exceeded their revenues by the sum of $225,000,000 in gold !
The inflationists have not been so fortunate in augmenting their literary store from the writings and speeches of our early American statesmen. Still, they have made vigorous efforts to draft into their service any isolated paragraph that can be made useful for their purpose. So far as I have seen, they have found no comfort in this search except in very short extracts from three of the great leaders of public thought.
The first is from a juvenile essay in defense of paper money, written by Benjamin Franklin in 1729, when he was twenty-two years of age. This has been frequently quoted during the last four years. They are not so fond of quoting Franklin the statesman and philosopher, who after a life-long experience wrote, in 1783, these memorable words:-- "I lament with you the many mischiefs, the injustice, the corruption of manners, etc., that attend a depreciated currency. It is some consolation to me that I washed my hands of that evil by predicting it in Congress, and proposing means that would have been effectual to prevent it if they had been adopted. Subsequent operations that I have executed demonstrate that my plan was practicable; but it was unfortunately rejected." (Works, X. p. 9.)
A serious attempt has been made to capture Thomas Jefferson and bring him into the service. The following passage from one of his letters to John W. Eppes (September 11, 1813.) has been paraded through this discussion with all the emphasis of italics, thus:--
"Bank paper must be suppressed, and the circulating medium must be restored to the nation, to whom it belongs. It is the only fund on which they can rely for loans; it is the only resource which can never fail them, and it is an abundant one for every necessary purpose. Treasury bills bottomed on taxes, bearing or not bearing interest, as may be found necessary, thrown into circulation, will take the place of so much gold or silver, which last, when crowded, will find an efflux into other countries, and thus keep the quantum of medium at its salutary level."
This passage was quoted as a strong point for the soft-money men in their campaign documents in Ohio, last fall. They did not find it convenient to quote the great Virginian more fully. When this letter was written, the United States was at war with England, with no friendly nation from whom to obtain loans. The demand for revenue was urgent, and the treasury was empty. Mr. Jefferson had long been opposed to the state banks, and he saw that by suppressing them and issuing treasury notes, with or without interest, the government could accomplish two things: destroy state bank currency, and obtain a forced loan, in the form of circulating notes. In enforcing this view, he wrote from Monticello to Mr. Eppes, June 24, 1813:---
"I am sorry to see our loans begin at so exorbitant an interest. And yet, even at that, you will soon be at the bottom of the loan-bag. Ours is an agricultural nation. ... In such a nation there is one and only one resource for loans, sufficient to carry them through the expense of a war; and that will always be sufficient, and in the power of an honest government, punctual in the preservation of its faith. The fund I mean is the mass of circulating coin. Every one knows that, although not literally, it is nearly true that every paper dollar emitted banishes a silver one from the circulation. A nation, therefore, making its purchases and payments with bills fitted for circulation, thrusts an equal sum of coin out of circulation. This is equivalent to borrowing that sum; and yet the vendor, receiving payment in a medium as effectual as coin for his purchases or payments, has no claim to interest. ... In this way I am not without a hope that this great, this sole resource for loans in an agricultural country might yet be recovered for the use of the nation during war; and, if obtained in perpetuum, it would always be sufficient to carry us through any war, provided that in the interval between war and war all the outstanding paper should be called in, coin be permitted to flow in again, and to hold the field of circulation until another war should require its yielding place again to the national medium."
From this it appears that Jefferson favored the issue of treasury notes to help us through a war: but he insisted that they should be wholly retired on the return of peace. His three long letters to Eppes are full of powerful and eloquent denunciations of paper money. The soft-money men appeal to Jefferson. We answer them in his own words: "The truth is that capital may be produced by industry, and accumulated by economy; but jugglers only will propose to create it by legerdemain tricks of paper money." (Letter to Eppes, November 6, 1813.)
Their third attempt to elect some eminent statesman as an honorary member of the new school affords a striking illustration of a method too often adopted in our politics. It was very confidently stated by several advocates of soft money that John C. Calhoun had suggested that a paper money, issued directly by the government and made receivable for all public dues, would be as good a currency as gold and silver. Mr. Hill finally claimed Calhoun's authority in support of his absolute money, and printed on pages 56, 57 of his pamphlet a passage from a speech of Calhoun's. This extract was used in the Ohio campaign with much effect, until it was shown that there had been omitted from the passage quoted these important words: "leaving its creditors to take it [treasury note circulation] or gold and silver at their option.'' After this exposure, the great nullifier was left out of the canvass.
Thus far we have attempted no more than to exhibit the state of public opinion in regard to the currency in 1861-62, the changes that have since occurred, and the leading doctrines now held by the soft-money men. Most of these dogmas are old, and have long ago been exploded. All are directly opposed to principles as well established as the theorems of Euclid.
The Doctrine of Hard Money.
Believing that this generation of Americans is not willing to ignore all past experience, and to decide so great an issue as though it were now raised for the first time, we shall attempt to state, in brief compass, the grounds on which the doctrine of hard money rests.
Hard money is not to be understood as implying a currency consisting of coin alone (though many have held, with Benton, that no other is safe), but that coin of ascertained weight and fineness, duly stamped and authenticated by the government, is the only safe standard of money; and that no form of credit-currency is safe unless it be convertible into coin at the will of the holder.
