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Full text of "The money question; the legal tender paper monetary system of the United States; an analysis of the specie basis or bank currency system, and of the legal tender paper money system"

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dent f I'kfenix Furniture Company, 

M) KAI'IPS. Ml< H. 




( > F 'I 1 I I K 










I.v appearing before the public in the character of a 
writer, upon what is commonly supposed to be a very 
abstruse subject, a word of explanation seems to be neccs- 
>ary. For over a quarter of a century I have been actively 
engaged in business, as a manufacturer, and have naturally 
been led to enquire into the laws which govern the produc- 
tion and distribution of wealth. It was a matter of perplexity 
to me why it was that a nation possessed of the wonderful 
natural resources and the enormous productive powers that 
are possessed by the American people, should not enjoy 
general and uninterrupted prosperity; and, knowing that 
wealth is chiefly the product of labor, that the industrial 
classes^!' society are unable to retain anything like a fail- 
proportion of the wealth produced by their labor. The 
fanner, usually considered the most independent of mortals, 
is engaged in a never-ending struggle to secure a mere com- 
petency; the same is true of the mechanic, the laborer, etc.; 
and the merchant, the manufacturer and others engaged in the 
production and distribution of wealth, aided by capital, arc 
oppressed with a consciousness that their capital may at any 
time take to itself wings and fly away, no matter how wisely 
or prudently they may conduct their affairs. On the other 
hand, wealth is seen flowing in a constant stream into the 
laps of those who do not employ their capital in any wealth 
producing pursuit, but use it, in the shape of money, as an 
instrument to control property and labor. This certainly is 
sufficient to justify the suspicion that the unequal distribu- 
tion of the products of labor which is constantly going on 
in the land, greatly to the disadvantage of society, is due to 

IV. j'l; ! 

tin- manner in which money is instituted; and the <|ucxti 

-' , in \vh:it re>]iect ix money improperly instituted, and 
wliat is the remedy? 

If it had not been for the experience furnished during the 
Kchcllioii, the great body of the American people would 
doubtless liave continued to struggle on, in entire ignorance 
of tlie fact that it is possible to establish a monetary system 
on any other principles than those inculcated by the udvo- 
the -pecie hasix or bank currency sy>tem. Fortu- 
nately, however, it was then fully demonstrated that a >ystem 
of money, Mich as was suggested by Jefferson and other 
eminent founders of the republic, could be instituted upon 
entirely different principles a system thai would distribute 
the product* of labor in entire harmony with the law- 
trade, and far more equitably than could possibly be done 
through the instrumentality of bank currency. The ma- 
undoubtedly reali/e the truth of this, but are at loss to give 
-i reason for the faith that is in them. This is not at all 
Mranire. The wealth, intelligence and ability of the nation, 
.veil as the power of the prcxx, arc arrayed on the side of 
the banks, precisely as the same element- were arrayed on 
ihe side "f the 1'nitcd States liank in the memorable context 
between that institution and the people, under the patriotic 
leadership .if (ieneral Jackxon. Kven jrofesx.rx of political 

aorny are dragooned into Jthe same ignoble service, ami 
compelled to distort tho principles ol the science, to which 

they prfcx> to be devoted, for the juirjMise of icceivinu r the 
public. In piirsuinLT my wn invi-stiiratinx, T found, to my 
siirprix.-, that, e\<-ej.t Kcllo^-/* admirable work, written 
s..m- \.-arx before the war, there \va- no book extant of a 
popular character, from which anything like a clear under- of the .juextioiis involved in the pre-eiit crisis could 
I" obtained; and that the public was entirely dependent 

ri: i: K 4CB. \. 

upon (he fugitive writings of tin- t'ew earnest and aide men, 
who have espoused the cause of the people, for information 
upon the subject. It was in view of these circumstance- 
that this work was undertaken. I would have been glad, 
indeed, if some one, who was better prepared for the duty, 
had undertaken it; but as that did not seem probable, and, 
knowing the great want of such a work from my own expe- 
rience, I determined that it should be written at all events, 
in order that the American people might have a fair oppor- 
tunity to decide intelligently upon this all important ques- 
tion. No claim is made to originality, nor has there been 
any effort made in regard to style. My sole aim has been to 
present the facts and principles relating to the subject 
correctly, and in plain, simple language; and, as will be 
observed, I have not hesitated to quote extensively whenever 
it could be done to advantage. In preparing the work for 
the press I have also availed myself of competent assistance, 
in order that the subject matter might be presented to the 
public as forcibly as possible. Special care has been taken 
to give credit to those whose ideas or language have been 
adopted, but I am much indebted to the fugitive writings 
above referred to, and I desire in a general way to express 
my acknowledgments for the same, and especially to Hon. W. 

D. Kelley, General Win. Brindle, Henry Carey Baird and 

E. M. Davis, of Philadelphia; Peter Cooper and Pliny Free- 
man, of New York City; John G. Drew, of New Jersey; 
and to the Cincinnati Enquirer, the Chicago Industrial Age 
and the Indianapolis Sun. 


Mav 20th, 1870. J 




The Nature of Money 26 

The Intrinsic Value of Money 30 

The Uses of Money 37 

Systems of Money 48 

The Power to Make Money a Governmental Function.. 53 
How Paper Money issued by the Government Repre- 

sents Value 70 



The Bank of Venice 80 

The Bank of Genoa 87 

The Bank of Amsterdam 87 

The Bank of Hamburg : 88 

The Bank of England 88 

The Banks of Scotland 97 

The French System of Finance.' 100 



Early Colonial Currency 109 

Continental Money 112 

State Banks of Issue 117 

The First Bank of the United States 119 

The Money Panic of 1809 I _> I 

The Money Panic of 1814 125 

The Second Bank of the United States 120 

The Money Panic of 1819 l-_'7 

The Money Panic of 1825 133 

The War with the United States Bank 133 

The Money Panic of 1837-1839-1841 150 

The Money Panic of 1857 !">:> 

The Suspension of 180 1 154 

State Banks of Issue Supplanted by National Banks... 153 

Vlll. NTKNTS. 

l-->n i> DriMMi nn; KKHELLION. 161 

Tin- First Loan Acts ............................... J r,4 

Treasury Note hearing interest and not a Legal Tender. 171 
Full Legal Tender Treasury Not^ not bearing interest. 172 

Secretary Chafe's First Annual Report ............... 173 

The First Le-al Tender Bill ........................ 175 

The lircenback ................................... ]!><> 

Temporary Deposits in the Sub-Treasury ............. 203 

Certificates of Indebtedness ........................ 2o:i 

The Second Lcu'al Trmlrr Act ..................... 204 

The Second Annual Kcport of Secretary Chase ....... Jo 4. 

Tin- Third Le-al Tender Act %900,000,000 Loan Act. 200 

The National Bank Hill ........................... 209 

Public Del t Statement, 1863 ........................ 210 

Amount and kiixl of Paper Circulation, June 30, 1*04.. 215 

Bonds Fxcnipted from Taxation ..................... 216 

(ireenhacks Limited to $400,000,000 ................. 216 

iden Appointed Secretary of the Treasury ....... 216 

McCulloch Appointed Secretary of the Treasury ....... 217 

Deht and Circulation of the United States, isr.5 ....... 210 

McCullocli*> Contraction Policy ..................... 210 

Amount Contracted, .July, 1868 ..................... 222 

Act of Conirrc Suspendinr Contraction of (ireenhacks 223 

An Act to Strengthen the Public Credit ............. 2&I 

KcfundinLT the Public Debt ......................... 230 

Public Debt Statement, November, 1875 ............. 231 


try Chase Recommends a National Banking La\\ 

National IJank Hill Reported in the Senate 245 

The National Bankinir Law 240 

Of the Orirani/ation of National Banks 247 

The Protitx of National Banks 2-",o 

The Panic of 1873 

The ( 'ovt of Bank Currency 

Failure^ in the Country since Is:i 264 

K\travairane< ()\ i-r !'i-oduction 266 

An Act to L'fMinie Specie Payments and Make Bank- 
ing Fn-c to Bondholders 270 

The Little Tariff Bill an Act to Enable the National 

to Monopoli/e the Currency 271 

ro N i i. N i 8, ix- 


How Interest mi Government Bonds is Paid 27 J 

The Specie Resumption Ad 279 

The Aiiumnt of Gold in the Country 281 

I {cMimption Impossible 282 1 

The Consequences of Korced Resumption 289 

The Kxperience of Great Britain in 1819 182:} 290 

The Consequences of Forced Resumption in the United 

States 30O 


UPON Soi.ND Plil. \CIPLE8. 305 

The I teal Issue in the Impending Crisis 311 

An Analysis of the Specie Basis or Bank Currency Sys- 
tem of Money ..'... 312 

The Cost of the Credit System :J24 

Commercial Crashes and Money Panics 326- 

An Analysis of the Lejj^al Tender Paper Money Svstem. 33O 

What is a Dollar? .* 333 

Money of Account 334 

The Legal Tender Question 341 

How .Much Money a Nation Should Have 344 

How Interest Should be Regulated 349 

The 3.65 Bond Plan 352 

How the Public Note is Put in Circulation 355 

The National Debt 356 

Conclusion 359 


Horace Greeley's Famous Editorial on the 3.65 Bond 
Plan 363 

The Legal Tender Bill as it passed the House of Rep- 
resentatives, Feb. 6, 18(52 367 

The Legal Tender Act of February 25, 1862 37O 

Speech of the Hon. Thaddeus Stevens in the House of 
Representatives, December 19, 1862 37$ 

Table Showing the Monthly Range of the Gold Pre- 
mium since 1862 381 

The Frem-h As^ignats 382 


The table given on page 231 exhibiting the amount and character of the public 
debt, bearing interest, on the 30th day of November, 1875, is incomplete. By au 
oversight the currency bonds issued to the Pacific Railroads were omitted. The 
amount of thn currency bonds outstanding at that date was $64,623,512, which, 
added to the amount given on page 231, would make the total public debt, bearing 
interest, November 30, 1875, $1,758,874,812. 

On pag' ss for " out," tho last word on the page, read "about." 

On page 17. In the <evcnth line from the bottom of the page, substitute '"April" 
to "March." 





THE prosperity of a people depends chiefly on the use 
which they are enabled to make of their natural resources. 
It frequently happens that nations possessing great natural 
advantages fail, through want of properly directed industry 
6r defective laws, to attain even a reasonable degree of 
prosperity; and, on the other hand, that nations possessing 
but limited resources succeed, under wise laws and by means 
of well directed energy, in achieving great wealth. History 
abounds in instances illustrating the truth of this statement. 
At the present time Ireland and Holland may be cited a> 
cases in point. Ireland possesses a fertile soil, salubrious 
climate, fine harbors, noble rivers, and a population naturally 
brave, quick and capable of great labor; but her people, by 
reason of unequal laws and bad government, are chained 
to poverty and ignorance. Holland, a land reclaimed from 
the ocean and held only by sleepless vigilance, was orig- 
inally destitute of even ordinary advantages; but under 
enlightened laws, industry and art have accomplished the 
most marvelous results. " Below the level of the sea, and 
the surface of adjacent rivers and canals, have been created 

10 i:ix>i ]; i.- "} Till; IN 1 1 i.D M A i );>. 

ly human art, fat pastures teeming with llocks and he 
rich artilicial garden land, nourishing the industriou^ a 
thriving population of innumerable cities, towns and \ illa_ 
Tin- \er\ j an artificial fortification against tin- ocean, 

the ancient and natural monarch of the country, Here lie 
is defied by leagues of artificial sea banks there by mile- of 
granite masonry. Ui\rr> anl canals are made t<> run many 

ahnvc the level of the cuimtry. Annie- !' indefatigable 
wind mills are perpetually pumping and draining. AmMer- 
dam and K"ttenl:mi, ]M>puh>u>, opulent and splendid c'r 
Irivcn into the mud."' Thu>, ly well din- 
indu>try, under wi>e law^, ha\c the people of Holland I- 
enabled to achieve a wonderful victnry over the forces of 
nature, and to clothe thcm>dvcs \\'ith general prosperity. 
The people of the I'nited States are peculiarly r\( h in all 

iM.untio of nature. They po-^c<s a land wlm>c area 
4,000,000 of square miles. Within its Imundaries 
re embraced e\ery variety of >oil and climate; ine\hau>tible 
minex .f iron, coal, copper, lead, /'me, gold and silver; im- 
men-i- : -rand lakes and mighty ri\ei>. A better 

id.. eat extent may be formed by comparing & 

..f the, v ,,f the Union with the kingdoms of Km 
California, for example, u equal in si/.e to Kngland, Scotland,. 
Ireland, Wale-, Ilelgium, Holland and I'ortugal; and T- 

jiial to France, Holland, Jielgium and Denmark. The- 
mineral reflOUTCefl of tlie country are alnio-t beyond conijn- 
tation. For example, it i> e-tiinated that coal enough ha- 
already bi-.-u <!i-.-..\ i-red to Mipply a population of l.oooj 
000 for ( Mlier mineraU, comparatively sj.eak- 

, an- equally abundant. Tlie gold ]roducing region of 

country COTen an area of o\er 1,000,000 of square miles, 
the di-.-.-\,'i-y of _-., Id in California in ] ^40, tlie 
gold yield of the world did not exceed $20,000,000 a \ 

i:i -.'i i:< Bfl <! TIM-: IM n:i> 81 ,\TE8. 1 1 

\o\v tin 1 I'nitcd States alone produce annually over 
*7:),000,000 worth of bullion. 

The agricultural roourees of the 1 country are cijually 
i'oundlcss. In almost every section the noil yields bounti- 
fully, while in SOUK- regions, as in the great States of the 
\Ve>t, its fertility is unsurpassed. The agricultural produc- 
tions of that region alone have reached an almost fabulous 

The gn-at natural advantages possessed by the country 
have enabled its manufacturing interests to make great 
progress, in spite of the ever changing and illy devised tariff 
laws, which, for the greater part of the time, have disiigured 
the statute books of the nation. While agriculture and 
manufactures flourish side by side, in all parts of the country, 
greatly to the advantage of both, it happens that the peculiar 
facilities and advantages enjoyed by different sections of 
the country have caused their industries to vary greatly in 
character. Thus, the people of the Eastern States are 
devoted chiefly to manufactures and commerce; the people 
of the Middle States, although engaged largely in com- 
merce, manufactures and agriculture, are also occupied 
extensively in dealing in iron, coal, lumber, salt, petroleum, 
etc.; the people of the Western and South Western States, 
while poes>cd of large mineral and other interests, as yet 
find their chief profits in the vast agricultural resources 
which they enjoy; the people of the Southern States are 
engaged principally in tlve production of the valuable staples 
common to that section, such as cotton, rice, sugar, tobacco, 
etc.; and the people of the Pacific States, besides their 
immense agricultural and commercial interests, find a wide 
field for employment in developing the rich mines of gold, 
-ilver, etc., which have rendered that region famous 
throughout the world. 

i; i.->! i: j;> OK MIK i MTKI> STATES. 


To glance briefly at a fe\v detail.% the ae>sed value of 
the farms and stock in the 1'nited States in 1870 wa* nearly 
|1 1,000,000, ouo, and this sum did not cover one-half their 

actual \alue. The following statement, gathered from the 

CenMix Keport of 1870, gives a partial vie\\- of the airricul- 
tural operations of the country during the preceding year: 

Farm product*, including addition! to > $2,500,000,000 

Farm \sa- -, ineludinir value of board 310,000,000 

Wheat 2^.<>oo,000 

B 17,oon,ooi) 

Indian <'<>rn 701,000,000 

< >al - 2S2,000,000 

Barley 30,000,000 

Buckwheat 10,000,000 

Flax Seed 1.700,000 

Clover Seed l',OO,000 

u 600,000 

P"t .it.M"* 144,000,000 

Sweet 21,000,000 

I Means 5,500,000 

( '"ft. .11 1,200,000,000 pound-. 

Flax 27,000,000 

Hemp 25,000,000 

H..p> 25,000,000 


\N '"-,] 100,000,000 

T"bace, 203,000,000 

Butter 500,000,000 

Cheese -JM,OOO,OOO 

27,000,000 ton*. 

And the following statement presents a general view of 
the manufarturiiii; inteiwt^ ,f the country in 1H70: 

Number of inanufacturiiig establishments... 252,148 

Number of operati\c- :.!M<7 

< 'apital in\extrd $2,118,000,000 

Animal salaries paid 776,000,000 

K'.iu material u-ed , 


BX8O1 i: B8 OF TIIK t MII.I> > r \ i KS. 13 

111 considering the resources and advantages of the coun- 
try, it is proper to notice the labor saving machine ry, largely 
the result oi' American ingenuity, which now performs such 
an important part in all the departments of labor. In (ircat 
Britain the power of the machinery of that country i> e-ti 
mated as equal to that of 600,000,000 of -men. In this 
country it probably does not reach that amount, but it is 
MitHciently large to add enormously to the productions of 
the country. In many sections one thousand acres of land 
can now be cultivated with no more cost than was formerly 
required to cultivate one hundred. 

The great and varied industries of the country are rendered 
vastly more useful and profitable by reason of the channels 
of communication, natural and artificial, which extend in 
everv pov.vihle direction. In addition to the many lakes and 
riveis, which traverse the country, it is covered with a net- 
work of railroads from ocean to ocean, affording ample 
means of transportation to gather and distribute the products 
of the nation. 

From this outline of the wealth and resources of the 
United States, it is apparent that the American people are 
pn.s>e>si-d of vast advantages, such as are hardly possessed 
by any other nation on the globe. It isestimated that the 
United States are capable of sustaining a population of 
upwards of 350,000,000, while the population of the country 
now scarcely exceeds 40,000,000. If enabled by wise laws 
and well directed industry to make a proper use of their 
advantages, the people of the United States ought to enjoy 
general and uninterrupted prosperity. And, as the govern- 
ment of the Unite* 1 States is republican in form based upon 
the theory that all power emanates from the people, the 
responsibility of any failure on their part to a'ttain wealth 
and prosperity must rest with the people themselves. 

14 . > M.I: AI. IM:<>MM:KITY. 


vithstandin^ their boasted industry, intelligence aii'l 
enterprise, :in<l tin- vast resources which they possess, the 
people of the 1'nited States, as a nation, have failed, utterly 
and di-L:racefully, to attain anything like a reasonable 
irencral prosperity. We sliall not resort to any 
elaborately prepared statistics to establish tin- truth of the 
a*-crtion, hut will simply call attention to a few important 

the < -onvideration of which, we believe, cannot fail to 
prodm-i* conviction. 

TI;N IIMI- within the past sixty years has the country 
IM-.-II visiti-d l>y coniniercial crashes and money panics, 
accunijjanied or followed by general stagnation of business, 
ruin ami bankruptcy. From '1814 to 1801 the country suf- 
fered MM; JIMKS in this way, and only o//ce, from 1841 to 
L857, did it c-cape a financial crash for a hinder period than 
ff.n : /' ' . At- the present time the country is suffering 
f'rnni thi- crash of 1.^7:;, or rather from the same cauM-> that 
|irolucrd that cra>h. The-e coniniercial crashes have 
invariably paraly/ed all forms of productive industry, bank- 
rupted huv' m <.vv i m . n , ><l the debtor cla>s of their 
prop-rt\, and occasioned want and distress amoii^-; nearly 
all classes of peoph-. When we look back over the pa-; 
half century, we find that, a> a matter of fact, the people at 
lar-je have never had an opportunity, even between these 

- of financial disturbance, to enjoy more than a 
glimpse of prosperity. They have been kept hii^y, either 
HtniirLTliii'-: to a\')id impendiiiLC ruin, in view of a commercial 
crash, <>r laboring \<> rebuild their shattereil fortunes, after 

:;ic had subsided. And now, the (i \II.\M\I. YI-:AI:. 
1870,80011 to be celebrated with L r reat pomp on the banks of 

tiuylkill, under the auspice* of a irreat city writhinL' 
under tlie heel .f a corrupt K'inir. finds the people, in the. 

.KNKKAI. IM:o>n.KI I '> . 

midst of plenty, distressed, exlUNRftted and poor. And how 
does this happen? Has nature frowned upon the husband- 
man and refused to ropond t<> his toil? Has the earth 
declined to yield up her precious stores? Has the hand of 
the artisan or nu-chanic lost its cunning, or the arm of the 
laborer its strength? Not at all. The graneries of the 
Wot are bursting with the- products of the soil; the valuable 
^taples of the South are as ready as ever to respond to the 
touch of labor; the mineral wealth of the earth lies exposed 
on every hand; the wheels of the workshop and the factory 
are faithful as ever; and the mechanic and laborer are not 
nly able and willing, but anxious to work. The cause of 
the whole trouble lies concealed in the simple word 

In civilized nations at the present day a circulating medium 
of exchange, called money, is as essential to the production 
and distribution of wealth in all its forms as railroads and 
wagons are to its transportation. In 1ST:* an epidemic 
among the hordes, for a few weeks, seriously interfered with 
trade and travel. Were all the railroads and canals of the 
country to suspend operations for a single season, it is not 
difficult to surmise the amount of disaster and distress that 
would ensue. And the public might as well try to conduct 
the affairs of life without railroads and wagons, or the far- 
mer try to cultivate the soil without implements, as for a 
nation to attempt to develop its producing forces, or carry 
on successfully the operations of trade, without an adequate 
amount of money in the channels of circulation. 

The business affairs of the country during and after the 
late war increased largely. The wealth of the nation, in 
spite of the ravages of war, increased from $16,000,000,000 
in 1*00 to $30,000,000,000 in 1870. All the money and 
evidences of indebtedness of the government, which could 
be uxrd a* a circulating medium of exchange, were actively 
-employed. The people, for the n'rst time in their history, 

16 N" -.I.NUIM. i'i:o.Ni'i-;i:iTY. 

i an abundance of money in circulation and were enabled* 
in develop tin- resources <>f tin- country and add to its wealth 
in :i corresponding degree. The increased production in 
-MTV department of labor rendered the burdens of tax.r 
liirht, and, at the same time, increased the revenues of the 
irovernment to an enormous extent. The government, in 
'"ii-e<juence of its largely increased revenue, was enabled, 
at the close of the war, to begin the reduction of the public 
debt at a rapid rate. The people, notwithstanding the bur- 
den .if taxation which they were compelled to bear, wen-. 
individually, out of debt. But matters began to cha; 
The -hannels of trade became stagnant or sluggish, bu-i- 
nevs began to languish, factories and workshop?* \\ 
obliged to suspend or reduce labor and wages, real estate 
fell in value, and enforced idleness began fa grow common; 
and. as in times prior to the war, the climax was capped by a 
financial panic. The cause of this astonishing change in 
the Condition of the country from activity and prosperity 
to inactivity and distress will be found in the following 
statement. *akcn from the books of the Treasury Department 
by I Inn. MOM-X \V. i-'ield, which exhibits the contraction of 
the cin-iil-ituig medium of the country that took place from 
September 1, 1865, to December 1, 1873: 

Amount of money, currency, and circulating medium, Sep- 
tember I, 1805, (exclusive of coin:) 

I'nited State* Note* ...................... $433,160, 

rYactional Currency ...................... 26,344,7 r_' 

anal r.ank NotVs ..................... 180,000,000- 

< 'ompoimd Interest LcLral-tender Notes ...... 217,024,160- 

Temporary Loan ( Yrt'iticates, (lOnl^l,) ...... 107,148,71:; 

of Indebtedlievx ................ H5,093.' 

Treasury live per cent, legal tenders ........ 32,536,991 

Tre:iv llrv Note-., p^r due, legal-lenders, and 

not prevented ........................ 1,50: 

Uank N-.Tev ........................ 78,867.- 

Hiree year Treasury v .............. s:}u,ooo,ooo 

Total Sept. i, i860 ................... $1,996,67^ 


ulating medium, < \dusive of coin, 1 K-rember I, i 

I'nited Stat. > Notes $367,001, 

1'Yactional Currency 48,0<H>, 

Certiiicat;- ..;' Indebtedness (bearing Interot) 678,000 

National liank Currenev 850,000,000 

Total December I, 1S73 $706,679,665 

Contraction from Sept. 1, 1865, to Dec. 1, 

l^7:i, (causiiiLT a money panic) $1. _:{< >,!!9,085 

r'rom the foregoing statement it Appears that the circula- 
ting medium of tlie country (or evidences of indebtedness 

of the government, used as sucli) was contracted over 
$1,200,000,000 in eight years. The greater part of this 
amount consisted of the Three year Treasury Notes ($830,- 
000,000.) These notes \\cre called in and bonds substituted 
in their Mead prior to isr.s. The crash of 1873 followed as 
an inevitable consequence. It won't do to say that it was 
the result of the Avar, or of extravagance, or of over produc- 
tion, or of anything of the kind, ('rashes and money panics 
]U8t like it occurred before the war, on an average, crery 
fire yr'/rx, and this <-ra>h did not occur until c'njht years 
"ff> i' the war. The periodical money panics, Avhich 
occurred before the war, were the natural results of the 
specie basis system of money; and the panic of 1873 was 
caused by enforcing the policy of contraction, which was 
planned at the same time that the National Ranking system 
was projected, in order that the specie basis system might 
he re-estal .Fished. The act of Congress of March 1-J, 1SOO, 
authorizing a contraction of the currency, A\as adopted on 
the recommendation of Hugh McCullodi, Secretary of the 
Treasury. It gave him unlimited control over the finances 
of the country, and he did not fail to use the power placed 
in his hands, to the fullest extent, in aiding the money 
power, with which he was in league, to rob the country and 


I: \I. 

tin- people. When McCulIochV infan rayal of 

high tru.-t ivpo^-d in him becomes fully understood, liis 
name will be a ly-winl ami reproach throughout 

tin- nation. 

Apart from commercial crashes, or money pani 

, idcnt thai there i> something radically wrong in the 
-trm of the country that then- i> some con- 

'ly operating cause, which tends u to fcrtili/e tlie rich 
man's iichl ly the sweat of the ]oor man's hrw." The 
ma-M's toil, day after day and year after year, seeking to 

ire a competency and scarcely succeed in obtaining a 
The lictter chives may succeed in building up 
hnim-s, lut t! never M-CUIV in their PO-M--MOH, until 

they ha. --ed siitlicicnt proj>erty to at least enable 

them to outl --in of financial depression. The pr 

of labor tlow in a steady stream into the hands of non- 

Lncera, who an- e!iLTa.L r i'd in manipulatiiiLC money. 1 
not ditl'u-ult to di-c(\cr the rea-on. .Money is c-oential to the 

lopnieiit of the producing forces of the country, and 
to the diMribution of its products It is far more n 

that money >!niuhl l>e abundant and cheap, than that t! 
should be abundant and cheap means of transportation. 
. tlM IM-CII the LTeneral rule since the 
nstitutcil a nation. They imfortu- 

ly inherited the Uriti-h -\-tem of l>anks of i--ue. \\hicli 
thefl the moneyed olawefl \\ith unlimited control OV6T the 
ilating medium .f a country. "Money shoiihl 1)C tlie 

ervunt and not the ma-ter..f wealth, and then it will flow 
in flie channels <' in obedience to the natural la\\ 

demand; Imt the jtei.plc have permitted the 
power to fmiii-h the i-irculating medium <f the country to be 
filched fnmi lh- nation and gi\cn over to individuals and 
corporations to 1 L ai a monopoly. At present money 

NO <;I-:N 1.1: M. n;< >ri:i:rrv. 19 

has ceased to till tin- channels of trade, and, refusing to 
perform its oilices, has taken refuge in the luniks in the 
commercial centers. Statesmen, like Senator ( '?iristianc\ , 
may tell the >eople a tO gO tO work in any and c-very form 
of ]: "'iiirtive induMries," and coniinand it, to return, and 
imagine that they are uttering a great deal of wi>dom, lint 
M here are the productive industries;' If Senator ( 'hristiaiicy 
had been in .Moses's place, the .Irws. possibly, would have 
heel! at in* h>s In\v to ''make bricks without straw:" lmt a- 
sucli wisdom is not available in tliis country, it is to be 
reu'retted that lie did not turn up in Kirypt a few thousand 
years ap'. instead of in the I'nitcd States Senate at the 
pi'i-seiit lime. 

It is of course mere matter of speculation as to what, 
would In- tlie condition of the country now if u'old and silver 
had l>ecn its circulating medium in i'act as well as theory, 
01- if a lcL r :il tender paper money had IK-CM adopted at an 
early period) ftfl ur^ed l>y Franklin, Jeiferson, ('alhouu and 
-thers. With Mothinix out gold, and sil\ er the progress of the 
eoiMitry Avuld undoiiMrdlv have oeen slow, ]>ut tlie people 

generally would doubtless be better off than they are MOW. 

With :i K-gal tender paper uioney, in the light of late expe- 
rience, it. is more than that the Tinted States would 
to-day l>e the- richest, most jio \verful and most prosperous 
nation on the gl. !-. Neither M->ICMI of u'loMcy, however, 
was :idoptMl. The government allowed the circulating 
medium to U- taken out of its hands and erected int< a 
giga.utic monop(ly in tlie han<ls of individuals and corpora- 
tions. The gold and silver of the country v.erc locked up 
in l>ank Aaiilt>, as the p:-e:.-ndel basis of bank notes, and the 
people were compelled to pay an exorbitant price for a false, 
iluctuating and unsafe currency, subject to the entire control 
of those who issued iL 


kg of itt :i :i fruitful source of disaster, 

in ( IJritain anl in tin Hike --mr- 

agit .nt> and inflating their circulation they greatly 

stimulate business of all kinds. As the process goes on, 
168 inflated to an unlimited extent, until a turning 
point, beymid which inflation cannot go without burstim 
hed. \Vhilsttheprocessof inflating the currency and 
lit of the country is going on, great activity prevails in 
all departments of industry, and everybody seems to be on 
the high nad to wcaJth and prosperity. But it 1 
in M -s>ary or desirable for the banks to put themselves in 
funds, and they begin to convert their discounted bills into 
money as rapidly as possible. They cease discounting and 
call in their loans. "If by such means they do not actually 
obtain specie, they redeem their notes, which might other- 
\s i-e l,e presented for redemption in coin. Prices begin to 
fall. Merchants, deprived of their accustomed facility for 
borrowing, and with obligations coming round every day, 
upon which they are liable as principals or cndor- 
anxious to sell, while none of them want to buy. The 
.ins in the great marts of foreign trade, and 
iid- from them to the dealers in the interior. The latter 
crowded for payment by their di>tr< <d < !' dit"!'-, and 
crowd their debtors in turn. Property of all kinds depre- 
ciates and becomes difficult to sell, when every body wants 

-11, and is an\imis to restrict his purchases to the kn\ 
practicable amount. Sale-, nevertheless, are made upon 
the purpose of obtaining contracts to deliver 
if, a future day, which can be Fold to Usurers, who 
in their harvest Collections are enforced by 

: at the expense of :i heavy toll to utMrneyv 
and Sheriffs' officers, OUt of the pr.M-.cdv of i 
~-n. uho-e pn.p, t] M . 


NO (.1 \ 1.1: \\. ri:osi'i;i:irv. 21 

rates, t" the payment of their debts, become bankrupt from 
tin- failure of their debtors to pay promptly. When the 
<loors of a ban-king house arc closed in die' afternoon, and a 
merchant's obligation is protested, his credit is gone, and he 
Oeasefl the effort to maintain it by ruinous sacrifices. The 
failure of one increases (lie embarrassment of his creditors, 
and repeated failures spread general distrust. As one after 
another goes down, however, there is one less engaged in 
the scramble for money, and the survivors experience the 
same sort of relief as men in a crowd do when some of them 
faint and are carried out."* These financial crises invariably 
involve a general suspension of specie payments. The 
suspension is charged up to the people, who arc told that 
they have been * producing too much," or "living too 
extravagantly;" and the banks are enabled to retain their 
reserve of gold and silver, to repeat the operation as soon 
as the Sheriffs services are no longer required, and "confi- 
dence has been restored/ 1 

The power which such a system confers upon those, to 
whom the right to furnish the circulating medium of the 
country has been delegated, is immense. The price which 
the people are compelled to pay for their circulating medium 
of exchange- is of itself sufficient to rob labor and industry 
of their profits. The wealth of the country increases, a> 
Statistics show, a little over three' per cent, a year, and with 
money in circulation that costs from 6 to 25 per cent., it is 
not difficult to see how it is that the wealth of the country 
has a constant tendency to accumulate in the hands of the 
few. The profits of industry are eaten it]) by interest on the 
circulating medium of exchange if not entirely, a commer- 
cial crash will take what is left. How seldom do people, 
when handling money, think of the great difference which 

Political Economy by E. Teshine Smith. 


tueen ;i 1'nited Slates legal tender note (greenback) 
and ;i National bank bill. The greenback represents the 
property of the people, on which it is a lien, and in the 
performance of it> mission of usefulness, as it ilics from hand 
to hand, feeding tlie hungry, clothing the naked, ministering 
to the sick or distressed, or furthering the operations of 
industry and trade, no keen eyed usurer marks its flight; it 
is not burdened with interest. J Jut it is otherwise with the 
National bank bill. Whether serving the purposes of money 
in the channels of trade, or stowed away in the recesses of 
a bank vault, it is perpetually drawing interest. That 
intereM, although paid by individuals, is a tax upon the 
community at larire. No one can hope to escape his share 
of the tax by "keeping out of bank/' (tciiera! laws in the 
economical world arc as universal and constant in their 
elVecj as the law of gravit.ition is in the natural world. 

The specie b:;sis system of money has existed in G 
Britain for nearly two hundred years, and the result of its 

workings there can be >een at a glance. The bulk of tin- 
wealth and property of the kingdom is held by a small and 
-tantly decreasing class, whilst, the masses are steeped in 
poverty and ignorance. During the wars with France, from 
!7'.7 to l*ii:i, the people of (Jreat Uritain had an irn-deema- 
lile jiaper cui-rency. For twenty-five years, notwithstanding 
the drain of a great war, they enjoyed unparalleled prosper- 
ity, by reason of the abundance of money in circulation. 
l!ut the money power demanded a return to specie payments, 
and in 1819 Ull act of 1'arliameiit was passed decreeii 
return to specie payments in |sj:{. Fngland pO88e88ed 
abundance of gold, had no fureign delt, the balance of trade 
TOM in hei- favor, and the difTerence between gold and paper 
money was only three percent. Notwithstanding all tl 

i-able circumstance-, the enforced return to specie pay- 

NO <;;: M.i:\i, PROSPERITY. 23 

ments prostrated the industries of the kingdom, ruined the 
fanning, manufactaring and business interests, and plunged 
the entire nation into bankruptcy. The masses of Great 
Britain, whose labor and valor had just enabled the British 
government to prosecute to a successful termination one of 
the most gigantic Avars of modern times, wore hurled by an 
act of Parliament, at the instance of the money power of 
the kingdom, in the most heartless manner and without the 
slightest grounds of excuse, from a state of prosperity into 
the depths of ruin and poverty. 

At the demands of the same power the people of the 
United States are now being subjected to like treatment. 
With but little gold, scarcely $100,000,000, in the country, 
with tin 1 balance of trade against the nation, with a large 
public debt mostly held abroad, and with a difference 
between gold and paper money of over twelve per cent., 
enforced resumption of specie payments has been decreed 
to take place in 1879. In the light of English experience 
umler vastly more favorable circumstances, the people of 
the United States can look forward to nothing else but 
continued and increasing prostration of all forms of industry, 
and, when the fatal hour for resumption arrives, a general 
crash, burying the entire nation in its ruins. 

The people of the United States are a forbearing and long 
suffering people, but it is scarcely possible that they would 
continue to submit in silence to the exactions of the money 
power, if they were fully apprised of the nature and extent of 
the robbery to which they have been, and are still, subjected, 
by reason of a false and corrupt monetary system. The 
public debt of the United States in 1805 was $2,682,593,026; 
on September 1, 1875, it was $2,127,393,836, showing a 
reduction of $555,199,190. Besides this $555,199,190, the 
people have paid in the past TEX YEAKS, for interest on the 

.\< (.KNKKAI. I'Kosl'KIMTY. 

public debt, navy, war, civil service, pensions ami Indians, 
. or in all tlic enormous sum of $3,879,759,- 
1)75, which is .Hie-half more than the oriirinal amount of 
the national debt, or a sum Creator than the national debt of 
(Jrcat IJritain. This vast sum has been pa 'hi principally by 
the producing classes for the bondholder ami moncv power 
irem-rally hear no part of the expenses of ^\ eminent. It is 
hii^h time that the burdens of taxation should he more 
equally distributed. This can be done only by the imposi- 
tion of a -jTadiiated income tax, than which nothing can be 
more just. 

1'roident (irant siiifLrested in his last annual mcs^airc tliat 
the ( 'cntennial year would be a tit time to inaugurate reforms. 
\Ye agree with him. Let the people take a Icsvnn from 
exjierience and reform their monetary system. AS it is the 
year for the general elections, something mi.irht al-o be 
done in the way of purifying the administration of public 
a(Tair>. The ( Vntennial year can thus be i-i-ndi-retl d>ubly 
memorable in the annals of the country. 

Tin- rclehratcd Junius said: -The ruin or prosperity <>f :i 
State depends so much on the administration of the _ 
iiient, that to be acquainted with the merit of ;i ministry we 
need nnly uh.iTvc tin 1 condition of the people. If n 
them <bedieiit to the laws, prosperous in their industry, 
united at home and respected abroad, we may iv.i^.nably 

presume that their affairs are conducted by men .f e\peri- 

ability and \irtue. If on the eontrary \\ e 
univcrx;d vpirii <.f <li-tru-t and di--;it i.faction, :i rapid decay 

of trade, dissensions in all parts of the empire, and a total 

i re-p-i-t iii the eyeN i,f forei-n p<\\er-, we may pro- 
nomi'-e. without he-it:iti<.n, that the --, ,\ ei-iimeiil <-f that 
country i- \\ I:\K, DI8TRA< PED \M> OBB1 n." 



IN :i state of civilization money performs an important 
part in the production, distribution and accumulation of 
wealth; it is necessary, therefore, that it should be based 
on sound principles. A great deal of nonsense lias been 
written about money and its " hidden power," partly through 
ignorance and partly through design. So widely have 
political economists diiTered in regard to its nature and 
functions that it is not surprising that people have been 
willing to ascribe to it some mysterious power, or that they 
should have almost despaired of being able to comprehend 
the principles on which it is founded and by which its 
movements are governed. And this delusion has been 
encouraged in every way possible by the moneyed and gov- 
erning classes, who are thus enabled to found systems of 
money on the false theory that money is the master and 
not the servant of labor and property. 

P>ut the age is characteri/ed by a, spirit of progress, and 
old systems are rapidly yielding to new ones. The signs of 
the times indicate that the hoary tyranny of the money 
power, which has exercised despotic sway for ages over the 
masses of mankind, will, sooner or later, be compelled to 
succumb to the influences of an enlightened public senti- 
ment. A distinguished Knglish writer,* in commenting on 
the imperfect and rudimentary condition of the science of 
political economy, says: '-The steam engine, steam naviga- 
tion, railways, mechanical inventions, the electric telegraph, 

*Sir John r,arn:ii-a I'.vles. 


mod< TII chemistry, have net appeared for nothing. A 
science of political economy will yet dawn that shall perform 
as well as promise a science that will rain the rid 
nature into the laps of the staning poor. Mm <lo not yet 
dream of the prosperity M nidi is in store foi- ail or.! 
the people." A large ami increasing number of leading 
thinkers, state-men ami philanthropists of the day are calling 
public attention to the unequal and unjust distrihuti' -n of 
the products of industry that is constantly going on through 
the agem-.y of a fal>e :ind corrupt nioni-tary sy^ti-m, ami 
their views have already made a profound impivion <>n 
the public mind. Tlu- i_L r mrant nias>es of <iiH-a? liritnin 
may In- deluded into liclicvinir, :is is tauifht liy the <li>mal 
school of Kn^Tisli ])olitical economi>ts, "that it i-> natural, 
and if natural, proper though M c may i 

that jMJverty and want and disease and misery should lie 
I OOF neighbors of \\ealtli nn<l unbounded ]ro^]ei-ity;" ! 
but the intelliirent fanners, mechanics and laboi. 
United States are not to easily convinced that the surplus 
wealth, which their labor produces annually, should naturally 
be owned at the end of the year by the financiering and 
BOn-prodttcing classes of the country. When people find 
themselves beiiiir robbed, they are apt t try to discover the 
offender and the means by which it U accomplished. A 
\ery moderate amount of in\ estimation, u c think, will - 
ndid mind that the theory, that, the money p<,\ 
the robber, \\ hich dejri\ -s labor of its ju-t r u ard. and that, 
a corrupt, monetary sxsteiu i- the instrumentality, by i 
of which the robbery N perpetrated, i- ba^ed on sound 

reason v. 

i in ifOH M 

MOIICN. m iN ordinary si^niliration. i- ttl ;;ireiie\ of trade. 
Civili/^ition has de\doped a --real \ariet\ .f want< and 


industries, and labor has come to be divided into innumera- 
ble forms, requiring a constant exchange "f commodities. 
Individuals are dependent on their fellow men for every 
thing, except the particular product of their own labor. One 
class furnislies food, another the material for clothing,. 
another builds houses, etc., etc., and each class is susceptible 
>f innumerable subdivisions. When we come to individ- 
uals, each one has to give his labor, or the product of his 
labor, or the product of the labor of others, for that which 
he needs or desires. This exchange is effected through the 
iiey of money. It is necessary, therefore, that money 
should poxse-s a legal representative value. It must possess 
representative value to be the equivalent of the commodity or 
labor for which it is exchanged, and its representative value 
must be established by law, otherwise its acceptance by a 
creditor would be optional. As the value and power of 
money depend on law, its institution and regulation are 
duties which devolve upon the legislature or governing 
power of a nation. 

The adoption of money or a medium of exchange wa^ 
undoubtedly ne of the first steps in civilization. In a simple 
>tato of society, as in newly settled countries now, the 
exchange of commodities took place by means of barter, but 
the necessity of a medium of exchange becoming apparent, 
different representatives of value were adopted, according to 
the wants, taMcs and possessions of the communities or 
nations concerned. Thus the Spartans adopted iron, the 
ancient Romans bars of copper and cattle, the North Ameri- 
can Indian beads, and the East Indian and African shells. 
At an early age gold and silver came to be regarded as the 
most suitable materials for the purposes of money for many 
reasons, among others on account of their po-M-viiig large 
value in a small and compact form. Coins or tokens made 

28 Till-: NA'ITKK OF -Mo 1 . 

of these metals next appeared, but originally -.1 no 

other j.oucr llian tliat which they derive.! iV'.ni tin- intrinsic 
value of the materials of which they were made, which wa> 
determined by weight, as is the cast- now, when iiM-d in 
commerce between different nations. (Governments next 
assumed the ri^ht to make ami regulate the value <f money, 

in consequence of the necessity of establishing ;i common 
representative of value to be used in the payment of debts 
and taxes. As civili/ation progressed and wealth incr- 
requir'niLT a more rapid and extensive exchange of commod- 
ities, it. became Decenary that the medium iianire 
shonld be increased in the same proportion. It \\a^ imp.- 
silile to obtain jjohl and silver in sufficient quanti: 
answer the purposes of money, and it would scemiiiLrl; 
been lut the part of wisdom to have adopted new systems of 
money, )ut history LT'IVCS but one or two instances wluxe 
anything of the kind was attempted. The scarcity of money 
led to the use <f credit, wliich now j.lays such an important 
part in the commerce of the world. IJills of exchaiiL r - 
invented, it !-> bclic\cd, hy the .Jews of Loinbardy in ti 
century. In the l:uh, 14th and I."ih ccniiii: reatcr 
put of the Commerce of Kurope wa< accomj.lished at peri- 
odical markets or fairs. Merchants and trader-, or their 
brokers, would meet at these fairs with their account-* or 
h'l/niix (balance) made out, and by tran-ferrinjj debl^ and 
cn-d-N fnun one to another, effect a I \vith the u-e 

more money than was re<|iiired to settle balanc. 
many parts of ihese fairs arc still held, alt; 
h>t ninxt of their f.nncr importance, \ 
other dev icefl t- increase the circulating inelium ;' e\.-JianLfc 

liecn rc-o!-:ed to by dilVcrent nations, such as reducing 

the amount of bullion in iheir coins from time to time, until 

iin but a fraction of the \aluc \\hidi their 

i HI: N.M i I:K OF HONEY. 29 

names originally called for. In tin* days of William, tin- 

Conqueror, tin- u pound" actually was a pound weight of 
silver, and ;i shilling \\a> :i twentieth part of a pound, but at 
the present time a pound of silver is coined into sixty-six 
shillings. Tin.- legal money of England has been regulated 
or altered in this way by the English government one hun- 
dred and eighty-four times. 

The specie basis system of Great IJritain, which was 
adopted nearly two hundred years ago, owes its origin to 
the same cause the necessity of increasing the medium of 
exchange. The effect of the system is to centralize wealth. 
In Great I>ri(ain it has enabled the aristocratic and moneyed 
classes to acquire enormous wealth, and lias reduced the 
industrial classes t ;i condition of abject poverty. In the 
I'nited States it lias had the same tendency. 

The only people- of former times, who seemed to fully 
understand the nature of money, were the Venetians. In 
the l-'th century they adopted a system of money, based on 
the wealth and credit of the people, which lasted over 600 
years. Inscriptions on the books of n bank, established by 
the State, which were divisible to any desired amount and 
transferable on the books of the bank from one to another, 
formed the chief medium of exchange during the period 
named. These inscriptions of credit were not redeemable 
in coin, but, notwithstanding that, they commanded a high 
premium over gold and silver. The Venetians were enabled, 
principally through their enlightened system of money, to 
attain great prosperity, which they enjoyed for centuries, 
and commercial crashes and money panics were unknown 
amongst them. (See Chap. IV.) 

The French people manage their financial affairs with 
more wisdom than any other nation of the present day. 
When specie is scarce an irredeemable legal tender paper 


money is UM-IJ uj 1. Great pains are taken ly the 

French g '\crnmcnt to keep every section amply supplied 
with a circulating medium of exchange, in order to develop 
the producing forces of the country a policy that has 1 
crowned with marked success. 

The American people have had some experience in r 
to the advantages of a legal tender paper money system 
>ince ls(il,but the notes of the government (greenb:i< 
were issued in such a mutilated form, and the workings of 
the system have been so materially interfered with by the 
money power, by means of corrupt legislation, that as yet 
they have had no fair opportunity to judge of its real m 

From an early period, then, money came to derive its 
power, as an agent to represent, measure and exch.v 
value, from, public authority. Individuals and nati 
to exchange and accumulate property and commodities, and 
money is desirable only on account of the power, with 
which it is clothed by public authority, to command prop. 

ibor. It is not useful of itself, for it cannot be 
food, or clothing, or shelter. It must be parted with be- 
any service 01- value can be obtained from it. In an accumu- 
lated form, as capital, it can bring no income until it i> put 
to use parted with. It is, therefore, the immaterial princi- 
ple 01- po\\ ei- to represent value that is the 
and this it can only derive from law. * M-mey i- then." in 
the language of Kellogg, "a legal existence, bein 
tilted a, national representative of property; con^ecjuently it 
is a public lien on all property for sale in the nation, a public 
medium for the exchange of products and a tender in 
payment of debt-." 

I III! IN! KIN -I. \ 

QOIkey i- a legal public medium of exchange, p- 
ing representative value, it is not nece^ary that the mat 

TIIK IN rancsie VALUI 01 KONBY, m 

of which it is made should pOSSesi intrinsic or commercial 
value. To usi' again the language of tin- author last quoted, 
"The value of money perpetually depends upon its power t> 
represent value and not upon its material, bemuse money 
ne\er reaches 8 point at which it can be used us an article 
of actual value." Tin- value ol' the material can add nothing 
to ils pi. wcr as money; it can only render its value more 1 
certain, ;;> when money is issued by a \\eak and irresponsible 
L;-(>vernment, or l>y a nation possessing few or no products 
for which it can be exchanged. When issued by a stable 
aiul I'esponsible government, whose people j>os^ess ample 
property and valuable products, its value corresponds to the 
value of the products of the country for which it can be 
exchanged. If money made of paper will procure the same 
property or commodities, as if made of a material possessing 
intrinsic value, like gold or silver, it possesses the same 
power in one instance as in the other. If A. has a ten 
dollar gold piece and 1>. has a ten dollar legal tender note, 
and the gold piece and paper money will each purchase the 
same article of value, in parting with them A. does not part 
with anything more than K, although A's money pOSSCSSea 
an intrinsic \alneand U's does not. And as long as the 
gold piece is used as money, it is not possible for any one 
to derive any more UM- or value from it, than that which 
belongs to it in its representative capacity by \irtue of law. 
Dr. Walker, a political economist of the bullionist school, 
in speaking of money as an instrument of exchange, says: 
-Anything which by general consent, or in obedience to 
law, all receive in exchange will answer the purpose (of 
money.) ^o far as this function N ' concerned, it is of no 
consequence whether the article has value or not; safety 
and convenience are the only considerations of importance. 
Money in this respect is Dimply ;l counter, token or universal 


The power of money, then, whether made of :i ma 

possessing yalue or not, depends <Mi its ability to r- 
value. How a piece of paper, posses-ing little or no intri- 
value, can acquire tin- power 1o ivpiv-ent value, will 
explained further on. In the meantime it will appear from 
a slight examination that it is a disadvantage t> money to 
possess an intrinsic value 1 , and that gold ami silver, lm\\. 
suitable they may be to adjust balances between nation-. 
not the proper substances out of which to make the circula- 
ting medium of a nation. If money p< an intrii 
as well as a representative value, it is then a commodity 
well as money, and is subject to two diiYcrent and often 
antagonistic sets of laws. As money it seek- to perform the 
functions of money and to fill the channels of trade, whii 
a commodity il is compelled to obey the u uncontrollable ! 

apply and demand." In commerce gold and silver 

commodities and are taken in exchange for product.-, when 
they are preferable, in a business point of view, to other 
products OF Commodities, OF in the settlement of balan 
after an exchange of products ha- been made. They 
thus liable to be taken at any time from the channel 
circulation by the demands of commerce, and thi> can be 
done nio-t readily when they an- stored in bank vault- a- tin- 
basis of bank notes. In this way the amount of t! 
lating medium in :i country is rendered dependent on 
wants and whims of Other nations, and i-, OOfl86quei 
uncertain in amount and fluctuating in value. It may be -;it'e]\ 

rteil that, there was scarcely e\ er a time in the hi-' 
of the 1'nited States, \\lien the Specie bftSU ystem \\.i- in 

tence, that the Emperor of china could not ha-, 

siojn-d :i commercial <-ra-h and money panic, by simply 
decreeing that the idols and image- worshipped by 
subjects shouhl 1 M. 

Tin-: INI EUXrSIC V.M.I !; OF MONET. 33 

Gold and silver money are objectionable on account of 
the inconvenience and \-\>k which attend their u>e, and for 
many other reasons, but the chief objection to gold i- 
scarcity, which also renders it expensive. There is not 
sufficient gold money in circulation to answer the A\ ants of 
any one of the leading commercial nations o!' the world, 
and for all to seek to use it as an exclusive medium of 
exchange is simply an absurdity. It is true the difficulty is 
remedied in part in some countries by issuing paper notes 
based on gold, but these notes are not legal representatives 
of value, but merely representatives of the credit of those who 
issue them, and constitute, as experience has proved, an 
unsafe and unreliable medium of exchange, as will hereafter 
more fully appear. As compared with the vast amount of 
money required to pay interest on debts, national, state, 
municipal and corporate, and the expenses of governments, 
and to cany on the transactions of hundreds of millions of 
people, the amount of gold in use as money is as a grain of 
sand to a mountain. 

.And when properly considered the intrinsic value of gold 
and silver is comparatively trifling. These metals owe 
their chief value to their use as money. If that use were 
discontinued to any considerable extent, their value would 
depreciate in a corresponding degree. Only recently Ger- 
many demonetized silver, and it depreciated so rapidly in 
value that it became a, matter of importance to the German 
government to dispose of its supply at the earliest moment 
possible. In 1704 the British Board of Trade objected to 
the use of legal tender paper money in the colonies, doubt- 
less because it rendered the. people of the colonies independ- 
ent of the money power of Great Britain, on the ground 
that " every medium of exchange should have an intrinsic 
value, which paper money has not." To this Dr. Franklin 
replied : 

TI1K 1N'T1:1N>1< VAUK <>F .MuNKY. 

"However fit a particular thing may IK- for a particular 

purpoM-, A\hencver tliat tiling is not to he- had, or nt to he 
had in suilicicnt. quantity, it hrconics necessary to MM- some- 
thing else, the fittest that can be got in lieu of it. * * JJank 

hills and hankers 1 notes are daily Used here [in Knuland] 
medium of trade, and in lai'ire dealings perhaps the 
Lrrcater part is transacted hy their means, ami yet tlu-y l:a\c 
no intrin>ic value, hut re>t on the O'edit of tho>e that im-il 
tlu-iii, a> pa[>er hills in the eolon'u'.s do on the eivdit. of tin- 
dve setth-iiu-iits thei-e. These (hank hill>) heinir 
j)ayal.le in ea>h upon si-'ht hy the drawers i>, indee<l, a 
circuinstanee that cannot attend the colony hill>, f.-r the 
reason, ju-t al.o\c mentioned, tlu-ir cash (hullion) hi-iiiir 
di-a\vn from them hy the IJi'itish trade; hut the Iciral ten<U-r 
l.i-in-_r suhstituted in its place, is rather a, greater sulvantagt* 
to the pO88668Or, since he nerd not l.e at the trouhle of 

.articular hank or hanker to demand the money." 
"At this very time t-ven the silver money in England is 
d lo ihe le-al tender for a part of its value; that part 
which is the difference lu-t \\cen its real \\ciirht and denom- 
ination. <Jrat part of tin- shiHinirs ami si\-pen<-- 
current are, hy \\ earing, hecoine live, ten. . and some 

of tlie si\-jteiiM > even fifty, per cent, too liirlit. l''"i' this 
difTerence het\\ fen tin- real and nominal you ha\ e no inti'insic 
value; you ha\ c n>J. so much us paper; you have nothing. 

lender, with the kno\\ ledire that if can 
[forth* '/<, that makes t/,,-,, />enny- 

silver pa^s for BlX-pi 

!d and siher are ii"t iutriiisirally of e|iial value with 

:i metal in itself ca] DUUiy inor.- lu-m-lits to 

.iml. ThciT Value ret chiefly in the e-timation tliey 

happent..he in :inmnr the generality of nations, ami the 

credit Lfi\en to the opinion that the estimation will continue. 

Till: INTlMNMi 1 VAl.t'K OF MONEY. 85 

Otherwise a pound of gold would not be a real equivalent 
for even a bushel of wheat/ 1 [Franklin's Works: Duane's 
edition, 1809; volume 4.] 

Gold or silver, or Loth, however, are used for the pur- 
poses of money by nearly all nations, and hence k is that 
these metals have come to be used in the commerce of the 
world, not as money, but as commodities, under the name of 
bullion, possessing an established and universally recognized 
value. Gold at the present time is a commonly accepted 
equivalent for all other commodities. It will be borne 
in mind, however, that this general recognition of the 
value of gold depends chiefly upon the fact that gold is a 
legal tender, when coined into money, in all nations where 
it is used. No law exists compelling citizens of different 
nations to receive from each other gold in payment of 
debts, but people will always take that in payment of debts 
which they can in turn apply to the same purpose. It is 
incorrect, therefore, to speak of gold as the l> money of the 
world." No such money has ever been established, nor can 
be until all nations adopt a uniform unit of value as well as 
of money. Different units of weight, length, value, etc., 
have grown up in different nations, in the same manner a-> 
different languages, manners and customs have grown up, 
and it would be almost as ea>y to establish a universal 
language &fl to induce the vari<u> nations of the world to 
adopts common system of money. A person who takes 
$100 in gold, coined in the "Tinted States, to England, U 
obliged to sell his coin, just as he would sell a bale of cotton, 
in order to obtain money which will pass current in that 
country; and if he cm^es over to France he is obliged to 
sell English coin in the same way. And it may happen, 
and frequently has happened, that a person may be unable 
to obtain money for gold or silver. During the financial 

36 ivnriNsif \ .M.t ; \ MY. 

crisis in Knuland, in 1*47, it wis impossible in borrow a 5 
note nn thousands <,f dollars worth nt' silver, because sti 
not a le-'al tender I'm* an amount over forty shilii: 
and was, therefore, practically useless for the purposes of 

money; and in Calcutta, where silver money is the legal 
tender of the country, during the stringency of 1S04, it 
impossible to borrow money on gold. It is well authenti- 
cated that, during that crisis, persons, with as much a< 
$100,000 worth of gold in their possession, were obliged to 
allow their notes to go protest, because they could not 
borrow x i o in silver money on a bushel of gold. 

.Another clap-trap name given to gold and silver, now in 

common use, is " honest money." .Money is hones? or 

honest according to the- uses it performs and the manner in 
which it performs them. <Jn!d or silver may perform tin- 
uses of money in an honest. manner it is then Hi< 
money;" 1 lint it has been, and still is, the misfortune 
these naturally honest metals to be made the basis of all 
the rascally systems of money ever founded. 

And it may be well, loo, to notice brietly aiiotl: 
name .vhidi is nnu-h relied upon by the bullionlsts to dec< 
and intluenee ;i hn-^e and intelligent class of people. In 

the memorable fight between the people, under the tea 

and patriotic leadership of President .Jarksmi, and the 
money piwer, represented by the I'nitcd States IJank, the 
tei'in "hard money" became deservedly popular. <Jnld and 
silver <-oin \\ere then the people's niolie\ --the **hn; 

money" of the country, a-> the greenback i- now; and the 
of the controversy TOM then, preci- ly as it. i- iii the pending 
Straggle now, whether th< dmiihl retain the eonti-ol 

of the circulating medium of the nation in their own hai 
uhere ir is placed by the ( 'oiistifiition .,f the I'nited St., 
OF should permit individuals and corporate-: -urp 


the 1 functions <>t' the general government, and, in its stead, 
make* :ind regulate the- medium !' exchange of the- country. 
(See Chapter V.) 

If gold and silver were demoneti/cd by tin: principal 
nations of the earth, they would owe their value as commod- 
ities to the use that could be made of them for other pur- 
poses, as for ornaments or in the arts; and as they could 
then be had for such purposes in abundance, their value 1 
would doubtless diminish to but a fraction of what it is now. 


The uses of money correspond to its powers or properties 
viz: to represent value, to measure value, to accumulate 
value and to exchange value.* Actual or real value belongs 
to property or products, which are necessary or desirable', 
and money is the legal medium by which it is represented, 
measured and exchanged. In an accumulated form, as 
capital, it represents accumulated property or labor, and is 
capable of accumulating value 1 in the same 1 manner that the 
property or labor which it represents could be used for that 
purpose. It measure's value because it is the legal standard 
of value established by law, just as weights and measures to 
determine the weight, length and bulk of articles are' estab- 
tablished; and if based on sound principles, it would prove 
;is unvarying, as a standard of value-, as are- the' standards of 
measurement of weight and quantity. The value of prop- 
erty and products would the'ii rise' and fall in obedience to 
the laws of supply and demand, but the standard of value, 
money, would remain the same' as previously determined by 
the law which instituted it, provided the law emanated from 
a responsible source. This may be- illustrated in a measure 
by the greenback now in use, though not with the same 
degree of force and certainty that it could be done, if the 

See Kellogg, page 40. 

THK 1 -1 - ->K MONEY. 

ijrccnback iial n>t been mutilated :iul depreciated by law. 

\aiuc of property and commodities is now measured by 
tin- ;. " the value of the i;rcei:back corres- 

ponds to tlie idea of value carried in llie minds of the- people 
of the United States. The unit of value in the United States 
is the dollar, ami this unit of value is iixed in the mind, just 
as the units of measurement expressed by a pound, a bushel, 
a yard or a di irree, are fixed there, that i> by u>c ami eustoni. 
Partial leiral tender paper money (the greenback) is now 
the money or medium of exchange of the country, and cor- 
responds to the idea of value iixed in the minds of the 
p'-o pie. People think in irrecnhacks when cstima:' 
value. If told that the price of a horse is x|nn, the amount 
or value rly referred to the greenback standard of 

measurement. The price of particular commodities. a> well 
as the price of L r <>ld, may change daily without anYctiiiLT the 
j.i-ico of olher eommoditio, as mea>iiri-d by the ^rcenba-'k 

lai'd, whirh could not be the ca>e if it were tli< 

. that tliK-tiialed. Hence it may be inferred, anion L r 
other thim_r-, that cditoi> ,,f u-w^papcrv. \vln miot<- 
l>:u-ks as worth so many cent> on the dollar as eonijiarcd 
with L r ld, are cither rr !.>!% ignorant >f the nature of mo: 
or ha\i' become- entangled in the toils of the money po\. 

IJut it is of the u-cv of iiK.ney in a legfl technical 
that we wish to speak. .Mom-y has come to be a vital 
incut in production, in the operation-* .f trade and in the 
bu-i. '!' life. In a simjilc vta'< :\.a-in 

ever now, indi\iduals and families ;nu for th 
par: eif-.npp.,rtinL r . 'I'hc farm su]plicN fond and 
'rial for c| ( , tiling, and the spinning wheel and loom are 
found in e\ery household, lint whci-e the advan' 

ization and a medium f exdian-jv ha\c once become 

lit ion of ail. 


merchant, the tailor, the carpenter, the shoemaKer, the 
blacksmith, the doctor, etc., etc., have made their appearance, 
find individuals and families arc no longer self-support ing, 
l>ut wholly dependent upon each other. Mncy is then a 
necessity. Food, clothing, rent, fuel, light, taxes, insurance, 
railroad fares, etc., etc., require cash, and a general scarcity 
of money will occasion w-ant and suffering, even in the 
midst of plenty. How dependent individuals are upon each 
other in a state of civilization, is thust set forth by Kellogg: 

"The necessity for the exchanye of commodities is gen- 
erally acknowledged. Few, however, even among thinking 
men, are a \varc how indispensable these exchanges are to the 
subsistence and comfort of the human family. Men are 
social beings, and mutually dependent. To appreciate this 
important truth, we must, consider the inability of each man 
to provide for the numerous wants of his nature; and the 
ignorance and discomfort to which each would be exposed, 
were lie not benefited by the labor of others. If every man 
could build his own house, furnish his own food and cloth- 
ing, and make all the instruments and utensils that he needs 
to use: if the mate-rials for all these things were placed upon 
eveiy acre of land, and every man, woman and child, were 
endowed with sufficient skill and strength to produce them, 
there might be no need of an exchange of commodities. 

But all men are, in many, in most things, dependent on 
the labor of their fellow men. For example, take the 
farmer, who is acknowledged to be the least dependent of 
men, and see for how many things even he is indebted to the 
labor of others. He must have implements for the' cultiva- 
tion of his farm, a plow, harrow, shovel, hoe, sickle, cradle, 
scythes, a fan, or fanning mill, and a cart or wagon. The 
farmer is dependent on the miner for the iron ore; on the 
collier to dig the coal; on the furnace worker to smelt the 


:ml tin- smith to make Iiiin his iron and 

..-ii. lent -MI the wagon inak- 
tin- maehinist f"i- his fanning mill; on tho 
: on the nail maker for nails; on tho 

glass manufa< - -; on the stone cutter and the 

ma-oji w.rk; on the brick maker for brie'* 

for barrels, tubs and pails; on the saw maker for 

: .MI the rolling mill to roll out the iron or 

. on the tin-plate worker for kitchen utensils; on the 

mouM of iron f,,r iron ]><>N; on the miner of 

i <>n the copper :iml brass founder for bra> ami 

ttles; on tin- pump maker for a pump, etc., etc. 

: the needle maker, the 1 pin maker, the 

maker, the ^ilk grower, the tanner, the shoemaker, 

He ami harness maker, the cabinet maker, 

ami t' er, type setter ami printer. Not one of 

..Mending to his particular employment, 

o,l ami clothing; and all would be destitute 

Of them, Unless Supplied with them by the labor of others. 

all of hi- food, except salt, tea, 

nid the like; the^e, and the ships to 

rheni, inn*? he furnished by others. These wants 

rail into emi ^dip earpcnter*, sailors, compass 

i-hart maker-. !,-. The fanner must 

ll :;.p or flax, or el>e be dependent Oil 

ing. If the farmer, \\hi is the leaM <le].end- 

:M others so many supplies, how i- it 

with r and shot-maker? The former mak- 

the h. .id, the latter one to COT6T th- 
: t!.e additional -upplie* of both muM be furnished by 

|. nd upon each otlu-r 

for the di!' I" tln-ir \\ork; the cotton mannfac- 

-i*t<-,| by others to carry forward his maim- 

Mo.NKY. 41 

fact urc. Many articles, such as watch springs, are useless 
unless they aiv combined with other jiarls. It is, thru, of 
paramount importance that no obstacle's be thrown in the 
way of :i ready exchange of commodities. 

A certain quantity of one kind of produce is worth as 
much as a certain quantity of another kind; and all civilized 
nations have adopted sonic im.Jiirin. by means of which all 
kinds of produce may be more easily exchanged than by 
direct barter. We hear it sometimes asserted that there is 
no need of a medium of exchange. But the articles of trade 
could not be divided and distributed to supply the numerous 
wants of a people without a representative of value through 
which the distribution could be made. For example, a man 
brings to market five hundred bushels of wheat. The pur- 
chaser tenders corn in payment; and they agree that seven 
hundred and fifty bushels of corn are worth as much as five 
hundred bushels of wheat. The seller can use but a small 
portion of the corn, and finds a purchaser, with whom he 
exchanges the surplus for hams. He disposes of the hams 
for hats and shoes. If he endeavor to divide the hats and 
shoes, and exchange them for the articles that he needs, he 
may spend two years before he can return to his farm to 
raise a second crop of wheat. Yet he is fairly dealt with. 
All those with whom he exchanges, give him, as nearly as 
possible, an -equivalent of actual value for the actual value 
that they receive; and all the articles are such as all need. 
In fact, all trade is simply a barter of one useful thing for 
another. A person who produces more of an article than 
he needs for his own use, exchanges his surplus for the 
surplus articles of others. If the farmer had sold the wheat 
for money, the money would have been a tender for any 
other article that he wished to purchase." 

In the large operations of trade, as with foreign countries 


and I" US of the country. \a>t sums of 

stantly required. The foreign trade of the 

Unite i :i ordinary times amounts ;. nearly * 1,000,- 

000,0" , ami tin- trade between the different sections 

of the country amounts to probably live times that sum. It 

that, in the tra<le with foreign nations and be* 

"f tlie nation, the tra: i re-transfer of 

:n one to the other is rendered unnecessary by the 

hecks, ilrafts ami bi!N of exeliaiiLTe, except t< settle 

lal:in- in the production, transportation, n-j 

handling and distribution of the commodities, represented 

by the \a>t sums r-fen'e<l to, the amount of money required 

I-'nr example, in the movement of the en 

lh- \Vrxti-ni States aim '-.-ish is recjuiivd eaeh year 

tlian i an l>e had for the ]iur]io>e; an<l in the days of the 

-rein the Western banks, as is well known, 

i the habit at siieli i :nie> of issuing their notes witliout 

any regard to Iriral limi;ati<ns. I'n-ident (irant in liis 

!' ^ember, 1^7::, aft( r the j.anie and lefoiv lie 

1. bauehed by the money power, eallcd the 

the fact in the following language: 

eiit t( the ino-t casual <b>erver that much moi'e 

Or money is required to transact the legitimate 

the cnimiry during tin- fall and winter months, 

when the \ ast crop. are beiniT r<-iin\ cd, than during tlie 

balan A'ith our present system, the amount 

in tin .ins the same throughout the entire year, 

lesultitii: in a:i accumiilatin of all the surplus capital of the 

country in a few centers, when not employed in moving 

pti-d there by the offer (.f interest on eall loans. 

: paid, this surplus capital must earn the 

id with a pr.t!:. llei::^ s U b' .ill/ it can 

'I, only in part : man- 

TIN-: r*i-:s oi- 1 MOM^ . 4& 

ufactuivr, for u lixcd term. Hence, no matter how much 
currency there might, be in the country, it would In- absorbed,, 
prices keeping ]>acc with the volume, and panics, stringcii'-v 
and disasters would ever be recurring with the autumn. 
Elasticity in our monetary system, therefore, is the object to 
be attained iirst, and next to that, as far as possible, a pre- 
vention of the use of other people's money in stocks and 
other species of speculation." 

Money is also an important element of production. When 
the channels of circulation are supplied with money, the 
industries of the country are quick and active, and the entire 
nation becomes engaged in adding to its wealth. It lias 
been well said that u A nation, whether it consumes its own 
products, or with them purchases from abroad, can have no 
more value than it produces. The supreme policy of every 
nation, therefore, is to develop the producing forces of its 
own country. What are they? The workingmcn, the land, 
the mines, the machinery, the water power, etc."* The 
producing forces of a country can be developed only slowly 
and laboriously without the aid of money. The productive 
soil, the iron, the coal, the timber, the water power, the 
machinery, the labor, etc., may all be at hand, but until 
touched by the vitalizing current of money, as it circulates 
in the channels of trade, they can give forth but a, feeble 
spark of the life and power which they possess. 

At an early day in the history of the colonies the inhabi- 
tants were subjected to great drawbacks for the want of a 
legal medium of exchange. Dr. Franklin, in 1764, stated to 
the British J.oard of Trade that: "Tn 1723 Pennsylvania 
was totally stripped of its gold and silver. * * * The 
difficulties for want of cash were' accordingly very great, 
the chief part of the trade being carried on by the extremely 

'Sir John Barnard Byles. 

t t B OF MONKY. 

inconvenient method of barter, wlii'ii, in 1 7:M, paper money 

there \\hich i;ave new life to business, promo- 

ftlemcnt of new lands, whereby the 

pro\i: atlv inc>v:iM-d in inhabitants that the 

export from thence thither [to England] i< ii"\\- more than 

-Id \\hat it then u 

In I . liadly in need of money or a niedium 

'i:m-_re. A paper money bottomed on a spe.-itir tax 

:, \vhirh afTordc<l alumdant relief, and, as \ve learn 

from.' > nerer depreciated a farthing in value. IJnt 

a mi.n- marked instance' of tlie value of money as an dement 

dnetion is fiinii>lied hy the exj.erieiiee of Pennsylva- 
iiirin^ the prenenl century. In 1841 the ]>eople of 

mi the \er_re of lianknipley. The State 

pay interest on tlie puhlic debt, or even ]tay 

era for work done on the pnhlie works. 

lankrnpt, and merehants were in nearly 

icition. Then- was no money, and consequently 

nid production \\-cn- <-ompletely paraly/ed. The State 

Jvania in thi^ rri-is issued $3,100,000 of what 

il!'d nTief n-.tcv, ln-ariii;: simj>ly a promise* tliat tliey 
would I..- red ived 1>\ ih- Treasury of tlic State in payment 

of all- obligations due to the State. u Tliev ( . 

t.ik.-n -jreedily l>y the people. Hanks iiiM-rted in 

nt of their 1 bian :i'_fi-eement that the depo>itor 

'.ii rheek the same kind of money he depox- 
.ind then t(u,k these note-. 'I'hey dix-ounted paper 

\\iflitin-m. The wbeeb of industry were Bel in motion hy 

-, \\hidi promi^<-d nothing hut that tliey would 

aces, The State paid her 

:md the-e lia-lciied to j.ay theirs or to 

supply their wants l.y piuvhasr., for which there 

i: the hinin -ind the spindle were 

Tin-: i 8ES OF .MMNKY. 45 

again heard; labor, lifted from despair, found \\ rk and 
wages, and with tlio great resources of Pcnn.-ylvani:i under 
full and free development, she was soon exporting m>iv 
than she iinj)oried. Gold and silver llo\ved in upon her; 
and the broken banks resumed specie payments. We then 
did," says the Hon. William D. Kelley, of Pennsylvania, 
from whom wo quote, "what France does; we were wise 
enough then to know that it is labor, not coin, that main- 
tains the public credit and gives prosperity to the people." 

But the people of the 1'nityd States have had ample proof, 
during the past few years, of the great advantages to be 
derived from an abundance of money. The activity in all 
forms of productive industry during and immediately after 
the war, which constituted an inexhaustible fountain of 
strength to the Federal Government, and which, in spite of 
the ravages of war, enabled the country to double its wealth 
in ten years, from 1SGO to 1870, was attributable entirely to 
the vast amount of money, or evidences of indebtedness of 
the government used as such, that then filled the channels 
of circulation. The condition of the country then, when 
money was plenty, and now, under the policy of contraction, 
which has withdrawn the circulating medium of exchange 
from the channels of trade, is thus eloquently portrayed by 
the distinguished statesman quoted above (Kelley), in a 
recent address to the citi/.cns of Philadelphia: 

"You have seen a strong man, full of life, rise in the morn- 
ing as a lion shake^ the dew from his mane and go forward 
to the battle of life, full of vigor, full of hope, full of energy, 
full of enterprise. His brawny nether limbs bear his stout 
body ably; his muscular arm and his cunning hand go glibly 
and gladly to their duties, performing their functions. But 
an accident happens, an artery is cut; the blood docs not 
ooze, but flows from him. The surgeon comes just in time 


his life, lie Maundies tin- wound and hinds it up. 
Uut tin- man i> another heiiiu', IK- lies there pallid and 

shrunken. His sturdy limbs will not even bear his wasted 

His muscles art- tlaccid, and his lingers have lost 

kill. II: >ne, and he dreams not of enter- 

This is our condition to-day a- a people. In 
ind l^'if. every man in Anu-rica who had tin- skill and the 
will to lalmr could <-arn ua^cs to support his family and lay 
thing hv. All industries were (jiiic-k and active. I'ro- 
dn<-ti(.n ran <n. The American ]>e<p!e waked up each new 
iiiorni: ! that there were LTii-at duties hei'ore them; 

that there were mines to he opened, forces and t'nrn:i<-e t 

Aork the- iron, the copper, the silver and the 

New h"iiM v \\-I-IT hnilt. Skill, energy, science and 
\ed t-> |nicken and cheapen productive pro- 
. < >ur wealth Lrreu- as it, or that of any other people, 
had D "Wii. \Vi- were moving onuai'd, when one 

' ulloch tapie<l a irreat arteiy and let nearly all 
ll<\\- from the body politic. Diseased, paraly/ed, 
shrinking fnin day today, \\hat Ameriean has the rneriry 
in dr\ eloping a lu-w mine:' IVmisvl vanians, who 
:\ I" e.Hi-truct a new foi'LTe or a new furnace'/ 

building to-day? Your laborers 

.lien, in uant are be'_:u r inx the poor privih 

'ami; 1 by an day's labor. Their homes 

nipped i,f e\ei-ythiii'_r tliey chc-rish. (Jo thr..u-li 

,- city, halt before the houses when- of a 

>mid \\ould, a few years air<>, ha\e found 

.nily Lrathere.l about the melodeoii or the cheap piano. 

Him \\lio had _rivrii them tlu-ir lines 

i" tin . All! the ln.u-e i^ silent now; the 

iployiiieilt, the OM are ill idleness, the 

- , w..rk; the juel.Hleon or piano is L"'nc. 

TIIK rsKs OK .MONKY. 47 

Aye, WOI-M- than tliaf, tin 1 most cherished mementoo, though 
of little value measured in dollars and cenN the cheap 
jewelry the trinket that the young lover toiled in over 
hours tliat he might huy and see it grace the person of his 
sweetheart, the amulet he hung upon the neck of his bride 
the silver cup that marked the birth or christening of their 
first born cherished by all, but they have gone, to the 
pawnbroker or jeweler to bring them food. Courage gone, 
hope gone, despair crushing him to the earth, and destroy- 
ing all the pride that made the American mechanic the 
boast and honor of his country, how many u man to-day, 
longing for honest work but powerless to obtain it, creeps 
and crawls from town to town, foot-sore, ragged, dusty, to 
beg from strangers rather than from those who know him 
and will remember it to be denounced as a 'tramp' and 
commended to the custody of the police!" 

As the end and object of money are to exchange com- 
modities and promote production, it should be increased in 
amount in proportion to the increase of population and 
trade. Bullionists assert the contrary, but they can furnish 
no sound reason or proof upon which to base their theory. 
They invariably rest their argument on the fact that nations 
have increased in wealth and population without adding to 
their monetary circulation, and most always cite Great Brit- 
ain as a case in point. Properly considered the experience 
of Great Britain docs not sustain their theory. How does 
Great Britain manage to conduct its large and increasing 
business without a corresponding increase of money? The 
answer is by means of inflated bank credit. On account 
of the want of a sufficient medium of exchange, the British 
people are compelled to use and pay for the credit of banks 
to an enormous extent. This is a heavy tax upon the indus- 
trial classes of that kingdom, and explains why the wealth 

48 VKY. 

of tin- :i^tant!y flowing int;> the hands of the 

\\ ' tiii'l the following statement used 1,\- Dr. \Y 
a polr the bullionist school, to shov, 

!e of Great Britain can iret along with but a 
limited Amount of money. We submit that it shows much 
more forcibly to what ;i desperate use of inflated, credit 
that i. 11 driven by a false monetary M 

'. an Ulastration in }>oint, Sir John Lulihock 

in a paper read before the Statistical Society, in June, 
1865, an analysis of 19,000,000 paid into his banking house 
in a few < 

^ and bills .............. 18,395,000, OH !'7 per cent. 

Hank of Knirland notes ........ ' >00 } 

Cmnitry note* ................ 79,000 V 3 per rent. 

( ............... 1 I -.DIM) ) 

.1 which statement it ajipear> that ii!y th.vr p-r cent. 

!ai<l in the form of money, i. e., notes and coin 

of which a little mo:v than <nu-lt'ilf <>f one per 

\* The bullionists pretend t> DC 

much of the evil COnsequenCCfl f inflation; Imt when 

:i ofT, it is apparent that they are only con- 
I alt nt retaining the power to inflate in their own 

- 09 HO3S 

J nation has it8 OWH peculiar s\-tem f linancc, the 
in details than in principles. 
;i <>f the I'nited States is nowcoini 

Independent Tn-i-ury \\ the recei] 

and dwbursemcnt of tiie n-vmu'--; of the Treasury proper, 

which maintains an i>-nc of about $370,000,000 of Treasury 

i, conxtii-; ;1 tender m 

itry, ami about % ! (' fractional currency; 

of the National ] tin number, with a circulation 


of over #360,000,000; and :i number of Stale l>ank-, otab- 
lished under Slate authority. 

The medium of exchange of the United States, it will be 
observed, is composed of Treasury notes (greenbacks) and 
bank notes. It is important to notice the difference between 
the Treasury note and the bank note, because they belong 
to two entirely different and distinct systems of money; and 
a clear perception of the difference is essential to a proper 
understanding of the money question and of the political 
issues, growing out of it, which now agitate the country. 

A bank note is a bill of credit, promising payment in law- 
ful money on demand, issued by and resting on the credit 
of a private corporation established by law. Being payable 
or redeemable in money on demand, it represents money 
and circulates as such, and performs nearly all of its func- 
tions. Private corporations, therefore, upon whom the 
privilege or power to issue bank notes is conferred, are 
practically invested with the authority and power to make 
and put in circulation a medium of exchange. If the bank 
note is secured by a deposit of stock or bonds to insure its 
payment and maintain its value, as is the case with the 
National Hank note, which is secured by a deposit of United 
States bonds in the Treasury of the Federal Government, it 
will form a perfectly safe, uniform and convenient medium of 
exchange. But a bank note possesses two peculiar features, 
which do not belong to money, (of any kind, whether made 
of gold, silver, or paper) and which render it a costly 
medium of exchange. One peculiarity of :i bank note is 
that it enters into circulation encumbered with interest, and 
constantly accumulates value, whether it is in use or not. 
Its very existence, therefore, is a tax upon production and 
trade. The other peculiarity, which grows out of the one 
just mentioned, is that a bank note is not free to obey the 

50 - * 

natural laws of trade, but is subject to tlie will and control 

of the corporation which puts it in circulation. This can be 

IK by supposing two notes, a greenback 

and a National IJank note, to be put into circulation at the 

same time and observing the cur-c taken l>y each. A 

'ark dollar is paid out by the United States govern- 

-juivalciit in labor or value. A. pays it 

for a dollar's worth of commodities. 1>. lends it to ('. 

for tli! per cent interest. C. pays it to P. for a 

MS it ip hi> pov-cssion for three months and 

then puts it in circulation again. It pusses from hand to 

until finally it reaches Z., who pays it to a collector of 

internal revenue, when it is returned to the Federal Treasury, 

to be used over and over again in the same manner. While 

:uing its use as a medium of exchange, it bore no 

-t. When held by D. for three months in a state of 

idlen< I no value for any one. It is true B. 

lent it to ('. for thirty days at per cent, interest, but that 

was an individual transaction and extended no further than 

M-t-rned. As soon as C'. put it in circulation 

and unencumbered as 

uhen it left the Trea-nry of the United State-. Hut it is 

iiflferent with a bank note. The bank, which i^ues u. 

!a\s at say per cent, interest, and 

A. puts it in circulation. At tin- expiration of sixty day-, A., 

unable to return the identical note which he borrowed, pays 

the bank with a greenback or another bank note. This note 

ly lent to 15., and the process goc- on 

:ial bank n<>t,- thus constantly reali/es 

M accumulates value for the bank, whether it 

Circulate* in the channels of trade, or reposes in the vaults 

b M a deport, ,,r lies rotting at the bottom of the 

This interest comes out of the profits of production, 


and is a tax upon the community at large. The tax thus 
imposed upon the pul)lic for a medium of exchange is a 
greater burden than industry can bear, and every few years 
labor is driven to the wall and production, except of the 
necessities of life, ceases. To promote production, or in 
other words, to "develop the producing forces of a country," 
it is, as we have seen, more essential to have a cheap medium 
of exchange, than it is to have cheap transportation; but a 
bank note is the most expensive medium of exchange that 
could possibly be devised, because it is accumulating value 
all the time, whether it is performing the uses of money or 
not. The bank note is subject to the will and control of 
the corporation which issues it, because when the bank 
ceases to discount paper, as it usually does whenever there 
is a money stringency, and calls in its circulation,, it is 
obliged to leave the channels of trade, no matter how much 
its services are needed as a medium of exchange, and return 
to the bank. But this is not all. The tax which banks are 
thus authorized to impose on the medium of exchange 
issued by them, enables them to control not only their own 
notes, but the money of the country, whether coin or legal 
tender [taper money, as will be more fully explained in 
another chapter, and thus it happens, as at the present time, 
that the circulating medium of the nation every few year* 
becomes concentrated in the money centers of the country. 

A bank note medium of exchange, whether redeemable in 
coin, as in England, or in greenbacks, as in the United 
States at the present time, it will, therefore, be observed, 
constitutes a peculiar and distinct system of money, and one, 
it may be added, that has proved an infinite source of dis- 
aster and weakness in both England and America. 

It was for these reasons, in days gone by, that Jefferson 
insisted that "Bank paper must be suppressed and the circu- 

to tin- nation to whom it belongs;" that John 

Adaiu i'.-uik pa]> .:le freak of those who 

i in T"rviMii and Ilritish idolatry; that Jackson 

:iks of is MIC; that C'alhoun labored to 

J tender paper money, to be iued by the 

1 imient; ami it is for the same reasons that a 

host of tin* foremost Matomen, political economists and 

philanthropists nf tlir country are to-<lay urging the people 

ft th'-ir rights and prevent the 

.in destroying the greenback, in order that 

-nbvtitute tin- National Hank note in its stead, ami 

thus secure tbc entire control of the medium of exchange of 


A Treasury note issued 1>\ the Federal Government rejre 

'In- j.rojM ny and ]>roductions of the country to the 

\alue invcribeil ,,n its face. It rests on the credit 

government in the same manner that a bank note 

rests on the credit of a corporation, and represents the 

property and j)r)ducti<.ns of the country (including gold 

which it is exchangeable, just as a bank note 

the "in or Tivaxury m>te in which it is payable 

'emahlc. f l'1ie foundation <.f the Treasury D 

[Jnited States bond, which secures the 

p:i\im-nt and maintains the value of the bank note, and it, 
therefore, possesses the highest and best security that a 
.11 jM,sxii,ly liave.* A bank note is a 
promise to pay immey, but a Treasury note, being a 

-f \alue (proprrty and product- , is money. 

'// it would be more 

to receive. It is true 

ndi-p moiM-y of the Tnited S 

(& greenback) promi-. .vliich is a 

Sw note at tbo end of thl chapter. 

I KM-i OF Mn.N i:\ . 

misfortune, becau-" it misleads people, even prof, 
political economy,* but the promise is an empty phi 
Wholly foreign tO the nature of the Treasury note and the 
principles upon which it is based. It was spread on the face 
of the greenback at the instance of the money power, which 
was unwilling to recognize any other kind of money than 
that based on bullion, and for the purpose of depreciating 
its value as a medium of exchange. 

It is apparent, therefore, that legal tender paper money or 
Treasury notes and bank notes belong to two separate and 
distinct systems of money, based on entirely different prin- 
ciples. In the one case the medium of exchange is furnished 
by the government and subject only to the natural laws 
which govern trade 1 . Iii the other, it is furnished by private 
corporations, who tax the public heavily for its use, and is 
subject, not to the laws of trade, but to the control of the 
corporations issuing it. In Great Britain, where the system 
originated, the legal tender money of the country, in which 
bank notes are payable, is gold and silver, as was the 
case in the United States prior to the war, and hence 
the system is commonly known, and is generally referred 
to in these pages, as the specie basis system. When the 
medium of exchange is limited to gold and silver, or paper 
money based on gold and silver, the public is compelled, on 
account of the scarcity of these metals, to use bank credit, 
which explains why the money power is now striving to 
force the American people to submit to a return to specie 
payments, no matter at what sacrifice. 


The power to make and regulate money lias long been 
recognized as a governmental function, or, in the language 
of Tooke, "Tn every civilized country supplying and regu- 

*See Professor Newcomb's silly comments ou this point in Appendix. 


.;vulatini iiii'iliiuiL is a function of sovereign 

' The reason of this is obvious. Money to be 

,Mic medium of exchange must pOMCSfl legal reprcsenta- 

i-l this can be derived only from tlie sovereign 

\v making i. \\crof a nation. The bullionists do not 

thi-, lut profevs to believe that the government is 

-imply with the posver to coin gold and silver, 

mse "the Stan- can do the work best, * * as no 

atU-- iirhtand purity of coin) furnished by 

private ] an compote in authority with the stamp 

impo-. d bv the jjoverumcnt mint."* This view of the 

mattei- gri\vs out of the peculiar ideas in regard to tin 

:' money held by those who advocate the specie 

: i. r.onamy Price, Professor of political economy 

in the t'nivcrsity of Oxford, England, say-: ^('oin, metallic 

money and nothing else is, unless it be a 

mo.lity, as an ox, a cow, or a piece of salt," preci>ely 

the of money, it will be observed, as that held 

by tin- ancient Romans, who u>ed bars of copper and cattle, 

and by the American Indian of the present day. 

< 'oii-titiition ,,f the United "lifers upon Con- 

Lo wing, among Other, powers, \ix: 4 -To lay and 

, dutii-, imports and excises, to ]ay the debts 

the common defense and ^encKal welfare 

1 ' * to borro\v inoiu-y on the 

1 s * * to coin money, regulate 

tlu-Nali; ; and of foreign coins; * * and to make 

all la\\M \vhicli shall be n<'e,- v -ai-y and proper to carry into 
i'orcgoing power-, efo." It also j.rohil.its the 
oinin-r nmncy, emitting bills of credit, or inak- 
'iiii'_j but t^old or silver coin a tender in payment of 
ti. Tlie e\<-lusivo ].o\ver to make and regulate the 
rcncr nd Banking, by Bonamy Price, pa. 

A GOVEKNM i:\T.\I, I L \< TION. 55 

medium of exi-hangi', therefore, devolves upon the Federal 
Government At the time the Federal Constitution AV.-I^ 
framed the money question was one that had to be handled 
\vith great delicacy. The money power, then as always in 
fact, was on the alert, and care had to be taken not to incur 
its hostility, lest it might prevent the ratification of the Con- 
stitution by the several States. When it was proposed to 
insert a clause in the Constitution empowering the Federal 
Government " to emit bills of credit," it was boldly stated 
on the floor of the Convention that " the moneyed interest 
would oppose the plan of government if paper emissions 
(bills of credit) be not prohibited," and the clause was 
rejected by a vote of nine States against to two for. A* 
"bills of credit" are promises to pay in lawful money and 
belong to the specie basis system of money, it is fortunate 
that no such provision was inserted in the Constitution. In 
this respect its frame rs, perhaps, "builded better than they 
knew." As the Federal Government is clothed with no 
power "to emit bills of credit," and States are expressly 
prohibited from doing so, it is a very pertinent question a^s 
to how either the Federal or a State government can dele- 
gate that power to a private corporation. Individuals can 
issue promises to pay M because they are in the nature of a 
common contract, but when it comes to corporations issuing 
promises to pay (bills of credit), under special authority 
of law, which are clothed with the attributes of money, it is 
a very different matter. The well known legal maxim 
that what one "does through another he does himself," 
would seem to fit the case pretty closely. But the people 
can not afford to waste time with constitutional quibbles. 
They can compel their Representatives in Congress to 
extinguish banks of issue and "restore the circulation to the 
nation to whom it belongs,"* and if it is necessary to amend 

Thomas Jefferson. 


ill,- < in order to accomplish that purpose, they 

lo that. 