Money as an Instrument of Exchange.
As preliminary to this discussion, it is necessary to determine the functions which money performs as an instrument of exchange. As barter was the oldest form of exchange, so it was and still is the ultimate object and result of all exchanges. For example: I wish to exchange my commodities or services for commodities or services of a different kind. I find no one at hand who has what I want, and wants what I have. I therefore exchange, or, as we say, sell, my commodities for money, which I hold until I find some one who wishes to sell what I want to buy. I then make the purchase. The two transactions have, in fact, resulted in a barter. It amounts to the same thing as though, at the start, I had found a man who wanted my commodities, and was willing to give me in exchange the commodities I desired. By a sale and a purchase I have accomplished my object. Money was the instrument by which the transactions were made. The great French economist, J.B. Say, has justly described a sale as half a barter, for we see, in the case above stated, that two sales were equivalent, in effect, to one act of simple barter. But some time may elapse between my sale and the subsequent purchase. How are my rights of property secured during the interval ? That which I sold carried its value in itself as an exchangeable commodity; when I had exchanged it for money, and was waiting to make my purchase, the security for my property rested wholly in the money resulting from the sale. If that money be a perfect instrument of exchange, it must not only be the lawful measure of that which I sold, but it must, of itself, be the actual equivalent in value. If its value depends upon the arbitrary acts of government or of individuals, the results of my transaction depend not upon the value of that which I sold nor of that which I bought, nor upon my prudence and skill, but upon an element wholly beyond my control --a medium of exchange which varies in value from day to day.
Such being the nature of exchanges, we should expect to find that so soon as man begins to emerge from the most primitive condition of society and the narrowest circle of family life, he will seek a measure and an instrument of exchange among his first necessities. And in fact it is a matter of history that in the hunting state skins were used as money, because they were the product of chief value. In the pastoral state --the next advance in civilization-- sheep and cattle, being the most valuable and negotiable form of property, were used as money. This appears in the earliest literature. In the Homeric poems oxen are repeatedly mentioned as the standard by which wealth was measured. The arms of Diomed were declared to be worth nine oxen, as compared with those of Glaucos, worth one hundred. A tripod, the first prize for wrestlers, in the twenty-third book of the Iliad was valued at twelve oxen, and a female captive, skilled in industry, at four. [Jevons's Money and the Mechanism of Exchange, page 21.] In many languages the name for money is identical with that for some kind of cattle. Even our word "fee" is said to be the Anglo-Saxon "feoh," meaning both money and cattle.[Ibid. p. 23.] Sir H.S. Maine, speaking of the primitive state of society, says that kine, being counted by the head, was called capitale, whence the economic term capital, the law term chattel, and our common name cattle. In the agricultural and manufacturing stage of civilization, many forms of vegetable and manufactured products were used as money, such as corn, wheat, tobacco, cacao nuts, cubes of tea, colored feathers, shells, nails, etc.
All these species of wealth were made instruments of exchange because they were easily transferable, and their value was the best known and least fluctuating. But the use of each as money was not universal; in fact, was but little known beyond the bounds of a single nation. Most of them were non-exportable; and though that fact would have commended them to the favor of some of our modern economists, yet the mass of mankind have entertained a different opinion, and have sought to find a medium whose value and fitness to be used as money would be universally acknowledged.
It is not possible to ascertain when and by whom the precious metals were first adopted as money; but for more than three thousand years they have been acknowledged as the forms of material wealth best fitted to be the measure and instrument of exchange. Each nation and tribe, as it has emerged from barbarism, has abandoned its local, non-exportable medium, and adopted what is justly called "the money of the world." Coinage was a later device, employed for the sole purpose of fashioning into a convenient shape the metal to be used as money, and of ascertaining and certifying officially the weight and fineness of each piece. And here has arisen the chief error in reference to the nature of money. Because the government coins it, names its denomination, and declares its value, many have been led to imagine that the government creates it, that its value is a gift of the law.
The analogy of other standards will aid us at this point. Our constitution empowers Congress to fix the standard of weights and measures, as well as of values. But Congress cannot create extension, or weight, or value. It can measure that which has extension; it can weigh that which is ponderable; it can declare and subdivide and name a standard; but it cannot make length of that which has no length; it cannot make weight of that which is imponderable; it cannot make value of that which has no value. Ex nihilo nihil fit. The power of Congress to make anything it pleases receivable for taxes is a matter wholly distinct from the subject now under discussion. Legislation cannot make that a measure of value which neither possesses nor represents any definitely ascertained value.
Coin an Instrument of Universal Credit.
Now apply to the operations of exchange a given coin, whose weight and fineness are certified by public authority. We cannot do this better than by borrowing the language of Frederic Bastiat, found in his treatise entitled Maudit Argent. [What is money] He says,--
"You have a crown. What does it signify in your hands ? It is the testimony and the proof that you have at some time performed a work; and, instead of profiting by it yourself, you have allowed the community to enjoy it, in the person of your client. This crown is the evidence that you have rendered a service to society; and it states the value of that service. Moreover, it is the evidence that you have not drawn from the community the real equivalent, as was your right. In order to enable you to exercise that right when and as you please, society, by the hand of your client, has given you a recognition, a title, a bond of the commonwealth, a token, in short a crown, which differs from other fiduciary titles only in this, that it carries its value in itself; and if you can read with the eyes of the mind the inscription which it bears, you will distinctly decipher these words: 'Render to the bearer a service equivalent to that which he has rendered to society; a value received, stated, proved, and measured by that which is in me.' .... If you now give that crown to me as the price of a service, this is the result: your account with society for real services is found regular, is balanced and closed. .... and I am justly in the position where you were before." --Œuvres Complètes, etc. Vol. V, p. 80.