Jjut the, tO be no ditliculty so l';ir as the Constitu- 

tion i< conCN rm-d. That the framers of the Constitution, 
1 to empower the Federal Government "to 
emit hills of credit/' <li<l not intend to prohibit paper money 
or in any way curtail the legitimate functions of government 
with n-Nj..-1-t to making ami regulating the medium of 
tin- country, is apparent from CMtcmporaneous 
h'iM< veil as tin- subsequent course of the govern- 

ment. .Mr. Madison, who was ;i member of the Convention 
which framed tlie Constitution, in speaking of his vote 
airain-t empuwi-ring the Kedi-ral (Government "to emit hilN 

<!' credit. 

"Tin- \"ic in the aHirmative by Virginia wa- nee:ixioiKMl 

by the acqoleflOeBOe of Mr. Madison, who became satisfied 

\vords ['to emit bills of credit'] would 

not overnmcnt from the use of public, notes, a> 

nld I..- safe and proper; and would only cut off 

paper currency, and particularly for making 

the bills [of credit currency) a tender either for public or 

pri\ .Madi-on Papers."] 

repeatedly urged that,bank^of issue should 
i and that public note< issued by the Federal 
should be Hib.xiituted for bank not. 

. In a letter dated June 24, 181! 
..-law Kppis, who \vasa member of the committee 

IDS of the national House of 1 Jcproentat i \ 
iut. In- s.-,id: 
var ..f 17.-,.-), our State availed itself of this fund, 

paper currency, bottomed on a Bp for 

its i-.-d.-!,,pti,,,,, :md to in>ure the creclii, bearing an interest 
"f I- nt Within a very short time, not ;i bill of this 

A <,OVKKNMK\TAL Ft\< n<>\. 57 

emission was found in circulation. It was locked up in the 
chests of executors, guardians, widows, farmers," etc. 

"We then issued bills bottomed on a, redeeming tax, but 
bearing no interest. Tliese were received, and never depre- 
ciated a single farthing." 

"In the revolutionary war, the old Congress, and the 
States, issued bills, without interest and without tax. They 
occupied the channels of circulation very freely, until those 
channels were overflowed by an excess beyond the calls of 
circulation. But although we have so improvidently suffered 
the field of circulating medium to be filched from us by 
private individuals, yet I think we may recover it, in part, 
and even in the whole, if the States will co-operate with us/' 

"If Treasury bills are emitted, on a tax appropriated for 
their redemption in fifteen years, and (to insure preference 
in the first moments of competition) bearing an interest of 
six per cent., there is no one who would not take them in 
preference to bank paper now afloat, on a principle of patri- 
otism, as well as interest, and they would be withdrawn 
from circulation into private hoards to a considerable 
amount. Their credit once established, others might be 
omitted, bottomed also on a tax, but not bearing interest; 
and if ever their credit faltered, open public loans, on which 
these bills alone should be received as sp.-cie. Tliese oper- 
ating as a sinking fund, would reduce the quantity in circu- 
lation, so as to maintain them in an equilibrium with specie. 
It is not easy to estimate the obstacles which, in the begin- 
ning, we should encounter in ousting the banks from the 
possession of circulation." 

Mr. Jefferson's plan, it Avill be observed, is identical in 
principle with the much derided 3.65 inter-convertible bond 
plan, so ably advocated by Pliny Freeman, Judge Kelley, 

58 TIN-: io\vi:i: TO MAKI-: M<- 

Hor. -cy* and a host of able ami earnest friends of 

\merican ilia- 
Tin- issue of Tn-a.xury notes under the Constitution aceonl- 
invrlv he-_ra:i at an early day, though not \\ ithout meeting 
witli fierce oj >j x >-it ion from the money power, and their 
,ity has IMM-II sanctioned from the first by all depart- 
inents of the government. The first issue of Treasury n< 

made in pursuance of an act of Congress of June :i(), 
Kurt! were authorized by the acts of Con- 

U ot I-\hniary 25, 1813; 3Iarcli 4, and December 26 r 
1814; October 12, 1837; January 31, and August 31, 1842; 
July L'-J, ls4>; and January 28, 1857. 

The validity and constitutionality of these acts were t 
and affirmed in the Supreme Court of the United States, in 
the caxf of Thorndike against the United States. Judu r < 
dt !i\ ( i in'_r the opinion of the court, said: 

itcs of the United States, under which the 
.xiiry notes have been issued, it is enacted that such 
ivaole in payment to the United States 
3, and sales of public lands, to the full 
amount of the principle! and intrre-t accruing, due on such 
notrx. It follows, of course, [that they are a leiral tender 
in payment of debts of this nature, due to the United St.: 
. l.y tli- very terms of the acts, public officers are hound 
oetve them." 

Whcntheact of Congress of October 1J, 1 -::7, author- 
an i-x M .- of TivaMiry not-x, \ V a> landing, Mr. Calhoun 
the m-a>uro m Ktrong terms. The following 
h deliver, d by him September 10th, 

prior to the passage of the bill, confirm the distinction which 
made between public notcx and bills of credit, and 

lain what was meant when wo stated that it would be 

< Greeley's famous editorial on the C.CO Buud plau will be found in the 
Append! k. 


more accurate to drscrilie ;i greenback :is :L promise to 
receive than a promise to pay.* He said: 

"It is, then, my impression, that in the present condition 
of the world, a paper currency, in some form, is 

almost indispensable in financial and commercial operations 
of civilized and extensive communities. In many respect- 
it has a vast superiority over a metallic currency, especially 
in great and extended transactions, by its greater cheapness, 
lightness, and the facility of determining the amount." * * 

"It may throw some light on this subject to state, that 
North Carolina, just after the revolution, issued a large 
amount of paper, which was made receivable in dues to her; 
it was also made a legal tender, but which, of course, was 
not obligatory after the adoption of the Federal Constitu- 
tion. A large amount, say between four and five hundred 
thousand dollars, remained in circulation after that period, 
and continued to circulate, for more than twenty years, at 
par with gold and silver during the whole time, with no 
other advantage than being received in the revenue of the 
State, which was much less than one hundred thousand 
dollars per annum." 

"No one can doubt but that the government credit is 
better than that of any bank; more reliable more safe. 
Why, then, should it mix it up with the less perfect credit 
of those institutions? Why not use its own credit to the 
amount of its own transactions? Why should it not be safe 
in its own hands, while it shall be considered safe in the 
1 lands of eight hundred private institutions, scattered all 
over the country, and which have no other object but their 
own private profit; to increase which they extend their 
business to the most dangerous extremes. And why should 
the community be compelled to give six per cent, discount 

*See page 52. 

;i POU KB TO M AKI: .MO.S i:v 

;overnn:cnt credit, blended with that of the bank, 
[1 the Superior Oredit of the government could bo fur- 
nMicd separate, without discount, to the mutual advant:. 
of tlit- irovernment and the community:'' 1 

leving that there might bo a sound and safe paper 

currency, founded on tlie credit of the government cxclu- 

:y, I was desirous that tliose Avlio arc responsible, and 

have the power, should have availed themselves of the 

opportunity. 91 

* We are told the form I MiiriTcsted is hut a repetition of 

the 'old Continental money; a Lrhost that is ever conjured 

up by all who wish to Liivc the banks an exclusive monopoly 

"\ eminent credit. The assertion is not true; there N 

not flu- least analogy between them. The one 

ay, when there was no revenue; and the other a 
to receive in the dues of ^ovc-rnment when there is abun- 
dant reu'imc." 

" We are told that there is no instance of a u>veniment 
er that did not depreciate. In reply, I aflirm, that then 

one, assuming the form I propose, that ever did depre- 
ciate. Whenever a paper, receivable in due- of -( .venmienb 
had anything like a fair trial, it has j 1. lu-tance 

tlie case of North Carolina, ref-rred to in my openiii-- 
n -in. irk-. The drafts of the Trea-ury, at this moment, with 
all their iiirumhraiscc, are nearly at ]>ar with i^old an<l silver. 
The (MM- of Ku>sia mi-lit al>o be mentioned. In 
.' she had a lived paper circulation in the form of bank 
;f \\hich were inconvertible, of upward of one hun- 
dred and twenty million*, of dollars, otimated in the metallic 
rouble, and which had for years remained without fluctua- 
tion, having nothing to sustain it, but. that it \\ M received in 
the dues of the government, and that too with a revenue of 
"it ninety millions of dollars annually. I speak on 


the authority of a respectable traveller. Other inMun 
no doubt, might, be added, hut it needs no such .support." 

"It has another striking advantage over brink circulation, 
in its superior cheapness, as we'll as greater stability and 
safety. JJauk paper is cheap to those who make it; but 
deai-, very dear, to those who use it, fully as much as gold and 
silver. It is the little cost of its manufacture, and the dear 
rates at which it is furnished to the community, which gives 
the great profit to those who have a monopoly of the article. 
Some idea may be formed of the extent of the profit, by. the 
splendid palaces which we see under the name of banking 
houses, and the vast fortunes which have been accumu- 
lated in this branch of business; all of which must ultimately 
be derived from the productive powers of the community, 
and of course adds so much to the cost of production. On 
the other hand, the credit of government, while it would 
greatly facilitate its financial operations, would cost nothing, 
or next to nothing, both to it and to the people, and of 
course would add nothing to the cost of production; which 
would give to every branch of industry, agriculture, com- 
merce and manufactures, as- far as circulation might extend, 
great advantages, both at home and abroad." 

Subsequently, March, 3838, Mr. Calhoun, in his speecli 
on the Independent Treasury bill, said : 

"I now undertake to affirm positively, and without the 
least fear that I can be answered what heretofore I have 
but suggested that a paper issued by government, with the 
simple promise to receive it in all dues, leaving its creditors 
to take it, or gold and silver, at its option, would, to the 
extent to which it would circulate, form a perfect paper cir- 
culation, which could not be abused by the government; that 
would be as steady and uniform in value as the metals them- 
selves. I shall not go into the discussion now, but on a 


suable occasion I shall be able to make good every word I 
have uttered. I will be able to do more to prove that it is 
within the constitutional power of Congress to use such a 
paper, in the management of its finances, according to the 
most rigid rule of construing the Constitution ; and that those 
at least who think that Congress can authorize the no- 
private corporations to be received in the public due- are 
estopped from denying its right to receive its own paper."* 

The United States Treasury notes, issue. 1 prior to the war 
of 1861, had never been made a tender in payment of pri- 
vate debts, nor had they been issued in u suitable form to use 
as a circulating medium of exchange. But when the Re- 
bellion broke out in 1861, the necessity for an incr 
amount of money became imperative, and it became neces- 
sary to issue public notes better adapted to the wants of the 
times. The banks of Xew York, Boston, and Philadelphia, 
soon after the war began, agreed to lend the Federal Gov- 
ernment $150,000,000. After the loan had been negotiated, 
the Secretary of the Treasury, unexpectedly to the banks, 
required it to be paid in specie instead of bank notes, and 
the result was that the banks throughout the country were 
obliged to suspend sj.ccie payments. 

The government stood in need of soldiers, ships, gun- 
boats cannon, guns, ammunition, commissary stores, quarter- 
ma-ter stores, transportation, etc. The people at large were 
obliged to supply the wants of the- government, and fortu- 
natelv p., e-sed both the ability and willingness to do so, but 
it \\a-> impracticable to accomplish the ends desired except 
through the inst rumentality of a medium of c\chair_rc - 
money. Congres<, by virtue of the sovereign pivrMgativr 
inherent in the people, and as their representative duly 
authori/.ed by the Constitution, enacted a law authori/ing 
and directing the Treasury Department of the I-Ydcral Gov- 


eminent to issue public notes wl i'u-1 1 should ho a legal tender 
for debts, hotli public and privato. As they were issued by 
tin- jtoople ill their collcotivo capacity, and represented the 
property and products of the nation, it was eminently just 
and proper that they should declare that what they did in 
their collective capacity should be binding upon them indi- 
vidually. In fact, in no other way could the 1 people all have 
boon put upon the same platform Avith respect to the wants 
of the government, in the exigency which then existed, than 
by declaring their public notes a legal tender in payment of 
debts. These notes, as we liave said, represented the prop- 
erty and products of the nation, and by virtue of their legal 
tender property they naturally and necessarily conformed to 
the unit and standard of value of the country. They there- 
fore possessed the power to measure and exchange, as well 
as to represent value, and consequently possessed all the 
attributes of money in a- word were money, in every sense 
of the term; and the American people found tliemselve>, 
unexpectedly, it is true, in the enjoyment (to use the language 
of President Grant) "of the best currency that was ever 

When public notes were issued, the people in a collective 
capacity in effect said to those who were able to supply the 
wants of the government: "Give the government all the 
guns, ships, food, transportation, etc., that is required, and 
the rest of the people will make good to you whatever 
amount you may contribute over and above your share out 
of any other property or products which they may po- 
that you need or desire." As it was a matter of compulsion 
on the part of the people to supply the want* of the govern- 
ment, it was an act of supreme' folly in them to encumber 
their circulating medium with interest directly or indirectly, 
.as was done, which can only be compared to a man paying 

64 Tlli-: J'OW Mil 

some-body else interest f<>r tin- privilege of using his own 
money. Jt simply made it the prey of speculators and 
money dealers, greatly to the disadvantage of the nation. 
That it was imnere-ary appears from the fact that green- 
backs to the amount of hundreds of millions of dollars cir- 
culated in the channels of trade and performed all I 
of money, as effectively as gold or silver could have done, for 
more than a year before the United SfaUs hoiid>, hearing six 
per cent, interest in gold, with which they were interchange- 
able, were iued, and continued to do so after their inter- 
changeability was taken away by act of Congrc . Mr. 
Spaulding, chairman of the sub-committee of Ways and 
Means of the House of Representatives, in a speech on Jan- 
nary !_', isii3, said: "The Secretary has paid out nearly 
x !'."> ),oi)< i.niii) li.--.-il tender notes, bcingall that he was author- 
i/ed to issue; and notwithstanding he has had authority for 
the la^t ten months to sell N.500,000,000 of live-twent;. 
per cent, bonds at the market price, he has only di>povd of 
about $25,000,000, and has still authority to sell 475,000,000 
at the market price, and take his pay for them in legal tender 
notes. One of the reasons \\hymoreof these bonds have 
not been disposed of is, that there has been no redundancy 
of currency, and it has been difficult for the Secretary of 
the Treasury to get legal tender notes on a sale of the bonds 
and sevcn-threc-tenths notes that he has alread\ ' ne^olia; 
In other words, the people needed greenbacks far wir>c than 
anything e!>e, and could not spare them to invent in live- 
twenty bonds, which have since been paid both principal and 
interest in gold. At. this time gold ranged from 1 :M to 160. 
Had Congress not yielded to the demands of the niom-y 
power, but passed the legal tender act as originally framed 

and offered in th- House of Representative to -ay, 

had made the greenback a full h-gal tend. able for 

A '.oVKKNMKNT AI. l'T\< HON. 05 

on import > as well as other public dues), and not made 
tin- interest en tlu- bonds, with which it was intended io he 

interchangeable, payable in gold; and resorted to a judicious 

-\-tein of taxation, using tin- bonds only to sustain the 
greenback in case its credit ever faltered, by receiving it 
alone as specie i'nr lioinls, there is every reason to believe, 
from the experience- of the country lit that time and since, 
that the war could have been carried through successfully 
without incurring but a fraction of the debt now owed by 
the Federal Government, and that the debt, whatever it 
might be, would be held mostly at home instead of abroad. 
Hut no sooner had the legal tender act made its appearance in 
Congress than the money power was up in arms against its 
passage. Delegations of bankers from New York, Boston 
and Philadelphia hurried to Washington; and formally 
organi/ing, by selecting one of their number chairman, they 
summoned the Finance Committee of the Senate, the Com- 
mittee of Ways and Means of the House, and the 1 Secretary 
of the Treasury into their presence. In the end the money 
power, although it, did not succeed in preventing the passage 
of a legal tender act, secured a complete triumph. The 
interest of the bonds was made payable in gold in order 
to create a demand for gold, and then duties on 
imports were made payable in gold in order to get the 
gold to pay the interest on bonds. A premium on gold 
was thus established, and the public notes of the gov- 
ernment were dishonored by the government itself; and.a- 
we have seen, the premium on gold was run up to 100 before 
ever the gold interest bearing bonds of the <j<'< mment 
were issued. A National Hanking law was also enacted to 
enable the money power to regain control of the monetary 
affairs of the nation. This was the beginning of the most 
stupendous robbery, boldly and openly planned and remorse- 


lessly executed, to be found in the annal> of any nation, of 

either ancient .r modern times, the details of which will 1m 
accurately set forth in a coming chapter (Cliai 
the end i> not yet. 

The legal tender acts passed during the war not only 
received the sanction of every department of the govern- 
ment, Imt met with the universal approbation of the wealth 
producing classes of the nation. Their validity and con-ti- 
tutionality, which were of course contested by the money 
power, have been affirmed by the Supreme Court of the 
United States, and by the Supreme Court of fifteen St- 
and only iii one instance has a State Court failed t<> endorse 
their constitutionality. The Constitution of the United 
States does not in express terms confer upon Congress the 
authority to make anything a tender in payment of d 
the word tender being no where mentioned in that instru- 
ment, except in the clause prohibiting States from making 
anything but gold and silver a tender, but the right to d 
i- so clearly an incident of the general powers of ('mi- 
over the currency of the country, that it has never hesitated 
to enact such laws upon the subject as the intercut- of the 
nation required. The right to declare by law what shall be 
a tender in payment of debt* has thus been . by 

Congress in twenty-four statute- passed during the adminis- 
trations of Washington, .b-lTcr>n, Madi-n. M>nroe..l 
Tyler, Polk, Killmorc, Pierce, L ; iM-,,ln and John-on. 

Hut driven out of the Supreme Court, the money ]><> 
now busy striving to inculcate the doctrine tl: 
could only make public notes a tender in payment <f ]>ri 
debts in time of war. A distinguished lawyer,* who li:m 
made himself cons], iciious of late in i mislead 

the public upon this subj. -That the only currency 

lion. Reverdy Johnson. 

V i.oYKKN MKN 1 \l. K1MTION. 67 

known to the Constitution is gold and silver, or paper con- 
vertible into it on demand," and gi\es il as his opinion that, 
the Sapreme Court did not intend to go BO far, in tin- legal 

tender C:IM-> decided at the I )ecember term, 1870, as to 
decide that Midi an aet would he Constitutional il' |aed 
in time of peace. As the framt rs of the Constitution, afl 
has already heen explained, refused to authori/e Congress 
"to emit bills of credit," (paper coin crlible into gold or 
.silver on demand) it is evident that this distinguished advo- 
cate of banks of issue, in asserting 1 that such a eunvney i- 
"known to the Constitution," lias allowed his y.eal to outrun 
his judgment, and lie is no less in error in regard to the 
opinion of the Supreme Court. I\Ir. Justice liradley, one of 
the Judges of the Supreme Court, who read an opinion in 
the cases referred to, says: 

"Another ground of the power to issue Treasury notes or 
bills is the necessity of providing a proper currency for the 
country, and especially of providing for the failure or dis- 
appearance of the ordinary currency in times of financial 
pressure and threatened collapse of commercial credit. 
Currency i> a national necessity. The operations of the gov- 
ernment, as well as private transactions, are wholly depend- 
ent upon it. The State governments are prohibited from 
making money or issuing bills. Uniformity of money was 
one of the objects of the Constitution. The coinage of 
money and regulation of its value is conferred upon the 
(Icneral ( Jovcrninent exclusively. That government ha-* 
also the power to issue bills. It follows as a matter of 
necessity, as a consequence of these various provisions, that 
it is specially the duty of the General Government Co provide 
a national currency. The States cannot do it, except by the 
charter of local banks, and that remedy, if strictly legitimate 
constitutional, is inadequate, fluctuating, uncertain and 

nii: ro\\ i;u TO .MARK MOM.Y 

insecmv, and operates with all the partiality to local intei 
which it was the very object of tin; ('..n-titntion to avoid. 

But regarded as a duty of the General < io\ eminent, it is 
strictly in accordance with the spirit of the Constitutio: 
well as in line with national necessities" ( 1 _' Walla 
Re-port N f,r,-_'.) 

The necessities of peace may he as irreat, though of a dif- 
ferent character, as those of war, as the- American people are 
experiencing at the present time. Fur several years the 
nation has been suffering a daily loss of millions of dollars, 
by reasor of its inability to develop the producing fore. 
the country, as they mi^ht be developed under wiser la\v>. 
Nor need anyone indulge the hope that a times will chan 
lie-cause there c;m be no change, except from bad to \\ 
until the cause \\hich has produced the present prostration 
all form-- of productive industry is removed. Tin- repeal 
of the :i<-t decreeing specie i-esumptioii .January 1, 1 
which rcst^ as an incubus upon the industries of the com, 
niiirht afford temporary relief, and would certainly avert the 
ire M era 1 bankruj)tey, which is ine\ liable if its provisions are 
can-led out, but to place the affairs of the nation on a sure 
foundation soinethinir more is required, vi/.., the extinction of 
banks or issue and the adoption of a monetary system based 
on sound principles. Specie circulation would then come 
naturally as soon a^ ;he nation produced a sufficient sin-plus 
of products to caitM- its return. This was witnessed in 
Prance after the late war with (ierman\. Stimulated by an 
abundance of irredeemable h-iral lender paper money, the 
nch pcoph- bent every eiier'j;y to\\arU producing wealth, 
and in less than three years a-tonNied the world by paying 
off the German indemnity of $1,000.000,000; and sp- 
now cii-ciilatc-s thei'e >id b\ ride at par with irredeemable 
paper money. The immense sum paid by FIM 

OVTtBB MI:N i \\. /i \. HON. 69 

many \\.-IN not paid iii actual gold, but i:i bilU !' exchange, 
etc., which rcprocnicd i!n- proceeds of l<Ycnch industry. : 
a common error in the I'nited Slates to suppose that interest 

on the public debt is paid in gold, and that therefore it ism 

>arv to require duties on i in ports to ho paid in gold. 1 1. is :i more 
iiction. The interest of American securities held abroad 
paid in products, and products do not sell for :i farthing nx-iv 
or los in foreign markets, on account of boing HR'asured 
and exchanua'd in the United States by greenbacks instead 
of gold. The premium, however, on gold, which oxi.sts by 
reason of the law requiring duties on imports to be paid in 
gold, is a disadvantage to all classes, except the bondholder 
and money dealer, which should be remedied. It' the green- 
back were made a full legal tender, and sustained by an 
interest-bearing bond with which it was interchangeable, 
there is c\ cry reason to believe that the premium on gold 
would almost totally disappear. In 1861, by the acts of , July 
17 and August.."), the Treasury .Department was authori/ed to 
i>xiie *"> ii, 01 1! >,<><)<) in what were 1 commonly known then as de- 
mand noto. An additional issueof $10,000,000 was author- 
ized Feb. It), lxii-j. 'These notes were receivable for all public 
dues, duties on imports inoluded, and were subsequently 
made a legal tender for private debts, and the result \\a^ 
that they commanded the same premium o\ er the ordinary 
greenback that gold did, and went up with gold, step by stop, 
to the enormous premium of L'S.">. Could any better evidence 
than this be required to prove that a greenback made a full 
legal tender would circulate at par, or nearly so, with gold? 
These " demand notes" were of course very obnoxious to the 
bullionistS, because they gave the lie to all their theories 
about paper money, and accordingly they were got out of 
the way at the earliest moment possibh all except about 
$75,000, which are probably lost and, if such is the case, 
constitute a gain of that amount to the people at large. 

70 HOW i-Ai-KK MONKV ii I:D i;v -j HE 

HOW 1'AJ'KK MONKY isst KI> r,v TIN; <;OVKI:XMK.\T 1:1:1 
-I:\TS VAI.I i:. 

Tin- natmv of money has been BO constantly and generally 
misrepresented that, as we have already suggested, it is not 
surpri-ing that people find it difficult to understand how 

:i piece of paper issued by tliG government represents value. 
This can l)e fully understood by considering briefly the atti- 
tude of the individual with respect to his duties and obliga- 
tions to the government. In an organi/ed state of society 
the Controlling power, or sovereignty, is exercised for the 
common good through the agency of a government. A< 
the sovereignty in the United States resides in the people at 
large, the duties of the individual may be said to be self- 
imposed. The powers with which the government, whether 
Federal, State, or local. i- vested, imply a corresponding duty 
on the part, of the individual. It is the duty of the Federal 
( iovernment to provide for the. common defense and general 
welfare. In time of peace it imposes taxes to defray the 1 
expenses of government and discharge its obligation-; and 
in time of Avar it can demand the personal services of tin- 
individual. Thus the entire wealth of the nation is held 
subject to the need- of the State. Private property is taken 
daily, no matter ho\v much it may be endeared to the indi- 
vidual by a-.-ociation, for public uses, Bfl in the 0886 of rOftdt, 
street-, etc., and the tax warrant takes precedence over all 
other liens, without re.-pect to priority. 

The expenses of the government are paid out of the earn- 
ings of the people at large. When the government needs 
money it has to look t-> the people for it; taxes are laid 
and the people are obliged to re-pond. Hut if thcr- 
no money in the country, people are unable, not only to cany 
on private Iran-action-, but to supply the necrs-ities of the 
government. They may pOOSeSfl property and products in 

. .i:s MI.N i I;I.]-I;I;-I.N TS \ M.I i:. 7 I 

abundance, but they can imt In- made available for the U 
of the- government, except through the. instruiiiciitalily of a 
medium of exchange, and it is necessary, therefore, that a 
medium of exchange be deviled. The government might 
borrow gold or silver, or the credit of corporations in t he- 
shape of bank notes, by paying interest; but why should the 
people bo compelled to pay interest for the use of a com- 
modity like gold, when they have abundance of other 
commodities at the service of the government, which only 
require a medium of exchange to be made available, or for 
the credit of corporations, when their own credit is much 
better than that of any corporation? Through the agency 
of the Federal Government, upon whom, under the Constitu- 
tion, that duty devolves exclusively, the people in a collective 
rapacity can issue their own notes, which cover the entire 
property and wealth of the nation, including gold, silver 
ythinir, in :i word, that can be reached by a tax warrant. 
These notes represent property to the amount inscribed on 
their face, which the government was entitled to demand in 
the way of taxes at the time the notes were issued. It was 
in this sense that. Calhoim declared that they were in reality 
"promises to receive," and bore no analogy to notes prom- 
ising payment in money. As between citi/en and govern- 
ment they are the same as money, and, if the individual in 
turn is not obliged to receive them as the representative of 
property to the amount inscribed on their face, it is tanta- 
mount to the people repudiating individually what they have 
done collectively. It is, therefore, but a matter of simple 
justice and equity that Congress should declare the public, 
nntes of the government a legal tender. It is also a matter 
of great advantage to the people, for when a public note 
is made a legal tender it acquires all the functions and 
serves all the purposes of money. The public note is 

72 v,' r.u-Kii MOXKY js.srKn i;v Tin: 

not, then, one tiling t<> the government and another to the 
people, hut ils value- becomes iixcd and certain, as determined 
by law. A dollar legal tender note of the government then 
represents a dollar's worth of property neither more mu- 
lt consequently corresponds to the unit of value 
in the minds of the people In- usage and education, and is a 
mea.Mirc of value. It lias, therefore, representative value 
and the power to ine.-'.surc and exchange property; in other 
words, all the attributes or functions of money. As it rep- 
resents a dollar's worth of property, it cannot vary as a 
standard or measure of value, except as the unit of value may 
vary in the minds of the people. This is not the case with 
money possessing intrinsic value, because its power as 
money then depends chietly upon the value of the material 
of which it is made, and as that will fluctuate' according to 
the laws of supply and demand, it cannot be used as a fixed 
measure of value. Thus gold fluctuates in value, and is 
itself, whether in coin or bullion, a thing to be measured. 
That a measure of value must poc ////////*/> yah,' 

i of the schools, which men of science, out of a desire to 
Distent perhaps, adhere to notwithstanding t!i 
that, they are furnished with abundant proof to the contrary 
in almost, every transaction of daily life with as much per- 
tinaciiv, as the men of science and the churchmen < 
17th century adhered to the opinion that it wa> the sun that 
revolved around the earth and not the earth around the MIII. 
When tin- Federal < lovernnient pays out a dollar legal 
tender note for value received, it will be a.-kcd h<>\\, when 
and where- is the ln.lder to obtain the property or \altie 
which it. represents? The Federal < io\ eminent could say, 
this note represent?- property, which the government is n..\v 
entitled to reeeive, and a tax warrant can produce th: 
property any moment, if it takes the la-t dollar's worth 

I VAI IK 73 

in tin- country; but tin- government is constantly receiving 
proper! v, or its equivalent, in the shape of revenue, and there 
is no ncceiiy to make :i special levy of taxes to pay this 
particular dollar; nor is there any necessity to fix a time for 
its redemption in property. -Being :i legal tender, every 
individual in the nation will take it at the value inscribed on 
its face, and in the natural course of events it will redeem 
itself, in one sense, liy re-turning to the Federal Treasury in 
the form of taxes or revenue. Tt was for this reason that, 
in the ease of North Carolina, mentioned by Mr. Calhoim, 
M-veral hundred thousand dollars of legal tender paper money, 
issued l>y the government of that State, circulated for years at 
par with gold and silver, with no other advantage than being 
reeeived in the revenue of the State, which was less than 
one hundred thousand dollars per annum. 

The wealth of the United States is estimated at over 
$40,000,000,000. The. annual expenditures of the Federal 
Government amount to about $300,000,000, rcqui ring a corres- 
ponding revenue. The amount of public notes, based on 
sound principles, which the Federal Government, backed by 
$40,000,000,000 of property, with a revenue of $300,000,000 
:i year, could safely is.Mie, is a matter of opinion, arrhed at 
in much the same way that the credit of an individual is mcas- 
u red. The amount of money required by a nation is just 
what can be used safely and profitably in carrying on its 
affairs, public, and private. Tt will vary in different years 
and at different seasons of the same year, through the 
operation of causes existing in various parts of the world. 
Hence the necessity of sustaining the legal tender note of 
the government with :i bond, with which it may bo inter- 
changeable in times of redundancy; and it might be possible, 
if the government were out of debt, to accomplish the same 
end by increasing or diminishing the rates of taxation as 
occasion required. 



NOTE. On ]>.-mv .vj we stated that "the foundation of tho 
Treasury note (greenback) is the same as that of a I'nited 
States bond, which secures the payment and sustains the 
value of the bank note, ami it, therefore, ]> the 

highest and be>t security that a medium of exchange can 
ly have." Professor Bonamy Price, although lie 
seems to think that notes issued by a government are not 
as LCood as bank notes, because u there are no means for 
compelling a irovernment to ]>ay money, if il chose- to .vav 

that it haa none," (Currency and Banking, page 45) never- 

theless, is of the opinion that no guarantee for the solvency 
of the notes of a bank is so natural and safe as a deposit oY 
irovernment securities. lie says: U 15ank notes circulate 
largely amonic the poor and uneducated, and when the bank 
breaks, the loss is severe and distressing. These facts supply 
ample \varrant to the State to require of issuing bankers, not 
only that they should pay their debts to the utmost extent of 
their fortunes, as any other person, but further that they 
shall lodire such security as shall al\vay> provide for the 
payment of the debt acknowledged on the note. A guaran- 
tee for the solvency of the notes may be obtained in various 
ways, but none seems so natural and so simple as ;i deposit 
<>t Lfveriimeiit securities with some ollicer of the State. It 
combines two advantages safety, and a natural and fitting 
profit, for the banker from the interest accruing on the bonds 
*ock. The old Exchequer bill of the KiiLrlish government 
\\ :;s an excellent specimen of this kind of security. It could 
always be paid in for taxes, bore a daily interest, and u;t- 
thoroughly trusted, and with reason, by the whole commu- 
nity/' (Currency and Banking, p It i- a bad <: 
that obl'iLTes a professor of politieal economy to* blow liot 
and cold' in this manner. 



BANKING h:ul its origin at an early period in the history of 
commerce, and a banker originally was simply a dealer in 
money. In the New Testament mention is made of a bank 
in which money could be placed at interest, and only 
recently the tablets of an ancient banker, with their inscrip- 
tions uneffaced, were brought to light by the explorations 
now being made amongst the ruins of Italy. In England, 
until as late as the beginning of the 18th century, the busi- 
ness of banking was carried on by goldsmiths. IJanking, 
however, as it is n<\v conducted, is an institution of modern 
growth. The check, certificate and bill of exchange have 
come to perform an important part in the work of exchange. 
It is n<L the intention to enter into a consideration of the 
principles and details of banking further than is necessary 
to a proper uiidcrManding of the question of money, with 
which it is intimately connected. Money, as has been 
explained, is an agency of trade, and, in an accumulated form 
as capital, an instrument of production. The lir>t thought 

of the possessor of money is safety and the next profit. 
Money cannot accumulate value of itself, and consequently 
has to be put to u>e in order to bring its owner a return. 
When hoarded it is not only useless to the owner, but 
society i* deprived of the advantage of an important agency 
of exchange and of production. It is, therefore, a matter of 
importance to FI> ',ety, as well as to the individual, that 
money should be afforded every opportunity to occupy the 
channels of trade and perform the uses for which it is 


designed. Tin? interests of society, as we ha\e seen, arc 
best promoted by a division of labor. OIK- class is devoted 
to agriculture, another to manufactures, trade, education, < 

etc., ami each class is again subdivided into innumerable 
forms of industry. In this way it happens that a class ha- 
grown U]> which is specially engaged in tlie collection, 
custody ami investment of money, and in dealing in di- 
and crcilits based on money. The banker offers reasonable 
safety and re])ayment on demand, or moderate interest, and 
in turn lends the money for the purposes of trade. The 
offices of a bank are to receive money on deposit subject to 
order, to collect money, to invest money, to lend money, ami 
to buy and sell securities and exchange. The check and 
bill of exchange are invaluable' aids to business and com- 
merce, and for many purposes are preferable. to money. 
The great, facilities which a bank affords for the transaction 
of business, as well as its ability to promote the circulation 
of money and foster enterprise, render it an agency of trade, 
ml in importance and usefulness only to money itself. 
Like all other human institutions, banking is of course liable 
toabuscs,but when legitimately ami properly Conducted then- 
is no other institution so closely connected with the well 
being of every individual, or One which is capable of ren- 
dering so much service to soeiet\. It is, therefore, impor- 
tant that banking, like money, should be ha-ed upon sound 
principles. Hanking legitimately conducted is purely a 
matter of private enterprise, as much so as dealing in grain 
or lumber, ami the relation, which the banker sustains to 
the community, differs in no n-speet. from that of an individ- 
ual, following any other pursuit, or profession. Hanking 
should, therefore, be free, and subject only to gei.- 
laws, such as the laws under which partnerships 
conducted. The generally rceogni/ed and ackiiuwled 


importance ..!' hanks, however, have led individuals to - 
and governments to bc>ti\v upon them powers aiil jirivi- 
leges, snch as are bestowed upon tlir v(ca!i<ui <r no niln-r 

class <>f society. \Ve refer more particularly to the power, 
with which banks arc clothed by law, of isMiing promissory 
notes, nominally payable on demand, to circulate as money. 
There is no reason why bankers should be invested with 
tins authority any inure than any other class of society. 
The temporary relief which, by reason of this privilege, 
they are enabled to afford to individuals, and from which 
the community derives ;i henelit, has blinded society to the 
far greater evils which flow from the custom. .V distin- 
guished writer'" upon the subject of money and iinance, in 
speaking of this feature of banking, says: "The bad pra< 
which originated with the IJank of England was an agree- 
ment to pay gold on demand for its inscriptions of credit. 
This was to undertake to do an impossibility. The general 
debts of a, bank are redeemed by its general rexmrccs, and 
these consist mostly of loans and discounts which mature in 
the future. A more flagrant violation of sound banking was 
never conceived. It has repeatedly involved the banks of 
the Tnited States in fatal embarrassments, and brought 
ruin upon thousands of merchants who were otherwise able 
to pay their debts and retain :i handsome surplus/' It is 
not alone the excessive and unfair profits which this system 
(banks of issue) enables those engaged in it to reap from 
the public, but the periodical derangement, of business and 
trade, so fruitful of disaster, which it, leads to, that renders 
it so obnoxious. Jefferson, who never failed to warn hi* 
countrymen against the evils of the >\st-m, in a letter upon 
the subject in l>!o,said: I Jut it will be asked, ' Are we to 

have no banks? Are merchants and others to be deprived 

J. S. Gibbous, In Jobnsou's Universal Cyclopedia. 


of the resource of short accommodations found so conven- 
ient;'' J answer, let us liave banks; but let them bo such M 
an- alone to be found in any country on earth, except Great 
Britain. * No one has a natural right to the trade of 

a money-lender but he who lias the money to lend. Let 
those, then, among us who have a moneyed capital, and who 
prefer employing it in loans rather than otherwise, set up 
banks, and give cash, or national bills (United S; 
Treasury notes) for the notes they discount. It is from 
< ircat Britain we copy the idea of giving paper in exchange 
for discounted bills; and while we have derived from that 
country some good principles of government and legislation, 
uc unfortunately run into the most servile imitation of all 
her practices, ruinous as they are to her, and with the gulf 
yawning before us into which these practices are precijnta- 
ting her/' 

The dependence of the government upon a medium of 
exchange for its revenues lias contributed largely to the 
abuses of the banking system, to which we refer, but since 
the Treasury note, made a legal tender, has been found to 
answer all the purposes of money, much better than gold, 
silver, or the bank note, there is DO longer any reason for 
tolerating banks of i^ue. That, this theory in substance 
finds able advocates, even in Kngland. is manifest from 
following extract from an article in the II 
/;< oii >r of October, 1-7:',, entitled, "The Mint and the P.ank 
of Kngland:'' 

"In breaking this monopoly of the bank, we should be 
taking great Strides toward the attainment of that ideal 
tern of currency which Sir IIbert iVel mu>t have had in 
heart when he passed his currency I n under 

which the State shall be the sole fountain of issue; under 
which no money shall circulate on credit, or if it does, shall 

I;\NK-> \\i r. \\KIN... 79 

circulate on the credit of the State, all liank OOteS, U uell U 
coins, bearing the image and siipcrscript'n ..... f tin- head of 
tin- Staff, and under which all profits upon the issiio of 
money shall form part of the imperial revenue. * The 

power of issue, no\v exercised by the IJank of Kngland. 
and by the English, Irish and Scotch hanks, [all private 

corporations,] is a relio of feudalism. r rhe 

manufacture of coin lias been suppressed long ago, but 
the manufacture of paper money still remains, and the protiN 
of this manufacture are allowed to remain in private hand-. 
the State taking upon itself the manufacture of the only part 
of the currency upon which there is, or can be, a lo>s. If jx 
high time this state of things ceased; that all rights <>f ine 
were gathered into the hands of the State; that the debt of 
the Bank of England was paid off; that all notes but those 
of the State were suppressed; that the powers of issue, now 
exercised t>y the banks, were vested in the royal mint, * * 
and that the profits upon paper currency were claimed by 
the State, and appropriated * * * to the reduction 
of taxation." 

Public banks in the United States are conducted solely 
for private gain, and are free from governmental connection 
or control. They are, however, as we have already observed, 
invested with extraordinary privileges and franrhi.M-s of a 
public nature, intended for the public good. While they 
are eminently successful in enabling their corporators and 
stockholders to secure their own ends, they are far from 
being beneficial to the public. The languishing condition 
of the country at the present time demands that the right to 
make :i circulating medium of exchange shall no longer be 
suffered to remain in private hands, but shall be restored to 
the nation, to whom it belongs, and by whom alone it can 
<be exercised in a spirit of -equal and exact just ice .to -all. 



IMPORTANT lessons can "be learned from the teachings 
of experience. A brief glance at, the banks of the old world 
will be found useful at the present time, as well as interest- 
ing. The first bank of which history gives an authentic, 
account is the Bank of Venice, established in the year 11 71, 
and which, strange to say, furnishes an example of success 
that has never been equaled. 


The JJaiik of Venice \vas established under peculiar 
circumstances. The Venetian government, under the Duke 
Vitale Michel II., was engaged in a war Avith the (Grecian 
Emperor, on account of an outrage perpetrated in his empire 
upon Venetian merchants, and also iii a war with the 
Kmperor of the AVeM. Standing greatly in need of 
means, the Venetian government reported to a forced loan, 
and required its wealthier cili/.eiis to contribute to the 
support of the government ac<-ording to their ability. A 
chamber of loans was organ i/cd, of which the credi: 
constituted the managers, bookfl were opened and an inscrip- 
tion of credit entered for the amount paid in by each, 
on which the State agreed to pay interest, at the rate 
of four per cent. a. year. The^e inscriptions of credit \\ 
made transferable in whole or in part on the books of tin- 
bank. The government entered into no obligation to repa\ 
the money, but, to quote from C'olwell, "reimbursement of 

the loan ceased to be rega either necessary or desi- 

I;A\KS OF TIM-: m.n woi;i.i>. 81 

rable. Kvcry creditor was reimbursed when he tran-t'crn .i 
his claim on thi' books of the bank. Fnun being convenient 
and valuable as an investment readily obtained, juul as 
readily disposed of, it became, by a natural proces-. 
medium of payment, in transactions of commerce. That 
fund, which was desirable to all seeking investment, would 
be willingly, in many instances, accepted in payment of 
debt* already existing, or for goods ju>t purcha>ed. There 
is u r ood reason to believe that this fund was largely used in 
tills way for centuries before the final arrangements were 
made, of which our accounts are more clear, * * There 
is no question, although we have not the details, that the 
government had found it perfectly easy to enlarge the 
amount of the original loan or stock of the bank, as the 
demand for its funds generally exceeded the supply. All 
money deposited for the purpose of obtaining a credit in 
bank was accounted an addition to the original loan, and as 
Mich taken into the public treasury as money lent the State. 
Every such investment increased the stock of the bank, and 
replenished the treasury of the republic. If individuals 
could make purchases and pay debts by transfers in bank, 
the public treasury could well afford to receive, in payment. 
of its dues, credits in bank, as that would only be equivalent 
to taking up its own obligations. Thus, the more these 
credits were employed, the more the demand for them 
increased, the more rapidly money flowed into the treasury, 
and the more readily the government could afford to receive 
payment of its revenues in the funds of the bank." 

The history of the Bank of Venice is presented by Mr. 
Colwell, in his abl? work entitled, "The Ways and Mean- 
of Payment," in such a clear light, that we can do no better 
than to continue to quote from him at length as follows: 

" The way was opened, by the experience of two centuries 


and a half , for the next chief characteristic of the Bank of 
Venice. In the year 1423, in the administration of the 
Doge Thomas Moncenigo, it was decreed that all bill- 
exchange payable in Venice, whether domestic, or f.>r ' 
should be paid, unless otlier\vi>e stipulated and so expressed, 
ill the bank; and that all payments in gross, or in whole 
transactions, should be effected also in bank. This at once 
brought the mass of the payments of that great commercial 
city to the bank. Whatever irregularities, and whatever 
confusion had prevailed, this introduced a uniform and, from 
long familiarity with the bank, an intelligible system. The 
endless diversity, and bad condition of the coins circulating 
in Venice were a, suflicient recommendation of the i 
regulation to all who had not very special reasons, ind 
for disliking it. This measure at once created a great 
additional demand for the funds of the bank, and brought 
large sums into the public coffers. The government, how- 
ever, no longer paid interest for the sums received from the 
bank. The funds obtained in this way were brought t the 
bank for the payment of bills of exchange, and were paid in 
for that purpose, and not with a view to interest. The rapid 
succession of payments occurring at a point where all {In- 
payments of Venetian commerce were accomplished, n 
the intervals during which the funds remained in the hands 
of any one merchant too short to make him solicitous at 
interest on balances or deposits. As all payment* of the 
kind above designated were, by law, to be made in hank, 
unless otherwise agreed, and as that mode of payment 
far more convenient, it became alni'.-t the exclusive Of 
"f trade. All who had engagements to'mert, found 1l 
in the bank: of conr-e, all such provided 

py to meet them, >r carried to the bank the amount 
of coins renuUitc lor the purpose. The government con- 

i: \\K> MI-' ! III! OLD W<>KM>. 83 

tiiiiicil to take- nil money paid in as a consideration for 
allowing an in>cription on the hooks of tin- bank to tin- 
credit of tin- depositor. The 1 sums which thus flowed through 
(he bank into the treasury would, with the previous bank 
funds, make up the quantity needful for the convenient 
discharge of the commercial payments of Venice. As thU 
amount fluctuated from year to year, and during each year, 
with the course of commerce', a very effective modi- of 
accommodating the supply of bank funds to the exigency of 
the demand came obviously into use. AVhcn the payment^ 
in bank were heavy, and the bank funds in great demand, 
money flowed freely into bank, and the credits were propor- 
tionnbly increased. When an occasional demand for the 
precious metals arose, the holders of bank funds could 
readily dispose of them at a slight reduction for coins. The 
purchasers of bank funds were sure of meeting soon a 
demand for them; for the demand for a medium in which 
the 1 ever-recuning payments of debts were made so much 
exceeded in intensity the occasional demand for specie for 
exportation, or any other use, that during the whole existence 
of the bank, with very slight exception, the bank fund was 
at a large premium over coin^, so large that it was finally 
fixed by law at 20 per cent." 

"The republic could well afford to maintain a liberal 
policy towards an institution so important, both as a fiscal 
and commercial agent. That the inhabitants of Venice were 
satisfied, we cannot doubt, as not an objection was ever 
made to the bank, at least none is extant; neither book, nor 
speech, nor pamphlet, have we found, in which any merchant 
or dweller in Venice ever put forth any condemnation of 
its theory, or its practice. There was no hesitation in 
carrying money to the bank, so long as it was not doubted 
that the bank funds would purchase specie without a loss, 


whenever it might be needed; and the uniform premium of 
kink funds settled tli:it point. Under such in, the 

regular payments of trade would proceed with a rapidity 
and economy previously unknown, so far as the history ..f 
coiip-ieive informs us." 

"It is worthy of remark, that this very etlicient mode of 
adjustment discovered and used so largely at this early 
period in the history of commerce, was not dependent for 
its efficacy on the guarantee of the republic. That guarantee 
sprung out of the mode in which the bank originated: this 
convenient method of liquidation sprung from the u 
this new substitute for money." 

" The facility of payment furnished by the bank, which 
made it the admiration of Europe, honorable at once to the 
government and merchants of Venice, and a support to the 
pride and power of its people, consisted in substituting, 
medium of payment, the debt of the republic for current, 
coin. * * * The government took the coin* 
time for all, giving therefor a corresponding credit in the 
bank; and allowed the depositor or lender to transfer his 
claim upon the republic in payment of his debt, in pi.-, 
transferring over the coin in each payment. \Vliat. -\ 
can employ in payment of debts, they will be willing to 
receive in payment, and this independent of any legal com- 

"Experience soon evinced the power and convenience of 
this mode of payment. These bank credits were divisible to 
every desirable - and they could be transferred with 

a readiness, speed and safety, beyond all comparison, 
Superior tO any mode of paying in coin. Tin- same sum or 
credit might be kept in such rapid circulation, as to 
an amount of payments, in a specified time, far beyond any 
;H nt of coin. This rapidity 1- 

RAJS !(!: oi. i> woiM.n. 

ioiny, for :i mnch lc-s sum of credits \\a- made to c: 
a given amount of payments with far greater speed than 
could have b'.-n attained with ruin. Imt this ceonomy 
resulting front an increased speed aii'l power of circulation 
\\ as still more important, arising from the fact that tin- coins 
which were deposited as the basis <>f tin- crnl'it \\. 
MM ui again ivstmvl to the n^iial cliannrls of circulation 
the payments of government. Thus the coin was nut with- 
drawn from its proper functions, and the credits remained a 
perpetual fund, to In- employed in larirc payments. ThN 
tem of payments was so well adapted to the exigencies of 
commerce, that it was maintained in full vigor, in t : 
Commercial city of Venice, for almost four hnndrrd year<. 
It was nil institution or device of the credit system, fr by 
its aid payments Avere effected, and that to :i vast amount 
annually, without any n>e of coins or bullion. It only 
perished, when the city itself fell, at the conquest of Italy 
by Napoleon; but the conqueror carried off no coin, no penny 
of prey. The credits of the bank were crushed under the 
rude touch of nu invading foe. They wen- l^t to the 
proprietor, but no equivalent passed into the hands <.f the 

destroyers. If the holders of thoe credits suffered, the 
invaders were not enriched. In assuming the sovereignty 
of Venice, the conqueror assumed the 1 right and duty of 
making good these bank credi 

The Venetian government was careful at all tini 
provide for the wants of the public. In course of tin 
became necessary to establish in the bank a department for 
the custody of coin or bullion, which the o\\ ner might desire 
to use. Deposits of this kind were subject to the order of 
the owner, who could reclaim them at pleasure, or transfer 
them in the same manner as bank credits. This feature of 
the bank prove eminently useful to the public, but did not 



lead to any diminution in thv- i'niin if, as the 

demand for inscriptions of credit was al\\ ;-r than 

tlie supply. The original capital of the hank was 2,000,000 
ducats, but it rose to about 5,000,000 in the ]sth century, 
and to over 14,000,000 (about 816,000,000) at the d 
long and remarkable career. 

The history of the bank of Venice establi>hes several 
important facts of deep significance to the American pi 
at the present time. The inscriptions of credit of the bank 
were simply evidences of indebtedness of the government, 
bearing no interest, which constituted a medium of excha: 
The law which required nil bills of exd, 
Venice t<> be paid at the bank, unless otherwi- 
stipulated, was apparently an arbitrary requirement, but it 
worked no* injustice; <>n the contrary it increased the 
>lrength of the bank inscriptions, and resulted in greatly 
promoting the facilities of commerce and in making 
the commercial metropolis of the world for centuries. The 
evidence of indebtedness, which the government in the 
iirst instance required its creditors to take, it in efl'ect. made 

gal tender for private debts, which was no more than 
ju>t. The large premium which these inscriptions hoiv W3 
ii(jt. dm; t) any act of the government, but to the value 
attached to them by the public. It, r 9 high as 30 

per cent., when the gi.v-rm< nt f-und Li 

a limitation, which was 1i\cd at 'JO per cent. This premium 
on inscriptions of ere. lit in :i bank, which \ pede< in- 

able or payal.le in gold, (mere * rag money" they might be 

d) uliich e\i-tcd f..r centories, ifl inexplicable on any 
i-y \\iiidi C;MI ! advaj; 'lie bullioni-fs. The 

ai .!--d, by the Use of their invdeemabl" 

of credit, to achieve ;L decree of DOWCT :md 
prosjei-ity, \\hi-h they retaiix-,1 f,,r ccnturio, that proved a 

OF 'Mir: < ; D \\ < >i;u >. 87 

con-tai'l >oiirce o! rn\ y and wonder to the rcM ol llie world; 
MIK! <luri.i ;_;' the A\ hole time they never once suflVivd frm 
commercial cra^i cs or money panics, such a i-rienrrd 

in Kngland aiiu the United States e\cry six to t 
It lias been :i mallei- of sir.-prisc tliat other nations \\ iin.- 
the j.i-osperity of Venice did Hot imitate her c\amj.le, 
that is not liali' so jstrango us tlie fact that the people of the 
CTnited States, having experienced the great advantag< 

c-ven jKirtial le-'al tender paper money, should blindly cliiiLC 
to the rotten and disastrous vpr.-ie l.a-is >\>tem of bank- 


Tlie Bank of Genoa was established early in the 1'Uh 
century, and, like the Bank of Venice, had its origin in the 
ncces>ities of the State. The loans upon which it \va^ la-cd 
were not, however, forced, but were the spontaneous oll'ei ; 
of the people. The creditors of the bank bccam. 
powerful body. In the course of time the bank adopted 
various new devices, and its system became greatly compli- 
cated. According to C'olwell, the Bank of (ii-no.-t \\as the 
first to originate the bank note, which has since played so 
important a part in the affairs of the world. It met with the 
same fate that befell the Bank of Venice at the time of the 
French invasion under Napoleon. 


The Bank of Amsterdam was established in 1609 on the 
theory that deposits once made could never be withdrawn. 
For nearly two centuries it enjoyed great credit, and con- 
tributed largely to the prosperity of Amsterdam. Coin and 
bullion were also received on special deposit, and could be 
reclaimed by the owner at pleasure. The fact that deport x 
once made could not bo withdrawn, resulted in the bank 

88 HANKS OF Tin-: oi.i* WOULD. 

accumulating a vast amount of money, but how much was 

kept a secret. "When tin- supply of credits based < 

led the demand, the bought up bv the 

bank, through brokers, at a premium of four per cent. In 
1790 it was discovered that, during the preceding fifty years, 
large loans lia<l been secretly made to the East India Com- 
pany, the Provinces of Holland and the city of Amsterdam, 
and that there was but little treasure left in the bank. It 
consequently failed through the unfaithfulness of its officers. 


The Uank of Hamburg v\":is established in 1G19 on the 
model of the Bank of Amsterdam. It, is still in existence, 
and is a useful and flourishing institution. 


The next great bank established in the course of time was 
the JJank of England, an institution which has exercised, 
from its organization, a powerful influence in the commercial 
and financial affairs of the world. Its charter was obtained 
in ir.!4, and it went into operation January ], 100.",. Its 
eliarter conferred on it full authority to borrow or receive 
money ami give security for the same under seal, buy or sell 
bullion, gold or silver, etc., etc. No special power was 
granted to issue bank notes, but the authority to do so was 
assumed as an incident to the general powers -with which 
the bank was invented. It was, in brief, chartered as a bank 
of deposit, loan, discount, i>sue and circulation. The whole 
amount of the capital stock originally subscribe. 1, 1,200,000, 
was handed over to the government as a special loan, the 
interest on which was secured by certain ta nated 

for that purpose, and the sum of $20,000 a year was allowed 
by the 'j-overnment to the bank for the management of 
the loan. The capital stock of th c bank is HOW out 


t,000,000, and the accruriulated profits about i.;,000,000 

in all about $88,000,000, It can iiu- bank notes to the 
amount of 870,000,0000, not under 1*5 (*2">) in denomination, 
; iivt thai amount of government securities, and also to 
the amount of gold and silver held in its vaults fur their 

At an curly period in the rareer of the bank, it took a 
bold and dangerous step, which introduced a new feature in 
banking. By its charter the bank was authorized to deal in 
bills of exchange and promissory notes, and, as has been 
mentioned, it also assumed the right to issue its own n> 
1 Jills of exchange and promissory notes, then as now, enter- -d 
largely into all commercial transactions, and usually had 
some time to run before they were payable. In order to 
acquire favor with the public, and increase its business, the 
bank adopted the custom of giving its own notes, payable on 
demand, for discounted paper, payable in the future. This 
custom was adopted on the theory that the small bills of the 
bank would pass into circulation, like money, and be dispersed 
throughout the kingdom; that they would become indispen- 
sable in business transactions, which would be greatly 
increased by the number in circulation, and that consequently 
they would not be returned suddenly, or in large amounts to 
the bank for redemption. 

The unsoundness of the principles of banking, adopted 
.about this time by the Bank of England, and upon which 
the specie basis system of banking has been built up, is fully 
demonstrated by Colwell, from whom we again quote a^ 
follows: "Upon such considerations, the bank decided to 
issue notes payable to bearer on demand, in exchange for 
individual paper payable at a future day. The bank thus 
undertook to do an impossibility, in the hope that it would 
not be called upon to redeem the promise or make the 


attempt. Wliat the 'bank could do was to give its own n 

of convenient denominations for circulation in exchange for 
individual paper and payable at the same time; and in d 

tliis alone, the hank could have rendered ;i great service to 
the public with small risk. The bank had not the 
and could not, therefore, purchase the paper offered; the 
notes offered by the hank were not, money, though a much 
better subMitule for money than the notes of individuals, 
which could only circulate to :i very limited extent as a me- 
dium of payment. The hank issued notes payable to hearer, 
without endorsement, and this certainly added to the facility 
and convenience of their passing rapidly from hand to hand 

currency. It, departed from sound principles when it, 
made thoe notes payable on demand in gold or silver; for 
it must be contr. >und principles to undertake to do 

what cannot he done. The hank notes were nothing n 
and should not have been held up to the public as anything 
more, than the mere promissory notes of the bank, conven- 
ient in form for circulation among all tho-e who chose to 

them, not as money, but as promises to pay mo: 
The promise should have been only such as the bank could 
perform. Strictly speaking, the hank could only pay in coin 
when it received in coin. It could c\a< t p-yment for the 
note received of every individual only when the note ma- 
tured and not before. The accommodation between the 
bank and its customers was mutual in this exchange of li- 
the hank iv-eived a profit, and the cu-toiner received the 
bank n< ' 'er medium of payment, one \\hich would 

he received out of bank a- w-ll as in it, in payment of d< 
oi' in making of purchases. lint it should >een 

imagined t' >r a moment, that by t the 

}>ank and its c iln-y manufactured money. * 

This advantage, (notes payable <: demand.) which the 

BANKS Of 'I UK OLD woi:i.i>. !H 

IJank of I'ji^laml only ofl'ercd in the lirM in-taiice to attract 
biiMiiess, and f> p ve currency to tlu-ir notes, lias been paid 
i'or' since l>y the people uf Kii^land, in :i scries of pressure-, 
revulsions, and currency iliictuations, which have inflicted 
injuries and losses upon the H'ON eminent and people of < Jrea: 
Britain, in c.)iuparison with which the present, national debt 
may he iiiMpiiiicant. * 
M Bat the bank was stil] more daring; it discounted .notes 

largely, and carried the- amount of the proceeds to the credit 
of the party, as so much money deposited; that is, in the 
same column in which' the bank ufave its customers credit 
for gold and silver deposits, it LTave them credit for the' 

amounts of notes and acceptances having months to run before 

maturity, anil eniraiLvd to pay the amount of the^e securi- 
ties on demand. It mingled :i process of credit with apn 
of cash, in a modi' as absurd in theory as it was dangerous 
in practice. The men who had ^iven their notes on time 
had provided i'or a regular progression of payments, accord- 
ing to the movements of business and the demands of con- 
sumption; but the Bank of England virtually abolished the 

contract of deferred payment between the parties, and 
became paymaster on demand of debts not due for months, 
to an immense amount."' 

"The bank had no warrant, in principle or practi-e, }<>r 
this hazardous eii'_ra^emcnt. Its only excuse was the same 
which was -iven for the i>Mie of bank notes payable on 
demand, Without the money, namely, that the bank would 
not be asked to pay for them all at one time." 

k *\Ye n-LTard this error of the Hank of Kn^land as the 

parent of the uTeau-r portion of the mischief s and evils for 

which banks in more modern times are answerable. The 
banks from that day to this have continued to issue notes 
payable on demand, and to u'rant credits so payable, in e\- 

HANKS <>K Till; <H.). WOKI.Jt. 

change !'<>r - payable in from '.',() to 120 days. They 

do this, relying wholly on the forbearance of the public. 

i'.ank of Fngland did at iirst. Sad experience ha- 

shown, that there are times when the public is not only not 
forbearing, but when men rush with frantic haste to demand 
of the hank payment of both notes and deposits. Nearly 
every bank in existence, conducted on this plan, has, at some 
period of its history, felt the power and rashness of the public 
iu seasons of commercial panic. The banks lose their power 
and usefulness at the, very moment when the public mo>t 
needs their assistance. Friends in sunshine, they beo 
enemies in the storm/' 

Tin- most notable event in the hi>tory of the Hank of 
Knglaml was the suspension of specie payments in IT'.'T. 
Thi> was catiM-d by the large advances made by the bank 
to the government, to aid in the pn.-ecution of the wars with 
France. The spe.-ic in tin- bank had been reduced to a little 
.'too. (ion, when the directors of the bank became 
alarmed and brought the matter to the attention of the Privy 
Council. The council on the L'Tth of February, ]7'.'7, 
determined k> that it is indispensably necessary for the public 
service, that the .Direct. .rs of the Bank of Finland should 
forbear is^uin^ any cash in payment, until the p 
Parliament, can be taken on the subject." < hi the :;d of May 
following, the ftUflpensioi] w:i^ sanctioned f-u-a limited time 
by an a't of I 'aiTiament, and wai subseijuently continued 
by repeated act-- of Parliament until is-jo, when an 
pa-M-d pn,\ idiiiLT for the resumption of specie payments by 
inning on the Nt of October, 1820, and reach- 
ing full payment on the 1st of May, 1823. The people of 
.1 r.ritain were obliged, theref." ry on tlx-ir 

affairs for :i jicriod of twcnty-tive jean with an irredeemable 
bank paper currency. During this period, notwithstanding 

BANKS "! i in: OLD \\ <H:I.I>. 93 

tin 1 vast expenditures of war and the great burdens of taxa- 
tion, (in-at IJritain increased in wealth and prosperity more 
rapidly than at any other period in her liistory. The public 
revenues were increased from 23,126,000 in 1707 to 
672,210,000 in 1815, at the cl"M- of the Avar -with rYance, 
and stood at 54,-Js-J,oou in is-JO. The amount raised by 
loan and taxation, during the time referred to, was never 
less in any one year than 47,362,000; during nine years it 
was over 70,000,000 a year; and for the years 1813 and 
1^14 it was respectively 108,397,000 and 105,698,000. 
The loans negotiated by the bank for the government during 
the suspension of specie payments amounted to 350,000,000. 
During this period the Bank of England was a lower of 
strength to the government. I>ut what after all enabled 
Great IJritain to surmount all difficulties and eome off victo- 
rious in one of the greatest contests of modern times, was 
lli'- wonderful development of her producing forces, occa- 
<-d by the abundance of money put in circulation by the 
Avar, irredeemable though it was. During this time 3,000,000 

<>t* acres of unimproved land were brought under cultivation, 

:md the exportation of manufactured cotton goods increased 
in amount from 7,000,000 in 1801 to 27,000,000 in 1822. 
All classes of society participated in the general prosperity 
which prevailed, and during the entire period the nation 
never once Miil'ered from a commercial crash or money 

The guns of Waterloo, however, had hardly ceased to 
echo, until the money power became' clamorous, just as it is 
in the United Siaies n,.\\, for a return to specie payments. 
No one was so blind as not to be able to see that Great 
Hritain was enabled, by her paper money alone, to carry on 
her wars on the Continent, and that by it alone Avere the 
people enabled to make such remarkable progress in com- 

9-1 I ;. \.\K- OK TIIK OI.I> WOULD. 

mcrce, agriculture and manufactures; but there were, m 
llieles>, large JiiuiilKTs who Avcre bitterly hostile to paper 
currency, and who seemed to imagine that they were bein'_r 
subjected, in some way, to :i great wrong. Landlords, for 

example, in many instance's, in contempt of tlie la\v which 
gave tlieir tenants the right to pay in bank notes, compelled 
them to pay their dues in gold. There were evidently fools 
and rascals in th<>M- days, as we'll as at the present time. 
The " political economists," backed by the ''cannibaN 
change alley," were strong in Parliament, and the country 
gentlemen were led to believe tliat a return to specie wa- 
essential to their interc-sts and safety. Specie p:mi) 
\\cjx- accordingly resumed in 1823, and the resumption 
was accompanied by the most disastrous commercial crash 
and money panic that ever visited any nation. The era of 
general prosperity departed to return no more. Jlral otatc 
depreciated largely in value, and the real estate owners of 
the kingdom decreased in number from over 150,000 to ] 
than 40,000; bu>inc>s men, merchant^, manufacturers^ < 
were ruined by the thou>and; wages -\vero rebiced, and 
laborers thrown out of employment, by the tens of thousand^: 
and the public revenue fell oft' to such an extent that pay- 
ments on the public debt, cea-ed, and have never practicably 
been roumed.* 

The bank act of ISM, by which the isMie department 
separated from the general banking bu-ine-> of the institu- 
tion, remedied T-omc of the defects of the sy-tem which the 
bank had founded, but sii-pen-ioii> of j^perie payment are 
still of frequent occurrence. In lv;7 another cra-h and 
money panic, occurred in Kngland, which al- involved 
this country. C'oiigre^, in ]^:'.L', had raided the pri-e 
gold, as compared with silver, to sixteen to one, and demon- 

See Chapter ou Specie Kesnmiitlon. 

OK 'J UK out \voi:i.j. 95 

eti/ed silver by making it a legal tender only for small Minis. 
Gold thus became the basis of the currency, and when the 

Hank of England called it away to supply the wants of 
England, tin- banks of the I'nited States were obliged to 
MisjK-nd. IMIHIIC-S in tin- United States was brought to a 
-complete stand, and for three years the American people 
were left without any iiold basis, and uere e<nse<]uently 
obliged to use shinpla^tei>. In Kngland the looses were > 
enormous and the distress so threat, that Parliament at its 
next session reorganized the bank by separating the issue 
department from the general business department, as already 
mentioned . 

From September "7, ls44, -when the bank was reorganized, 
to February 4, ls:>s, it altered its rate of interest n'fty-six 
times, raising it, from time to time, from two to ten per 
rent., in an effort to retain its specie in its vaults; this, in 
the meantime, led to great linancial embarrassment, and a 
panic was only averted by the bank suspending specie pay- 
ments (October 2:*, 1847) and affording relief by issuing 
irredeemable paper. In 1S57, having ruined the merchants 
and business of England, it "\vas again obliged to suspend. 
Eleven changes in the rate of interest were made between 
April, 3857, and January, 1858. The bank again drew 
upon the United States for gold, causing the banks to sus- 
pend, involving thousands of people in ruin and bankruptcy. 

In 1806 the ]>ank of England suffered another suspension 
in consequence of the war on the Continent of Europe; but 
this time the United States escaped. (Greenbacks were the 
medium of exchange, and the nation was no longer at the 
mercy of foreign banks. Gold was shipped abroad to the 
amount of $45,000,000, and sold as a commodity at a Jiigli 
price for the use of the Bank of England, without occasion- 
ing the slightest ripple in the business affairs of the country. 


A distinguished statesman,* in commenting on these facts,. 

"Thus, three times -within less tlian twenty years in tliis 
generation, each time in violation of law and without right, 
has the bank of England suspended, and acknowledged her 
bankruptcy! "what a. 'marvel of financial strength ami credit' 
sin- has been, to be sure! AVcll may the hullionists sing 
jin ans to this destructionist of all values for their benefit. 
True, each time her failure was sanctioned by a healing act 
of Parliament, because her illegal suspensions \\ ere necessary 
to save the credit of the government itself and to prevent 
the widespread destruction of all values and the overthrow 
of commerce and manufactures which was then going on." 

"Neither of these suspensions took place until she had 
refused all discount to her customers, even on the best sixty 
day commercial bills secured by government securities. It 
will be thus seen that gold was not the regulator of the 
currency of England, but the price paid for money at her 
bank, and having provided herself with a currency based on 
gold, in order to retain that basis whenever it is wanted 
foreign loans, or he-cause of a foreign war, slie i* obliged to 
increase the value of her unit by changing the rate of dis- 
count, or the interest which her people were obliged to pay 
for their mon 

"This is a very important matter to be borne in mind. 
Indeed it is the root of the ^hole matte)-, and in <li>< -n 
questions of finanrc has h< < -n too ofien overlooked, i 
it ahows that after all, a currency based on gold must have 
its value determined by the rate of interest paid for it, and 
not by the stability in value of gold itself. Because of thi> 
necessity of keeping gold in her vaults, the Bank of England 
could not maintain a steady and permanent rate of int. 

A<Mrr' of Hon. 15. F. I'utltr. :it i t the Board of Trade of Sew 

York City, Oct. II 


for money to which her business men could adjust their 
affairs. Hence come fluctuations of trade, financial depres- 
sion, ruin of commerce, the stoppage of manufacture. Who 
can cany o? business requiring credit, successfully and 
without failure, when the rate of interest which he must pay 
for his accommodations and loans, alters day by day and 
quintuples in a month, and especially when these changes 
come from causes that he can neither foresee, guard against, 
hinder or alleviate?" 

"I challenge all the bullionists of the country to show any 
disasters and losses in trade and commerce, traceable to 
inconvertible paper, continental money and all, which shall 
be equal in effect, either as to sums, amounts, disasters or 
ruin to the business and people of a country, with these I 
have sketched coining from a currency called 'honest money,' 
based on gold in the vaults of a bank." 

The average bank note circulation of the Bank of England 
for the past twenty-eight years has been $100,000,000; its 
average of bullion, $80,000,000; its average rate of discount, 
4 per cent.; its average deposits, $100,000,000; its average 
liabilities, $102,000,000; and its average reserve, $9,500,000. 


The first public bank in Scotland was established in 1695, 
under a charter from the Scottish Parliament before the 
union with England. The Scotch banking system is similar 
to that of England, but is conducted very differently. With 
a population of a little over 3,000,000, Scotland has nearly 
400 banks. From C'ohvell we learn that, "Whilst the Bank 
of England, from its first conception, was identified with the 
government, the Bank of Scotland, and those which suc- 
ceeded it, identified themselves with the whole body of the 
people, from the laborer who could save five pounds to the 


richest merchants and manufacturers. They became at once, 
and have continued to be, tin- savings banks of the poor but 
industrious clashes. The banks paid OIK- per cent, below the 
current rate of interest for these deposits, and returned them 
on demand, or according 1<> stipulation. The-e savl 
the poor help largely to make up the vast sum of dep< 
\vhieh characterize the banks of Scotland. One result ha- 
been to give the benefits of those savings to the general 
customers of tlie banks, instead (f their being invested in 
tlie ]nblic debt, or lent upon mortgage, as in Kngland. 
No doubt this has contributed greatly to that pro- 
in weal tli and productive industry which has so much distin- 
guished Scotland for more than a century. It had another 
good effect in begetting that care, caution and prudent 
management for which the banks of Scotland have so well 
founded a reputation.*' Another peculiar feature of the 
banking system of Scotland consists in the manner of 
.irivini; cash credits. An applicant <lepo>its :ijpnvel secu- 
rities with the bank and is allowed a standiiiLT credit on 
book-. He then draws checks for this amount and makes 
<lcpo>its in the ordinary way. An account is made- up e\ 
six months, the rate of interest charged on loan- I- 
per cent, more than that allowed on dejo>it>. In comment- 
ing upon this feature of banking in Scotland, Colwell say-: 
"In Knirland, the bank which deals in promi^ory notes and 
bills of exchang .iling in paper which repiv- 

business transactions which are pa-t; in Scotland, the bank 
ope: th rcb'i'ence to busi: 

which 5^ i,, conic. Tn Scotland, th" bank- 
me: : which helps their standing, and upon which 

they can draw for the purpose of payment, whenever t' 

need. The theory of the KnglMi banks \<, that the 
mrrency mi;-t folh\\ , and be. cditi-olled in quantity, by the 

HANKS <>;' TIIK Ol.Ii WoKl.H. 99 

business transactions which go before. The theory of the 
Scotch banks is, that, these business transactions being all 
managed by nun of business, who decide according to the 
exigencies c>f industry and trade what will promote their 
private interest, and meet tlie wants of the people, it mu>t 
prove an important aid to men thus engaged to supply them, 
in advance of the progress of their business, with :i credit 
upon which they can draw at pleasure. * In England, 

they think this will lead to over-trading, by the stimulus it 
affords to so largo :i class of dealers: in Scotland, long 
experience has taught them that this Knglish apprehension 
is wholly groundless. They know that the dealers who 
enjoy these cash credits are so immediately brought under 
the supervision of the banks, and their own sureties, that 
they are, perhaps, the most prudent and safe men of business 
in the world. There is a prevalent idea among 

statesmen and writers upon money, that there should 1)0 a 
broud basis of money or g,hl coin, under and as a support 
to the paper circulation; * * that a paper currency, to 
be perfect, should fluctuate as a gold currency would do, if 
it were the sole medium of payment. To the mind of a 
Scotch hanker, a greater absurdity could not be presented 
in as many words. He would say: 'What! when a demand 
springs up for !_r-M, in consequence of some foreign Avar, 
must we so regulate the issues of our banks, as to reduce 
the currency of notes in the same proportion that the 
currency of gold is carried off! Rather should we increase 
our issues, and supply the place of the currency that is 
exported.' They km\v that bank notes can fully discharge 
the functions of money, for they see it every day; and not 
only so, but they are certain that almost no business of 
Scotland is carried on by means of a currency of gold. 
The Scottish people can never be made to comprehend why 


their bank notes, hank deposits, and cash credits, should 
fluctuate in amount as gold would fluctuate, it' exclusively 
employed. These forms of currency do not come of gold; 
they are not founded upon it, and they have nothing to do 
with it. In Scotland they understand, as well as they do in 
England, the use of gold as money; they know its value as 
a commodity, but being a costly commodity, they do not 
incline to employ it as a currency, except BO far as their bank 
currency fails of its object; nor do they wish to purchase or 
hold it as a commodity, except for such special purpose as 
may promise adequate advantage. Their system of banking 
enables them to dispense with it almost entirely. In this, 
they are far from thinking themselves behind their neigh- 
bors, in intelligence or financial skill." The hanks of 
Scotland issue bank notes as low as 1, and the people of 
Scotland are always amply supplied with a medium of 


France enjoys a financial system superior to that of any 
Other nation. The iiscal a flairs of the government are 
conducted by a central administration, or Ministry of Final 
and ei;_rhty-six branches located in different di>tricts. All 
transactions between the LI'ON eminent and the people arc 
carried on in the iWms ami methods of the tiva-ury depart- 
ment, without, the intervention of banks. The government 
has no connection with the Hank of France, but deals with 
it as it does with individual.-, except that its QOtefl arc m 
_ral tender whenever the scarcity of specie ivnder< such 
JSary. The tna-ury department of France in 
many re-pec; fflkg, Ii : i-d as a 

duty by the French L r o\ eminent to afford tl all the 

facilities in the way of domestic exchange that banks could 

TIM-: FI:I:N< ir SY-IIM OF ri\\\i:. 101 

give, instead of allowing it to be i'urmshcd exclusively by 
the 1 tanks. 

In each district there is a receiver general, in whose office 
tlu- revenues of the district arc paid. AVhen once paid in 
they are subject to the order of the central ad ministration 
alone, and abundant precautions exist to insure strict 
accountability and integrity. The treasury is managed with 
special reference to the wants and requirements of the 
public. The manner in which its operations in this respect 
are conducted is thus set forth by Colwell: "Among its 
numerous officials, is one in direct relations with the chief 
minister of finance, who ha* special charge of the locality of 
all money in the treasury. lie can neither receive nor pay 
money; but he can transfer the public money from one 
office of the treasury to another, and place it wherever the 
exigencies of the government may require. It is in the 
office of this functionary that is established a direct and 
very important connection with the current business of the 
day. Bis duty requires of him a careful and timely study 
of the points of public expenditure; he must know not only 
where the money will be wanted, but he must have it ready 
when required. To accomplish this important, object, it 
becomes his duty to study the domestic trade of the country, 
that he may avail himself of the internal exchanges in the 
necessary distribution of money in the treasury. It is very 
rare, indeed, that the French treasury ever shifts the locality 
of gold or silver. It may require many circuitous tran.xfers 
to move the excess of revenue, in some departments, to the 
points of expeniture, and to supply the deficiency in other 
departments. To make these transfers, the officer who has 
special charge of that duty relies almost wholly on the 
domestic exchanges. lie is well informed where funds are 
wanted for the purposes of industry or trade; he learns 


where and when those "who reside in the vicinity of each 
office of the treasury desire to remit funds; and lit; learns 
whence and when they wish to draw them. His office 
becomes the depository of this information, Because lie 
intervenes in this biisinos of giving drafts upon the treasury, 
payable at other points, and giving money at his own office 
for money received at other offices. His intervention in the 
transmission of funds assists in balancing the internal 
exchanges of the country; for, of course, the office is only 
applied to when the business of individuals requires such 
accommodation. But this business is not confined to receiv- 
ing money at an office of the treasury in one place, and 
paying the amount as may be required at another oilice, in a 
different place; that is, to a mere exchange of money between 
the treasury and individuals at different places; it goes much 
further. At times and places where large transfers of funds 
become necessary, the proper officer of the treasury becomes 
the receiver of commercial or individual paper to a large 

"The receivers-general of the eighty-six departments, and 
their subordinates, the recei\ers of the treasuries of the 
aiTOiidissnicnts and communes, maintain reciprocal bu>ii. 

relations by frequent exchanges of money, by drafts upon 

each other, and by bills upon Paris and oilier place-. The 
chief officers of the treasury become, by the constant report 
of this business to them, intimately acquainted \\iih the 
whole industrial and commercial movement of the popula- 
tion. They regard it as extremely important to th- 

. that, the money which is necessarily withdrawn from 
private n 88 for public, purposes, should be retained in the 
trea-ury as short a time as po>sibl>. Out of 300,000,000 or 

.000,000 of francs annually remitted from the country 
treasuries to Paris, not more than ten per cent., or 30,000,000 

Tin: I'KKNf n SYSTKM or FINANCI;. 103 

or 40,000,000 of fr;tn<-<, arc ever at one time in the public 
treasuries.* This shows thai disbursement follows so rapidly 
upon receipt, that the money taken from the people for t;< 
does not remain, on the average, more than a month or two 
out of its proper channels, and that the government has 
carefully reduced the inconvenience and disadvantage of 
taxation to the lowest possible point. By this regular and 
constant communication with men of capital and business, 
by this constant association with them in the business of 
transferring funds, the officers of the treasury are able at all 
times to command, in advance of the regular receipts, large 
sums of money, which are freely placed in the public treasury 
at low rates of interest. Money is, in fact, frequently pressed 
upon the various receivers by those who desire short but safe 
investments, and by those who would secure, in good season, 
the aid of the treasury in placing money at particular points. 
The treasurers of the departments do not lend money, 
though they receive it in the way of short loans; they 
transfer money for individuals, and they purchase bills of 
exchange ilpon such points as the exigencies of the public 
may require. Upon one side, then, there are open relations 
between the public treasuries and the movements of trade, 
industry and currency; that is, upon the side of the domestic 
exchanges of the country; the transactions of the treasury, 
in relation to the distribution of its funds, are blended with 
the movements of the internal exchanges as conducted by 
the individuals concerned in it. This constitutes a very 
broad field of contact between the business of the country, 
from which the money is withdrawn by taxation, and the 
public treasury. The public money being retained for the 
shortest possible time, is so managed, nevertheless, as to 
render an important service in aiding and regulating the 
internal exchanges." 1 

*This was prior to I860. 


\atiun having reached, in France, a point beyond 

whi' } ' IK- increased without passing the ability of 

,11 alleviation of the burden, like that we 

'list mentioned, i- <f n^nal advantage. According to 

-in of Francis the money remained 

,ny months in the hands of the receivers, who merely 

inces, on interest, to the government from time to 

Yd their accounts once a year. Now, all 

money is held to be in the treasury from the moment it is 

the ofhYe of any department; and it 5- 

neral circulation airain with as little delay as posssihle. 

Tin- . !Vrded to the adjustment of the 

'eatly promotes ])unctuality in com- 

il ami industrial payments and remittances, by diinin- 

e and the disturbances occasioned by 

the internal trade. These features 

of th financial system, by which it is so ch)^ely 

with the internal trade and exrhaMuv^. are 

by an eminent French writer upon finance as 

58ary in France than in other cnnntries, 

junrnt of credit in bankinir which is so prevalent 

cNc\\ here." 

in France, o\\ in-_r in the abundance .f money 

;.f in circulation, is dom* mainly with cash, and 

in, \\hich has \\roim'ht so much evil in (ireat 

Britain and the t'nited Mat. 8, haa never .irained a foothold 

the prejudice nf the French peoj)le 

tem, doubth->> because they aiv not blin.I Jo 

rkiiiL's ii d, that they cannot be indue. 

ordinary hank aeenunN and use elieeks, in the 

i-iness. M. I'inard, .Mai; the Comptofa 

be Fn-nch commission of 

; '" 1865-8, that irreat etTort- had been made by that 


institution to induce French merchants and shop-keepers to 
adopt Ku-lish liabits in this respect, but in vain; " it was no 
MM* reasoning with them," lie said, "they would not do it, 
because they would not." 

Gold and silver are the legal tender money of France, 
but whenever occasion renders it necessary the notes of the 
Bank of France are declared a tender in payment of debts; 
and the channels of trade are thus always supplied with a 
medium of exchange, to keep the producing forces of the 
nation at work. The wisdom of this policy has been signally 
illustrated twice within the past thirty years in 1848 and in 
1870. In 1848, after the revolution, the republic found 
itself without revenue and the people out of employment. 
.Matters were in a precarious situation, and the Bank of 
France alone possessed any available money. Instead of 
looking after its own interests alone, it united with the 
government in a hearty effort to stimulate industry, by 
supplying the arteries of trade with a fresh supply of money. 
To accomplish this end, the government declared the notes 
of the bank a legal tender an act which was everywhere 
denounced by the bullionists as suicidal. The marvelous 
results of*this step are thus depicted by the London Times, 
of February 16, 1849, although less than a year before it had 
been loud in its denunciation of such a course: 

'As a mere commercial speculation, with the assets which 
the bank held in its hands, it might then have stopped pay- 
ment, and liquidated its affairs with every probability that a 
very few weeks would enable it to clear off all of its liabili- 
ties. But this idea was not for a moment entertained by 
M. D'Argout, and he resolved to make every effort to keep 
alive what may be termed the circulation of the life blood 
of the community. The task was overwhelming. Money 
was to be found to meet not only the demands of the bank 

100 ; i;M () 

!i public and private. !' every rank in 

;iti:il to enable the manufacturers to 

eir workmen, driven 1o desperation, should fl'mic 

thci! :hc most violent enemies of public 

II was c-scntial to provide money for the food of 

the pay of tlu- troops, and for the daily support of 

tUc a '''. A failure on any one point would 

have led 1o a !Ve>li con vulsioii. I>ut the panic had I>een 

followed bv BO -jTc.-it :' scarcity of tlie metallic currency, that 

v day> la'er, out of a payment of 'JO millioiis fallen due, 

onlv -IT.ooi) francs could be recovered in silver."* 

'In thi> extremity, when the bank alone retained any 
available sums of money, the government came to the rescue, 
and, on the- ni^lit of the l."th of ^laix-h, the notes of the 
ban'. decree made a le^al tender, the- iue <f 

iiein^ limited in all to :;."><) millions, but the 
int of the lowest of them reduced for the public; con- 
\enieii<-e to 10() francs. One of the irreat, difficulties men- 
tioned in the report, was to print thcM- loo fi-am- note^ ' 

i-^h for the public consumption in ten days the amount 
d in this form had reached 80 millions. Xo sooner was 
the bank relieved from the necessity of paying :1way the 
remnant of it-, coin, than it. made every exertion to inciv 
it> metallic re-t. About 4n millions of silver wen- purchased 
iirli prii-e. -Move than TOO millions wen- male 
in dollars to the treasury and the executive departments 
in Paris. In all, taking into account the branch banks, B 

millions of five-franc pieces have been thrown by the' bank 

titty since March, and her currency was thus 
supplied to all the channels of the social >\ Mem."' 

S the strictly monetary operations, the Hank of 
1 >und means to furnish a scries of loans to the gov- 
"iO million he<juer l)ills on the 31st of* 


March, 30 millions on the 5th of May, and <>n the 3d of June, 
150 millions, to be paid up before the end of .March, 1849; 
of this last sum only one-third has yet been re. t uiivd by the 
State. The bank also took a part in the renewed loan of 
250 millions, and made vast advances to the City of Paris, 
to Marseilles, to the department of the Seine', and to the 
hospitals, amounting in all to 260 millions more. But even 
this was not all. To enable the manufacturing interests to 
weather the storm, at a moment when all the sales were 
interrupted, a decree of the National Assembly had directed 
warehouses to be opened for the reception of all kinds of 
good?*, and provided that the registered invoice of these 
goods, so deposited, should be made negotiable by endorse- 
ment. The Bank of France discounted these receipts. In 
Havre alone, 18 millions were thus advanced on Colonial 
produce 4 , and, in Paris, 14 millions on merchandise in all, 
GO millions were thus made available for the purposes of 
trade. Thus, the great institution had placed itself, as it 
were, in direct contact with every interest of the community, 
from the Minister of the Treasury down to the trader in a 
distant outport. Like a huge hydraulic machine, it employed 
its colossal powers to pump a fresh stream into the exhausted 
arteries of trade, to sustain credit, and to preserve the circu- 
lation from complete collapse." 

Again, in September, 1870, after France became involved 
in the war with Germany, the Bank of France suspended 
specie payments and issued legal tender notes to an immense 
amount, with like marvelous results. In June, 1870, the 
circulation of the bank was $275,000,000; in 1871, after the 
termination of hostilities, it amounted to $420,000,000, and 
in October, 1ST:], to ^602,000,000. When the first install- 
ment of the indemnity of * 1,000,000, 000 to Germany fell 
due, gold, for a short period, bore a premium of 2-J per cent., 

108 Tin: KI:I:\ H >VSTI-:M- OF FINANCE. 

but with this exception the notes of the* hank circulated at 
par with coin, and continue to do so to this day. The 
amount of irredeemable bank notes in circulation iii France 
at the present time is nearly $500,000,000. The only reason 
that can possibly be given why French irredeemable bank 
notes, to the amount of *o 00,000,000, circulate at par with coin, 
while United States Treasury notes, less than $400,000,000 
in amount, arc at a depreciation of over 12 per cent, is that 
the Fivnch notes are a full legal tender for all debts and 
duo, both public and private, while the "Tinted States 
Treasury notes are only :i partial legal tender, not being 

ivablc for duties on imports. 

By the f: of irredeemable paper money, tlie French 

people, like the people of the United States during the 
Rebellion, were enabled to rally to the support of their 

'rnnient. !>ut there the parallel ends. After the German 

war had ended, the circulation of irredeemable bank notes, 

vc seen, was increased nearly 200,000,000, and the 

producing forces of the French people were developed in 

v way possible, in order to repair the losses sustained 
during the war, and to enable the government to pay the 
indemnity to Germany. The wonderful success of this 
policy IS known tO all the world. The German indemnity 
of $1,000,000,000 was paid before it fell due, apparently 
without an effort, and gold has flowed into France until 
now tlie French people have, besides their legal tender bank 
notes, a specie circulation estimated at $1,200,000,000. It 
ha- been the lot of the French people to suffer, in common 
with other nations, many evils resulting from bad govern- 
ment, but they have great. C:IUM- to feel profoundly thankful 
that they have never, in the administration of their finances 
i cursed with a Hugh McCulloch. 



THE trials and tribulations to which the American people 
have been subjected from the earliest settlement of the 
country, on account of the want of a proper and well settled 
system of money, would form a sad but instructive chapter 
in American history. The limits of this volume, ii..\\. 
preclude more than a cursory view of the subject, but that 
will be sufficient to establish the fact that when paper money 
fails to perform the functions of money, it is because it is 
not based on sound principles, and also that bank notes, 
nominally redeemable in specie, constitute the worst form 
of paper money ever devised. 

For many generations after ihe first settlement of the 
colonies the work of production was slow and labor! 
and the surplus products, at least such as could tind their 
way to foreign markets, were hardly sufficient to procure in 
return the common necessaries of life. The small sums of 
money brought to the country by the settlers were soon 
exhausted sent abroad for merchandise, and trade for the 
most part had to be carried on by the inconvenient method 
of barter. The Indians found along the shores of L 
Island Sound were more advanced in civilization than tlic-e 
further north, and used a circulating medium of exchange 
consisting of beads of two kinds, one white, made out of the 
end of a periwinkle shell, and the other black, made out of 
the dark part of a clam shell. They were rubbed down and 
polished, and, when artistically arranged in strings or 1>< 
formed objects of real beauty.* These beads circulated 

4 Professor Stunner's History of American Currency. 

1 HI ,'i.y 4 OLOJH \i < !'KKI:\ 

tin- [ndians as money, one black bead beini. 

tli tuo white one-, and were known as wampum or 
wainpumpeair. The colonists came to use them, first in tlicir 

\\ith tlu- Indians and then amongst themselves. Fn 
Massachusetts they became by custom the common currency 
of the- clony, and were made a leiral tender for 1J pence. 

IJarter currency was established at an early day in the 
(ol-.nie^, and products of all kinds were made :i tender in 
p.-ivnient ofdeliS. "In C'onnecticut there were four p 

'money, 1 an<l 'trustiiiLr.' The mei'- 

cliant asked his customer how he would ]>ay before fixing 

his price. 'Pay' was bailer at the government rates. 

-finish t>i' New Knirland coin, also wampum 

for clianLTc. i I 'ay as money' \\as barter cnrrrency at ]>rices 

one-thii'd le^s than the government rates. 'Trusting' was 

an enhanced price according to time. A six-penny knife 

Jd. in pay, .^d. in pay as money, and Gd. in coin."* 

About the middle of the 17th century the trade with the 

lo briiiLC i" coin, and a mint was estab- 

i!, thouirh an infraction of the prerogative of 

>WIL Laws forbidding the exportation of coin were 

passed, but it could not lie kept in the country. The first 

i^ne of p:ip'T money made in the colonie- wa> made b 

>:u-liu-efts in KJIM), before tin- establishment of the 

Hank of I-jiLfland. An expedition h:d been sent out against 

:id, i-eturninLT without spoils and in a state of 

re clamorous for thei: 

X>m ~> shilling to f.3. The form of 

follow B: "This indented bill of 

due from (1i UaSSachtlSettl colony to the 

possessor, F!I all be in value ejnal t<> money, and hliall be 

:-urer and r 

rrofcMorSumncr'sllHtory of American Ciirr 


dinate to him, in all public payments, and for any stock 
(cattle) at any time in the treasury."" Then followed the 
date and the signatures of the committee appointed to is>ue 
them. They were not a legal tender, but were receivable 
merely for taxes and property in the treasury. In 1692 it 
was ordered that these bills be received at 5 percent, pre- 
mium oxer coin in the treasury, and the result was that they 
circulated at par with coin for twenty years, until redeemed, 
and barter currency ceased for a time, or at least became 

3 common. In 1703 another issue of bills in the same 
form, for 15,000, was authorized by act of Parliament, but 
they were not made a tender. A subsequent act passed in 
1712, however, made them a tender for private debts. In 
1710 another issue of bills to the amount of 150,000 was 
authori/ed by an act of Parliament; to be distributed among 
the different counties of the province; and to be put into 
the hands of live trustees in each county, to be appointed by 
the legislature, to be let out by the trustees on real estate 
-ecurity in the county, in certain specified sums, for the 
space of ten years, at five per cent, per annum. These bills 
u ere not made a tender. Another act for 50,000 in bills 
was passed in 1720, containing similar provisions. In 1773 
Massachusetts was out of debt. 