C'est bien le moment d'analyser la vraie fonction du numéraire, abstraction faite des mines et de l'importation.
Vous avez un écu. Que signifie-t-il en vos mains? Il y est comme le témoin et la preuve que vous avez, à une époque quelconque, exécuté un travail, dont, au lieu de profiter, vous avez fait jouir la société, en la personne de votre client. Cet écu témoigne que vous avez rendu un service à la société, et, de plus, il en constate la valeur. Il témoigne, en outre, que vous n'avez pas encore retiré de la société un service réel équivalent, comme c'était votre droit. Pour vous mettre à même de l'exercer, quand et comme il vous plaira, la société, par les mains de votre client, vous a donné une reconnaissance, un titre, un bon de la République, un jeton, un écu enfin, qui ne diffère des titres fiduciaires qu'en ce qu'il porte sa valeur en lui-même, et si vous savez lire, avec les yeux de l'esprit, les inscriptions dont il est chargé, vous déchiffrerez distinctement ces mots: « Rendez au porteur un service équivalent à celui qu'il a rendu à la société, valeur reçue constatée, prouvée et mesurée par celle qui est en moi-même»
Maintenant, vous me cédez votre écu. Ou c'est à titre gratuit, ou c'est à titre onéreux. Si vous me le donnez comme prix d'un service, voici ce qui en résulte votre compte de satisfactions réelles avec la société se trouve réglé, balancé et fermé. Vous lui aviez rendu un service contre un écu, vous lui restituez maintenant l'écu contre un service; partant quitte quant à vous. Pour moi je suis justement dans la position où vous étiez tout à l'heure. C'est moi qui maintenant suis en avance envers la société du service que je viens de lui rendre en votre personne. C'est moi qui deviens son créancier de la valeur du travail que je vous ai livré, et que je pouvais me consacrer à moi-même. C'est donc entre mes mains que doit passer le titre de cette créance, le témoin et la preuve de la dette sociale. Vous ne pouvez pas dire que je suis plus riche, car si j'ai à recevoir, c'est parce que j'ai donné. Vous ne pouvez pas dire surtout que la société est plus riche d'un écu, parce qu'un de ses membres a un écu de plus, puisqu'un autre l'a de moins.
Que si vous me cédez cet écu gratuitement, en ce cas, il est certain que j'en serai d'autant plus riche, mais vous en serez d'autant plus pauvre, et la fortune sociale, prise en masse, ne sera pas changée; car cette fortune, je l'ai déjà dit, consiste en services réels, en satisfactions effectives, en choses utiles. Vous étiez créancier de la société, vous m'avez substitué à vos droits, et il importe peu à la société, qui est redevable d'un service, de le rendre à vous ou à moi. Elle s'acquitte en le rendant au porteur du titre.
F. This is the time, then, to analyze the true function of money, independently of mines and importations. You have a dollar. [écu; the 5-franc silver coins of Bastiat's time were still called écus and were a continuation of the old gold écus.] What does it imply in your hands? It is, as it were, the witness and proof that you have, at some time or other, performed some labor, which, instead of turning to your advantage, you have bestowed upon society as represented by the person of your client (employer or debtor). This coin testifies that you have performed a service for society, and, moreover, it shows the value of it. It bears witness, besides, that you have not yet obtained from society a real equivalent service, to which you have a right. To place you in a condition to exercise this right, at the time and in the manner you please, society, as represented by your client, has given you an acknowledgment, a title, a privilege from the republic, a counter, a title to a dollar's worth of property in fact, which only differs from executive titles by bearing its value in itself; and if you are able to read with your mind's eye the inscriptions stamped upon it you will distinctly decipher these words: — "Pay the bearer a service equivalent to what he has rendered to society, the value received being shown, proved, and measured by that which is represented by me." Now, you give up your dollar to me. Either my title to it is gratuitous, or it is a claim. If you give it to me as payment for a service, the following is the result: — your account with society for real satisfactions is regulated, balanced, and closed. You had rendered it a service for a dollar, you now restore the dollar for a service; as far as you are concerned you are clear. As for me, I am just in the position in which you were just now. It is I who am now in advance to society for the service which I have just rendered it in your person. I have become its creditor for the value of the labor which I have performed for you, and which I might devote to myself. It is into my hands then, that the title of this credit — the proof of this social debt — ought to pass. You cannot say that I am any richer; if I am entitled to receive, it is because I have given. Still less can you say that society is a dollar richer, because one of its members has a dollar more, and another has one less. For if you let me have this dollar gratis, it is certain that I shall be so much the richer, but you will be so much the poorer for it; and the social fortune, taken in a mass, will have undergone no change, because as I have already said, this fortune consists in real services, in effective satisfactions, in useful things. You were a creditor to society; you made me a substitute to your rights, and it signifies little to society, which owes a service, whether it pays the debt to you or to me. This is discharged as soon as the bearer of the claim is paid.