In 1720 bills were issued by the colony of Rhode Island 
and were made a tender for all debts, except special ones; 
and similar bills were authorized at different times subse- 
quently, some a tender and others not. 

The colony of Connecticut issued similar bills at various 
times between 1709 and 1731. Xew York began to issue 
bills in 1709; Pennsylvania, in 1723; Maryland, in 1733; 
Delaware, in 1739; Virginia, in 1755; and South Carolina, 
in 1703. The first emission of bills by Virginia bore 
interest at 5 per cent., and, according to Jefferson, in a very 

1 1 _' EARLY COLON l\L < I i 

short time not one of them \vas to be found in circulation. 

Thev were locked up in the chests of exeeutors, guardians, 
widows, farmers, etc. "AYe then," says Jefferson, "issued 
hills bottomed on a redeeming tax, hut hearing no inti ' 

i ceived, an<l never depreciated a farthing."* 

In 17'il J)r. Franklin bore testimony before llie .British 

1 <>f Trade, as we have already mentioned,! to the value 

and usefulness of the bills issued by Pennsylvania. Just 

ili<- Revolution North Carolina issued a large amount 

iper money, whieh was made receivable in dues to her; 

it w adc a legal tender. Several hundred thousand 

dollars of this paper money remained in circulation more 

than twenty years, at par with gold and silver, with no other 

advantage than bring received in the revenues of the State.J 

In 17">1 Parliament passed an aet forbidding the issue of 

any more paper money, save in the form of exchequer bills 

.ble in a year, except in case of war, when they 

made redeemable in four years; and in 1763 all 

colonial arts for i>suing paper money AA ere declared by 

:ment to be void. Dr. Franklin protested against 

. but without avail. The Kngli>h had reached the 

condition that nothing u ;>> money but gold and >il\er,and, 

1 by that p<culiar spirit which has characteri/cd 

'iiiiinedi ndant.N in this country, wen- determined 

that, ri-ht or \\rng, e\ , i -\ body el>e should MibM-ribt- to the 

same opinion. In 1773, however, Parliament allowed any 

bills i^ued by the colonies to be- a tender to their treasury. 


During the Revolutionary war Congress issued nearly 
$350,000,000 in bills of credit. The first iue \\a-in 177-"), and 


M follow-: "This bill entitle-; the 
See page M. tScc page 43. jscc page M. 

COS i' IN I:\TAI, MOM-:Y. 113 

bearer to receive. . ..Spanish milled dollars, or I ho value 
thereof, in gold or silver, according to the resolutions <.f 
Congre>.." The last emission was in 1780 under the guar- 
antee of Congrcs.v, ami was in the following I'-TIII: "The 
posseor of this bill shall be paid . . . .Spanish milled dollars 
by the 31st of December, 1780, with interest, in like money, 
at the rate of 5 per cent, per annum, by the State of. . . . 
according to an act of the legislature of the State of...., 

the day of. . . ., 1780." The endorsement by Congress 

was: "The United States insure the payment of the within 
bill, arid will draw bills of exchange, annually, if demanded, 
according to a resolution of Congress of the 18th of March, 
1780." The bills were required by Congress to issue upon 
the responsibility of the several States, and the confederated 
colonies pledged their faith for their payment. They were 
not made a legal tender, doubtless because Congress did 
not possess the authority to make them such. They circu- 
lated at par with silver for over a year, but. after that they 
began to depreciate rapidly in value, owing to the character 
of the bills and the excessive amount put in circulation. In 
March, 177s, they were depreciated to $1.75 for $1, and 
before the end of the year to $4 for * 1 ; March, 1770, * 10 for 
*1; September, 1779, $18 for $1; March, 1780, $40 for $1. 
Congress then passed a resolution to fund the whole mass 
at that rate, but the depreciation continued until it reached 
$500 for $1, in 1781, and after that they ceased to circulate. 
In 1791 they were still permitted to be funded at the rate of 
$100 for $1. Continental money, according to .leil'erxm, 
"expired without a single groan. Not a murmur was heard 
among the people. On the contrary universal congratula- 
tions took place on their seeing the gigantic mass, whose 
dissolution had threatened convulsions which should shake 
their infant confederacy to its center, quietly interred in its 


gnti ire, indeed, who do not like tin- natives feel 

indul'4< i - memory, :t^ of a bein^ which has vindi- 

d their liberties and fallen in the moment of victory, 
ha\ebe.-n I. .ud. and still are loud in their complaints. A 
of them have reason; but the most noi>y .-ire not the 
of tin-ill. They are persons who have become bankrupt 
ly unskillful attempt- at commerce with America. That 
they may have s^me pretext to oll'er to their creditors, they 
have bought up great masses of this detfd money of America, 
when- it i- to be had at live thou-and for one, and they 
show tin- certificates of their paper possessions. M if they had 
died in their hands, and had been the cause of their bank- 

A- ( 'ontinental money is the "ghost conjured up by all who 

wi-h to uise the bank> an exclusive monopoly of govern- 
ment cn-dit,"* it may lie well to pau>e a moment to consider 
Die paper money i>Mied by the several colonies 
prior to the Revolution hail answered the purposes of money 
admirably, thoiiirh not issued accordinij; to any well settled 
policy. \Vlu-ne\i-r it had a fair trial, however, it never 
fail- cd. lint Continental money \\a^ i^^iu'd 

und- different circumstance-. The Colonies had been 

ht together not ont of choice but by ncce-vit\. ('n- 

assumed the powers which it exercised through in 

irere acquiesced in by the people only out of 

- . ( had no power to lay and 

col!- , and the confederation was without revenue. 

\Vhate\ei- prM J-nie, had to be done through the States. 
it after the adoption of the Ailicles of ( kmfed< ration, in 
17^ only the semblance of authority. 

Jii'i de-ei-ibex the situation at the time in the fol- 

lowing lan-ua^e: * In the tir-t place there was an utter 
Calhoun, ee page CO. 

CON TIN i:\IAI. MoNK.V. 115 

want of all coercive authority to carry into effect its own 
<-on>titutioiial measures. This of itself was sufficient to 
de:stroy its whole efficiency, as a superintending government, 
if that mav he called a government which posscs>es no one 
solid attribute of power. * * In truth, Congress possessed 
only the power of recommendation. It depended altogether 
upon the good will of the Stales whether a measure should 
be carried into effect or not. * * Even during the 
Revolution, while all hearts and hands A\erc engaged in the 
common cause, many of the measures of Congress were 
defeated by the inactivity of the States; and in some 
instances the exercise of its powers was resisted. But after 
the peace of 1783 such opposition became common, and 
gradually extended its sphere of activity, until, in the 
expressive language already quoted, 'the confederation 
became a shadow without the substance.' * * But a still 
more striking defect was the total want of power to lay 
and levy taxes, or to raise revenue to defray the ordinary 
expenses of government. The whole power confided to 
Congress upon this head was the power to ascertain the 
sums necessary to be raised for the service of the United 
States, and to apportion the quota or proportion on each 
State. But the power was expressly reserved to the States 
to lay and levy the taxes, and of course the time, as well as 
the mode of payment, was extremely Uncertain. The evils 
resulting from this source, even during the Revolutionary 
war were of incalculable extent; and but for the good 
fortune of Congress in obtaining foreign loans, it i^ far from 
being certain that they would not have been fatal. * * 
Requisitions were to be made upon thirteen independent 
States, and it depended upon the good will of the legislature 
of each State, whether it would comply at all; or if it did 
comply, at what time and in what manner. The very tardi- 

DTKNTA1 \lo\i \. 

,:ion, in tin* ordinary cour*e of things, 

was Mill! involve tin- government in perpetual embar- 

rassment, ami to defeat many of its best measures, even 

the utmost good faith ami promptitade on 

he State*, in complying with the requisite 

lint many n "iicurred to produce a total want of 

f Toniptitude on the part of the States, ami, in numerous 

instances, a total disregard of the requisitions. Indeed from 

Mioment that the peace of 178.3 secured the country from 

the distressing calamities of war, a general relaxation took 

ml many of the States successively found apologies 

their gross neglect in evils common to all, or complaints 

listened to by all. Many solemn and affecting appeals were 

from time to time made by Congress to the State*, but they 

d with no salutary effect. Many measures \\ 

. .si-d to obviate the difficulties, nay the dangers which 

ted the I'liion; but they failed to produce any 

in the eonfederation. An attempt was made 

. during the war, to procure from the States an 

authority to h-\y an impost of live per cent, upon imported 

and |.ii/ . I ut the as-nit of all the States could not 


The population of the thirteen colonies u;i,- estimated in 
177"> at L',44s.uoo,f and the entire property of the country at 
than $600,000,0(10. That a paper currency, i^ued to- 
ED < amount, by thirteen sparsely settled colm.' 

; .elliiii. Milder a revolutionary government 
-easing only a vl, a d<>w ,,f authority, against t ; 

,! nation on the earth, should ha\e ein ulated at all, 

trkahlc fact* connected with 

1 on, and is t" -only by the patriotism 

: in that memorai jh-. IJi;- 

Vol. I. |>K 1"1. 
tJ*ff*ron'. Work, Vol. 9. pp.. 

MOHSY, 117 

have seen, it circulated I'm- over :i year at par with silver, 

and iii 177s, three years after tin- lirst emi-Mon, it depreci. 
only to 1.75 for $1. Congress resorted to various measures 
to sustain tin 1 credit of Continental bills, l>ut, as ought t' 
have been expected, without success, Money, as lias been 
fully explained, derives it power to represent value from law, 
but there must be value in property or product*, for which 

it can be exchanged, for it to represent, and the law must 
emanate, from a roponsible source from a government 
possessing the right and power to command such property 
for its uses, otherwise' it is only money in name. It is 
worthy of note, too, that Continental bills were not issued 
in the form of paper money, such as was iirst introduced by 
Massachusetts, and subsequently adopted ly many of the 
other colonies, but in the form of promises to pay specie, at 
certain specified times, which, under the circumstances, was 
a. manifot impossibility. The gradual depreciation of Con- 
tinental money, as it pa>scd from hand, inHicted a ]*> upon 
each Mi<-cessive holder, which came to be regarded in the 
nature of a tax or contribution towards the cause of inde- 
pendence. The large sums held by individuals after it 
'i-.-oed to circulate' were taken at its greatest depreciation, 
and no great hs wa- Mi-stained. When, after it had seen 
the liberties of the people \indicated, it sank, in the moment 
of victory, quietly into it> grave, no commercial crash or 
money panic attended its fall. Its ghost has troubled no 
one since, except the advocates of the British system of 
bank currency, which, perhap>. i> only in accordance with 
the eternal titnc ,,f thing-. 


We come now to a new era in the history of American 
currency. When the colonies entered the Federal Union, 

in: r.M i 

titution framed in 17*7. they surrendered all 

<>r control over the question nt' money to the Federal 

nment. The object of this was to secure to the pro pk- 

;i luiifonu ami .stable medium of exchange, anl hence it was 

W*B inserted in the Constitution c.xprcvsly 

prohibiting from coining money, emitting ''ills of 

. eU'.* But this u i-e provision of tlie Constitution was 

totally subverted by the money power, through tlie 

instrumentality of banks of tone, modeled on the Hritish 

: of bank currency: and practically the currency of 

the country lias been subject to the control of th:,t power 


About the close of the Revolution four banks of is>uc were 

established in the United States; one in each of the States 

!iis\lvania. New York, .Massachusetts and Maryland. 

At the tin: leral Constitution was framed, then- WM 

and formidable party, with aristocratic notions and 

. under the leadership of Alexander Hamilton, a 

"f undoubted patrioti.Mii and -.Teat ability, which 

:!y in favor of the formation of what \va< termed 

This policy urew out. of a want of 

faith in the )>., pi.-, and the belief that tic incapable 

:'-i:overnment. In a speech on thi> -ul.j. -ct. June 1>. 

Hamilton sai-1: "I believe the IJritish LT<vernment 

lei the \\orld ever pr<luced, and such 

haabt'Mi its pn . the minds of many, that this truth 

Lrradually ^ains ^roiiml. Thi> .LT\ eminent h .. .bject, 

ii-th and individual security. It i- s ; ,id uith us 

to be unattainable. If it \\ rmed it would maintain 

All communities divide themselves into the f<-\\- and 

rich and \\cll born, the other 

iss of the people. * * Can a democratic', assembly, 
page i. 

I:.\\K< OF TIII: rvrn.i. VTA \ : 119 

who annually revolve in the mass of the people, lie supposed 
M lily to pursue the public good? Nothing hut a perma- 
nent body can check the independence of democracy. Their 
turbulent and uncontrolling disposition requires checks * * 

Let one body of the legislature be constituted during good 
behavior or life. Let one executive he appointed (for life) 

who dare^ execute hi* powet-v. All State laws to be 

absolutely void which contravene the general laws. An 
officer to be appointed in'each State to have a negative on 

all State laws. All the militia and the- appointment of 
otlicci-v to be under the national government. The 

people are gradually ripening in their opinions of govern- 
ment; they begin to tire of an excess of democracy/'* This 
policy of a strong government, based on an aristocracy of 
wealth, was rejected by the convention; but it has never 
been abandoned by the money power .f (he country. In 
1863, in :i speech, in the House of tteproentativcs, in support 
of the National Hank Currency Bill, lion. E. G. Spaulding, 
a banker of New York, boldly asserted that, "Tt is now 
imt apparent that the policy advocated by Alexander 
Hamilton of a strong central government was the true 
policy;'' and at the present time we "have the policy of a 
third term openly and fearlessly advocated by the money 
power and il> tools. 

Hamilton, who was the lirM Secretary of the Treasury, 
urged the establishment of a National Bank modeled upon 
the IJriiish syMem, and upon his recommendation the lirst 
Bank of the United States, with a capital of $10,000,000, was 
chartered by Congress, February -~>* 17!l.for a period of 
twenty years. .Jefferson, who wa* then Secretary of State, 
LTUVC a written opinion denying the power of Congress to 
Incorporate a bank of issue, and ^Madison, who was in 

*Vato-' Debate of the Coii-titutionai Convention (',: 

HI: INI: i.i> BTA i 

: it, in a powerful speeeh, as a violation of 

the Constitution, fn 1M1 the bank applied to Congress for 
wal of its charter, but it was not granted. Clay and 
other lead' men opposed its re-charter on the ground 

that if wa- "une. institutional, anti-American, and strictly a 
KritMi institution." 

In the meantime a mania to start banks had sprung up in 

Kn-land, which siiloe.juently extended to the .Middle 

. and finally all over the country. In 1815 Jefferson 

fie following statement of the number of banks which 

had been established up to that time: 

"In 17*1 we had 1 bank, capital $1,000,000 

- 1 79 1 ' bank-, " 1 :*, 500,000 

J \ "' 20,472,000 

1803 84 - u 29,112,000 

iii; " amount of capital ii()t known. 

ime (isl'i) we have probably one hundred 

the eonstitntional prohibition a;_: 

emitting bi!l> .!' nvdit, chartt-i-s, incorporating jirivatu in>ti- 
authorized t<> i-mit bills of credit (bank ii' 
by tin- h"4Matmv> <.f the M-\rral States in larirr 
, in utter di^n-ir:inl <!' the ( 'mi-tit i;t ion, as well 

i. In IN-nn-ylvaiiia, for example, twenty-live 

incorporat - banks of iwu,., were 

ed daring the flension of 1^1;;, but \ven-\et.M-d by the 

1 At the i. ,11 of the leu r i-latnre, in I 

bill \\ .1- the Veto of the (io\rrnor rhartt-ring 

, u ith a eaj.ital of $17,000,000. Thirt\ 
:i u.nt info operation at -e, and ^i\ nio: 

-n-prinled specie payment The manner of obtaining 

Was \ery simple. A petition .setting forth "the 
of the pe. .),!,-" in the l...-alit\ where the bank \\a> (o 

BARKS or Tin-: r\i n-:i> 8TATJ 121 

be established wax all thai WM n-.jiiired; political inilucncc 
and intrigue accomplished the re-t. 

Specie basis banks arc always required by law to redeem 
their notes in specie, but as they are, also, always authori/cd 
to issue notes to three times the amount of their capital 
Stock, their redemption in specie becomes an impossibility. 
This feature in banking, as has been explained,* was 
originally nothing more than a bold plan on the part of 
certain ingenious financiers and schemers to acquire favor 
with the public for the Bank of England and increase its 
business. As the system in time was found to have a 
tendency to concentrate wealtli in the hands of the few, it 
commended itself to the aristocratic, or governing class, of 
that kingdom, ami soon became an integral part of the 
structure of British society. Transplanted to the free 
atmosphere of America the system was afforded an oppor- 
tunity to develop its latent evils, greatly to the disad- 
vantage of American society. If banks were 1 authorized to 
isMie only a dollar of paper for a dollar of specie held for 
its redemption, there would be no advantage in issuing notes; 
they might as well lend the specie. Individuals obtain 
charters to cany on the business of banking on the theory 
that, they have capital to employ in that business, but under 
the specie basis system they are not required to use their 
capital at all. Bank notes arc issued and exchanged for 
the notes of individuals. These bank notes are based on 
the credit of the institution which JSMICS them, and represent 
nothing more; if redeemed, they are good; if not, they are 
as worthless as the note of an insolvent individual. A bank 
of issue in effect simply substitutes its notes, of various 
denominations and otherwise convenient for use in payments, 
for the notes of its customers. As a large portion of the 

*See page 89. 

122 BANK- : i IM-: rvi : ID BTATi 

community arc r..n>tanlly having payments to make in 

hank, tin- notes of tin- bank an- BS u'ood to them as money, 

and tlu-y thus come t perform not only tin- functions of 

tlic individual note-, f,, r which they were substituted, but 

.c function- of :i circulating medium. \Yhilst in reality 

re nothing more than promises to pay, representing 

f the indebtedness of the bank.) they al 

me time become substitutes lor money. In this \\-ay 

a bank of i>>uc enables its corjiorators and stockhol.h-i-> to 
their credit, or evidences of indebtedness, upon the 
jtuldic, at a hi^h rate <!' interest, and compel it< <!- 
circulating medium, \vhi-ther the public de-'nvs to u-e it or 
The medium of exchange fhus foi'ceil upon the pulilic, 
encuiuliered \\ith intercut, 1. B ta\ upon the commu- 

nity at larire, because iu cc-t enters into the price <f coin- 
bankii''' ' ntii-ely UJMHI private credit, 

dcprcciatinii in value, which inipM-- an 
additional burden upon trade and production. It i-. as we 

f the sped. <\ to treat dis- 

c"imt' -1 p:!p-i- a- deposits, and this furnishes flu- ba-i- f.r 
additional loai lit. I5y enCOOraglDg discounts and 

lendi' , through the instrumentality of bank DOl 

d capital, luisinevs l.e.-,,in<'s active, prices 

iid -peculation bccoino rife. Intlatinn of bank 

and nut- M an-' a Inure slrueturt .f credit i< 

n in-i^'niticant )>a-i- .f gpeoie, Mipj..,-, d to be 

; in the \ault> of the hank, which is toppled OV< r l-\ 

the lir-t linaiicial brcc/.c that sj.riiiLTs up, and the puMic is 

i in its ruins. When the bai,' . ailed upon to 

i" pay they arc of course unable in 

. fr the uif of man ha d.-\i-cd a u 

d-.llar- \\ith -_ r "ld dollar. Like 

pave 49. tft 

<n' Tin: rxrn:i> M 


individuals, banks can be thrown into bankruptcy and com- 
pelled to go into IijuilaliMi, but. Mich ;i stcp<nly aggravates 
the distress of the public, and is raivly adopted; and the 
banks are permitted to escape, only to repeat the operation 
as soon as confidence has been restored through the aid of 
the Sin-riff.* The extent to which hanks are enabled to 
lend their credit by means of the specie basis system of 
banking will appear from an examination of the following 
table, which is an abstract of the Commissioners' Report of 
the banks of Connecticut for a period of twelve years, from 
1837 to ls47 inclusive and the year 1840. The banks of 
Connecticut, it should be mentioned, were conducted during 
this period with as much safety to the public as those of any 
other State in the Union: 






Loans and 



:,li97 50 
8,754,41)7 ;')0 
8,87!VJr- (i" 
8,873,<'-7 MI 
8,876,:} 17 f.T 
8,580,393 50 
s t 2'.2.2.",s 00 
8,359,748 00 
8,475,630 00 


l.'.i'JO,552 45 
3,987,815 45 
2,325.f>y 95 
J.7S 1,721 4.". 
J..~>.V>,638 33 
5359,947 02 
3,490,%3 (1C. 
4,102,444 (K) 
3.565,947 0<> 
4.i:;7.c.:;i (MI 


]2,it:)0,572 40 
13,W,373 45 
\052 32 
12.tilt,12t 60 
14,472.c>l 82 
r..v.i-j.;s5 2:. 

15,784,772 04 

S415.386 10 
535,447 86 
.".112,180 15 
455. Tin 3d 
481,3i7 OH 
462,165 5,3 

$13,246,495 08 
9,769.286 80 
12,286,946 97 
10,428,630 87 
10,944,673 35 
10,1)83,413 37 

10,842,955 35 
12,477,196 06 
13,032,600 78 

i-j.7-1,^ ; 


,629 57 

/J17 00 

,-.:.-) i: j , 
4,,f7l oo 


$5,168,957 95 
575.676 00 

$126,292.898 33 

13,740. '! i"i 


$5,744.633 95 

$140.033.489 33 

Average Capital, - 
Average Liabilites, - 
Average Specie, ... 
Average Loans and Discounts, - 

$8,688,295 55 

13,129,239 37 

478,719 50 

11,669,457 44 

Kellogg, who gives thi> table,f in commenting upon it, 
BHj s : "By the fore-.. ing table it will be seen that the average 
amount of the .specie held by the banks in the State of 
Connecticut, for the twelve years, was $478,719, while the 
average amount of their loans to the public, during the same 

*See page 520. 1 KeHogp'^ New Monetary System, page 204. 

i;\ in: rsi i 1:1. >i \ i 

peri im-re than t wen ty-foiir and ono- 

lliinl time- a- iniich money a- tin- l)anks had specie. The 
:iiinu:il inlen-M on $11,661M -7 W&6 1700,167. If they could 
ha\e loaned only tlicir specie, the interest would have 
amounted to lint x-JS.7;.';;. The hanks L r ained from tlic juihlir 

annually $671,444 above tin- mtrn-M <n tlic'n- >.|iccic; am.l, 

in the tu . They rullrrh-d thiv int< 

in :'l\ancc, :iinl in:nlf their divi<lcinls half yearly to their 
i-x; then-tore, it is jr<i|M-.- to (-oiMj.ouiid thi^ 
half yearly, which would swell their u'aiu^ 1< nearly 
$12.' that i- i" Bay, X|,<)<>I>,<HH) intrn^t annually. 

Th' M-Hial u-ain-, as much reali/.ed l.y the^e liank 

if they had produced and sold annually *7<Hijt;7 \\di-tli <f 

'nltnral |n-odurtx." (The statements of the li:ink- 

of the large cities pablished from time in time in the 
neu>|.aj.ei v, will diseh.c a similar inflation of credit at the 
jire-ent time. Tin- fact that the National Hanks do not 

-m their notex in sjecie makes no difference. They are 
liank- of ix^iir .-ind ln-h.-n-j; t,. the >j.e<-ie lasi- ^ytc-m all the 

The banks of the United Siat^ have i- ijielh-d to 

10 |.:i\menix :i t \arioiis times as follow-, to wit: 
in 1-0-.., 1814,1810,1 , ;. 1837, L839, 1841, 1857, 1861, 

and in 1^7:; rurn-ney payment. Th- aaionfl ha\c 

in\ i LTi'eat jml.lic 1 i-t :->, and in se\ei'al 

in-tan. . > h.i\e in\..l\e.l the enliiv country in l>ankni| 
and i uln, from \\hieli it. to.ik yeait \er. In .March, 

S( ite .f liliodc Nland 

made an i-xaiiiinat ion into the affairs of the l-'anm -r-' 
' : . and it \\ as f.nind that the 

hank had *:>-o,oo<> of it- llOtea in circulation, and only 
$8t>. r their redemplion. Ilcfore the end of 

the ~;<.n .f the liank- 1 !ii'_rland 

took .iid it \\a> di-e,. \eivd Jiiaf they were neai'ly all 

in the - , iitioii no hj.e. i and nothing to show l>ut 
the irorthlesi notea of >j.c< nlators. 

BANK* <>!' Till-: I \iii:i> 8TA1 !-"> 


In 1814 all the banks ..HIM,!,. ,,f \ ( -u Kn^'land, including 
the forty-one banks chartered by the Pennsylvania legislature 
in the early part of the year, were obliged to suspend specie 
payment, occasioning great distress. The peoph- \vn-e help- 
tan, and OOOld do no better than to use their depreciated 
note's. This condition of affairs lasted for years. The 
following table shows the 4 depreciation of the notes of the 
banks of the cities of Baltimore, New York and Philadelphia 
during the suspension: 

It.-iltimoro. Philadelphia. NVw York. 
IVr cent. I'T cent. 1'er cent. 

1 s 1 l September 20 

October i:> 

November 10 

December 14 

1815 January 20 . . 15 

February 5 . . 2 

March 5 . . 5 

April 10 .. 6i 

May 14 5 5 

June JG 9 11 

July 20 11 14 

August 19 11 12 

September 20 15 13~ 

October 21-J- 15 10 

November |:> 1(> 12 

December 18 14 12 

is 10 January i:, \4 12. 

February 1:; 14 o" 

March..' is 1-j.i, 12.J- 

April 23 14 ] . 10J 

May 20 14~ U I 

June 20 U> li". 

July 15 15 <j" 

August 12 10 5 

September 10 7 7 , :* 

October 8 94 2 

November 7 1 $ 

Decembei- !) 7 *2j- 

is 17 January 2 -U 2.}- 

Februai-y j \ 4 2| 

126 BAKKfl 0* i ii K UNITED BTATBS. 

On tin- tir>t of January, 1S17, tin- second Bank of the 
United States In-Lean luisiness, and on the I'ntli uf February 
following specie payments were nominally resumed. The 
e\t<-nt ami character of the resumption that took plaec may 
b 'hered from tin- following 0*86 cited by Simmer, i:i his 
Hixi'ry of American Currency: "In 1 V 17 a ca-e at Uidi- 
mond, after >pcr'h' ].ayin<Mit> \\'r|-c i-oiinic'l, LT:VC an insight 
UltO the State of things. A man having jiiH-riit'-il ten onr 
liiimlri'il lollar not-- f \t re Innjition \va< ivfii^rl. IIv cuiihl 
r a lau'yi-r to take a c-a-c a^ain^t the hank fora huii; 
time. Finally having ohtained judirmcnt, the Sheritl \va- 
sent to eolleet. The pn-vi-lciit of the hank was taken liefon- 
i irt, 1'iit refnx-il t<> pay. The hank wa>-ehs-il hy the 

SlieriiT, hut soon after opened and went on." 

The >perie la-i- -\-tem had now heen in operation IOIIL^ 
i-ii'. iiuh t<> produce its legitimate fruits, and accordingly we 
lind that here and there the people were hecominu: alarmed 
neroaelmieiiN upon their rights, as well ax at the e\ iU 
which it inflicted upon the pnhlie. The following i- an 
extract from a report of a legislative committee of the State 

i -irk in 1M B: 

all ar'MiH-raeir-. none inon- <-, .mpletely en-!.' 
people than that of money; and, in tin- opinion of \oiir 
'ommittee, no -\xji-i, i \\ :l x '\er hetter de\ i-ed BO ]ei-fe<-tly 

to enslave a oommunity as that of the present mode !' r <ni- 

diiftin^ hanking establishments. Like the siren of the fahle, 

dexn-,,y. They hold the |ui xc-vtrin 

, and, ly moiiM|Mili/inir the whole of the circulating 

medium of the coiurtry, they form a preearioiix standard, hy 

which all property in the country home-, land-, del.N and 

tS, per-omd ;m ,l n -al . all .lc-cri].tioiix are 

1, thux i-end'-rin^ the whole community dependent 

hem; pr..x,-rihin^ exery man \\ ho dare- to CXpOSC their 

BAKKfl <! i in: i MTKi> MA i 127 

unlawful practice.-. It' lit- happens to be out of their reach, 
-o a> to require no favors from them, his friends an- made 
tlic victims; so no one dares complain. Tin- committee, on 
taking a general view of our State, au<l comparing tli^- 
parts where hanks have been, for some time, established \vith 
those tliatliavo none, are astoiiishe<l at. the alarming disparity. 
They see, in the one case, the desolation they have made in 
societies that were before prosperous and happy; the ruin 
they have brought on an immense number of the more 
wealthy farmers, and they and their families suddenly hurled 

from wealth and independence into the abyss of ruin and 
despair. If the facts stated in the foregoing be true, (and 
your committee have no doubt they are,) together with 
others equally reprehensible and to be dreaded, such a> 
that their influence too frequently, nay, often already, begins 
to assume a species of dictation altogether alarming, and, 
unless some judicious remedy is provided by legislative 
wisdom, we shall soon witness attempts to control all selec- 
tions to offices in our counties nay, the elections to the 
very Legislature; Senators and members of assembly will 
be indebted to the banks for their seat in this capitol; and 
thus the wise end of our civil institutions will be prostrated 
in the dust of corporations of their own raising." 

Tin: niAsii OF 1819. 

In 1818 the bank of the United States had discounted to 
the amount of $43,000,000, and had $2,000,000 in specie. It 
had established eighteen branches, and its notes could not 
be signed fast enough for the public. To increase its reserve 
of specie it had bought $7,000,000 of bullion abroad, at a 
cost of $800,000 for expenses, but it was exported as fast as 
it was imp. uled. The Bank of England, which had been 
in suspension since 1797, was preparing to resume specie 

HE i- \n i:i -TATES. 

awing -pe.-ie from every source tliat 

!:iiilc. Iii April, 1818, less than iil'teen months after 

the Hank of the I'liilcd States started, it was believed to be 

mmittee, appointed by Congress to im 

affairs, reported ;i resolution requiring the bank to 

086 why its eharter should not be forfeited, but the 

ution was lost, forty members of Congress being stock- 

Icrs in the bank. The bank now resorted to vigorous 

; Mires to save itself from bankruptcy, and in a little 

; tuo months was once more solvent. It had, however, 

ruined the country. The amount of bank note circulation 

in is 13- 14 was about $45, 000,000; in 181 7-18, $100,000,000; 

and in 1819 about $45,000,000. Contraction had done its 

work, and the ruin which it had accomplished was deep and 

widespread. In August, 1819, 20,000 persons were seeking 

employment in Philadelphia, and a similar condition of affairs 

prevailed in New York, Baltimore and other cities. The 

dist least severe in Xew England. In the Western 

was intense. In the South the banks still pretended 

pecie, but the following account of the manner in 

h they did bu>iness in some localities would hardly justify 

j. retention; ( )ne who presented a bill had to make oath in 

bank that the bill was his own and that he was not an 

:.t for any one. He was required to make this oath 

before the ea>hier and five directors, and had to pay *1. 

"ii each bill. 

lafioii and distros hiMed throughout the year 
Wl KO cent*, per bu>hel in Kentucky. At Pittsburgh 

(lour was *i p,. r barrel, hoanU, x-j per thousand, etc., <!., 
while imported goods remained at their old price-.. < 
a half bushels of wheat would buy a pound of roflV. 
f flour would buy a pound of tea, and twelve and a 
f flour would buy a yani dcloth. 

I;A\K-> or MM: t MII:J> BTATB& 129 

a better idea <>f tin* condition of affairs may be formed, 
pcrh:i]>s, from a report of :i committee of the Senate of 
Pennsylvania, of which the distinguished Condy Raguet 
was chairman, made on the 20th of rYbruary, is-jo. It is 
as follows: 

"In ascertaining the extent of the public distress, your 
committee lias had no difficulties to encounter. Members of 
the legislature from various quarters of the State, have been 
consulted in relation to this subject, and their written testi- 
mony in answer to interrogatories submitted to them by the 
committee, has agreed, with scarcely a single exception, on 
all material points. With such respectable weight of evi- 
dence, added to that which has been derived from the 
prothonotaries, recorders and sheriffs of the different counties, 
from intercourse witli numerous private citi/ens residing in 
different parts of the state, as well as from the various peti- 
tions presented to the legislature, your committee can safely 
assert that a distress unexampled in our country since the 
period of its independence, prevails throughout the common- 
wealth. This distress exhibits itself under the various 
forms of 

" 1. Ruinous sacrifices of landed property at sheriffs sales, 
whereby, in many cases, lands and houses have been sold at 
less than a half, a third, or a fourth of their former value, 
thereby depriving of their homes, and of the fruits of labo- 
rious years, a vast number of our industrious farmers, some 
of whom have been driven to seek, in the uncultivated forests 
of the West, that shelter of which they have been deprived 
in their native State. 

"2. Forced sales of merchandise, household goods, farming 
stock and utensils, at prices far below the cost of production, 
by which many families have been deprived of the common 
necessaries of life, and of the implements of their trade. 


Numerous bankruptcies and pecuniary embarrassments 
v-eription, as well among the agricultural and 
manufucturiBg as tlir mercantile classes. 

neral scarcity of money throughout the country, 
tarhich renders it almost impossible for the husbandman or 

other owners of n-;il estate to borro\\- at :i usurious ii. 
an<l \\ here landed security of the most indubitable character 
! -ledge. A similar difficulty of procuring on 
loan had existed in the metropolis previous to October last, 
lint has since then been partially removed. 

neral suspension of labor, the only legitimate 

source of wealth, in our cities and towns, by which thousands 

ni.-t useful citi/ens are rendered destitute of the 

- of Mipjort, and are reduced to the extremity <]' 

|Hi\erly ami despair. 

An almost entire cessation of the usual circulation of 
oommodities, and a cnnsetjuent Btagnation of business, which 

is limited to the mere ])urchase and sale of the necessaries of 
iidof'snch arti<-lc> of c(nsumpti<n as are :ibsolutely 

rcijuired ly ihe season. 

A iini\ cr>al suspension of all manufacturing 
I'V which, in addition to the diMin^al of the numerous 
!:iiivr- Iier-tfin-e eiiu r aired therein, who can find 
nt, the public lofiefl the revenue of the 
Capital invested in machinery and buildings. 

I'-mi'Mi- !!-, whereby corporations in-!itutcd 

,:ice and other purposes, in violat: 
Uevofthe products of industry without 
ing an e.jiiivalent. 

>\ ci-tl'\\ iug of our prisons with insolvent delitors, 

"f wliom are r.ntined f'r tritling sum^, \\ hereby the 

community loeei a j.oii'mn .d is com- 

i-v\K^ oi TIM-: i \m.:> >TATI>. 1 ] 

pelled {< support families liy charity who have tints been 
deprived of their protectors. 

"10. Numerous law-suits upon the dockets of our courts 
:iinl of our justices of the peace, which lead to extravagant 
eoM< and loss of a great portion of valuable time. 

"11. Vexatious losses arising from the depreciation and 
fluctuation in the value of bank notes, the imposition of 
brokers and the frauds of counterfeiters. 

"12. A general inability in a community to meet with 
punctuality the payment of debts even for family expenses, 
which is experienced as well by those who are "wealthy in 
property as by those who have hitherto relied upon their 
current engagements. With such a mass of evils to oppiv-^ 
them, it cannot be wondered at that the people should be 
dispirited, and that they should look to their representatives 
I'm- relief. Their patient endurance of suffering, which can 
only be imagined by those who have habitually intermingled 
with them at their homes and by their firesides, merits the 
commendation of the legislature and prefers a, powerful 
claim to their interference." 

The people of the United States had not been without 
warning as to the evils and dangers of the specie basis system, 
but they had supinely allowed the money power to gain 
control of the monetary affairs of the country, precisely as they 
are doing now. January 16, 1814, previous to the crisis of 
that year, Jefferson wrote as follows: "Everything predicted 
by the enemies of the hanks in the beginning is now com- 
ing to pass. We are to be ruined by the deluge of bank 
paper, as we were formerly by the old Continental paper. 
It is cruel that such revolutions in private fortunes should 
be at the mercy of avaricious adventurers, who, instead of 
employing their capital, if any they have, in manufactures, 
commerce, and other useful pursuits, make it an instrument 

HANKS OF '\}ii: rvi i i:n BTA1 

to burthen all the interchanges of property with their 
-\\indliiiL; profit*, profits which arc the price of no useful 
industry of theirs. * * I am an enemy to all banks dis- 
counting bills or notes for anything but coin." And airain, 
January G, 1816 he wrote as follows: "The American mind 
is mm- in that state of fever which the world lias so often 
seen in the history of other nations. We arc under the 
bank bubble, as England was under the South Sea bubble, 
France under the Mississippi bubble, and as every nation is 
liable- to be, under whatever bubble, design or delusion may 
puff up in moments when off ijuard. We arc now taught to 
believe that legerdemain tricks upon paper can produce as 
solid wealth as hard labor in the earth. It is vain for 

eDSe to ui'LTc that notli'nuj can produce but 
* * Not Quixot enouirh, however, to attempt to ; 
Bedlam to rights, my anxieties are turned to the m<>-f practi- 
tneanfl of withdrawing us from the ruin into which we 
MII. Two hundred millions of paper in the hands of 
the people, (and less cannot, be from the employment of a 
banking capital known to exceed one hundred milli" 

ul tax to fall at hap-ha/ard on their heads. * * And 
what ha\e we purchased with this tax of two hundred 
millions, which we are to pay by wholesale, but usury, 

windling and new forms of demoralization.' 1 As we have 

heel), the bubble hlllM, as predicted by Jefferson, ill 1819. 

.iti-.ji and distress continued during 1-.M and 

1822. In 1823 there was a large creation of banks in 

'-mk of the I'liiicd States be^an to 

expand. In I--JI all the banks hciran to expand. IVims-yl- 

of I - M. Tn the Hprinc^ of 1825 

tks ami insurance coinp :cky there 

narchv. Alalian. \ 

or TIM: r\rn:i> STA i 133 

discount. Indiana, Illinois and Missouri wen- still suffering 
from the 'relief ' system (^t.-iy taws against the collection of 

debts, etc.) Tin. 1 Xc\v York and r>oMon banks were fighting 
the country is-ucs. * * The bank of tlie United States 
increased its issues over $3,000,000."* 


Ill the hitter part of is-jl- and beginning of 1825 the JJank 
of England found it necessary to curtail its discounts, in 
order to check the outflow of bullion. This occasioned 
another terrible crisis in that country. Seventy banks fuile-d 
and nearly two thirds of the merchants and manufacturers 
stopped payment, causing great distress among the working 
classes. Gold begun to fio\v r from the United States, and 
the banks were obliged to suspend specie payments. Fifty 
failures occurred in Xew York befoi'O Deeember, and banks 
went under all over the country. The crisis, however, was 
BOt felt SO Severely in the rnited States as it was 'in Kng- 
land, because the banks had not yet had sufficient time to 
inflate their credit and circulation to the greatest extent. 
Here and there throughout the country industrial activity 
u as stimulated somewhat during the next few years by the 
high tariff of 1824 and 1828, and by the building of railroads, 
which began in 1830; but business generally continued to 
suffer from the rotten monetary system which had been 
fastened upon the country, and distress was more or less 


The fight between President Jackson mid the United 
States Bank, whh-h occupied the attention of the people- for 
years, now began. The specie basis system had been in 
operation for over a quarter of :i century, and during the 
whole time the country had never once enjoyed the advan- 

*Sumner's History of American Currency. 

i:M r.ANK-; OF 'i in: r\r: KS. 

md currency. Pecuniary distress, periodical 

returns of e\pan>ion and contraction, deranged currency, 
ruined exchanges, and panics and convulsions had charac- 
teri/ed the entire period. TIio banks, although based on 
"hard money/' and professing to pay coin, we're in a state 
of chronic suspension. The press of the country was com- 
pletely sub>idi/ed; Congress, as well as State legislatures, 
i in abject submission to the mandates of the money 

; aixl even the Supreme Court of the United States 
did not ex-ape its contaminating influence. The people 
perfectly helpless, and the outlook of American free- 
dom and independence, was dark indeed. It is worthy of 
mention that Pitt, in 1 70 1, when Hamilton brought forward 
lii< funding and banking scheme, said: "Let. li:e Americans 
adopt their funding system and go into their banking 
institutions, and their boasted independence will be a mere 
phantom/' J>nt fortunately for the country the election of 
1828 resulted in the choice of Andrew Jack-on as President 
of the Tinted States, and the people found in him a leader, 

:-le>s as he was patriotic. In his 1ir>t message to- 
Decembers, ISi'D, in lan^na^ 1 of extreme mod- 

, he called ].ul)lic attention to the Unitc'l States Rank, 

and expressed himself ac unfavorable to ha continued exist- 

'The charter of the Hank of tin- ("niied States e\pi: 

ckholders will probably apply for a renewal 

of their privileges. In order \<> avoid the evils resulting 

precipitancy in a meastin* involving sii'-h important 

principle, and such <leep pecuniary interests, I fed that 

iot, in jnxti.-,. ; , .rties intere-t-d, t> 

f it to the delil.erafe c-oii-idrratioii of the legislature 

and the pe.plr. llnjli the coiKfiiutionality and -\jiediency 

of tlie la\v creating this bank are well questioned by a 

BANKS OP Til!' UNITED -- 1 \ i 

large portion of mi" fellow citi/ens; and it. must In- admitted 
by all that, it. has f.iiled in the grout end of . Mablishing a 
uniform am! sound currency." 

The bank immediately began preparations for war. 
Through its branches and its control over State banks, its 
power extended into every part of the country. Millions of 
dollars (belonging, as it subsequently appeared, to depositors 
and stockholders) were squandered for the purpose of 
corrupting the people. Statesmen, Congressmen, brawling 
politicians, editors, all succumbed to Its influence, very much 
in the same way as they are seen bowing to the power of 
the National J>anks at the present day. After :i careful 
survey of the field and a thorough canvass of Congress, it was 
determined by the bank that :i renewal of its charter should 
Le applied i'<;r during the session of Congress immediately 
preceding the next general election in 1832. The bill passed 
Congress by a majority of eight in the Senate and twenty- 
two in the House. As was expected, it was returned with 
the President's veto, on the 10th of July, 1832. The contest 
was then transferred to a wider lield and carried on with 
excessive virulence. The money power everywhere went to 
work to defeat Jackson. In Philadelphia, for example, 
"the bank would order the business men to hold public 
meetings in its behalf in order that it might ascertain who 
were its friends, and who were courageous enough to stand 
by the government in its efforts to redeem the people, and 
then, in turn, would appoint places for the assembling of 
the different trades, in order that the employers might 
who of their workmen had opinions which they dared 
maintain."* The masses, however, rallied to the support of 
the President, and the capacity of the American people for 
self-government was triumphantly vindicated. President 

*From Speech of liou. W. D. Kelley, at ludlanapolis, Aug., 1875. 