Edmund Burke expressed the same opinion when he said, "Gold and silver are the two great, recognized species that represent the lasting, conventional credit of mankind."
Three thousand years of experience have proved that the precious metals are the best materials of which to make the standard of value, the instrument of exchange. They are themselves a store of value; they are durable, divisible, easily transported, and more constant in value than any other known substances. In the form of dust and bars, as merchandise, their value is precisely equal to their declared value as money, less the very small cost of coinage. Coin made of these metals measures wealth, because it represents wealth in itself, just as the yard-stick measures length, and the standard pound measures weight, because each has, in itself, that which it represents. Again, the precious metals are products of labor, and their value, like that of all other merchandise, depends upon the cost of production. A coin represents and measures the labor required to produce it; it may be called an embodiment of labor. Of course this statement refers to the average cost of production throughout the world, and that average has varied but little for many centuries. It is a flat absurdity to assert that such a reality as labor can be measured and really represented by that which costs little or no labor. For these reasons the precious metals have been adopted by the common law of the world as the best materials in which to embody the unit of money.
Statutes cannot Repeal the Laws of Value.
The oldest and perhaps the most dangerous delusion in reference to money is the notion that it is a creation of law; that its value can be fixed and maintained by authority. Yet no error has been more frequently refuted by experience. Every debasement of the coin, and every attempt to force its circulation at a higher rate than the market value of the metal it contains, has been punished by the inevitable disasters that always follow the violation of economic laws. The great parliamentary debate of 1695, on the recoinage of English money, affords an absolute demonstration of the truth that legislatures cannot repeal the laws of value. Mr. Lowndes, the secretary of the treasury, though he held that a debasement of the coinage should be rejected as "dangerous and dishonorable," really believed, as did a large number of members of Parliament, that if, by law, they raised the name of the coin, they would raise its value as money. As Macaulay puts it,--
"He was not in the least aware that a piece of metal with the king's head on it was a commodity of which the price was governed by the same law which governs the price of a piece of metal fashioned into a spoon or a buckle; and that it was no more in the power of Parliament to make the kingdom richer by calling a crown a pound than to make the kingdom larger by calling a furlong a mile. He seriously believed, incredible as it may seem, that if the ounce of silver were divided into seven shillings instead of five, foreign nations would sell us their wines and their silks for a smaller number of ounces. He had a considerable following, composed partly of dull men who really believed what he told them, and partly of shrewd men who were perfectly willing to be authorized by law to pay a hundred pounds with eighty." (History of England, Vol. IV, p. 503.)
It was this debate that called forth those masterly essays of John Locke on the nature of money and coin, which still remain as a monument to his genius and an unanswerable demonstration that money obeys the laws of value and is not the creature of arbitrary edicts. At the same time. Sir Isaac Newton was called from those sublime discoveries in science which made his name immortal, to aid the king and Parliament in ascertaining the true basis of money. After the most thorough examination, this great thinker reached the same conclusions. The genius of these two men, aided by the enlightened statesmanship of Montague and Somers, gave the victory to honest money, and preserved the commercial honor of England for a century.
Paper Money an Instrument of Credit.
In discussing the use of paper as a representative of actual money, we enter a new branch of political science, namely, the general theory of credit. We shall go astray at once if we fail to perceive the character of this element. Credit is not capital. It is the permission given to one man to use the capital of another. It is not an increase of capital; for the same property cannot be used as capital by both the owner and the borrower of it, at the same time. But credit, if not abused, is a great and beneficent power. By its use the productiveness of capital is greatly increased. A large amount of capital is owned by people who do not desire to employ it in the actual production of wealth. There are many others who are ready and willing to engage in productive enterprise, but have not the necessary capital. Now, if the owners of unemployed capital have confidence in the honesty and skill of the latter class, they lend their capital at a fair rate of interest, and thus the production of wealth will be greatly increased. Frequently, however, the capital loaned is not actually transferred to the borrower, but a written evidence of his title to it is given instead. If this title is transferable it may be used as a substitute for money; for, within certain limits, it has the same purchasing power. When these evidences of credit are in the form of checks and drafts, bills of exchange and promissory notes, they are largely used as substitutes for money, and very greatly facilitate exchanges. But all are based upon confidence, upon the belief that they represent truly what they profess to represent-- actual capital, measured by real money, to be delivered on demand.