OF 'i in-: UNITED >i 4.1 

Jack ' ; i!'_: -Mi'. ( 228 

>rul college. I'pon examination it will he 
i-l dial the principles involved in the contest between 
and tin- I'nited States Hank arc pivci- 
Jiirh underlie the- impending eoi 
.ic and tin- National Hanks. The subject 
worthy of more than a passing notice. Il.-nton, 
ill liis *'Thir:_ ; :i the Tinted States Senate," in coui- 

,tiiiL, r upon some errors of MOMS, do Toe<jne\ille fc -in 
tion to the Hank of the United States, the Pre-ident and 
the peo] clear and coinjirelien sive analysis of 

princij.les and jiurjM>^-s involved in the content, from 
which we (jilote as fllo\\ N: 

"Thi< ] uas tlie ufrand feature of the 

ri>'n nt. and judicial decisions, going hack to 

the Constitution and the foundation of party on principle; 

and risking a contest at the commencement of his adminis- 

tion, which a mere politician would have put off to the 

Tiie Supreme Court had derided in favor of the 
^tifutionality of th<- in-titution; a democratic ( 
in charterin'4 a second hank, had yielded the (jucstion, hoth 

of censtitotion&lity and expediency. .Mr. .Ma-!i-n, in siirn- 

the hank charter in ISlfi, yiel-Ied to the autliorities 
without surrend. -rin^ hi- e,n\ict t tin- el: 

the v;n,| ( . in hclialf of the institution, and against th- Coi 

v ..f party founded "n prinri- 

| le. It thvr\v do\v!i t!ie'_T)'cat landmark of party, and yielded 
.\ver of construction which nullified the limitation- "f 
the ('oiivtitu:ion, and left ('.mirrcvx at lih'-rty to ] 
uliich it d carry into 

:ted p..v '^iiiiiriit for tlie bank turned 

up. tted 

See PK- 

i; ANK- OF 'i in i \i i i:i ST \i i>. 

powers granted to CoDgreSSJ :in<l gave ri8 to the 

division of parties in Washington's time tin- federal party 
beiii"- for the consfrurtion which 'would aulhori/e a national 


bank; the democratic party (republican, as then railed,) 
being against it. 

" It was not merely the bank which the democracy opposed, 
but the latitudinarian construction which would authori/e 
it, and wliicli would enable Congress to substitute its own 
will in other cases for the won Is of the Constitution, and do 
what it pleased tinder the plea of * necessary' a plea under 
which they would be left as much to their own will as under 
the 'general welfare' clause. It was the turning point 
between a strong and splendid government on one side, 
<loing what it pleased, and a plain economical government 
on the other, limited by a written Constitution. The con- 
struction was the main point, because it made a gap in the 
Constitution through which Congress could pass any other 
measures which it deemed to be 'necessary;' still there were 
great objections to the bank itself. Experience had shown 
such an institution to be a political machine, adverse to free 
government, mingling in the elections and legislation of the 
country, corrupting the press, and exerting its influence in 
thi> only way known to the moneyed power by corruption. 
General Jackson's objections reached both heads of tin- 
case the unconstitutionality of the bank and its inexpedi- 
ency. It was a return to tlie .IelTer>onian ami Ilamiltonian 
times of the early administration of (icneral Washington, 
and went to tlu' words <f the Constitution, and not to the 
interpretations of the administrators for its meaning. 

"Such a message, from such a man a man not apt to look 
back when lie had set his fare forward elect rilied the 
democratic spirit of the country. The old democracy felt 
as if they were to see the Constitution restored before they 

hi: ' \n i.i) BTA1 

died l! f they were suiiimnnril to the recon- 

struction of the work of their fathers. It was evident that 
uiing "", and the odds entirely against 

tin- President. On tin- one side, the undivided ])liahuix of 
the federal party (for they had not then taken the name of 
whig); a large part of the democratic party, yielding to 
preredent and judicial decision; the bank itself, with its 
colossal money power its arms in every State by means of 
branches its power over the State banks its power over 
the business community over public men who should 
become ii> debtors or retainers its organization under a 
single head, issuing its orders in secret, to be obeyed in all 
places and by all subordinates at the same moment. Such 

the formidable array on one side: on the other side a 
divided democratic party, disheartened by division, with 
nothing to rely upon but the goodness of their cause, the 

/'';/< of Jackson's name, and the presidential power; 
j.-iinst anything less than two-thirds of Congress on 
the final jiiestiun of the re-charter; but the risk to rui 
his noil-election before the final question came on. 

1'ndcr such oircumstances it required a strong sen 

duty in the new President to commence hi> career by risking 
-!; but he believed the institution to be uncon- 
stitutional and dangerous, ami that it ought to <-ca-e t e 
ami then- WM a clause in the Constitution that Constitution 
which he had sworn to siijport which commanded him to 
>::iinend to ( 'oiigrcx.v, f,r its consideration, such measures 
as ||- should deem expedient, and proper. Under th 

duty, ami under the obligation of this oath, President 

ommended to Congress the non-renewal of 

the bank charter, and the subsfituti -m of a different fiscal 

r tin- .jM-i-ation> of the government if any such 

'|uiied. And with 1 d frankness, 


and the fairness of a man who has nothing but tin- public 
good in view, and with a. disregard of self which |cnnils no 
personal consideration to stand in the way of a discharge of 
a public duty, lie made the recommendation six years before 
the expiration of the charter, and in the first message of hi* 
lirst term; thereby taking upon his hands such an enemy as 
the Bank of the United States, at the very commencement 
of his administration. That such a recommendation against 
such an institution should bring upon the President and his 
supporters, violent attacks, both personal and political, with 
arraignment of motives as well as of reasons, was naturally 
to be expected; and that expectation was by no means 
disappointed. Both he and they, during the seven years that. 
the bank contest (in different forms) prevailed, received from 
it from the newspapers and periodical press in its interest, 
and from the public speakers in its favor of every grade- 
an accumulation of obloquy, and even of accusation, only 
lavished upon the oppressors and plunderers of nations a 
Verres, or a Hastings." 

" lie impnnged neither the integrity nor the skill of the 
institution, but repeated the objections of the political school 
to which he belonged, and which were as old as Mr. Jeffer- 
son's cabinet opinion to President Washington, in the year 
1791, and Mr. Madison's great speech in the House of 
Representatives in the same year. He, therefore, made no 
attack upon the bank, either upon its existence, its character, 
or any one of its rights. On the other hand, the bank did 
attack President Jackson, under the lead of politicians, and 
for the purpose of breaking him down. The facts were 
these: President Jackson had communicated his opinion to 
Congress in December, 1829, against the renewal of the 
charter; near three years afterwards, on the 9th of January, 
1832, while the charier had yet above three years to run. 

140 i:\' i UK rvn 

Mini :i new ' elected before its expiration, and 

ntial election impending (Ciencrul Juekson and 
Mr. Clay the. candidates) the memorial of tlie pn 
and directors of the bank was suddenly presented in the 
of tin* Vnitcd States, for renewal of its charter, 
w, how came that memorial to be presented at a time 
>o inopportune? so premature, so inevitably mixing 
with tlio presidential election, and so encroaching upon the 
of the ptople, in snatching the question out of their 
hand-, ami having it decided by a Congress not elected for 
the purpose and to the usurpation of the rights of the 
: for the purpose? IIow came all these 
.lies? al] these violations of right, decency and propri- 

16 thus: tlie bank and its leading nnti-J;' 

friends believed that the institution was stronger than -the 
lent that it could beat him in the election that it 
could beat him in Congress (as it then stood), and curry the 
charter driving him upon the v<tn power, and rendering 
him odious if 1,,. nM-d it, and disgracing him if (after what 
1) lie did mt. This was the opinion of the leading 
pol!t;<-i.i!i> frit ndly to tlie bank, and inimical to the Presi- 
dent. Iliif the bank had :i class; of friends in Conirn -s aN> 
-'n; and between these two classes 
vehement opposition of opinion on the point of 
_C f'-r the new charter. Tt, was found impossible, in 
coinmnmcations lct\\ t-.-n Wushingtm and Philadelphia, 
-\\v and Uncertain, 10 Mage coach conveyances, over 
miry roads and fro/en waters, to come to conclusions on the 
difficult point. Mr. Middle and the director^ were in doubt, 
nould not do to move in the matter, unless all the 
tlie bank in ' '. Tn this 

f nneertaint;.. ' .'Iwallader, of Philadelphia, 

i and confidant of Mr. Middle, and his usual envoy in 


all the delicate bank negotiations or troubles, was sent to- 
Washington to obt:iin a ivsult; and the union of both wing* 
of the bank party in favor of the desired movement. lie 
came, and the mode of operation was through the machinery 
of caucus that contrivance 1 by which a few govern many. 
The two wings being of different politics, sat separately, one 
headed by Mr. Clay, the other by Gen. Samuel Smith of 
.Maryland. The two caucuses disagreed, but the democratic 
being the smaller, and Mr. Clay's strong will dominating 
the other, the resolution was taken to proceed, and all bound 
to go together." 

"The prudential counsels of such men as Mr. Dallas did 
not prevail; political counsels governed; the bank charter 
was pushed was carried through both Houses of Congrc^ 
dared the veto of Jackson received it roused the people 
and the bank and all of its friends were 1 crushed. Then 
it affected to have been attacked by Jackson; and Mons. de 
Tocqueville has carried that h'ction into history, with all the 
imaginary reasons for a groundless accusation, which the 
bank had invented. 

"The remainder of this quotation from Mons. de Tocque- 
ville is profoundly erroneous, and deserves to be exposed, to 
prevent the mischiefs which his book might do in Europe, 
and even in America, among that class of our people who 
look to European writers for information upon their own 
country. lie speaks of the well informed classes who rallied 
round the bank; and the common people who had formed 
no rational opinion upon the subject, and who had joined 
General Jackson. Certainly the great business community, 
with few exceptions, comprising wealth, ability and educa- 
tion, went for the bank, and the masses for General Jackson; 
but which had formed the rational opinion is seen by the 
event. The 'well informed' classes have bowed not merely 


to the decision, Inn to the intelligence of tin- masses. They 
..dopted their opinion of the institution condemned it 
repudiated it 18 an 'oh>olcte idea;' and of :ill of is former 
advocate*, not one now exists. All liave yielded to that 
instinctixe sagacity of the people, whieli is an overmatch for 
book-learning; and which being the result of common - 
is u-iially right; and being disinterested, i< always ],. 
I adduce this instance a grand national one of the suc- 
cumbing of the well informed classes to the instinctive 
sagacity of the people, not merely to correct Mon*. de 
Toc<|ueville, but for the higher purpose of showing the 
capacity of the people for self-government. The rest of the 
^notation, 'the independent existence the people accus- 
tomed to make and unmake startled at this obstacle 
irritated at a permanent institution attack in order to shake 1 
and control;' all this is fancy, or as the old English wrote 
it. fantasy enlivened by French vivacity into witty theory, 
as fallacious as witty/ 1 

u Now, while Minis, de Tocqueville was arranging all this 
line ecominm upon the bank, and all this censure upon its 
adversaries, the whole of which is nothing but a French 
translation of the bank publications of the day, fov 
and a-_rain^t IVc-ident Jackson during all this time there 
.foiug on in the Congress of the United Stales. 
by which it wa proved that the bank was then insolvent, 
and living from day 1o day upon expedients and getting 
hold of property and money by contrivances which the law 
would qualify as swindling plundering it- own M"ckh..lder< 
and bribing individuals, institutions, and meinb. 

itive bodiex, -\\here\er it, could be done. ThoM- line 
notes, of which he speak<, were then without solid value. 
The salutary restraint attributed to its control over local 
banks was noon exemplified in its forcing many of them into 


complicity in its crimes, ami all int<> t\v<> general 
of specie payments, headed )>y it>elf. Its solidity and it- 
honor \\ h"\\ ii 'i open bankruptcy in the dishonor 

of its notes the violation of sacred deposits (he disap- 
pearance of its capital the destruction of institutions con- 
nected with it the extinction of lil'iy-.-.ix millinns of capital 
(its own, and that of others drawn into its vortex); and the 
ruin or damage of families, both foreign and American, who 
had been induced by its name, and by its delusive exhibi- 
tions of credit, to invest their money in its stock. Placing 
the opposition of President Jackson to such an institution 
to the account of base and personal motives to feelings of 
revenge because lie had been unable to seduce it into hi- 
support is an error of fact manifested by all the history of 
the case; to say nothing of his own personal character. II 
was a senator in Congress during the existence of the 1 iirst 
national bank, and was against it; and on the same grounds 
of unconstitutionality and of inexpediency. lie delivered 
Jiis opinion against this second one before it had manifested 
any hostility to him. His first opposition was abstract 
against the institution without reference to its conduct; he 
knew nothing against it then, and neither said, or insinuated 
anything against it. Subsequently, when misconduct was 
discovered, he charged it; and openly and responsibly. 
Equally unfounded is the insinuation in another place, of 
subserviency to local banks. He, the instrument of local 
banks! he who could not be made the friend, even, of the 
great bank itself; who was all his life a. hard money man - 
an opposer of all banks the denouncer of delinquent banks 
in his own State; who, with one stroke of his pen, in the 
recess of Congress, and against its will, in the summer of 
1836, struck all their notes from the lisl of land office pay- 
ments! and whose last message to Congress, and in his 


farewell address to the people, admonished them earnestly 

and affectionately against the whole system of paper money 
:.k currency) the evils of which he feelingly described 
! filing heaviest upon the most meritorious part of the 

community, and the part least able to bear them the 

productive classes." 

The United States Bank continued its war upon the 
administration until the last moment of its existence. It> 
charter expired by limitation in 1836, but it was entitled to 
years in which to wind up its affairs. Instead of prepar- 
ing to cl<v' up its Intsinc.vs it resorted to new and desperate 
measures to prolong its powers. In Januan. . bill 

"snaked" through the legislature of Pennsylvania, by 
;' bribery and corruption, entitled "An Act to repeal 
., and to continue the improvement of the State 
by railmads and canals, and for other purpo.xcs;" and under 
He generality of "other purposes," was found a. 
charter for the United States Bank, adopting it as a State 
liank. Thf people of Pennsylvania were astounded, and 

denounce the act and demand its rep 

and at the next, S'-^ioii of the legislature an investigation 
ordered, but, as is iiMial in such cases, it came to nothing. 

ii and corrupt as the institution subsequently proved to 

be, it went on for se\,-ral year*, and exerted great influence 
iu the commercial and political affairs of the country. Th* 
two general sii-peii-i- uis . ,f Bpecie payment-., headed by tin- 
I'nited Slates Hank, referred to in the foregoing extracts 

Bton, were th<- suspensions , I -, in the 

latter of which the bank cloM-d its doors upon its creditors 

October full, 1839, never really to open them again. A report 

s affairs was ma*! 'inmittee of Stockholders, and 

I, to (jiiotc again from Ilenton, such an exhibition of 

waste and destruction, and of downright plundering and 

n A\k> <>\' i in: i MI I:D - 

Criminal misconduct, as was n<-\cr smi bel'oiv in the annals 
of banking. Fifty-six and three-quarter millions of capital 
out of eighty-two and one-quarter millions, (including its 
own of thirty-live,) wore Mink in the limits of Philadelphia 
alone; for the great monster, in going down, had carried 
many others along with her; and, like the strong man in 
scripture, slew more in her death than in her life. Vast was 
her Held of destruction extending all over the United 
States and reaching to Europe, where four millions sterling 
of her stock was he-Id, and large loans had been contracted. 
Universally on all classes the ruin fell foreigners as well as 
citixens peers and peeresses, as well as the ploughman and 
the wash-woman merchants, tradesmen, lawyers, wards and 
guardians; confiding friends who came to the rescue; de- 
ceived stockholders who held on to their stock, or purchased 
more: the credulous masses who believed in the safety of 
their deposits, and in the security of the notes they held 
all all saw themselves the victims of indiscriminate ruin. 
An hundred millions of dollars was the lowest at which the 
destruction was estimated; and how such ruin could be 
worked, and such blind confidence kept up for so 'long a 
time, is the instructive lesson for history; and that lesson the 
report of the stockholders' committee enables history to give. 
From this authentic report it appears that from the year 1830 
to 1836 the period of its struggles for a re-charter the 
loans and discounts of the bank were about doubled iis 
expenses trebled. Near thirty millions of these loans were 
not of a mercantile character neither made to persons in 
trade or business. * To whom were they made? 

To members of Congress, to editors of newspapers, to brawl- 
ing politicians, to brokers and jobbers, to favorites and 
connections; and all with a view to purchase a re-charter, or 
to enrich connections and exalt himself, (Nicholas Kiddle, 

140 i:\Mv> (>K Till: UNITED STATES. 

President of the Bank.) The importance of the destruction 

of the United States Bank cannot be overestimated. In 

no other wav could the government have la-en rescued from 

the domination of the money power, which was sparing no 

pains to subvert the liberties of the people. John Randolph 

warningly said: "Charter a bank with thirty-five millions of 

capital; let it establish and learn its power; and then find, if 

you can, means to * bell the cat.' It will be beyond your 

power; it will overawe your Congress, and laugh at your 

1 1 i s w ( ) rd s were fully verified. Even Clay, who had 

said, in 1811, "I conceive the establishment of this bank 

(National Bank) as dangerous to the safety and welfare of 

this republic," and Webster, who had declared his hostility 

to bank currency repeatedly, as "one of the great* 

political evils," and "a contrivance for cheating the laboring 

> of mankind, 9 ' were both dragooned into the support of 

;iited States Bank, in its application for a renewal of 

its charter; and all this power over the monetary and political 

- of the country was developed by the bank while it 

yet in its infancy and rotten, financially, to the c< 

We have dwelt at some length upon the subject of the 

Unite.; i.ank, because' the country is now undergoing 

a similar ordeal. The money power i- 

Secure control ,,f ii, t . monetary and political affairs 

country through the instrumentality of the National Banks. 

The monger is n-w hydra-headed. fa p--litical tooN of 

both partie>, in and out of Congress, pretend to be in 

of specie circulation of "hard money,*' Hiom -! money," 

etc. It is a UK iae, If they were honestly for "hard 

.-id opposed to "paper money," their first step 

would IM- i , >:; per money of the tanks, because, 

of all forms of paper money, that is t 1 and most 

dangerous. Benton, the great champion of hard money, 


could tolerate United States Treasury notes, and even voted 
for a bill authorizing their issue; but, unlike these hypocrit- 
ical champions of hard money of the present day, lie left no 
one in doubt in regard to his views upon the question of 
banks of issue. In his speech, on the Divorce of Bank and 
State, in 1837, he said: "Banks of circulation are banks of 
ha/ard and of failure. It is an incident of their nature. 
Those without circulation rarely fail. That of Venice has 
stood seven hundred years; those of Hamburg, Amsterdam, 
and others, have stood for centuries. The Bank of England, 
the great mother of banks of circulation, besides an actual 
stoppage of a quarter of a century, has had her crisis and 
convulsion in average periods of seven or eight years, for 
the last half century in 1783, '93, '97, 1814, '19, '25, '36 
and has only been saved from repeated failure by the pow- 
erful support of the British government, and profuse supplies 
of exchequer bills. Her numerous progeny of private and 
joint stock banks of circulation have had the same convul- 
sions; and not being supported by the government, have 
sunk by hundreds at a time. All the banks of the United 
States are banks of circulation; they are all subject to the 
inherent dangers of that class of banks, and are, besides, 
subject to new dangers peculiar to themselves. From the 
quantity of their stock held by foreigners, the quantity of 
other stocks in their hands, and the current foreign balance 
against the United States, our paper system (bank currency) 
has become an appendage of that of England. * * The 
power of a few banks over the whole presents a new feature of 
danger in our system. It consolidates the banks of the whole 
Union into one mass, and subjects them to one fate, and that 
fate to be decided by a few, without even knowledge of the 
rest. (This was strikingly illustrated by the almost general 
suspension of the National Banks in 1873.) An unknown 


div:in of bankers sends forth an edict which sweeps over 
the empire, orO006fl tin- lines of States with the facility of a 
finnan, pros! rating all State institutions, breaking up all 
engagements, and leveling all laws before it. This is a kind 
b Consolidation which the genius of Patrick Henry had not 
even c.meeived. But while this firman is thus potent and 
irresistible for prostration, it is impotent and powerh- 
resurrection. It goes out in vain, bidding the prostrate 
lianks to rise. A veto power intervenes. One voice is 
sufficient to keep all down; and thus we have seen one word 
from Philadelphia* annihilate the New York proposition for 
resumption and condemn the many solvent hank- to the 
continuation of a condition as mortifying to their feelings 
as if is injurious to their future interests. Again from the 
mode of doing business among our banks using r:n-h 
others notes to bank upon, instead of holding each other to 
weekly settlements, and liquidation of balances in specie, 
our banks have all become links of one chain, the 
strength of the whole being dependent on tin- strength of 
eaeh. A few govern all. Whether it U to fail, MI- to resume, 
the f-w govern; and not only the few but the weak. A few 
il; a panic ensues, and the rest shut up; many 
strong onei ire ready to roume; the weak are not ready, 
ami the strong must wait. Thus the principles ,{' safety, 
and the rules of government, arc reversed. The weak 
ii the strong; the bad govern the good; and the 

gOTOri] the solvent. This jx our sy>tem. 

I-- ealled, which lias no feature of OOllSUrteney, no 

principle . and which is 'nothing but the floating 

appen .1 f.. reign and overpowering system." Who 

can d-.ul.t U tO whew : and IJciiton would stand 

., if they were alive, in regard to the i ue now 

;r_r, whether the government and peoph- ..f tin- United 

i; \NKS en- 1 nil-: r\i i i:i BT \ 

beg shall use I'nited States Treasury notes, or National 
JJank notes, nominally redeemable in gold, for their 
Circulating medium? It was impossible in Jackson's time 
for the administration to suppress State banks of is.-iie, 

deeply liad they become rooted in the structure of 
American society, but, everything possible was done t<> 
curtail their power for mischief. The lirst step taken in 
this direction was the publication, July 11, J^'.r., of the 
famous * specie circular,*' ordering agents for the sale of 
public lands to take nothing in payment but specie. This 
circular was based on a law passed in 1816, requiring the 
Secretory of the Treasury to take- nothing but specie, Treasury 
notes, or the notes of specie paying banks. The notes of 
eastern banks at this time' were sent West for :i u good circu- 
lation," and "coon-box banks"' were set up in the Western 
States, which issued notes in easy loans to land speculators.* 
The title to land was passing rapidly to speculators, and the 
treasury was being filled with worthless paper. Ten millions 
of bank currency of this sort was arrested by the. circular on 
its way to the land ollicc at Washington. The money power 
was highly indignant, and Congress, then as now its suppli- 
ant tool, at its next session parsed a bill rescinding the 
circular, but it was not signed by the President and failed 
to become a law. This led to the establishment of the 
Independent Treasury system, of which more will be said 
hereafter. The number of specie basis banks in existence 
during this period were as follows: 

Years, Number, Years, Number. Years. Number, 
IS20 1835. . . . i--- 0(i:J 

1830 330 ls:5t; :.<;? 1839 slu 

1834 500 1837 (i:' t 1840 1)01 

The country was flooded wi'li a. depreciated currency, 
based on "hard money," 1 and commercial crashes and money 

History of American Currency. 


panics occurred with almost as much regularity as the ebb 
ami flow of the tides. 


Iii the latter part of 1836 several large failures occurred 
in < .real Britain. This was the beginning of a crisis which 
eonvul>ed both Europe and America. Early in May one 
bank in New York City and three in Buffalo failed. On 
the 10th of May all the banks in New York suspended 
payments, under a law passed by the legislature 
allowing tin-in to suspend for one year. The banks through- 
out the ( .nut ry soon followed their example. The <li>: 
of the year were aggravated by a failure of the wheat crop. 
The New York hanks being required by law to resume M :y 
10, 1838, contracted their circulation as rapidly as possible. 
It was reduced over $12,000,000, or one-half, during the 
year 1S:}7. The banks of New England were in a had 
condition, the best of them having only $1 in specie to 
redeem $11 iii notes. A meeting of bank delegates in New 
York was called for November 27, 1837, to confer in regard 
to resumption, but the United States Bank refusing, the 
convention did not meet. The New York Banks resumed 
on the loth of .May, 1 838, and nearly all the banks through out 
the country soon followed, at least nominal! iho^e 

of Philadelphia. Towards the end of the year the Bank of 
Knirland again became involved in trouble, producing the 
usual effect 'm America. 

CRASH OP 1839. 

on the Huh of October, 1839, the Bank of the United 

el.. sed its doors, and was followed by nearly all the 
- -nth and WeM. The banks in New York and 
Kii' made a show of holding out, but to no pur- 
pose. According to Sunnier, 343 out of 850 banks closed 


1'iitiivly, ;ui<l 02 p-irtially, and the government lst over 
$2,000,000 in deposit <. 

KASII OF 1841. 

An attempt was made to resume specie payments in 1841. 
But a run was made on tlie United States Bank, which had 
again opened, and it was compelled to finally close February 
4, 1841. This led to another general suspension, followed 
by great distress.* Specie payments were not again resumed 
until March, 1842. 

During all these years of banking on the specie basis 
system, banking operations had been carried on in the most 
reckless manner, without regard to personal integrity, or the 
laws of banking. Every possible device was resorted to by 
banks to put their notes in circulation, in such a way as 
would prevent their speedy return for redemption. Judge 
Kelley, in an able speech on the subject of banking, 
delivered at Indianapolis, in August, 1875, thus felicitously 
describes the manner in which this was frequently done: 

"Do you know where the phrase 'carpet-bagger' came 
from? The younger men of our day think it was invented 
to describe a man from the North who went South and got 
an office. Oh, no; not at all. The older members of my 
audience will attest the truth of what I say when I state that 
the phrase ' carpet-bagger ' arose from the fact that nearly 
every specie basis bank had its carpet-bagger a fellow it 
sent with notes by the carpet-bag full into some distant State 
to get them into circulation there. If he could not buy 
cattle, corn, hogs or something else in which there might 
be a profit, he was to enter into a treaty with the carpet- 
bagger or other officer of some bank out there for an 
exchange of notes. For instance: The Frogtown bank 
for I am. told there were banks located occasionally in 

*How tills distress was relieved iu Pennsylvania, see page 44. 


ulin np>, ami in those days, you must 

Lember, there were no telegraphs and but- few railn. 
the fellow from Frogtown would get way out into Skunk- 

,i, another almost Inaccessible place, and lie \vonld efl 
an < of ten, twenty, or thirty thousand dollar- 

I u l)ank nou-s for a like amount of Skunktown bank 
;d the SkunktOWB bankers would put off t! 
town noics on their customers, and the Frogtown ban 
would put oft' the Skunktown bank notes on theirs, and thu*. 
they would go on with this legitimate business to tlieir 
common advantage. I am giving you a histori> hen 

I tell you that I iirst became acquainted with that term in 
fellows who were traveling from on<- mt- 
M'-way place to .-mother with a. carpet-bag full of not, 
exchange, so tliat tiie notes put, in circulation in Skunktown 
couldn't find their way back to Frogtown, because the 
people in Skunktown didn't know where Frogtown wa>. and 
the people in Frogtown didn't know where Skunktown 
and if they did they couldn't get there-; the people in one 
: to the other to get the- specie on which 
the nntcN were based. Then after the bank at Frogtown 
had paid out the Skunktown notes, the- bank ;ii Fn>gt\vii 
would refuse to receive the Sknnktown note>, but it would 

I the holder, \vho wax it* debtor, around the corner : 
broker, uho would buy them at seven or nine per cent, 
di-coiiut, :md then the bmkcr and the bank would di 
the proceeds of thU gold i.i-i> t:-an>action. That la 

- <HI all over the- < oiintn ." 
In referring to this period, in tip 

''oreibly say-: "It, is u-ual to >|>cak <!' l 

;7, but f 16 unbr. 

f individual sulTering, roulling from the alternating 
ins and coutr | ; on 


what it could not get, and could not. have retained if it had 
-gold coupled with permission to issue notes and lend 
mom-}' deposited for safe keeping." 

In 1S40 the Independent Treasury act was passed, which 
took from the. hanks the custody of the funds of the govern- 
ment. This act excited great indignation amount the hanks 
and their tools, and the next year, :i new administration 
coming into power, Harrison having been elected President, 
the iirst step taken by Congress was to repeal it. It was 
re-enacted, however, in 1846, and remained in force until 
1861, when it was suspended to enable the Secretary of the 
Treasury to deposit the funds of the government with ''specie 
paying banks." (The Secretary of the Treasury was about 
to negotiate a loan of $150,000,000 from the banks ot New 
York, Boston and Philadelphia, and the Independent Trea- 
ury act was suspended at their instance, so as to enable them 
to retain their gold and pay the government in bank cur- 
rency; but the Secretary of the Treasury 1 unexpectedly 
required the loan to be paid in specie, and, after that, there 
were no "specie paying banks 1 ' left in which to deposit 
eminent funds.) 

The stimulus of the tariff of 1842, a great demand for 
breadst tiffs from abroad, the introduction of foreign capital, 
the discovery of gold in California, and other causes com- 
bined fo carry the country through from 1841 to 1857 
without a commercial crash or money panic. 

< KASII OF I So 7. 

In is/37, however, the people of (Ireat IJritain were over- 
taken by another of their periodical crises, which, as usual, 
involved the banks of the United States. The Ohio Life 
and Trust Company failed AIUTIM -24, is/37, with liabilities 
to the amount of $7,000,000. Sumner says, "at this period 


no rule M-ems to have governed issues save to keep one-third 
of the* circulation in specie, and in some States even this 
dwindled down to one-tenth or one-twelfth. Such a, rule, 
however, 5^ entirely fallacious, as any other arbitrary rule of 
reserve must be, and it proved in the time of trial that there 
\va< no strength to endure any shock." The New York 
banks, as an example of the contraction which followed, 
curtailed their loans from $116,000,000, August 29, 1857, to 
$94,500,000, November 28, 1857. The banks of Philadel- 
phia, Washington, Baltimore, and interior towns, suspended 
in September, and those of New York, Boston and of the 
country generally, in October. Stocks fell 40 or 50 per 
cent., and 20,000 persons were thrown out of employment 

s York City within a fortnight.* But it is unnec- 
to go into details. It was the same old story over again. 
The people \\ere accused of " extravagance," "over produc- 
tion," etc., and after "confidence" had been restored by the 
Sheriff, the banks started afresh. 

-(-PENSION OP 1861. 

Iii the beginning of 1861, when the great Rebellion broke 
out, the number of hanks in the United States was about 
1,600, with a circulation of over $200,000,000. Of this circu- 
lation, about three-fourths belonged to the Northern States. 
The Specie reserve of the banks of the Northern States, kept 
on hand for the purposes of redemption, amounted to proba- 
bly some $60,000,000. The necessities of the government 
Ymg urgent, tvo loan acts were paed by Congress, 
during the extra session of 1861, one approved July 17th 
and the other August /ith. By the act of July 17th Con 
authori/cd loans to the amount of two hundred and fifty 
millions of dollars, in bonds running twenf;. at not 

, per cent, interest; in 7-30 notes runnning three year-; 
Sumner, page 183. 


or fifty millions of the amount could, at the discretion of 
the Secretary, be issued in the form of Treasury notes, 
I >:iy:ible on demand, without interest* The act of Congress 
tt' August 5th authorized the Secretary of the Treasury to 
issue 6 per cent, bonds, running twenty years, for the purpose 
of funding the Treasury notes, etc., and also suspended the 
provision of the sub-Treasury act of 1846, "so far as to 
allow the Secretary of the Treasury to deposit any of the 
moneys obtained on any of the loans now authorized by law, 
to the credit of the United States, in such solvent specie 
paying banks as he may select." Then, to quote from 
Spaulding's Financial History of the War, " the banks in 
New York, Boston and Philadelphia most patriotically cai no 
forward and made arrangements in several negotiations 
with Secretary Chase to loan the government 8150,000,000 
under the provisions of the two loan acts passed at the extra 
session. Of this sum $105,000,000 was apportioned to the 
.^-ociated banks of New York, payable in installments. 
The banks were in good condition, * * and the loan to the 
government was made with the expectation that the money 
would be checked out under the direction of the Secretary, in 
pursuance of the sixth section (suspending the sub-Treasury 
act) above referred to. The Secretary of the Treasury 
refused to use the discretionary power conferred upon him 
by that section, and would not check on the banks for the 
expenses of the war, so that current bank notes could be 
paid or balances settled through the clearing house, but 
insisted that the banks should pay the money loaned into 
the sub-Treasury in gold or gold Treasury notes. * * The 
banks having been committed to making the loans, and 
having made partial advances on account of the same, were 
obliged, to complete the loan, notwithstanding the Secretary 

*Thee notes (known aftorwards as old demand notes) were subsequently 
u lull legal tender aud circulated at pur with gold. See Chapter VI. 

15G U' >TA I : 

iMiry deemed it ineMiiipatible with hi> 
duty, and the tradition- <>f the sub-Treasury i 

tin- government, oven under the 
rdinary exigency under which the loan* were i.. 
;his it appears that when the banks " most patriot 

forward"' to lend the government, tlie sum <>1 

000,000, they confidently expected that they would be per- 
mitted to exchange lauk currency for the bonds of the 
.incut, and in eil'ect to i>ecome factor- bet \\ven the 
:nnent and tlie people, in exchanging the bond- ot' the 
:iiiu-iit for the products of industry. I lad this ai : 
iiinit. IM- n carried out, it is not, difficult, in the light of sixty 
rien< < with the specie basis banking sy>U-m, to 
conjecture what would have been the result. Tlie banks 
would have taken the loans of tlie government a^ : 
they were offered, and inllatcd their circulation to a corres- 
ponding d> er or later tlie inflation would have 
ended in a commercial crash and money panic; the hanks 
wouhl have Mispnidrd specie paymentfl U usual, and the 

found themselves with some hund:> 

millions of dollars of worthless nr depreciated paper on their 
hamN -in M' bankruptcy. .ry Chase undoubt- 

edly Ijecamc entangled in the toils of the ni,.ney jower, but 
his action in this particular, in refusing to take anything but 
sj.crie from the banks on account of their loan of ^150,000^- 
000, was a foi'tunate circumstance, which led to imj)rtant. 
result.-. When nr-ed to check upon the banks, in>1- 
re(jiiiring them to j , he said, ' however harm! 

ial it might be, it' < .nt'mcd to the Ne\v Y..rk b -inks, 
i!d inevitably result in :d payment :ind receipt 

for public dnes or bank - . hi -h in turn \\"uld 1 

uld terminate in >fl and 

:id bank 
LettT ..r .1 . l . William* lo Hoi.. B. !.< 

IN: i M i I:D MA i 157 

Tin- banks accu&ed i i ry of the Treasury of acting 

in bad faith with them, in t only in the mailer of requiring 
tin-in to pay specie, l>ut in rout inning to issue Treasury notes 
(demand notes under the act of July 17, 1861) after he had 
given assiuraces to the contrary, and a general suspension 
of specie payments took place on the 28th of Dec-ember, 
1861. A prominent banker* iu speaking of this period say>: 
'* Kven with all these unfavorable circumstances surrounding 
them (the banks), it was an encouraging fact observed by 
those who were anxiously watching the practical operation 
of this great and novel experiment, that while the circula- 
ting notes in the country were restricted, the disbursements 
of the government l'<r the war were so rapid, and the con- 
sequent internal trade movement was so intense, that the 
coin paid out upon each installment of the loan came back 
to the banks, through the community, in about one week. 
The natural effect of this general commercial activity upon 
the circulating medium being to quicken its flow. After 
taking the third amount of fifty millions by the associated 
hanks, those in New York who had at that time paid in of 
their proportion over eighty millions in all found themselves 
in this position: 
Their aggregate coin, which on the I7tli of August, before 

the first payment into the Treasury, was $49,733,990 

Was on December 7th 42,318,610 

A reduction of only $7,415,380 

and the other two cities in like proportion." 

In the latter part of isui gold began to 1low towards 
Europe. This, together with the issue of demand notes, 
caused the specie reserve of the banks to diminish rapidly. 
The drain upon the Xew York banks in December went 
on at the following rate: 

Letter of Geo. S. Coe to E. G. Spauldlng, Financial History of the War. 


iber 7, 1861, the banks had in specie $42,300,000 

14, " " 39,000,000 

" 21, " " " 36,800,000 

" 28, u " " 29,300,000 

After a final conference with Secretary Chase, in which 
he refused to abandon the course he had thus far pursued, 
the banks decided that it was expedient to suspend 
payment-, and accordingly, as already mentioned, a general 
suspension took place on December 28, 1861. From this 
time on the specie in the New York banks began to in 
i, and March 8, 1862, was $30,000,000. 

The State banks continued to circulate their notes until 
after the National Banks were put in operation, when they 
were driven out of circulation by taxation. The National 
Banking bill became a law on the 25th of February, 1863, 
and (.n the 3d of March following an act of Congress w;i- 
passed imposing a tax of one per cent, each half year, on a 
graduated scale, of State bank circulation, according to the 
capital stock of each bank. This was dime for the purpose 
of getting the E :iks of issue out of the way of the 

:ial Banks, and proved successful. Thus, af: 
eventful career of n\er half a century, during which they 
had inflicted incalculable injury and suffering upon the 
American people, the s; is banks of is>ue. Ofg 

onder State authority, passed away, not in a merited 

of public indignation, but. quietly and stealthily at the 
mand of the money p. .\\i-r, to enable it to erect in their 

: powerful and dangerous development 
same system of lanki: 

N \TI"N M I' ' 

Tlie National Hanking sy-fem was ]lanned shortly after 

ChaM- entered upon tin- duties of his nflicc, and 

was recommended by him in his first annual report to Con- 


gress, December 10, 1801. It was found impossible to put 
tin- system into operation soon enough to meet the necessities 
of the government, and it became necessary to issue Treas- 
ury notes (greenbacks.) There is abundant reason to believe 
that the instigators of the National Banking system were in 
no particular hurry to have it put into operation. As the 
circulation of the National Banks was to be based on gov- 
ernment bonds, it became an object to these conspirators, 
chief among whom was the Hon. John Sherman, United 
States Senator from Ohio, to so shape legislation as to 
depreciate the paper of the government and enable them to 
secure the bonds necessary to establish the National Banking 
system at the lowest possible figure. The National Banking 
bill, therefore, was not pressed until 1863. It was then foisted 
upon the country at a time when National Banks could render 
no possible service to either government or people in fact, 
were :i disadvantage, for their circulation differs in no 
material respect from the circulation of specie basis banks 
of issue, and is a breeder of inflation. The National Banking 
system was conceived in fraud, and its promoters, who 
found it to their advantage to first depreciate by legislation 
and then decry, as they are still doing, the paper of the 
government, were more dangerous, because more subtle 
enemies of the government, than Jefferson Davis and all his 
hosts. The last step in the scheme, p'..i:med by Secretary 
Chase and certain capitalists and politicians, is now in- 
process of consummation. TVo refer to the retirement of 
the greenback and tho resumption of specie payments, 
January 1, 18 TO. "When this is accomplished the National 
Banks will hold the purse strings of society, and, by monop- 
olizing tho whole of tho circulating medium of the country, 
by which all property in the country homes, lands, debts 
and credits, personal and real estate of all descriptions are 

160 I IIH I'MTKI) STA'I i 

valued, will render tin- whole community dependent upon 
them. John Randolph predicted, and his prediction ua^ 
v niicd, that if a National Bank was established with :i 
capital of $35,000,000, it would '-overawe Congress and 
laugh at its laws." Now we have 2,<K)0 National Banks 
with a capital of -nearly #400,000,000. Benton characteri/.ed 
the unity of interest of the old State bank* of i--i;e as "a 
,-olidation of a kind which the genius of Patrick Henry 
had not even conceived." The National Hanking system con- 
stitutes "a consolidation"' besides which the one denoun 
by Ben!< -n is a mere pigmy. Hamilton when he son 
to found a strong government, based on an aristocracy of 

i!h,aiid to that end urged the establishment of a 1'ir 

States Bank modeled on the British system, never dreamed 

of such a consolidated power as that now constituted by 

2,000 National Banks, modeled on that (the British) system. 

But, apart from the dangerous power over the property 

and political affairs of the country, which such a system 

fera upon :i comparatively small class of people, why 

ild all other classes be compelled to pay the hanking 

clu^ interest on 400,000,000, more or less, of paper money 

1 on bonds of the government, for which the people arc 

nsible, when they can have a better circulating medium, 

without inferexf, based on precisely the same Becori 

The history of the National Hanking svMrm can be more- 
rtfa in connection with the hi>tory .f the le. 

.ring tlie war, and with that will form 

the subject of the next chapter. The details of the system 
will be duly explained in a. subse|iient cha]>ter (Chapter VII.) 



MONEY, as has been fully explained, is an important 
clement in the production and distribution of wealth in all 
its forms. Without it production is slow and laborious, aiM 
the distribution of the products of industry difficult and 
expensive. Hence the necessity of an abundance of money 
based on sound principles that is money that is free to 
obey the natural laws of trade, and not subject to the control 
of private corporations, as is the ease with bank currency - 
to fill the channels of circulation. With a sound currency 
in circulation the production and accumulation of wealth 
would go on gradually and steadily, and coimnereial crashes 
and money panics would be unknown. Individuals would 
Mieeeed or fail, as now, but it would be through natural 
eauses. That a people can carry on coimnereial operations 
of great magnitude for centuries, by means of an enlightened 
M -tern of money, without being visited once by such crises 
and convulsions as have marked the history of Great Britain 
and the United States, since the adoption of the specie basis 
(banks of issue) system of money, is fully demonstrated by 
tin- history of the Venetians,* and the experience of other 
European nations in more recent times. The weakness of 
the specie basis system lias been nut signally illustrated, 
however, in times of war, when great activity in both 
production and distribution became absolutely imperative. 
In the war with France, from IT 93 to 1815, Great Britain 
was obliged to abandon a medium of exchange based on 

*See Chapter IV. 


'her. P>y means of irredeemable paper money 
slit- \\.-i- enabled to carry on succe>>i'iilly OIK- of the i. 
tremendous wars of modern times, and at its <-l><e tlie 
people c- 1' (Jival Britain were, individually ami collectively. 
OS. Ignoring the teachings of experience she waded 
Lack through individual bankruptcy and ruin to tin- old 
and lias had her commercial crashes and money 
panics since with the same regularity as before. If paper 
money is found to be so invaluable in the production and 
distribution of the products of industry, under the n 
disadvantageous circumstances, in time of war, what is to 
hinder it from being equally invaluable in time of pe 
when no uncertainty in regard to its ability to represent 
value can attend its use? That the use of paper money 
durinLr war is a matter of compulsion, is the merest sophistry. 
During the Revolutionary war, when Continental money, 
which ran hardly be said to have been based on anything, 
in to #row worthless, Congress declared that th>e who 
refuse. 1 to take it should be regarded as public eneii; 
The public, smiled, and barbel's papered their shops with it.* 

1'aper money, however, undoubtedly becomes an acknowl- 
edged m-ci-xxity during war especially in countries \\i. 

lium of exchaiiire lielongs to the specie b 
In(ln-at Ilritain lnisiness affairs in tin. 

irted almoxt entirely, as we h:i ; by mean 

-tern, on account of the limited 

nut of money in circulation, and when an emergency 
quiring great rapidity of production and distrilni- 
tion, both government and people iind then^ehcs without 
B l-.|iiate -mplish the ends . 

n tho TJelH-Hion broke out in 1SG1, the p ( -,,plo of the 
P6 in the enjoyment of unusual prosperity. 
Simmer's History of American Currency. 1cc page 47. 

ISSUED nri:i\; TIM: I:KI:I-:I.UON. !;:; 

The crop> li;ul been moiv than ordinarily gund, and the coun- 
try generally Mas rapidly rccnxcring iVnin the cra-h of 1857. 
Tin- cotton crop of 1SOO had reached the enormous amount 
of 5,387,052 halos (of 400 Ihs. each.) 

The state of the hanks ami the currency from 1857 to 1863 
\va* a> follows: 

Circulation, Deposits. Loans, Specie, 

1857 1214,700,000 $230,309,000 $684,400,000 $58,300,000 

1858 155,200,000 185,900,000 583,100,000 74,400,000 

1859 193,300,000 259,500,000 657,100,000 104,500,000 
ls,;o_ 207,100,000 253,800,000 691,900,000 83,500,000 

1861 202,000,000 257,200,000 696,700,000 87,600,000 

1862 183,700,000 296,300,000 646,300,000 102,100,000 

1863 238,600,000 393,600,000 648,600,000 101,200,000 

Preparations for war were begun hy the Federal Govern- 
ment on a scale of great magnitude, with an empty Treasury. 
The real and personal property of the country, according to 
the census report of 1860, amounted to $16,159,616,068, or, 
leaving out the States in rebellion, to $10,957,450,961. The 
people of the States which sustained the Federal Govern- 
ment possessed ample resources and were inspired hy a 
sincere feeling of patriotism. The only question, therefore, 
was as to the means hy which the resources of the people 
could he rendered available to the government. It could 
of course he done -only through the instrumentality of a 
medium of exchange.* Taxation was impracticable at the 
ouNet, becau-e the government did not possess the ma- 
chinery for laying and collecting taxes, and funds were 
required at once; and besides the amount of money in 
circulation w is insignificant as compared with the wants of 
the government. There was manifestly but one of two 
eoursv-s- to p::vsue. Either to adopt the machinery of the 
hanks and through them exchange the credit of the govern- 
ment for the products of industry, or deal directly with the 

"Head ia this connection page C2, also pages TO, 71, 72 and 73. 


l.y issuing legal tender Treasury notes, based on and 
-nting tin- wealth of the country and redeemable in 
venues of tin- government. Neither course, hov 
!<iirsued, or rather the Secretary of the Treasury 
attempted to u>e both ]>lans in part, :ind with the mo<t 
iicd results. 