These evidences of credit have become, in modern times, the chief instruments of exchange. The bank has become as indispensable to the exchange of values as the railroad is to the transportation of merchandise. It is the institution of credit by means of which these various substitutes for money are made available. It has been shown that not less than ninety per cent, of all the exchanges in the United States are accomplished by means of bank credits. The per cent, in England is not less than ninety five. Money is now the small change of commerce. It is perhaps owing to this fact that many are so dazzled by the brilliant achievements of credit as to forget that it is the shadow of capital, not its substance; that it is the sign, the brilliant sign, but not the thing signified.---[Garfield is parroting what Nicholas Biddle advocated, that all capital should be turned into credit, and all credit into bank-currency; and upholds the propaganda that without banks and bank-credit currency agriculture and industry cannot exist]
Let it be constantly borne in mind that the check, the draft, the bill of exchange, the promissory note, are all evidences of debt, of money to be paid. If not, they are fictitious and fraudulent. If the real capital on which they are based be destroyed, they fall with it, and become utterly worthless. If confidence in their prompt payment be impaired, they immediately depreciate in proportion to the distrust. We have mentioned among these instruments of credit the promissory note. Its character as an evidence of debt is not changed when it comes to us illuminated by the art and mystery of plate printing. Name it national bank-note, greenback, Bank of England note, or what you will; let it be signed by banker, president, or king, it is none the less an evidence of debt, a promise to pay. It is not money, and no power on earth can make it money. But it is a title to money, a deed for money, and can be made equal to money only when the debtor performs the promise-- delivers the property which the deed calls for, pays the debt. When that is done, and when the community knows, by actual test, that it will continue to be done, then, and not till then, this credit-currency will in fact be the honest equivalent of money. Then it will, in large measure, be used in preference to coin, because of its greater convenience, and because the cost of issuing new notes in place of those which are worn and mutilated is much less than the loss which the community suffers by abrasion of the coin. To the extent, therefore, that paper will circulate in place of coin, as a substitute and an equivalent, such circulation is safe, convenient, and economical.
And what is the limit of such safe circulation ? Economic science has demonstrated, and the uniform experience of nations has proved, that the term which marks that limit, the sole and supreme test of safety, is the exchangeability of such paper for coin, dollar for dollar, at the will of the holder. The smallest increase in volume beyond that limit produces depreciation in the value of each paper dollar. It then requires more of such depreciated dollars to purchase a given quantity of gold or of merchandise than it did before depreciation began. In other words, prices rise in comparison with such currency. The fact that it is made a legal tender for taxes and private debts does not free it from the inexorable law that increase of volume decreases the value of every part. It is equally true that an increase of the precious metals, coined or uncoined, decreases their value in comparison with other commodities; but these metals are of such universal currency, on account of their intrinsic value, that they flow to all parts of the civilized world, and the increase is so widely distributed that it produces but a small increase of prices in any one country.---[the true colour of the bank-paper advocate always bubbles to the surface: he is not opposed to paper money, he is only opposed to government-issued paper money !!! The conservative, prudent banker, Steven Girard, maintained that this "limit of safe circulation" is three bank-notes for each dollar of capital; two counterfeit notes that represent nothing but the banker's insolence, backed by nothing but the banker's good name; and Mr. Girard was right, he died a rich man, without his bluff ever being called....
Not so with an inconvertible paper money. It is not of universal currency. It is national, not international. It is non-exportable. The whole effect of its depreciation is felt at home. The level of Salt Lake has risen ten feet during the last thirty years, because it has no outlet. But all the floods of the world have made no perceptible change in the general level of the sea. The character of inconvertible paper money, the relation of its quantity to its value, and its inevitable depreciation by an increase of volume were demonstrated in the Bullion Report of 1810 by facts and arguments whose force and conclusiveness have never been shaken. In the great debate that followed, in Parliament and through the press, may be found the counterpart of almost every doctrine and argument which has been advanced in our own country since the suspension of specie payments. Then, as now, there were statesmen, doctrinaires, and business men who insisted that the bank notes were not depreciated, but that gold had risen in value; who denied that gold coin was any longer the standard of value, and declared that a banknote was "abstract currency." Castlereagh announced in the House of Commons that the money standard was "a sense of value, in reference to currency as compared with commodities." Another soft-money man of that day said: "The standard is neither gold nor silver, but something set up in the imagination, to be regulated by public opinion."
Though the doctrines of the Bullion Report were at first voted down in Parliament, they could not be suppressed. With the dogged persistency which characterizes our British neighbors, the debate was kept up for ten years. Every proposition and counter proposition was sifted, the intelligence and conscience of the nation were invoked; the soft money men were driven from every position they occupied in 1811, and at last the ancient standard was restored. When the bank redeemed its notes, the difference between the mint price and the market price of bullion disappeared, and the volume of paper money was reduced in the ratio of its former depreciation. During the last half century few Englishmen have risked their reputation for intelligence by denying the doctrines thus established. These lessons of history cannot be wholly forgotten. It is too late to set up again the doctrines of Lowndes and Vansittart. They may disturb and distract public opinion, but can never again triumph before an intelligent tribunal. I commend to the soft money men of our time the study of this great debate and that of 1695. When they have overturned the doctrines of Locke and Newton and of the Bullion Report, it will be time for them to invite us to follow their new theories.---[Yes, we should study and learn from the experience of the 1820s, 1830s, 1840s in England; how did the agriculturists, the city labourers, the factory workers, the craftsmen faired under the blessings of demonetization of silver and return to specie payment ?]
But we need not go abroad to obtain illustrations of the truth that the only cure for depreciation of the currency is convertibility into coin. Our American colonies, our Continental Congress, and our state and national governments have demonstrated its truth by repeated and calamitous experiments. The fathers who drafted our constitution believed they had "shut and bolted the door against irredeemable paper money;" and, since then, no president, no secretary of the treasury, has proposed or sanctioned a paper currency, in time of peace, not redeemable in coin at the will of the holder.---[It is bold-faced falsehood: the very men who ratified the constitution sanctioned paper banks to do that which they themselves were not allowed to do, to issue irredeemable paper currency; yes, search the "records from 1787 to 1861" and see that state sanctioned printing-press-money corporations sprung up like mushroom after rain.]
Search our records from 1787 to 1861, and select from any decade twenty of our most illustrious statesmen, and it will be found that not less than nineteen of them have left on record, in the most energetic language, their solemn protest and warning against the very doctrines we are opposing. The limits of this article will allow only the briefest statement of the evils that flow from a depreciated currency, evils both to the government and to the people, which overbalance, a thousand to one, all its real or supposed benefits.
The word "dollar" is the substantive word, the fundamental condition, of every contract, of every sale, of every payment, whether at the treasury or at the stand of the apple-woman in the street. The dollar is the gauge that measures every blow of the hammer, every article of merchandise, every exchange of property. Forced by the necessities of war, we substituted for this dollar the printed promise of the government to pay a dollar. That promise we have not kept. We have suspended payment, and have compelled the citizen to receive dishonored paper in place of money. The representative value of that paper has passed, by thousands of fluctuations, from one hundred cents down to thirty-eight, and back again to ninety. At every change, millions of men have suffered loss. In the midst of war, with rising prices and enormous gains, these losses were tolerable. But now when we are slowly and painfully making our way back to the level of peace, now when the pressure of hard times is upon us, and industry and trade depend for their gains upon small margins of profit, the uncertainty is an intolerable evil. That uncertainty is increased by doubts as to what Congress will do. Men hesitate to invest their capital in business, when a vote in Congress may shrink it by half its value.
Still more striking are the evils of such a currency in its effects upon international commerce. Our purchases from and sales to foreign nations amount in the aggregate to one billion two hundred million dollars per annum, every dollar of which is measured in coin. Those who export our products buy with paper and sell for gold. Our importers buy with gold and sell for paper. Thus the aggregate value of our international exchanges is measured, successively, by the two standards. The loss occasioned by the fluctuation of these currencies in reference to each other falls wholly on us. We, alone, use paper as a standard. And who, among us, bears the loss ? The importer, knowing the risk he runs, adds to his prices a sufficient per cent, to insure himself against loss. This addition is charged over from importer to jobber, from jobber to retailer, until its dead weight falls, at last, upon the laborer who consumes the goods. In the same way, the exporter insures himself against loss by marking down the prices he will pay for products to be sent abroad. In all such transactions capital is usually able to take care of itself.
The laborer has but one commodity for sale, his day's work. It is his sole reliance. He must sell it to-day or it is lost forever. What he buys must be bought to-day. He cannot wait till prices fall. He is at the mercy of the market. Buying or selling, the waves of its fluctuations beat against him. Daniel Webster never uttered a more striking truth than when he said: "Of all the contrivances for cheating the laboring classes of mankind, none has been more effectual than that which deludes them with paper money. This is the most effectual of inventions to fertilize the rich man's field by the sweat of the poor man's face."---[Daniel Webster said that while he was advocating for the renewal of the Charter of the Bank of the United States on May 25, 1832., while he was receiving regular payments from that money corporation for services rendered !!!]
But here we are met by the interconvertible-bond-and-currency men, who offer to emancipate us from the tyranny of gold and secure a more perfect standard than coin has ever been. Let us see. Our five per cent. bonds are now on a par with gold. Any actuary will testify that in the same market a 3.65 bond, payable, principal and interest, in gold, and having the same time to run, is worth but seventy-five cents in gold; that is, thirteen cents less than the present greenback. How much less the bond will be worth if its interest be made payable in the proposed interconvertible currency, no mortal can calculate. It is proposed, then, to make the new currency equivalent to a bond which, at its birth, is thirteen cents below the greenback of to-day. We are to take a long leap downward at the first bound. But "interconvertibility" is the charm, the "subtle principle," the great "regulator of finance" which will adjust everything. The alternate ebb and flow of bond into paper dollar, and paper dollar into bond, will preserve an equilibrium, an equipoise; and this level of equipoise is the base line that will measure the new standard of value. The lad who sold his two-dollar dog for fifty dollars, and took his pay in pups at ten dollars each, never doubted that he had made a profit of forty-eight dollars until he found how small a sum the whole litter would sell for in the market.
Undoubtedly the beam will lie level that is weighted with the bond at one end and the paper money at the other. But what will be the relation of that level to the level of real values ? Both the bond and the currency are instruments of credit, evidences of debt. They cannot escape the dominion of those universal laws that regulate prices. If made by law the only legal tender, such a currency would doubtless occupy the field. But what would be the result ? To a certain extent the bonds themselves would be used as currency. The clearing-house banks of New York would doubtless be glad to get interest-bearing bonds instead of the government certificates of indebtedness, bearing no interest, which, for convenience, they now use in the settlement of their balances. The reserves of public and private banks, which now amount to more than two hundred million dollars, would largely be held in these interest bearing bonds. Thus the first step would result in compelling the government to pay interest on a large portion of the reserves of all the banks, public and private. It will hardly be claimed, however, that anybody will part with his property for bonds of this description, to hold as a permanent investment. Capital in this country is worth more than 3.65 per cent. How then will the new currency be set afloat ? The treasury can pay it out only in exchange for the new bonds or in payment of public dues. Shall we violate public faith by paying the gold bonds already outstanding in this new and greatly depreciated paper ? Or shall we, as some of the soft-money men have proposed, enter upon a vast system of public works in order to put the new currency in circulation ? No doubt means would be found to push it into circulation, so long as enterprise or speculation should offer a hope of greater profits than 3.65 per cent. Once out, it would inevitably prove a repetition of the old story: an artificial stimulation of business and of speculation; large issues of currency; inflation of prices, depreciation of paper, delirium, prostration; "up like a rocket, then down like a stick." They tell us that this cannot happen, because as the volume of paper increases, the rate of interest will fall, and when it reaches 3.65 per cent. the currency will be exchanged for bonds.