During the extra session of Congress in July and August, 
1861, two important loan acts were passed, which are 

, ing of special notice, one approved July 17th and the 
other August 5th. By the act of July 17th the Secretary of 
the Treasury was authorized to borrow $250,000,000, for 
which he was authori/ed to issue coupon bonds or registered 
bonds or Treasury notes in such proportions of each as he 
might deem advisable. The bonds were to bear interest n<t 
exceeding seven per cent, per annum, payable semi-annually, 
and to run for twenty years, when they would be redeemable 
,;t the pleasure of the United States; and the Treasury notes 
ued in denominations of not less than $50, 
payable three years after date, with interest at 7 3-10 per 
cent., payable semi-annually, and exchangeable at any time 
for twenty years six per cent, bonds. Or, at his option, the 

tary of the Treasury might issue $50,000,000 of the 
loan in Treasury notes, payable on demand, in denom- 
inations of not less than ten dollars each, without in: 

payable' for salaries and other dues from the 

1'nite (afn-rwards known as old demand 

l;e miirht i ue Treasury notes, payable ill one 

from date, bearing interest at 3 65-100 per cent, per 
annum, \changeablc at any time in sums of $100, or 
upwards, for three year Treasury notes bearing 7 :;-IO in' 
ly the act of August 5th, which was supplementary to the act 
of July 17th, ti ary of the Treasury was authorized 

[SSUED i.iKiv; TIIK i:i:i;i:i.i.iON'. 

tO iSSUe bonds bearing interest at six }er cent. per annum, 
payable after twenty years from date-, which, in denomina- 
tions not less than $500, might lie exchanged for Treasury 
nok's bearing 7 3-10 per cent, interest. Tin- act of July 17th, 
fixing the denomination of the Treasury notes without 
interest (demand notes) at not less than ten dollars Avas 
modified so as to fix the limit at not less than five dollars, 
and these notes (demand notes) were made receivable 'in 
payment of public dues. By the sixth section of this act 
the Sub-Treasury act of 1846 was "suspended so far as to 
allow the Secretary of the Treasury to deposit any of the 
moneys obtained on any of the loans now authorized by 
law, to tin- credit of the Treasurer of the United State--. 
such solvent specie payiny banks as he may select? 
By an act of Congress approved February 12, 1862, the 
Secretary of the Treasury was authorized to issue $10,000,000 
of Treasury notes, payable on demand, not bearing interest, 
in addition to the $50,000,000 of like notes authorized by 
acts of July 17th and August 5th, 1861, which should be 
deemed part of the loan of $250,000,000 authori/cd by said 
acts. And by the act of March 17, 1802, it was enacted 
that these demand notes ($60,000,000 in all) shall, in, addi- 
tion to beiny receivable in payment of duties on im- 
ports, be receivable, and shall be lawful money and </ 
I' Ii<i1 fender, in like manner and for the same purpM-> 
and to the same extent as the notes (^reenbarks) authorized 
by the act approved lu-bniary '_'."), is ;_'. These demand 
notes were the only notes issued during the war that wen- 
made a full legal tender, that is, receivable- for all public 
lues (including duties on imports) and a tender for private 
debts. After they were made a full legal tender they 
circulated at par and went up with gold to a premium of 
$2.85, or in other words it cost $2.85 in greenbacks to buy 
a dollar in gold or demand notes. 

HISTORY OF Till: I'.M'KK M"\I y 

of Congress it appears that Secretary 

9 clothed with the most ample powers to borrow 

money. He immediately proceeded to New York ami, 

<n the 9th of Aii'_:u-t, 1801, held :i consultation with a of leading hankers ami capitalists of the cities 

;k. I Jo-ton and Philadelphia, wlioin he met there 

by appointment. It wa - Ited on the part of tlie hanks, 

that the hanks of the North should form an "or^ani/ation 

that would combine them into an efficient and inseparable 

lor the purpose of advancing the capital of the country 

upon LTuvernmcnt bonds in lar^e amounts, and through their 

clcariiiir house facilities and other well known expedients, 

to distribute- them in smaller sums amon^ the people in a 

manm-r that would secure active co-operation amoiiLr the 

meinln-rs in thi> special work, while in all other n- 

-ach bank could pursue its independent business. This 

tion," say> Mr. C'oc'. iVom whom we (juotc.* iv met the 

approbation of the assembled company, and ai 

rnot attention of the Secretary. At his rrjue>t it 

was pn-( nted to the consideration of the banks at a mectiiiLT 

called fm- that purpose at the American Exchange IJank on 

016 foUowing day, and WM 80 far entertained ;i^ I.. 

tin- appointment of a committee of ten bank <>fliccr>, to 

it form and coherence. The committee convened at the 

Dank of Comim ivr, whose officers /calously united in the 

effort, and a plan was reported unanimously. It may be 

found, with the names of the committee, in the P,anker>' 

! ^ptemhcr, ISIJL Thi> n-prt was cordially 

accepted and adopted by the bankfl in New 5Tork,tho 

i and Philadelphia bein^ i-epresi-nted at the meeting 
and a> y..-:du>ly and cordinlly united in the ori;ani/.ati..n. 
' itly de>in-d to include also the bank> of the \Ve-t, 

Lf tur of Gco. 8. Coe, Esq. : Spaaldltig's Financial History of the War. Apx. p. 90. 

[88UED DUKING TIN-: i:!:isi-;i.i.i. >.N. 107 

but it was found impracticahle to secure the co-operation of 
; l- hanks of Ohio and In. liana, and the Slate hanks 
(.!' Mi ouri, tin- only other or^ani/ation under a compacted 
-y-tcin, were Mil-rounded hy conihatanis. It \v:is at once 
unanimously agreed that tin- associated hanks of the three 
rities would take lii'ty niillioiis of 7 3-10 notes at par, witli 
the privilege of an additional fifty millions in sixty days, 
and a further amount of tit'ty millions in sixty more, making 
$150,000,000 in all, and offer thorn to the people of the 
country at the same pricv, without change." 

The amount of specie held by the banks of the three cities 
at this time was as follows : 

Banks of Xe\v York ........................ 840,7: 


:, lGo,039 

The Treasury notes could not be delivered at once, as time 
was required for their preparation and execution. It A\ as 
manifestly impossible, therefore, for the banks to advance 
the several amounts of the loan, in specie, without danger of 
exhausting their reserve. The Sub-Treasury act, as ^ve have 
seen, however, had been suspended, evidently at the instance 
of the banks, with a vic\v to enabling them to handle the 
bonds and securities of the government, in return for bank 
currency. "Accordingly," says Mr. Coe, from AV!: m we 
have just quoted, "it was at once proposed to t: S tary 
that he should suspend the operations of the Sub-Treasury act 
in respect to these transactions, and following the course of 
commercial business, that he should draw checks upon some 
one bank in each city representing the association, in small 
sums as required, in disbursing the money thus advanced. 
By this means his checks would serve the purpose of a circu- 


lating medium, continually redeemed, ami the- exchai 
capital ami imliistry be he>t promoted. To the 

astonishment of tin- committee, Mr. Chase refused/' It was 
iir-c.l by the bankers tliat the Sub-Treasury act had 
suspended for tliis very purpose, but Mr. Chase thought 
differently, declaring that it had no sueh meaning or intent. 
Another subject of discussion between the banks and the 
Secretary was the issue of demand notes. A small amount 
of thcM- notes had already been emitted, and a resolution 
requesting the Secretary to refrain from issuing any more, 
until all other means had been exhausted, had been adopted 
by the associated banks. Mr. Coe says that the Secretary 
<_rave :;s-iiranres of his acquiescence in this suggestion, but 
refu>ed "to openly pledge himself not to exercise a power 
conferred by law," ami "that with this understanding the 
banks began their work, paying into the treasury in coin 
$150,000,oon, in sums at the rate of about $5,000,000 at inter- 
vaN,,f six day-."' The rapid disbursements by the govern- 
ment, and the intense activity of the movements of trade, as 
we ha\e sren,* brought the coin nearly all back to the banks 
within a \\ ('<. after it. \\as issued, so that in December the 
banks <f New York, after paying to the government over 
$80,000,000, found their specie reserve reduced only from 
149,733,090, August 17th, to $42,:M8,Ol -, I >< 
The banks Undoubtedly expected th I 
tary ( M b- induced to accede to their plan, ' 

tinned to issue the demand n<>;.-^it b circnt 

in the latter part !' DeC( nbcr, l-'il, after the banks had 
paid in a 1 <!' their loan, that the Secretary wa< 

niiied to adhere to his ciwn curse; find after :i confer- 
in which he expre'-M'd himself t-> that effect, the banks 
t it was expedient t<> suspend S] nients 

*S pago 

nriMNt; Tin: i:::i;\. 109 

forthwith, and did so on the 28th of the month. The l>;i! r 
of tin- l<>;m was paid by the kinks principally in Treasury 
notes, and was finally closed on the 3rd of February, 1862. 

The patriotism of the banks oo/ed out as soon as they 
found that They could not control Secretary Chase in their 
interests. After they had succeeded in paying the greater 
part of their loan without any material diminution of their 
specie, there was manifestly no good reasor why they should 
suspend specie payments, other than on account of the 
inherent weakness of the specie basis system. Their circu- 
lation did not exceed $140,000,000, and their specie reserve 
was unusually large, about $60,000,000. The suspension 
complicated matters greatly. With irredeemable bank paper 
and demand notes of the government promising to pay specie, 
when it had no specie, tilling the channels of circulation, 
gold of cour>e began to command a premium.* Had Secre- 
tary Chase adopted the plan of the banks, the securities of 
the government could unquestionably have been handled by 
them during the first part of the war with advantage to the 
government. In that event the government should have issued 
no paper currency. Hut the result would undoubtedly have 
been dis-ist-rou< in the end. The expenses of the government 
soon reached $2,000,000 a day. To meet the necessities of 
the government, the banks would have been obliged to inflate 
their circulation to an alarming extent. The first financial 
bree/.e that sprung up would have occasioned a panic; the 
banks would ha\e b.-i-n obliged to suspend, as they had done 
nine times before during their brief existence, and most, too, ;it a. critical period of the war, which could 
not fail to have resulted in great distress and general 
demoralization, to the great peril of the government. Se<-- 

rctary Chase seemed to apprehend the danger of adopting 

vv t.ibh- -liowing the monthly range of gold, from 1862 to 1876, will be found in 
the Appendix. 

170 HisToKY *>i' TIN-: I-AI-KK MOVFV 

the jilan suggested by the- associated hanks, hut in ail other 
respectfl he proved himself utterly incompetent as a Minister 
\Vheu he renounced the machinery of the 
banking system, instead of urging upon Congress the neces- 
sity of adopting at once the full legal tender money system, 
ami devising a judicious system of taxation, he 

the xtuftlixltim 'nt <>f flic. X'ifio.Ki 
.V//N/' ///. The inconsistency of his action in this re-pee? 
cannot fail to strike the reader, when it is considered that the 
National Hanking system differs in no essential particular 
from the Slate Hanking system, which he had just re' 
BXCepI that its notes instead of being secured by State bond-, 
as in the case of the banks of New York, were to he -eciired 
by bonds of the Federal (Government. 

^Yhen Congress convened, December -J, ls<il,the para- 
mount <juestiin was that relating to the finances of the 
Federal (Government. The people of the Northern Males 

-ed un! : iiiited resources, were animated by t'celii 
devoted patriotism, and were willing to assume any burdens 
in the shape of taxation, or otherwise, thai Cmigre^ might 
deem necessary to impose for the legitimate prosecution 
of the \\ar for the preservation of the I'liion. It simply 
de\ol\ed upon Congress to devise the ways and means to 
render the resources of the nation available to the govern- 
ment. As this could be done only through the instrumen- 
tality of a medium of exchange, it was- the tir-t duty of 
Congress to see that the channels of trade wen- supplied 
with a HiHicicnt amount of money to develop the producing 

<!' the nation to their utmost capacity, and enable the 
people to re-pond to the requirements of the government. 
I manifest, that the banks could not be relied upon for 

that purpox,. w ith any degree of certainty or sat', ty. There 

iicrcfore, HO other alternative but for Congress, by 

fflSTTED i.i !M\. Tin: KKHKI.I.ION. 171 

virtue of the x'vnvign prerogative inherent in the people, 
and as thi-ir representative duly authori/cd by tin- ('insti- 
tution, to ivsiic full legal tender Treasury notes, not bearing 
interest. The reason of this is obvious. The chief end 
desired was to create <i <>,< nl <itt ,i <j medium of exchange, 
and this end could be accomplished only by issuing Trcas- 
ury notes in a form that, would enable them to perform the 
functions and serve the purposes of money. 



And here it is proper to call attention to the difference 
between an ordinary Treasury note, bearing interest and not 
a legal tender, and a full legal tender Treasury note, not 
bearing interest. They are both based on the wealth and 
credit of the nation, but there the similitude ends. A 
Treasury note, bearing interest and not a legal tender, is 
simply an evidence or security of indebtedness, and differs 
from a bond only in form. It does not possess the attributes, 
nor can it perform the functions, of money. A creditor 
of the government may be obliged to take it at its face value 
or wait an indelinite time for his money; but, as it is not a 
legal tender, no one else is obliged to receive it at the value 
inscribed on its face. By its nature it is nothing more than 
a security in which to invest money, and is not designed or 
'ainilated to serve the purposes of a medium of exchange. 
The fact that it bears interest is a disadvantage to it as a 
medium of exchange, because in the ordinary transactions 
of life people cannot stop to reckon interest every time it 
changes hands; and the fact that it is a partial legal tender 
(payable for certain dues or taxes to the government) leads 
those who have such duties to pay to decry its value in order 
that they may purchase it at a depreciation. It is on the 


same principle that the greenback i> decried by tlio bullion- 
. because they have gold to sell, and it i> to tlieir advan- 
tO lniy greenbacks (with gold) as cheaply as po:ssible. 


I;I-:AI:I\; I\TKKK> i. 

On the other hand a Treasury note, not bearing interest, 
cannot be used as a security in which to invest money. 
Like money (made of gold or silver) it is of no use to the 
pov-essor until it is parted with.* If only a partial legal 
tender (receivable for certain dues to the government), it i- 
to the interest of many, as already mentioned, to decry its 
value, in order to obtain it as cheaply as possible. If the 
Lfvernme'it obliges i:s creditors to take it at its face value, 
and it is not a le^al tender in payment of debts, no one 

bliged to receive it at the >ame value, or indeed to 

ive it at all. While it is then the same as mone\ 
between the government and its creditor, it is quite a differ- 
ent thing between the creditor and the public. This U 
manifestly unjust. TivaMiry notes are iued by the people 
in their collective capacity, through the agency of the gov- 
ernment, and, unlevs simply intended a an interest bearing 

irity, not doiirned to pel-form the functions of nm 
oii'_ r ht clearly to be made a h-jfal tender for private debts as 
well as public duo, otherwise it |. laces it in the power of 
tin- public to repudiate individually what they have done 
collectively, and the people do not all stand on the same 
platform with respect to the government or to each other. 
The Treasury note, therefore, in this form (a l"_ral tender 
and not bearing interest) constitute^ a peculiar form 
indebtednrxx or credit, which serves all the purpo^o of a 
medium of exchange and enable-, the government to draw 

upon the resources of the people in advance of t<> 

See page 30. 

i>ti:i\i, TIM: REBELLION. 1T ;> - 

bearing equally upon every individual in tin- nation. The 
bllllionisls and their organs, in their efforts to decry the 
legal tender Treasury note and deceive the public, are 
constantly asserting that it costs tin- government nothing 
more tfian the expense of printing, and is, therefore, worth- 
K -xv. 'This is not a mere fallacy it is a, willful perversion 
of the truth. Kvery dollar of legal tender paper money 
i>Mied by the government costs the people precisely one 
dollar's worth of property or labor. A dollar greenback is 
put in circulation by the government for value received in 
property or services; it passes from hand to hand, com- 
manding a dollar's worth of property or services every time 
it is used as a medium of exchange; until finally it is 
returned to the Federal Treasury in the shape of taxation or 

On the 5th of December, 1861, the Committee of Ways 
and Means was organized as follows: 

THADDEUS STEVENS, of Penn., Chairman. 
E. G. SPAULDING, of N. Y. V. B. HOUTON, of Ohio. 
HORACE MAYNARD, of Tenn. J. L. X. SHATTON, of N. Y. 


On the 10th of December, ls<j 1, the Secretary of the Treas- 
ury submitted his annual report to Congress. He set forth 
in strong terms the weakness and disadvantages of the 
banking system of the country, and expressed the belief that 
the emission of bills of credit by state hanks was in violation 
of the spirit, if not the letter, of the Constitution. He said: 
"It has been well questioned by the most eminent Statesmen 
whether a currency of bank notes, i^ued by local institutions 
under State laws, is not in fact prohibited by the national 
Constitution. Such emission certainly falls within the spirit, 


if nut within tin- letter, of the constitutional irohibition of 
the enii>-iuii of -1. ills of credit' by the States and of the 
making by them of anything except gold and silver coin a 
il tender in payment of debts. However this may be, 
it i< too clear to be reasonably disputed, that Congress, under 
iN constitutional power to lay taxes, to regulate commerce, 
and to regulate the value of coin, p ample authority 

to control the credit circulation which enter- BO largely into 

the transactions of commerce, and affects in >o many u 

the value of coin. In the judgment of the Secretary, the 
time has arrived when Congress should exercise this power. 
Two plans for effecting this object are Miggt M< -d. 
The tirst contemplates the gradual withdrawal from circula- 
tion of the notes of private corporations, and for the issue, in 
their stead, of United States notes, payable in coin on demand, 
in amounts sufficient for the useful ends of a representative 
currency. The second contemplates the preparation and 
delivery, to institutions and associations, of notes prepared 
for circulation under national direction, and tube secured, as 
to prompt convertibility into coin, by the pledge of United 
States bunds and other needful regulations." 

The Secretary then proceeds to say, that the fir-4 of the<e 
plan- WM partially adopted by Congress during the . 

ion in July and August, iu authori/ing the i>su. 
$50,000,000 of demand notes, and atV 'ing ><>n 

the advantage- and disadvantage "f the plan, concludes l.y 
;hat he fccK him-elf con-trained t.. furbi-ar 
'inineniling its adoption." The principal features of the 

nd plan are presented by the Secretary ta foli 
"l-'ir-t, a circulation of M Lng a <-,!umon impress ion 

and authenticated by a common authority: 9 

aption of these notes by th iations and institution^ 

to which they may be delivered for i--ue; and, third, the 

ESStTXD i>t -I:IN; TIM:\. 175 

security of that redemption by tlie pledge of United Stat<-> 
Stocks, ami an adequate provision of specie." After eulogi- 
zing tin' plan,* lie adds: "The Secretary entertains the 
opinion that if a credit circulation in any form l>c desirable, 
it is most desirable in this." 


The Committee of Ways and Means appointed a sub- 
committee, consisting of Messrs. Spaulding, Hooper and 
Corning, on the proposed National Bank currency, the issue 
of Treasury notes and bonds, and the mode of raising means 
to carry on the war. The chairman of the sub-committee, 
.Mr. Spaulding, prepared a National IJank currency bill by 
the end of the month (December), and also drafted a legal 
tender Treasury note section, to be added to the bank bill, 
for the issue of Treasury notes to be used while the bank 
bill was being put in operation throughout the country. 
In his Financial History of the War, Mr. Spaulding says 
that, "upon more mature consideration and further examin- 
ation, he came to the conclusion that the bank bill, contain- 
ing sixty sections, could not, with the State .Hanks opposed 
to it, be pawed through both Houses of Congress for several 
months, and that so long a delay would be fatal to the 
Union cause. * * lie, therefore, changed the legal 
tender section intended originally to accompany the bank 
bill into a separate bill, with alterations and additions, and 
on his <>\vn motion introduced it into the House by unani- 
mous consent on the 30th of December, 1861." The bill 
was duly considered by the Committee of AVays and .Mean-, 
and, on the 7th of January, 1862, was reported from the 
committee to the lions.-. 

The original bill oil'ered by [Mr. Spaulding authorized the 
Secretary of the Treasury "to issue on the credit of the 

*ee Chapter VII. ou National Banks. 


Tinted Stales 8100,000,000 of Treasury notes, not bearing 

~t, payable generally, without specifying any pi. 
time <!' payment, and of such denominations as lie inav 
. -\ :pe lient, not less than live dollars each; and 
. and all other Treasury notes payable on demand, inn 
bearing interest, that liave been heretofore authori/ed 
issued, shall be receivable for all debts and demands due t 
the United States, and for all salaries, duo, debts and 
demands owing by the United States to individuals,, 
rations and associations within the United States; and shall 
also be lawful money, and a legal tender in payment of all 
debts, public and private, within the United States, and 
shall be exchangeable in sums not less than one hundred 
dollars, at any time, at their par value, at the Trca-ury of 
the United States, * * for j;:;y of the six per cent, 
twenty years coupon or registered bonds which the Secretary 
of the Treasury is now, or may hereafter be, authori/ed to 
i-Mie; and such Treasury notes shall be received the saun- 
as coin at their par value, in payment for any bonds that 
may be hereafter negotiated by the Secretary of the Treas- 

nd such Treasury notes may be n-iuel from time to 

time, as the exigency of the public nay require." 

Thi> bill was no sooner made public, than delegate : 
bankers from New York, r>>fn and Philadelphia hurried 
to Wa-liiii_rt<>M to oppii>i> it. They organi/.rd in a t 
manner by the >eleeii<.u of a chairman (S. A. Men 
Philadelphia), and invited the Finance Committee f the 
Senate, and the Committee of Ways and Mean-* of the 
meet them at the ofhYe of th- ;ry of the 

Treasury, January 11, 1862, The invitat' .'pted. 

At the meeting which followed, the bankers sp.kc in oppo- 
sition to the bill, and submitted the following plan for 

raising money: 

Tin; J.K<;.M. TENDEB ACTS. 177 

"1. A tax bill to raise $125,000,000 over and ab<\e duties 
on imports by taxation. 

'2. Not t<> isMie anv demand Treasury notes, except those 
authori/.ed at the extra session in .July last. 

''. 1-Mie 100,000,000 Treasury notes at two years, in sums 
of live dollars and upwards, to lie receivable for public dues 
to the Lroveninieiit, except duties on imports. 

4. A suspension of the Sub-Treasury act, so as to allow 
the banks to become depositories of the u'ovcrnmenl of all 
loans, and to check on the banks from time t< time as the 
LToveriiinent may want money. 

5. Issue six per cent, twenty year b.mU, to be negotiated 
by the Secretary of the Treasury, and v/'////o//f <in;/ //////'///- 
(nut <(* to the prict /"' in";/ ohtn'in for tin-in in the 


(. That the Secretary of the Treasury be empowered to 
make temporary loans to the extent of any portion of the 
funded stock authori/ed by Congress, with power to hypoth- 
ec-ate such stock, and if such loans are not paid at maturity, 
to sell tJie .s7of/- It t/],<.fl,< <'<it, it f,,,- tli, !>, f<f i,,fii'k> t />rl<;t 

.Mr. S]auldinu: sav> that "'tliese proposition^ ha\ IIILC been 
read, the Secretary and Finance Committees of the Senate 
awd House expressed themselvefl favorable to the iiiM proj)- 
osition to raise by taxation 125,000,000 :i year, over ami 
above duties on imports. It will be oler\ed that this plan 
did not include the national currencv bank bill recommended 
by the Secretary of the 1 Treasury in his annual report, and 
was not, therefore, in this respect satisfactorv to him. The 
meeting was somewhat conversational in character, but 

there appeared to be a ireneral dNM'iit by the Secretary and 

committeee from all other propositions. * * The only 
remarks that I (Mr. SpauldinLr) fan 1ind reported as being 


made ly any member of the committees of the Senate and 
Hou-r .-ire in tin- New York 7V//,, /,,,/, Januan J, in 


Sub-Committee of Ways and Means, through Mr. 
tiding, objected t( any and every form of "shinning" by 
'rnmeiit through Wall or State streets, to begin with; 
ol)jecfed to the knocking down of government stock- 

nty-tive or sixty cent* on the dollar, the ine\ -'liable result 
of throwing a new and large loan on the market, tritium* 
/iiiiif'ififm a$ t<> i>,'n-, ; claimed for Treasury n<>tc> a- 
much virtue of par value as the notes of banks which have 
su-jieiided x| M .,-i,. payments, l>ut which yet circulated in the 
trade of the North; and finished with lirmly refusing to 
nt to any .scheme which should permit a speculation 
by broker^, bankers, and others, in the government securi- 
ties and particularly any scheme which should double the 
public debt of the country, and double the expenses, by 
damaging the credit of the g<\ -eminent to the extent of 
ling it to "shin" through the shaving shops of New York, 
on and Philadelphia. lie atlirmed his conviction a- a 
banker and IcgMatnr. that it was the lawful policy, as well 
S8 the manife-t duty of the government in the pre-cnt 
e\iirrncy, to h-irali/c a-> tender it> iifty million i>Mie of 
demand Treasury notc N anthori/.ed at the extra .seion 
in July last, and to add to this stock of legal tender 
immediat' The conference adjourned without 

I ii|on any plan < arrangement. The bank <lele- 
\\r\cr, remaincil in \Va>hingln, and held further 
-ultations with Secretary ('ha-e. extending through 
. which n-Milted in an arrangement with him to 
the eHY | i-tlier thing-, that Congn-.-s should be 

]'-t-- the National JJank bill, and tliat the amount 
Of tlie demand i be incn- -nd the 

! K.. \i. TKM> 179 

$50,000,000 authori/ed by tin- art of July, 1861, and aliso 
that Congros should 1 K ' urired to extend the provisions of 
the existing loan acts, so as to enable tlu- Secretary of the 
Treasury to exchange intercut hearing Treasury notes for 
the demand notes, not bearing interest, ami get them out of 
the way. 

Tli us while the masses were exerting every energy to sus- 
tain the government, the money power was plotting to get 
control of its finances, in order that it might be enabled to 
prey upon the people in the hour of their extremity. How 
well it succeeded will duly appear. 

On the 22d of January the legal tender bill was again 
reported from the Committee of Ways and Means, with an 
additional section authorizing the Secretary of the Treasury 
to issue, on the credit of the United States, coupon bonds or 
registered bonds to an amount not exceeding $500,000,000, 
and redeemable at the pleasure of the government, after 
twenty years from date, and bearing interest at six per cent. 
per annum, payable semi-annually, to enable the Secretary 
of the Treasury to fund the Treasury notes and floating debt 
of the United State's; and it was made the special order for 
the 28th day of the month. The debate on the bill accord- 
ingly began on that, day, and was opened by Mr. Spaulding 
in an able argument in its favor. The debate, which contin- 
ued until the Oth day of February, when the hill passed the 
House, with some slight modifications, was characterixed by 
unusual ability. If had never before, in the history of the 
government, been deemed necessary to issue Treasury notes, 
in the legal tender form, not bearing interest, to enable them 
to circulate as a, medium of exchange and perform the func- 
tions of money, and there was naturally a great diversity of 
opinion upon the subject. Several substitutes and amend- 
ments were offered, most of them in the interest of the 


money power. Tin- views held by those who advocated the 
Treasury notes, but honestly opposed the legal tender 
feature, as an infraction of the Constitution, were embodied 
,b>titute offered by -Mr. Vallandigham, and were sup- 
ported by ablr speeche-, -pecially that delivered by Mr. 

Pendleton,of Ohio. Mr.Vallandigham'fl substitute provided 

for the same issue of notes ax the original bill, but not made 

:; legal tender, and instead of making them payable in coin 

on demand, they were to be simply receivable for all public 

In this particular (making them receivable for public 

dues instead of payable in coin on demand), the substitute 

wav preferable to the original bill. A Treasury note, properly 

understood, is "a promise to receive" and not "a promise to 

and making it redeemable in coin could add nothing 

value, but under the circumstance's was calculated only 
to depreciate i-t> value, because it misled the public, especially 

jaora of political economy. The following extracts 
from the speech of the Hon. Thaddeus Stevens in support of 
the bill, will sufficiently explain the nature and character of 
- and amendments offered, and, also, of the 
arguments employed for and against them, as well as the 
bill itself. Mr. > id: 

U T! - ii-y of the Treasury, in his report, n 

im-nded a scheme to produce a uniform national currency, 
and furnish a market for government bonds. It pro poses 
that the banks ^hall receive their circulation from the gov- 
< nnii' amount of government bonds pledged, with 

[YeMOiy for their security; and that n more notes 
should be ivxiied than the par value of such bonds, and 

'. be n-deemed by the bank-. 

kinking in ordinary tin* ry useful in rciru- 

the cm i 1 l,y the -ale of bonds the govern- 

Hee pages 62 it . 

T1IK l.K'.AI. ! 181 

ment might command coin. IJut while tin- l>:inks are in 
suspension, it is not easy to see how it would relieve the 
government. If the notes were procured it must he by 
accepting payment by the government in depreciated circu- 
lation. How would that he any better than the government's 
own notes? The security of the government is equal to that 
of the banks, and would give as much currency. To the 
banks I can see its advantage. They would have the whole 
benefit of the circulation without interest, and at the same 
time would draw interest on the government bonds from the 
time they j;"t the notes. Now, it is very plain, that it' the 
United State* i^iied tlm^e notes direct, they would have the 
benefit of the whole circulation. In other words, it would 
be equal to a loan, without interest, to the full amount of 
the circulation. This project, therefore, however desirable 
as a banking system, could afford no immediate relief, 
especially as it would afford no sale for additional bond- 
the banks ha\e already as many as would form the basis of 
their operations. Having, as I think, shown the impossibility 
of carrying on the government in any other way, let u* 
briefly notice some of the objections to it. First, is it con- 

"The power to emit bills of credit and make them a legal 
tender is nowhere expressly given in the Constitution; but 
it is known that but few of the a<-N which government can 
perform are specified in that instrument. It would require 
a volume larger than the Pandects of Justinian or the Code 
of Napoleon to make such enumeration, whereas our Con- 
stitution has but a few pages. Hut everything necessary to 
carry out the granted powers of the government is not only 
implied but expressly given to Congress. If nothing could 
be done by Congress except what is enumerated in the 
Constitution, the government could not live a week. 

182 \i. i KM.KI: A( is. 

4 *Ti arc prohibited from making anything but 

.I and silver coin u tender in the payment of debts;' but 
such jirnliiliitii.n does not extend to Congress. The Consti- 
tution is sill-lit as to the- power of Congress over that subject 
The question of the right to emit bills of credit by 
38 was considered in the convention that, framed the 
-titution. It was reported as a part of the power to 
4 borrow money.' It was objected to as tending to make a currency with legal tender, and a motion was made 
to strike it out and insert an express j>rohil>ition. This was 
-ted, IM -cause, as .Mr. Mason said, * it could not be 1 
. what the necessities of the government might at some 
require.' 'The late war,' he said, * could not have been 
led on had such prohibition existed.' It was finally 
ed to strike out the express power, and not insert the 
prohibition, leaving it to the exigencies of the times to 

:;iilie its necessity." 

"If constitutional, is it expedient? It is objected by the 

leinaii from Ohio that the legal tender clause would 

depreciate the notes. All admit the necrity of the issue. 

jed to their being made money, ll \< '. 

to pei-ceive how QOtea N-ued without being made immedi- 
cable in specie can be made any wor-e by making 
i a legal t'-ndcr. And yet that is the whole argument. 
*O far as expediency is concerned. Other gentlemen argued 

this would impair contracts by making a debt payable 

ther money than that which existed at the time of the 

contract, and would BO b.- unconstitutional. Where do 

lenien find any prohibition on Con- UWl pa ing 

i impairing contracts f There is none, though it would 

be unjust to do it. Hut this impairs n-. contract. All con- 

.! not only with a \it-w to present laws, but 

subject to the future legislation of die country. We have 

j 111: LBGAL i ENDEB \- tS, 183 

more than once changed the value of coin. Neither our 
gold nor silver coin "IN as valuable as it was lil'l y years ago. 
Congress in 1853, 1 believe, regulated the Weight and value 
of silver. They debased it over seven j>er cent, ami made 
it a legal tender. AVho ever pretended tliaL that, was uncon- 
stitutional? The gentlemen from Vermont [Mr. Morrill| 
and Ohio [Mr. lYndlcton] think it an ex post facto law. It 
is not wonderful that my distinguished colleague, not being 
a professional lawyer, should not be aware that the < .' />ot 
j'tn'to laws prohibited by the Constitution refer only to 
crimes and misdemeanors, and not to civil contracts. The 
gentleman from Ohio no doubt knew but forgot it." 

"I know the danger of granting to irresponsible institu- 
tions or individuals the right to issue paper currency not 
immediately Convertible, because their avarice would always 
abuse the privilege and over issue. ]>ut when the govern- 
ment thus issues, the fault and the crime is theirs if they do 
not restrain it within proper bounds. Is the proposed i- 
of $150,000,000 too much? It is believed that the ordinary 
business of the country, especially now, requires a circulation 
of $400,000,000. The bank circulation has been about 
$200,000,000, with coin to the amount of $250,000,000. 
The bank paper, now in suspension, would largely disappear 
before this par paper; and during suspension, which means 
during the war, there will be but little coin circulation. If 
the whole $150,000,000 of United States notes c<>uld be 
kept circulating, I do not think the surviving bank paper 
would furnish a sufficient currency for commercial purposes 
some coin must be added. But it is not probable that it 
could all bo kept out; much would rest in banks, in the 
pockets of private individuals, or await, investment tempo- 
rarily, at least, for a while. 

"I>ut my distinguished c<>ll<-a'_nie from Vermont fears that. 

1- t TIIK i I:;AI. TKMU-:!: A rs. 

mormons issues would follow to supply tin- expenses of the 

war. I do not think any nmiv would be needed than the 

$150,000,000. The notes hear no interest. No one would 

>n-k tin-in I'm- investment. In the rapi<l circulation of 

monrv, xjnu in a year is turned so often as to purrha- 

time> it-s \.-ilur. This money would soon lodge j n large 

quantities with the capitalists ami banks, who ///"*/ take 

them. JJut the instinct of gain, perhaps I may call it 

a\arice, \voiihl not allow tlieni to keep it long unproductive. 

A dollar in a miner's safe unproductive is a sore disturbanrr. 

\Vherecouldtheyin\e-t ii'/ In I'nited States loans at six 

lit, redeemable in gold in twenty years, the lest. and 

moet valuable permanent investment that could be de-ircd. 

The L;-O\ eminent would thus again ]n^>ess sucli notes in 

i.\rhanu-r t'..i- bond-, and again rri^ur them. I have no 

doubt, that thus the 8500,000,000 of bonds authori/rd \\ould 

-orhrd in lr>s time than would be needed by the 

nment; and thus 150,000,000 would do the work of 

$500,000,000 of bonds. When further loans are wanted, 

you nerd only authori/.e the sale of IIUMV bonds; the same 

',000,000 of notes will be ready to take them. 

u I ruiitcnd that this curn-ncy will be better than any this 

country ran produce. Hank note- are merely local. The 

holder of them in St. l.ouiv, wisliin^ t> transmit t< 

Vrk, must pay a discount, of from one to ten per cent. If 

he has gold, the ro-t of t raiis]M>rtation is considerable. If 

hetra\el,it. is cumbersome. \\\\\ if he has Tinted States 

par not,-, he ran send them without cost all o\ er the T'nion. 

iillemen are clamorous in favor of those \\ ho have 

dur them, h-t the debtor should tin- inure easily piy 

bi. I -lo net much syinpalhi/e A\ith such importunate 

J li-mlrrs. lint widows and orphans are 

and in tear* lest their estate should br badly i i 

TIIK 1 K'.AI. TK.NI' 185 

pity no one who has his money in\es!ed in United S: 
bonds, payable in gold in twenty years, witli iiitcrc-t semi- 

' Hut while these iiH-n have- agonized bowels over the rich 
man's cau>e, they ha\c no pity for the poor widow, the 
sulYeriii-j; soldier, the wounded martyr to liis country's good, 
who must receive these notes without legal tender or noth- 

iiiLS all( l who must give half of it to the Sliylock- to get the 
necessaries of life. Sir, I \visli no injury to any, nor with 
our bill could any happen; but it' any must lose, let it not be 
the soldier, the mechanic, the laborer, and the farmer. 

"Lot me restate the various projects. Ours proposes 
United States notes, secured at the end of twenty year- 
be paid in coin, and the interest raised by taxation, semi- 
anuuully; such notc> to be money, and of uniform value 
throughout the Union. No better investment, in my judg- 
ment, can be had; no better currency can be invented. 

"The amendment of the gentleman from Ohio [Mr. Val- 
landigham] proposes the same issue of notes, but objects to 
a legal tender; but does not provide for their redemption on 
demand in coin. lie fears our notes would depreciate. 
Let him who is sharp enough to see it instruct me how notes 
that every man must take are worth less than the same n 
that no man need take-, and few would, being irredeemable 
on demand. J>ut he doubts its constitutionality. He who 
admits our power to emit bills of credit, nowhere e\pre^ly 
authori/ed by the Constitution, is a sharp and unreasonable 
doubter when he denies the power to make them a 1 


"The proposition of the gentleman from Ne\v York [Mr. 
Ko>eoe Conkling] authorizes the issuing of seven per cent. 
bonds, payable in thirty one years, to be sold ($250,000,000 


Tin: I.KI.AI. 1 

OF exchanged forthe'-///Vfc/-y of the banks of \\ 
New York and Philadelphia. 

, tlii- proposition seems to :;ir to lack every (.lenient. 
10 legislation. -.Make a loan payable in irredeemable 
urrcncy, ami pay that in its depreciated condition to our 
contractors, soldiers, and creditors generally! Tin- banks 
would issue unlimited amounts of what would become trash, 
and buy good hard money bonds of the nation. Was there 
< \ i T such a tempation to swindle? 

44 He further proposes to issue 200,000,000 United States 
redeemable in eoin in one year. Does not the gentle- 
man know that such notes must be dishonored, and the 
plighted faith of the government broken;* No one believes 
That we could then pay them, ami it would run down at 

If we are to use suspended note< to pay oiire.\j 

why not u-e our own? Are they not a* safe as bank notes? 

During the suspension the government would have the 

benfit of the whoh- cireulation, without interot, until they 

'iinded that is, the interest of all we culd keep out 

would accrue to the government. If the ^^50,000,000 wi-re 

ntly afloat, it would be a loan to the irvernment, 

without interest, to that amount, $0,000,0(ni a \<ar. IJut if 

1 tin- Mispended paper of the )>anks our bonds would 

Qteresf from the inxtaiit, we .u't their notes a good 

for tin- suspended bank-. Be6ld< -.government would 

the bem-fit of all the lost and destroyed notOfl a item. 

" La-: comet the Mibxtimte of the minority of the commit- 
I look upon it ax a eurio>iiy. It j.r..j.o-i - t- i->ue 

-, not : l.-Lral teiide)-, bearing an ii 

of three and si\ty-ti\e hundred* -rut., and fundable 

into He ven and three-tenths per eent. b,.nd-, but not payable 

:uand, but at the pica-lire ,,f the United States. 

i i IK ).):., AI. '1 i M.I i: \ TS. 187 

. s one and three-tenths per cent, higher interest than our 
loan, an. 1 nt being redeemable <m demand, would fare the 
fate of all non-specie paying notes not a legal tender. But. 
the ingenious minority ha\e invented :i kind of currcncx 
never before known a cn-<-nt ( it;<,,i, ///,///// interest. 
Honda or notes intended for investments bear interest, but 
no one expects they will be used as currency; whether in 
the shape of bonds or notes they will be used only as invest- 
ments, or as pledges on which to procure loans. Suppose a 
tailor, shoemaker, or other mechanic or laborer, were to 
take one of these bills, and in a week he should wish to UM- 
it in market, or store, or elsewhere, he must sit down and 
calculate the interest on the days lie has had it to find its 
value. This would be rather inconvenient in a frosty day. 
This currency would make it ntM-r-^n-y for every man to 
carry an arithmetic or interest table A\ ith which to r:uiLre 
the value of the circulating medium. Gentlemen must see 
how ridiculous, if not impracticable, this scheme is. 

"Here, then, in a fe\v words lies your choice. Throw 
bond* at six or seven per cent, on the market between this 
and December, enough to raise at lea-t $600,000,000 about 
this sum is already appropriated, $557,000,000 or issue 
Tinted States notes, not redeemable in coin, but fundable in 
specie paying bonds at twenty years; such notes either to l>e 
made a legal tender, or to take their chance of circulation 
by the voluntary act of the people. 

"I maintain that the highest, sum you could sell your 
bonds at would be seventy-live per cent., payable in currency 
itself at a discount. That, A\ould pro.iuce a loss which no 
nation or individual doing a large business could stand a year. 

"I contend that I have shown that such issue, without 
being made money, must immediately depreciate, and would 
go on from bad to worse. I flatter myself that I have dem- 

188 'M I KM' 

i, both from reason and undoubted authority, that 
notes, made :i lc-_ral tender and nt i--ucd in ( 
tin- demand, \viil remain at jiar and pa-^ in all transaction-. 
at ami small, at tin* full value of their face; that we shall 
have one currency for nil sections of tho country and for 
t-very class of people, tin- poor as well as the rich. 

ae irentlcmen an- a>v Jiiuch frightened as if this were 

an unwonted apparition, for the iirst time prowling forth to 

BWallow the rich Creditor and nurse the poor debtor. No 

nation, it is said, has ever tried anything like it." 

"Mr. Chairman, lei me say in conclusion that nnlos this 

bill is t pass with the Iciral tender clause in it, it i> not 
desirable to its friends or to the administration that it should 
pass at all, and those who think as I do will have to vote 

ins! it if it shall be thus mutilated and emasculated. If 
it i to be defeated, I should be v;lad if we had tlu- power 
which they have in the Uritish Parliament to rc-iu'ii OUT 
places On the Committee of Ways and Mean-* and lca\ 
to tho^e who oppo>e this bill to mature some other measure. 

Far a- I am concerned, I shall be inodcM enough Ot to 
attempt any other scheme. The Committee of Ways and 
M'-an* have labored in the p reparation of this measure 
anxiously and to the be>i of their jmor abilitic-. We 
not inialliblc. \\'<- d not < onie near it. I am but poo.-ly 

qualified for anything of this kind. Hut we ha\c ui\cn it 

our ni"-t aiixiniis consideration, and ha\e con>ulted ti 
whom \\ ( beliex ed to be the la-^t (jiialitied to a-l\ i-e u-. We 

ha\<- v,,ii'_'iit to harmonize conflicting yiewa in the .substitute 

which the majority of the co.mniltcc have prepared, tnd we 

hope it \\ill pass. W- believe that the credit of the country 
will be sustained by it, that under it all classes will be paid 
in money \\hich all ch-es ean Ose, and that it \\ill CO1 
HO advantage on tin- capitalist o\ er the p laboring man. 

Tin; ii... \i. '1 I:\IH.I: A.CT8. Ibtt 

If this bill shall pa-.-, I -hall hail it as the mo.-t aii>pieious 
measure of this Commas it' it should fail, tin- n-Milt will be 
more deplorable than any disaster which could befall n.-." 1 

Mr. Stevens' speech closed the debate, and the bill came 
up for final action in the House, February 6, 1862, and \\ it- 
adopted by a vote of 93 to 59. 


On the 10th day of February, 1802, Mr. Fessenden, C 'hair- 
man of the Committee on Finance in the Senate* reported 

tlie House bill from the Finance Committee with amend- 
ments. The important amendments were as follow-: 

1. That the legal tender notes should be receivable for all 
claims and demands against the United States of every kind 
whatever, " except for interest on bond* <in<! //o^-x, irhick 
shall be paid in coin" 

2. That the Secretary might dispose of United States 
bonds "at the market value thereof, for coin or Treas- 
ury notes" 

3. A new section, No. 4, authorizing deposits in the Sub- 
Treasuries at tive per cent., for not less than thirty days, to 
the amount of $25,000,000, for which certificates of deposit 
might be issued. 

4. An additional section, No. 5, "that all duties on im- 
ported goods, and proceeds of the sale of public lands,'' etc., 
should be set apart to pay coin iutere-t on the debt of the 
I/nited State-; and one per cent, for a sinking fund, etc. 

On the 1-Jth day of February, 1862, the debate in the 
Senate was opened by .Mr. Fe>senden in a lengthy speech. 
A motion was made by .Mr. Collamer to strike out the legal 
tender clause, which was lost. On the 14th inst. the bill, 
.mended, pa<scd the Senate by a vote of 30 to 7, and was 
returned to the Huu-e. 