But all experience is against them. Inflation has never brought down the rate of interest. In fact, the rate is always highest in countries afflicted with irredeemable paper money. For all practical purposes, the proposed currency would be unredeemed and irredeemable; and this is what its advocates desire. General Butler sees "no more reason for redeeming the measure of value than for redeeming the yard-stick or the quart pot." This shows the utmost confusion of ideas. We do not redeem the yard-stick or the quart pot. They are, in reality, what they profess to be. There is nothing better for measuring yards than a yard-stick. But, in regard to the yard-stick, we do what is strictly analogous to redemption when applied to currency. We preserve our yard stick undiminished and unchanged; and, by the solemn sanction of penal law, we require that it shall be applied to the purchase and sale of all commodities that can be measured by the standard of length. The citizen who buys by a longer yard-stick or sells by a shorter one than our standard, is punished as a felon. Common honesty requires that we restore, and with equal care preserve from diminution or change, our standard of value.
It has been already shown that the soft money men desire a vast increase of currency above the present volume. The assumed necessity for such an increase was a leading topic in the debates that preceded the late elections. The argument, often repeated, ran substantially thus:--
"Fellow citizens ! You are in great distress. The smoke of your furnaces no longer ascends to the sky; the clang of your mills and workshops is no longer heard. Your workers in metal and miners in coal are out of employment. Stagnation of trade, depression of business, and public distress are seen on every hand. What has caused these disasters ? Manifestly, a lack of money. Is there any man among you who has money enough ? If there be, let him stand forth and declare it. Is there one who does not need more money to carry on his business ? [Cries of No! No!] The hard-money men have brought you to this distress, by contracting the volume of the currency, by destroying the people's money, your money. And they propose to complete your ruin by forcing the country to resume specie payments. We come to save you from this ruin. We insist that you shall have more money, not less. We are resolved to make and keep the volume of currency 'equal to the wants of trade.' "
These assumptions were answered by undeniable facts. It was shown that our large volume of paper currency [300million of bank notes; to which Garfield does not object] had helped to bring on the crisis of 1873, and had greatly aggravated its effects; but that the main cause was speculation, over-trading, and, in some branches of business, an over-production beyond the demands of the market. A striking illustration of the effect of over production was drawn from the history of one of the interior counties of Northern Ohio.
In the midst of a wilderness, far away from the centres of trade, the pioneers commenced the settlement of the county at the beginning of the present century. Year by year their number was augmented. Each new settler was compelled to buy provisions for his family until he could raise his first crop. For several years this demand afforded a ready market, at good prices, for all the products of the farm. But in 1818, the supply greatly exceeded the demand. The wheat market was so glutted that twenty bushels were frequently offered for one pound of tea, and often refused, because tea could be bought only for money, and wheat could hardly be sold at all. If the soft money men of our time had been among those farmers, they would have insisted that more money would raise the price of their wheat and set the plowboys at work. But the pioneers knew that until the stock on hand was reduced, the production of another bushel to be sold would be labor wasted. The cry for more currency shows that soft money men have confounded credit with capital, and vaguely imagine that if more paper dollars were printed they could be borrowed without security.
In whatever form the new currency be proposed, whether in the so-called absolute money or in the "interconvertible paper money tokens," as a relief from distress it is a delusion and a snare. All these schemes are reckless attempts to cut loose from real money, --the money known and recognized throughout the world,-- and to adopt for our standard that which a great gold gambler of Wall Street aptly called "phantom gold." Their authors propose a radical and dangerous innovation in our political system. They desire to make the National Treasury a bank of issue, and to place in the control of Congress the vast money power of the nation, to be handled as the whim, the caprice, the necessities, of political parties may dictate. Federalist as Hamilton was, he held that such a power was too great to be centralized in the hands of one body. This goes a hundred leagues beyond any measure of centralization that has yet been adopted or suggested.
In view of the doctrines herein advocated, what shall be said of the present condition of our currency ? It is depreciated. Its purchasing power is less than that of real money, by about fourteen per cent. Our notes are at a discount; not because the ability of the nation to redeem them is questioned, but partly because its good faith is doubted, and partly because the volume of these notes is too great to circulate at par. What that volume ought to be, no man can tell. Convertibility into coin is a perfect test, and is the only test.
Necessity of Resumption.
The duty of the government to make its currency equal to real money is undeniable and imperative.
First, because the public faith is most solemnly pledged, and this alone is a conclusive and unanswerable reason why it should be done. The perfidy of one man, or of a million men, is as nothing compared with the perfidy of a nation. The public faith was the talisman that brought to the treasury thirty five hundred million dollars in loans, to save the life of the nation, which was not worth saving if its honor be not also saved. The public faith is our only hope of safety from the dangers that may assail us in the future. The public faith was pledged to redeem these notes in the very act which created them, and the pledge was repeated when each additional issue was ordered. It was again repeated in the act of 1869, known as the "act to strengthen the public credit," and yet again in the act of 1875, promising redemption in 1879.
Second. The government should make its currency equal to gold because the material prosperity of its people demands it. Honest dealing between man and man requires it. Just and equal legislation for the people, safety in trade, domestic and foreign, security in business, just distribution of the rewards of labor, --none of these are possible until the present false and uncertain standard of value has given place to the real, the certain, the universal standard. Its restoration will hasten the revival of commercial confidence, which is the basis of all sound credit.
Third. Public morality demands the reestablishment of our ancient standard. The fever of speculation which our fluctuating currency has engendered cannot be allayed till its cause is destroyed. A majority of all the crimes relating to money, that have been committed in public and private life since the war, have grown out of the innumerable opportunities for sudden and inordinate gains which this fluctuation has offered. The gold panic of 1869, which overwhelmed thousands of business men in ruin, and the desperate gambling in gold which is to-day absorbing so many millions of capital that ought to be employed in producing wealth, were made possible only by the difference between paper and gold. Resumption will destroy all that at a blow. It will enable all men to see the real situation of their affairs, and will do much to ward dissipating those unreal and fascinating visions of wealth to be won without industry, which have broken the fortunes and ruined the morals of so many active and brilliant citizens.
My limits will not allow a discussion of the hardship and evils which it is feared will accompany the restoration of the old standard. Whatever they may be, they will be light and transient in comparison with those we shall endure if the doctrines of soft money prevail. I am not able to see why the approach to specie may not be made so gradual that the fluctuation in any one month will be less than that which we have suffered from month to month since 1869. We have traveled more than half the distance which then separated us from the gold standard.
A scale of appreciation like that by which England resumed in 1821 would greatly mitigate the hardships arising from the movement. Those who believe that the volume of our currency is but little above its normal level need not fear that there will be much contraction; for, with free banking, they may be sure that all the paper which can be an actual substitute for money will remain in circulation. No other ought to circulate. The advocates of soft money are loud in their denunciation of the English resumption act of 1819, and parade the distorted views of that small and malignant minority of English writers who have arraigned the act as the cause of the agricultural distress of 1822, and the financial crash which followed, in 1825. The charge is absolutely unjust and unfounded. In 1822 a committee of the House of Commons, having investigated the causes of the agricultural distress of that and the preceding year, found that it was due to the operation of the corn laws, and to the enormous wheat crops of the two preceding seasons. Their report makes no reference to the resumption act as a cause of the distress. In both that and the following year, a few of the old opponents of hard money offered resolutions in the House of Commons, declaring that the resumption act was one of the causes of the public distress. The resolution of 1822 was defeated by a vote of one hundred and forty-one to twenty-seven, and that of 1823 was defeated by the still more decisive vote of one hundred and ninety two to thirty. An overwhelming majority of intelligent Englishmen look back with pride and satisfaction upon the act of resumption as a just and beneficent measure.
But methods and details of management are of slight importance in comparison with the central purpose so often expressed by the nation. From that purpose there should be no retreat. To postpone its fulfillment beyond the day already fixed is both dangerous and useless. It will make the task harder than ever. Resumption could have been accomplished in 1867 with less difficulty than it can be in 1879. It can be accomplished more easily in 1879 than at any later date. It is said that we ought to wait until the vast mass of private debts can be adjusted. But when will that be done ? Horace has told us of a rustic traveler who stood on the bank of a river, waiting for its waters to flow by, that he might cross over in safety: "At ille labitur et labetur in omne volubilis ævum." The succession of debts and debtors will be as perpetual as the flow of the river.
We ought to be inspired by the recent brilliant example of France. Suffering unparalleled disasters, she was compelled to issue a vast volume of legal tender notes in order to meet her obligations. But so soon as the great indemnity was paid, she addressed herself resolutely to the work of bringing her currency up to the standard of gold. During the last two years she has reduced her paper currency nearly seven hundred and fifty million francs; and now it is substantially at par. Amidst all her disasters she has kept her financial credit untarnished. And this has been her strength and her safety. To meet the great indemnity, she asked her people for a loan of three billion francs; and twelve and a half times the amount was subscribed. In August, 1874, the American Minister at Paris said, in one of his dispatches, "Though immense amounts were taken abroad, yet it seems they are all coming back to France, and are now being absorbed in small sums by the common people. The result will be, in the end, that almost the entire loan will be held in France. Every person in the whole country is wishing to invest a few hundred francs in the new loan, and it has reached a premium of four and one half to five per cent."---[At that time silver was still in use in France, there were about $700million worth of legal tender silver coins among the people; in the U.S. Garfield participated in demonetizing silver because he wanted irredeemable bank paper. Eventually, the banking interests, whom Garfield represented throughout his military and political life, forced France --and the Latin union-- to abandon silver]
Our public faith is the symbol of our honor and the pledge of our future safety. By every consideration of national honor, of public justice, and of sound policy, let us stand fast in the resolution to restore our currency to the standard of gold.
James A. Garfield.