100 I.K<; \\. YKMI:I: \ 

TIIK r.n.i. A;AI.Y i.v TMI-: ii" 

On the istli, .Mr. Stc\eiix reported tin- bill, as amended by 
the Senate, from (lie Committee of \Va\> :unl .Means to the 
HOUM-, and said, tk T have no purpose of considering the bill at 
this time. I desire that it shall be referred to the Comm> 
of the Whole, and be made the special order for to-inorro\v 
at one o'clock. I hope rentlemen of the House 1 will read 
the amendments. Tin-;/ ,'< very 'nn]>,'t <i ,,t , <i,t<l, in ,,n/ 

judgment, very pernicious, hut I hope the Hi HIM.- will 

examine them." 

On Wednesday, the L 9th, Mr. Spaul ding Opened the debate 
in opposition to some of the amendmets of the Senate. \Ve 
jilote as follows : 

"Mr. Chairman, I de>ire especially to oppo>e the amend- 
ments of the Senate which require the interest on bonds an 1 
notes to be paid in mi,, semi-annually, and which authori/.e> 
the Secretary of the Treasury to sell six per cent, bond- 
the market price for coin to pay the interest. 

k -The Treasury note bill, as reported first from the* 
mitter of \Vay> and Means as a ni-cessary war measmv. wa- 
simple and perspiciiou> in its terms, and ea>ily understood. 
It \\a^ so plain that everybody could understand that it 
authori/ed the is>ue of $150,000,000 of h-iral tender demand 
note-, to circiilat Jioiial currency ainon_!J tlie people 

in all parts of the I'nited State-, and that they miirht, at any 
time, be funded in six per cent, twenty year-' hoinU. The 

of the mea-ure in this hou^e wa> hailed with Bfl 
faction by the iireat mass of the people all over the country. 
It ivcrixed the hearty endon-riiM-nt of such bodies a- the 
mben -f ( '..iiiinerce of New ^'..|k, ( "mcinnati, St. L..ui-. 
Chicago. UufTalo, Mil waiikee. and other pla<-cs. I havt- nrvci 
known any im-a^urc nMi-i\- a more hearty approval from the 


THK 1. K,. VI. Tr.M>i:K A 191 

every amendment to tin- l>ill since it was matured 
has rendered it more complex and diffiooll of execution. I 

regret to >av that some of tlu* amendments of tin- 8 

render tin 1 bill incongruous and tend to defeat its great 
object, namely to prevent all forcing of the Governmentto 
sell its bonds in tlu i market to the highest bidder for coin. 
It might be very pleasant for the holders of the seven ami 

three-tenths Treasury notes and six percent* bonds, to receive 

their interest in coin semi-annually, but very disastrous to 
the government to In- compelled to sell its bonds, at ruinous 
rates of discount, every six months to pay them gold and 
silver, while it would pay only Treasury notes to the soldier, 
sailor, and all other creditors of the government. 

w * 1 am opposed to all those 1 amendments of the Senate 
which make unjust discriminations between the creditors of 
the government. A soldier or sailor who performs service 
in the army or navy is a creditor of the government. The 
man who sells food, clothing, and the material of war, for 
the use of the army and navy, is a creditor of the govern- 
ment. The capitalist who holds your seven and three-tent h> 
Treasury notes or your six per cent, coupon bonds, is a cred- 
itor of the government. All are creditors of the government 
on an equal footing, and all are equally entitled to their pay 
in gold and silver. 

"lam opposed to all those amendments of the Senate 
which discriminate in favor of the holders of bonds and 
liotes by compelling the government to go into the streets 
every six months to sell bonds at the -market pi-ice,' to 
purchase gold and silver in order to pay the interest l in coin' 
to the capitalists who now hold United States stocks and 
Treasury notes heretofore issued, or that may hold bonds 
and notes hereafter to be issue* 1; while all persons in the 
United States (including the army and navy and all who 


them with food and clothing) are compelled to 
tender Treasury notes in payment of demands 
due tliem from the LTovernment. 

Why make this discrimination ^ Who a>k> to liave one 

creditors placed on a better foutinir than another 

.la^? Do the people of New Knu'land, the Middle St. 

or the people of the Wot and Xorthwest, or anywhere else 

in the rural districts, ask to have any such discrimination 

made in their favor;' Does the soldier, the farmer, the 

mechanic, or the merchant ask to have any such discrimina- 

tion made in his favor;' No. sir; no such unjust preference 

-ked for by this class of men. They ask for the legal 

ier note hill pure and simple. They ask for a national 

currency which shall be of ejual value in all parts of the 

'ountry. They want a currency that shall pass from hand 

to hand amoiiLT all the people in every State, county, city, 

town ami village in the United States. They want a cur- 

rency -.M-iired l>y adequate taxation upon the whole property 

of the country, which will pay the soldier, the farmer, the 

mechanic, and the banker alike for all debt due. They ask 

that the rovenmieiil shall stand upon its own responsibility, 

un rights, and exert its vast power-, piv-- <\\n 

lit, and Cany IU safely through this Lri^antic rebellion, 

in the shortest time, and with the least possible sacril: 

y intend d. f,.,t all the bills, and ultimately pay the 
whole amount, principal and interest, in -_rold and silver. 

" \Vh<>, then, are they that a-k to have a preference ^iven 
tD them Over Other On vernmcnt;' Sir. i 

labl.- claM of Lfentlemen, but a -la-- of men 
very sharp in all inom-y transactions. Tiiey are not 

the producing classefl not amoii'_ r th 
their labor ill, make the wealth of the 

but a class of im-n that i. -dth. 

nn: LEG LL 'i RHDEB A,< PS. 103 

men who arc willing to lend money to the government if 
you will make the security beyond all question, gi\e them a 
high rate of interest, ami make it payable in coin. Yes, sir, 
the men Avho are asking these extravagant terms, who want 
to be preferred creditors, are perfectly willing to lend money 
to the government in her present embarrassments, it' you will 
only make them perfectly secure, give them extra interest, 
and put your bonds on the market at the ' market price,' to 
purchase gold and silver to pay them interest every six 
months. Yes, sir, entirely willing to loan money on these 
terms! Safe, no hazard, secure, and the interest payable 
'in coin!' Who would not be willing to loan money on such 
terms? Sir, the legal tender Treasury note bill was intended 
to avoid all such financiering and protect the government, 
and people who pay the taxes, from all such hard bargains. 
It was intended as a shield in the hands of the patriotic 
people of the country against all forced sales of bonds, and 
all extravagant rates of interest. 

"The legal tender note bill is a great measure of equality. 
It proposes a currency for the people which is based upon 
the great faith of the people and all their taxable property. 
All are obliged to receive- ami pass it as money, and all are 
obliged to submit to heavy taxation to provide for its ulti- 
mate redemption in gold and silver. Every attempt on the 
part of any class of citi/ens to create distinctions and secure 
a legal preference, mars the simplicity and success of the 
whole plan. The very discrimination proposed carries on its 
face notice to everybody, that although the notes are declared 
to be 'lawful money and a legal tender in payment of debts,' 
yet that there is something of higher value, that must be 
sought after at a sacrifice to the government, to pay a pecu- 
liar class of creditors to whom it owes money a kind of 
absurdity and self-stultification which docs not appear well 

194 THE I.K'.AL T7:\I. 

on thr face of the bill. Il is an unjust discrimination which 

do<-> appear well now, ami will not look well in history. 

i will, if tho Senate's amendment is adopted, depreciate, 

by your ou n act-., your own bonds and notes, and effectually 
destroy the symmetry and harmonious workings of the 
whole plan.'' 

* (Mr. Spaiilding, in his Financial History of the War, calls 
iition to the fact that "at the time the abo\e remarks 
were made by him the duties on import* were, as the bill 
then stood, payable in legal tender notes; but this was after- 
wards changed in the committee of conference, making 
thoM- duties payable in ro/'y/, so that the interest might be 
paid in coin, without being obliged to force the bonds on the 
market to obtain coin for that purpose.") 

During the discussion in the Committee of the Whole an 

ndment to the Senate amendment requiring interest on 

bonds and notes to be paid in coin, was offered by ]NIi. IVn- 

dleton to the effect, "that the officers, soldiers, seamen and 

marines, cn^a^ed in the military service of the United 

should also be paid in coin, which was not agreed to. 

On the L'Oth the House resumed consideration of tho 
Senate amendments. Mr. Stevens closed the debate. We 
quote from hi- speed) as follows 

"Mr. Speaker, I have a \t-ry few words to say. I approach 
the subject with inoiv depre--in of spirits than I 
before approached any <jue-tion. No p. TV, ,nal motive or 

feeling influences me. [hope not, at Ica^t. I have a mel- 

anrlmly foreboding that. NSC are about to consummate a 

cunningly de\i><d scheme, which will carry great injury 

-s to all clasps of the per,ph throughout this 

I ].t one. With in- ie, T belii-ve that no 

of legislation of t i-nment wa^ ever hailed with 

as much delight throughout the whole length and breadth 

THK LKiiAL TEN'DKK A< P8, 195 

of this Union, by every class of people, witliout any excep- 
tion, as the bill we passed and sent to the Senate. Congrat- 
ulations from all classes merchants, traders, manufacturers, 
mechanic* and laborers poured in upon us from all quarter^. 
The Hoard of Trade from Boston, New York, Philadelphia, 
Cincinnati, Louisville, St. Louis, Chicago and Milwaukee 
approved its provisions, and urged its passage as it was. 

"I have a dispatch from the Chamber of Commerce of 
Cincinnati, sent to the Secretary of the Treasury, and by 
him to me, urging the speedy passage of the bill as it passed 
the House. It is true there was a doleful sound came up 
from the caverns of bullion brokers, and from the saloons df 
the associated banks. Their cashiers and agents were soon 
on the ground, and persuaded the Senate, with but little 
deliberation, to mangle and destroy what it had cost the 
House months to digest, consider, and pass. They fell up n 
the bill in hot haste, and so disfigured and deformed it, that 
its very father would not know it. Instead of being a 
beneficent and invigorating measure, it is now positively 
mischievous. It has all the bad qualities which its enemies 
charged on the original bill, and none of its benefits. It 
now creates money, and by its very terms declares it a 
depreciated currency, ft makes two classes of money one 
for the banks and brokers, and another for the people. It 
discriminates between the rights of different classes of 
creditors, allowing the rich capitalist to demand gold, and 
compelling the ordinary lender of money on individual 
security to receive notes which the government had pur- 
posely discredited. 

"Let us examine the principal amendments separately, 
and see their effect. The first important one (being the 
fifth) makes the notes issued under the law of July 17th a 
legal tender, equally with those authorized by this bill. 


There can be 1ml little wisdom in putting these two classes 
nn an equality. The notes of July bear seven and threc- 
tcnths per cent, interest, and are payable in three years. 
r l'li is gives them a sufficient advantage over notes bearing 
no interest and payable virtually in twenty years, with six 
per rent, interest. Why give them this additional advan- 
tage? Simply because the $100,000,000 issued are all held 
by the associated banks, and this is their amended bill. 
They would displace $100,000,000 of this money in the 
( -ire-illation, and render it impossible to use any considerable 
amount of these [ ~ni ted States notes as a currency. These 
notes have served their purpose. Why allow them to block 
up the market against further relief to the government? 

''The banks took $50,000,000 of six per cent, bonds, and 
shaved the government $5,500,000 on them, and now ask 
to shave the government fifteen or twenty per cent, half 
yt-arly, to pay themselves the interest on these very bonl-. 
They paid for the $50,000,000 in demand notes, not sj*t-ie, 
and now demand the specie for them. Vet, gentlemen talk 
about our making other loans in these times. They are cra/y 
or sleeping, one or the other, I do not know which." * 

"The notes, by another amendment, are authorized to 
be invested in notes or bonds payable in two years, and 
bearing an interest of seven and three-tenths. One of the 
_'! at objects was to induce capitalists to invest in six pel- 
cent, bonds >r IOM- their interest, and thus to furnish a 
continually recurring currency by the sale of tlu^c six per- 
cent, bonds. This provision would effectually prevent the 
funding a dollar in tlm>e bonds. They would all go in 
preference int., M-ven and three-tenths bonds, due ill tWO 
1) no ..IK- believes We call pay tllClll. 

1 tlii- is not the worst. The tenth amendment pro- 
vides that any holder of the I'nited States legal tender notes, 

Tin: I.KI; M. THNHKI: \ 197 

if lie have $100 and upwards, shall draw five or six per cent, 
interest <ii tin-in until lie choM-s to u>e them. The p.i.r 
who have lexs than v $100 shall draw no interest. It, is plain 
that, by these two contrivances, not one <!<>llar of tlu->e 
United States notes will ever be funded in six per cent. 

"But now comes tlie main clause. All daes of people 
shall take these notes at par for every article of trade or 
contract unless they have money enough to buy United 
States bonds, and then they shall be paid in gold. AVho N 
that favored class? The banks and brokers, and nobody 
else. They have already $250,000,000 of State debt, and 
their commissioners would soon take all the rest that might 
be issued. 

"But how is this gold to be raised? The duties and public 
lands are to be paid for in United States notes, and they or 
bonds are to be put up at auction to get coin for these very 
brokers who would furnish the coin to pay themselves, by 
getting twent\ per cent, discount on the notes thus bought. 

"Now, in less than a year, taking the public debt at what 
my colleague makes it I make it more $1,200,000,000, 
what will the interest be upon it at seven and throe-tent h> 
per cent, for it will all center in that rate of interest? It will 
be $87,000,000, and one-half of that amount, $43,500,000, 
must be raised every six months for the paying of thi> 
interot, and is to be raised in coin, which nobody holds but 
the large capitalists. Does anybody suppose that they are 
going to give that coin for such notes as we are now about 
to issue, at par? They will sell the gold for what their 
conscience will allow, and they will compel the government 
to give anything they choose, unless the government, con- 
sents to become dishonored. The first purchase of gold by 
the government will h'x the value of these notes which we 


issue and declare to be a legal tender. That sale- will fix 
their value at ten, fifteen, or twenty-five per cent. di>eounl , 
and then every poor man, when he buys his beef, his ]>..rk, 
and his Supplies, must submit to this fifteen or twenty-five 
per cent. discount, because* you have said that that shall Le- 
the value of the very notes which you have inale a legal 
tender to him, but not a legal tender to thoM- \\ho fix the 
value of these very notes. DI-CS any one believe that any- 
Lody l)iit l)ankers and brokers fixes the, depreciation of 
currency:* So you will thus have fixed the market value of 
your notes at seventy-live or eighty per cent., and yet they 
are a legal tender to the poor of the country, while they an- 
no legal tender to those who hold the coin of the country. 
* Ily the original bill the Secretary of the Treasury w:i* 
allowed to sell these bonds at their value for lawful money 
that is, for these le--al tender notes. J>ut now, by the 
provisions of this bill, after the market value has Leen fixed 
and they are depreciated, the Secretary of the Treasury i~ 
authorixed to go into the market and sell them for coin, not 
at par, hut at the market value; therefor. Was then- ever 
a more convenient contrivance ijot up, into which Llinl mi-e 
run, to catch them;' Was c\ cr before sm-h a machine LT"1 

op for swindling the g^overnment and making the fortunes 
of the gold bullionists in one single year'^ 

*' Hut as if this ai-cumulateil folly were not quite enough, 

another amendment, provides that the-e notes, ^hen piv- 
d in sums n<t h-^s tlian ^K'l), may be transferred ii.;,> 
n and three-tenths noti-x payable in two year-. I *a 

may buy these notes at a discount and jmt them into note* 

payaLle in bullion at, tuo year-, at, se\cu and thiv.-tenths 
interot, for that, is a part of the whoh; system. 

w, sir, <b.(.s any man In-iv Lelie\c thai, notu it h-tan-l- 
ing the vietorirs u.- an? gaining, the government, will be 

Tin: I.I:.AL 'i i M>I K A T8. 199 

able to redeem thrse notes in two years? If not, they will 
be shoved U|M,H tic- market aiul sold for coin at whatever 
discount may be demanded." 

Mr. Storms also offered an amendment to ]ay the anny 
ami navv in specie, tin- same as the bondholders 1 ink-rest in 

coin, which was \oied down. Tin; Senate; amendments 

were concurred in only in part, which rendered the appoint- 
ment of a committee of conference necessary. The confer- 
ence committee appointed by the Senate consisted of Mes-r-. 
rYvM-nden, Sherman and Carlisle, and the conference com- 
mittee of the House of Messrs. Stevens, Norton and Sedg- 
wick. The conference committee were in seoioii two or 
three days, and finally reported the bill with several altera- 
tions, the most important of which Mas that the duties on 
inijKn'tti alum/it /><>, jKti'l in. coin* so as to do away with 
the necessity of forcing the bomK on the market to procure 
coin to pat/ intercut, /'// '////, n- the bonded debt of the 

On the 24th of February, lsU>;j, tin* action of the confer- 
ence committee was agreed to by the House by a vote of 
97 to 22. On the 25th the Senate concurred in the action 
of tin' conference committee, and the same day the legal 
tender act was approved by the President^ 


Thus were the mo.M. sacred interests of the people, espe- 
cially of the producing classes the farmer, the mechanic, 
the manufacturer and the laboring man, i^ro^ly and wickedly 
betrayed into the hands of the money ] x we r by the Senate 
of the Tinted States. The Senate at that time was a small 
body, but twenty-four States beiiiLC represented, with but 
three or four members who^e ability I-OM- above mediocrity. 

:i Dt" Mini. Tli:i<Mt'ii^ St.-vriis in tli(> A|tp<-iiili \. 
tThe Legal Tender Act a- tiuallj j>a <! will be found in the Appendix. 

joo 'i UK I.KCAI. "i i.\i>i:i: A. i 8. 

Tin- occupants ,,C geatl once tillcl by statesmen, whose ability 
.-UK! eloquence had made the Senate of the I'nited States 
famous throughout the world, they became puffed up with 
lf-importance, which, with the venality of the Sher- 
man-, of tin 1 body, rendered tlu-m easy prey lor the sharks of 
Wall street. It will be observed that the points contended for, 
so strennoiixly ami successfully, by the conference committee 
of the Senate, which rejresente<l the sentiment of the 
majority of that body, were', in substance and effect, the 
same a> those c< .ntained in the plan of the bankers, offered at 
their meetinir, which convcm-d in Washington immediately 
after the introduction of the le^al tender bill in the House.* 
That the Senate was controlled, in its action in regard to 
the leiral tender bill, by improper influences is not a matter 
of conjecture, bat of history. In his speech at Philadelphia, 
January !">, 1*70, Jud_ire Kclley says: ki l remember the 
errand 'Old Commoner'' (ThaddeUfl Steven*-) with liis hat in 
his hand and his cane under his arm, when he returned to 
the IIoiiv,. after the final conference, and shedding hitter 
Over the i-e<ult. ' Ve<," said he, 'we have had to yield; 
the Senale wa*. stubborn. We did not yield until we found 
tjnit fl ,-,, ,,t ,-ij must be ?n#t or tji* f t unk* ?>< ///'"' 
and we have sought to save the country in spite of the 
cupidity of its wealthier citi/en^." 

Men- bf/iiix one of the darkest chapters in American 
hi-t-.i-y. It will be found that every ^tcp taken by Coir_rre-> 
IV.. m tliis on, in matter^ pertaining to the finances of the 
nation, has been dictated by the money power. Korean 
capitalists, such as the Hothsehild-, became deeply intere-t. d 
in the scheme of robbery inaugurated by the ]>a a-_ r '- of the 
first |- L r;il tender act, and through their agents, such as 
Aniriist r>elmont, banker and whilom chairman of the Dein- 

TIIK i.i:<; u. TKNDKI: A< T8, 201 

ocratic National Committee, have aided tin- money power 
linv materially in controlling the policy of botb of ilia 
great political parties. The amount stolen from the people 
during tin- war by the financial policy then adopted, ami which 
now encumbers the nation in the shape of ;i bonded debt, 
payable principal and interest in gold, is estimated by MK h 
writers upon the subject of finance as .1. S. (iibbons (contrib- 
utor to Johnson's Universal Cyclopaedia) at over one thou- 
sand millions of dollars,* to say nothing of the thousands of 
millions of which the people have been robbed indirectly, 
by means of the pernicious monetary system then foisted 
upon the country. 

The first legal tender notes (greenbacks) issued under the 
act of Congress of February 25, ISH'J, were issued bearing 
<late March 10, 1862, and on the back of them was printed 
these words: 

"This note is a legal tender for all debts, public and 
private, except duties on imports and interest on the public; 
debt, and is exchangeable for United States six per cent. 
bonds, redeemable at the pleasure of the United States 
after five years." 

Notwithstanding the mutilated form in which the green- 
backs were sent out by the Treasury department, they per- 
formed a marvellous work. The producing forces of the 
nation were set at work, and there was no longer any diffi- 
culty in rendering the resources of the people available- t<> 
the government. In speaking of this period, Judge Kelley, 
in his Philadelphia speech of January last, thus graphically 
and eloquently pictures the wonderful change which followed 
the passage of this legal tender act. He says: "Hut the 
patriots, (Lincoln, Stevens, etc.,) to whom I have referred, 
had studied the Constitution of the United States. They 

'Letter of J. S. Gibbon?: Spaulding's Fiiiaucial History oj the War. 

202 THE I.KiiAI. TKMiKR A- f s. 

knew that it imposed upon them tln i duty of saving the 
nation. They knew that money is the sinew of war, and 
that it must he hal. They knew that tin* ( '"limitation 
uuthorixrd the coining of the puhlic credit into money. 
They 'smote the- rock of puhlic credit," and power and pros- 
perity irushed forth. 'Smote the rock of puhlic credit!' 
What docs that mean ? Why, they called into i xistence 
'the rau r -baby !' They said to every man that would work 
'Here are waives for you; this rajjf-hahy will pay you." They 
said to ship-owners, 'unfurl your rotting sails and open vow 
hatchways; we have brought you grain from the farm, carry 
it ahroad to buy us clothing and arms; for our industries 
ha\e hecn stricken, and we cannot provide Mothiim' or arms 
for the army that is to sustain the l"nion." The ' rag-baby ' 
hhowered greenbacks upon them, and the >hip-> spread their 
sails, and carried rich cargoes to foreign lands, which were 

exchanged for clothing, anna and munitions of war. Indus- 

try was rife throughout the land. The farmers, wlu had 
Keen without an adequate or remunerative market for years, 
jetting good prices for their grain, were paying their 
to the local merchant, who in turn paid his to those of 
the L r ivaf cities. A marvellous child was that 'raiT-hahy.' 
While not yet a month old, its name, * LTreenhack, 1 n 
familiar to the people, it lighted the fires in every for-e and 
furnace of the country; it hired ships, and bought oth. 
blockaded the whole x, m thern const; it rallied an army of 
7:/. 'MM. men, and we soon after heard rimr'niLT through the 
the shout of well paid and well clad soldiers, 'we're 
comiiiLr, Father Abraham, three hundred thousand more! 
The 'rair-baby ' was welcomed by every commi--ary, juart-r- 
: and paymaster. It furnished transportation; it met 
all demands, and the American people at least those of the 
-with the -j-rcat war on their hands, were pi 

Tin: LEGAL T r\M i: 203 

OUH as they had i:rv< r been before, thanks to the marvellou.- 

power of the * rag-baby.' * * [name it not the 'rag-baby; 1 

I take (lie dcri.xixe term from the door of the Presidential 
mansion. I cannot imply a want of respect for the constitu- 
tional IcLral tender money of the country, the Treasury note, 
which did all that I have attributed M the k 

The premium on L r <'ld, which was :{ JUT eent. when the 
leiral tender act, was passed, February L'-"), I *'>_>, immediately 
bewail to decline, and did not LI'<> np a^ain until the latter part 
of May. United States bonds immediately went up from 
90 to loj. 


I>y the fourth seetion of the h-iral tender act, the Secretary 
of the Treasury was authorized to receive deposits in the 
Sub-Treasury to the amount of $25,000,000, in sums of not 
less than $100, at five per cent, interest, Avith the privilege 
of drawiiiLC it out a^ain on ten days' notice after thirty days. 
On the 17th day of .March, 1SG2, the authority to receive 
these deposits was increased to $50,000,000. On the llth 
of July, 1862, it was still further extended to $100,000,000; 
and by the act of January 30, 1864, to $150,000,000, and the 
Secretary was authori/.cd to pay as hi^h as six per cent. 
interest. These deposits reached the sum of $120,176,196. 

< Kirnri' A 1 1:> <>K IM>KHTI:I>M.--~. 

By the act of March K l s <',2, the Secretary of the Treasury 
was authorized to issne to public, creditors "who may be 
desirous to receive the same in satisfaction of audited and 
settled demands against the Tinted State-," certificates of 
indebtedness in sums not less than $1,000 each, payable in 
one year, with interest at six per cent. And by the act of 
March 17, 1862, this power was enlarged, so as to embrace 
checks drawn in favor of creditors by disbursing officers 

._'"! rm; i.i:<,.\i, TKNDKI: ACTS. 

upon sums placed to their credit on tlic books of the Tr 
urcr. These certilicates wen- issued in the form of bank 
notes ami circulated to :i larire extent as currency. The 

amount of certificates <>f indebtedness in circulation Novem- 
ber, Mil, W .M3,000. 


On the 7th <lay of June, 1862, Secretary Chase sent :v 
ei nun iin irat ion to the Committee of Ways and Means of the 
llu>e a>kin<x for autliority to issue ^150,000,000 more leLfal 
temler Treasury notes, ami that $35,000,000 of this sum 
should be of a less denomination than five dollars. On the 
1 1th of June a bill was reported to the House from the 
Committee of Ways and Means. The bill was made the 
special order for the 17th inst. On that day the debate \vas 
opened by Mr. Spauldinir in a speech in favor of the bill. 
A vote was reached June iMth, when the bill passed, sub- 
stantially as recommended by the Secretary, by a vote of 76 

to 47. 

On the istli of June the Finance Committee of the Senate 
reported it to that body with amendments. On the 2d of July 
it passed the Senate, as amended, by a vote of L'2 to l:?. The 
Iloii-e rrfu.-ed to a-_rree to the amendments; the farce of a con- 
ference committee was airain i^one through with; the report 
of the conference committee was agreed to mi the 8th of 
July, and on the 1 1th the bill was approved by the President. 

o\i) ANM u. i;i;i-oi:r OK >K-I;I: r \i: v CHA8B, 
Congress Convened in regular v r>s 5on December 1, 1862. 
On the 4th Secretary Chase submitted his second annual 
report. After an elaborate review of the revenues and 
< \pciidilui-cs of the LTovcrnment, he di-cued the tinancial 
affairs of the nation at lai-j-c. lie reiterated his objections 
to the State banks and declared that, M between a eurreney 

TIIK I.K<;AL TKMF-:I: A. is. -jn.- 

furnished by numerous ami unconnected banks in various 
Stales and a currency furnished by the government, he 
unhesitatingly gave his "preference i'or a circulation author- 
ized and issued by national authority." 

He took issue with those who entertained the opinion that 
the rise in the price of gold was due to the redundancy of 
the currency, and supported his views with great force,* but 
it did not occur to him to suggest the true reason, viz: 
because coin was the only currency that, was a- full legal 
tender. He again took occasion to renew his recommenda- 
tion of the National Banking system. lie said: 

"While the Secretary thus repeats the preference he ha* 
heretofore expressed for a United States note circulation, 
even when issued directly by the government and dependent 
on the action of the government for regulation and final 
redemption, over the note circulation of the numerous and 
variously organized and variously responsible banks now 
existing in the country; and while he now sets forth, more 
fully than heretofore, the grounds f that preference, he 
still adheres to the opinion expressed in his last report, that 
u circulation furnished by the government, but ism" ! 
by banking associations organi/ed under a general act of 
Congress, is to be preferred to either." 

The amount to be provided for by Congress for the current 
year he estimated at about $300,000,000, and for the next 
fiscal year, (beginning July 1st,) $600,000,000, and recom- 
mended that the chief dependence ot the government to 
secure that amount be placed on the negotiation of bonds. 

Congress was then urged by the Secretary to repeal that 
portion of the act of Congress of February 25, 1862, which 
restricted the sale <>f ?>n<7* to fhc'ir market price, and 

See Report of the Secretary of the Treasury : Appendix to the Congressional 
Globe, ISftJ-'GU. 


also the clause providing for the convertibility > 

<I,K/, Treasury -jtnfe*, (yreenbackx.) In conclusion lie 
said: "The gene-nil views of the Secretary may, there: 
lc thus briefly summed: He recommends that whatever 
amount may be needed beyond the sums supplied by revenue 
ami through other indicated mode-, 1 K . obtained by loan-, 
without increasing the issue of United States notes beyond 
the amount fixed by law, unless a clear public exigency shall 
demand it. lie recommends, also, theorganizat ion of banking 
ociutions for the improvement of the public credit, and 
for the supply to the people of a safe and uniform currency. 
And he recommends no change in the law providing for the 
negotiation of bonds except the necessary increase of amount. 
and the repeal of the absolute rexf ?><''>>> f<> imirket 
vahie and of the clauses authorizing convertibility 


Karly in the session the Hon. Thaddeus Stevens intro- 
duced a bill "to provide means t> defray the e\pcn>e- 
the government," which, in his own language-, fc - product- 
howl among the money changers as hideou^ as that sent up 
by their Jewish cousins when they were kicked out of 
temple." This bill was in substance the same as the ! 
tender bill, as it originally passed the House and bcfo- 
WEB mutilated by the Senate in the manner above explained. 
It was intended to bring the government back to the full 
legal tender money system, "the simplicity and harmony 
of which had been mangled and dcMroyed by the Senate/ 1 
In a brief, but powerful speech, ( December L':*, 1862) M 

ens pointed out the injustice and danger of the financial 
policy which was then being pursued, and closed with this 
prophetic warning: "Hut T ought perhap- i-efore I 

96, to my country banking friends that they need not 

TIIK l.Kt.M. TKNDKK \ 207 

alarmed. There is IK. L,nvat prospect, that we shall return 
to the .system I have indicated, nor do much to protect the 
people fniin tlu-ir own ca^cr speculations. When a few 
years /'//>, ^ the people shall have been brought to 
'funeral ban/cnrj,f<->/ by their mm -ITU luted enterprise, I 
shall have the satisfaction to know that I attempted to 
previ-nt it." (Mr. Stevens' speech will be found in full in 
the Appendix.) 

On the 8th of January, 1863, the Committee of Ways and 
Means reported a bill entitled, "A bill to provide Ways and 
Means for the Support of the Government," afterwards 
known as the $900,000,000 loan act. The bill reported 
contained no provision for the repeal of the clause in the 
ad of February 25, 1862, restricting the Secretary of the 
Treasury in the sale of bonds to their "market value," or of 
the clause allowing the holders of legal tender notes to 
convert them at any time into 5-20 six per cent, bonds. 

On the 12th of January the bill was taken up in the 
House, and Mr. Spaulding opened the debate in a lengthy 
speech in support of the bill, in which he discussed the 
National Hanking scheme, recommended by the Secretary, 
arguing in its favor. On the 17th of January, 186:3, a joint 
resolution was passed "to provide for the immediate pay- 
ment of the army and navy of the United States," authori/- 
ing the Secretary of the Treasury to issue $100,000,000 legal 
tender Treasury notes, to be covered by the bill then pend- 
ing ($900,000,000 loan act.) On the 26th of January, 1863, 
the bill was passed a substitute offered by Mr. Hooper, and 
one by Mr. Stevens, having been first decided in the nega- 
tive without a division. On the 13th of February, 1863, 
the bill, after being amended, passed the Senate by a vote of 
32 to 4. The usual routine of a conference committee was 
gone through with, with the usual result, and the bill was 


finally agreed to as amended by the Senate, and approved 
by the President March 3, 18G3. The following is a synop- 
sis of tin- bill as given by Mr. Spaulding:* 

"1. The first section authorizes a loan of $300,000,000 for 
tin- then current year, and $600,000,000 for the then next 
fiscal year, and to issue bonds therefor at not less than ten 
nor more than forty years, at not exceeding six per cent* 
interest, in coin, not exceeding in all $900,000,000. 

"2. By section second of the same act the Secretary, in 
lieu of an equal amount of said bonds, was authorized to 
issue $400,000,000 of Treasury notes, bearing interest not 
< \< eeding six per cent., payable in lawful money, which 
notes, payable at periods expressed on their face, might be 
in 1 1 >le a legal tender at their face value. 

"3. By the third section $150,000,000 in amount of United 
States notes, made a legal tender, might be issued. The 
restriction in the sale of bonds to 'market value was re- 
pealed. ''And the holders of United States notes issued 
under former acts, shall present the same for the pur- 
]mQ of exchanging them for bonds as therein provided, 
on or before the first of July, 1863, and thereafter the 
rig lit t exchange the same shall cease and determine? 

"4. This section imposed a tax of one per cent, each half 
year, on a graduated, scale of State bank circulation^ 
according to the capital stock of each bank." 

Making the interest of the bonds payable in gold and 
declaring that the legal tender Treasury note (greenback) 
should not be receivable for duties on imports, was a L r r-s 

betrayal of the interests of the people by the Senate of the 

United States. But that body was capable of still greater 
perfidy. It will be olocrved by the synopsis of the $900,- 
000,000 ],,an a-t, given above, that the convertibility of the 

Financial History of llic War, page ISO. 

Tin: I.KC.M. TENDjRB ACTS. 209 

greenback with Knitrd Si.itr- >i\ JUT rent, bond:-, .-is provi- 
dcd by the act of February 25, 1862, was repealed 

By the terms of the act of February 25, 1862, under which 
the greenback was issued, the right to exchange it for United 
Suites bonds was distinctly guaranteed, and was in the na- 
ture of a contract, made by the government with the holder, 
and to abrogate this right was an act of repudiation. The 
motive which inspired the act, was to still further depiv< iate 
the paper of the government. It is a fact worthy of note, 
that when Congress perpetrated this act of repudiation, "no 
doleful sound came up from the caverns of the bullion 
brokers or the saloons of the associated banks," nor was 
there any howl heard from the gentlemen of the press, who 
were so quick to detect repudiation in Mr. Stevens' bill to 
restore the legal tender act to the condition in which it first 
the House.*" 


Oil the 2d of February, 1863, the National Bank bill, 
a>- prepared by Mr. Spaulding in December, 1861, was 
reported, with alterations ami amendments, from the Finance 
Committee to the Senate by Mr. Sherman. The debate upon 
it began in the Senate on the 9th, and on the 12th (three 
days after) the bill passed by a vote of 23 to 21. It was 
taken up in the House on the 19th, and passed the next day 
by a vote of 78 to 64; and received the President's signature 
March 25, 1863. (See Chapter on National Banks.) 

The money power now had matters all its own way, and 
was in a situation to prey upon the government and people 
at its pleasure. Duties on imports were payable in gold; 
interest on the bonds of the Tinted States were payable in 
gold; the exchangeability of the greenback with bonds had 

*Seo Speech of Tlon. Tlinddpiis Stevens in the Appendix. 

210 TIIK I.i:(,AL TF.NDKU . 

been abrogated; the country waa flooded with e\M 

indebtedness of tlic <rovernment in all forms ami shapes, 
such as demand notes, Treasury notes bearing inte 
mutilate. 1 leLTal tender note-, eertitieates of deposit, certifi- 
cates of indebtedness, etc.; and a bunking bill, authorizing 
the issue of $300,000,000 in bank notes bad been passed. 

The following statement of the public debt (January 2, 
1863) will show exactly the amount and character of the 
indebtedness of the government at this time: 

Loan of 1842 $2,883,364 1 1 

1847 9,415,250 00 

" 1 -' IS 8,908,34 ! 

" 1858 20,000,000 00 

1860 7,022,000 no 

1861, act of February 8, 1860 18,415,000 00 

1861, act of July 18, 1861 50,002,000 00 

" 1862, five-twenty six per cent 25,050,850 no 

is indemnity 3,401,000 00 

Oregon war debt I,OL';,I;OO 00 

>debt 112,01)2 ;: 

Old funded and unfunded debt 1 It, I UJ 

Trcasiirv notes under acts prior to 1857. . . . 104, ~><'< I 

" " subsequent 2,750,350 00 

Treasury note* seven-thirty per cent, interest 139,998,000 00 

Temporary deposits at four per cent 38,458,00* 

live per cent 41,777,<52H Hi 

United State- note*, le^al tender and receiv- 
able, for customs 1 l.'.'i 

Tinted State's notes, leu-al tender 223,108,000 00 

I'.-tal currency less than one dollar ;.S.H, ;>,<> 00 

Certificates of indebtedness, six per cent... 110,321,241 
uisitions: (,n the Treasurer for soldiers' 
pay and other creditors, due but not paid 51),! 17,r>07 46 

Total funded and unfunded debt to January 
2, I "!':'>, according to the books in the 

asury Department $783,804,252 

The time had now arrived to put the $500,000,000 of 


United States bonds authm -i/.rd by the act of February 25, 
1862, on the market. Notwithstanding tin; urgent need of 
the government during this time, Secretary Ch:ise had licld 
these bonds back for over a year on tho pretence that the 
restriction to a sale at "market value" prevented him from 
negotiating their sale to any considerable amount. Mr. 
<jrurley, of Ohio, effectually disposed of this plea in the 
course of his speech on the nine hundred million loan act. 
He said: "He did not agree with the Secretary in several 
things contained in his report; the banking scheme, which 
the Secretary admits would not afford any immediate relief, 
should be rejected; we need a sensible, practicable plan 
that will furnish immediate means to pay the army and 
navy. lie insisted that Congress, by the act of February 
25, 1862, authorized the Secretary to sell $500,000,000 six 
per cent. 5-20 bonds at 'the market value thereof,' which he 
Jutd not done, as intended by Congress, and the conse- 
quence was that the soldiers and sailors were not paid, as 
they ought to have been before this time. * * The words 
* market value' do not mean par value, nor any specified 
time or sums. The market value was the price they would 
bring when offered in the market. There has been no 
business day or week since the law was passed, when any of 
the many agents of the Secretary in New York could not 
have placed one million, or several millions, in the market, 
and sold them H>mewlu>ro near par, to raise money to pay 
the army and navy." 

In May, 1863, Jay Cooke, "an enterprising banker" of 
Philadelphia, was employed to dispose of the five-twenty 
bonds. The Secretary of the Treasury, up to this time, had 
put out only about $25,000,000, leaving $475,000,000 yet to 
be sold. 3sTo effort was made by Mr. Cooke to negotiate 
these bonds with bankers or capitalists, but (to quote from 

212 TIIK I.K;.\I. TKNDKi: ACTS. 

Spaulding), "the editors of newspapers and others wen* 
enlisted to bring the advantages of the loan before the 
people, in order to make it a great popular loan, to bo taken 
by them in large and small sums in all the loyal States. Mr. 
Cooko succeeded admirably in this undertaking. The loan 
became very popular, and was taken extensively by farm 
mechanics and laboring people, in all the towns, villages and 
cities over the country. By the first of July, 1 803, the amount 
of $1 68,880,250 of these bonds were taken; and by the Hi 
October following, $278,511,500 had been taken uj>; and by 
the 21st of January following the whole sum of 8500,000,000 
had been taken at par, and the rush was so great near tin- 
closing out of the loan, that nearly $11,000,000 extra had 
D subscribed and paid for before notice could be given 
to sulKigents that the amount authori/ed by that act had 
been taken uj>. Congress, however, BOOH after authorized 
this extra sum to be issued." 

Hugh McCulloch also bears testimony as to what elas> 
of people took the 5-20 bond*. In a letter to the New York 
7V//////M , .lateil -it, T,< )<! n in September last, lie said: ii 1 
recollect the time when suovribers lor Tinted States bond- 
were regarded as patriot*, and I happen to know to what 
class they belonged. With rare exception they were not 
capitali>ts. * * The purchasers of our bonds were the 
patriotic men of all parties, chiefly men of moderate means. 
who were iv>ohrd that the Union should be saved, no- 
matter at what cost of money or blood.'' It may h 
interesting to state that Mr. McCulloch was not one of ti. 
who were n <olved that the t'nioii should be BEVed, 
matter at what D iie time lie refers to, he w 

:try banker "of moderate in- in the 

elk-ve, by the Sub- 


Treasurer of the United States, Mr. Cisco, to have his bank 
take and dispose of some of " our bonds." lie treated the 
request with -contempt. This matter was so well known at 
the time of his appointment as Secretary of the Treasury, 
as to be talked of on the streets of Washington, and was 
hushed up by ms friends only v.ith great difficulty. 

The partial legal tender Treasury note (greenback), issued 
by the government, now constituted the medium of exchange 
of the nation. Its legal tender property gave it the power and 

functions of money, to measure and exchange values. The 
legal tender money of a country is the measure of all values 
and the basis of all money contracts among its people; conse- 
quently prices in the Tinted States came to be regulated by 
the greenback and not by gold. Any one can satisfy him- 
self on this point by comparing the market prices of any of 
the leading products of the country for a given time with 
the fluctuations in the price of gold. Secretary Chase 
referred to this fact in his second annual report, in which 
he said: u That such is the case (no redundancy of the cur- 
rency) may he reasonably inferred from the fact that the 
prices of many of the most important articles of consumption 
have declined or not materially advanced during the year. 
Wheat, quoted at xi.:;s to $1.45 per bushel on the first of 
November, 1861, was quoted at $1.45 to $1.50 on the first of 
November, 1802. Prime mess pork on the first of Novem- 
ber, 1861, was quoted at & 1 ~> to $15.50 per barrel, and on 
the first of November, 1862, at $12.50 to $13. Corn sold on 
the first of November, 1861, at 62 to 63 cents per bushel, 
and on the first of November, 1862, at 71 to 73 cents. A 
comparison between the prices of hay, beef, and some other 
staples of domestic produce, at the two dates, exhibits 
similar conditions of actual depression in price or moderate 


rise." Products rise and fall in price according to the 
laws of supply and demand. Foreign goods, however, the 
duties on which have to be paid in gold, are subject to a 
different standard of payment, and are governed in price 
ly by the price of gold. The price of gold is reirulated 
by the laws of supply and demand, supplemented by the arts 
and efforts of speculators and gold gamblers. As long as 
the greenback was convertible at the will of the holder into 
a six per cent, gold interest bond, there was no danger of 
its becoming redundant, or in any way affecting the price 
of domestic products. But, as we have seen, this converti- 
bility was taken away, in the face of the plighted faith of the 
government, after July 1, 1863. 

On March 3, 1864, an act of Congress was passed giving 
Secretary Chase still further discretionary power. It author- 
ize- 1 him to issue $200,000,000 of bonds, bearing date March 1, 
1864, or any subsequent date, redeemable after five years and 
payable in forty years, in coin, bearing interest not exceeding 

per cent., subsequently known as 10-40 bonds. Un 
authority of this act, Secretary Chase, immediately after the 
5-20 bonds bearing six per cent, interest had been di>j> 
of, put 10-40 bonds bearing only Jive per cent, inu -iv>t mi 
the market. Very naturally the loan did not prove a suc- 

. and by the 1st of July, 1864, the sum reali/ed from 
10-40 bonds amounted to only $73,337,750. In order to 
defray tin- expenses of the L r o\ eminent, the Secretary OOD- 
tinn e evidence* of indebtedness of the government 

in various forms calculated to circulate as a eurrency. By 
this lime National Bank notes he^an to swell the volume of 

the currency. The following statement shows the amount 
and kinds of paper in circulation June 30, 1864: 

Tin: i.Kt-.M. TENDER A- i -. J 1 5- 

U. S. not,-, greenbacks *4:) 1,1 78,070 84 

iWal, fractional currency 2i',s!) 4,*77 25 

Interest bearing legal tender Treasury notes 1 (is,:,; 1,150 00 

Certificates .,f Indebtedness 100,720,00000 

National liank notes 25,825,095 00 

State liank circulation about 135,000,00000 

Seven-thirty Treasury notes 100,350,15000 

Temporary deposits 1'or which certificate* 

were issued 72,330,101 44 

$1,125,877,034 53 

From the above table it will be seen that the country was 
flooded with paper securities of the government of every 
description, mostly bearing interest and issued in a form to 
circulate as currency. Now take into consideration the 
fact that over 'S700,000,000 of bonds bearing interest payable 
in [i old had just been issued, and also that the military 
situation was very critical, and no one can fail to see into 
what a wretched condition the finances of the country had 
been brought. The ''bulls'" and "bears" of Wall street fairly 
rioted in the speculation and gold gambling which ensued. 
The premium on gold began to go up. On the 15th of 
January, 1804, it was 1.55; on the 15th of February, 1.59; 
on the loth of April, I.7S; on the- 15th of June, 1.79; on the- 
30th of June, 2.50; and on the llth of July, 2.85. The 
business affairs of the country were of course greatly 
deranged, and distrust became general. The credit of the 
government suffered enormously worse than if it, had BUS? 
taincd a do/en defeats in the field. Put the iraine had been 
carried too far, and it was no longer possible to deceive the 
public, so something had to be done to allay public feeling 
and restore confidence. Secretary Chase was compelled to 
resign June 30, 1804. No change, however, was made in 

216 TIIK LK(iAL T KM> F.i: ACTS. 

the policy of the Treasury Department, and matters went 
on from bad to worse. 


LIMITED TO 8400,000,000. 

By the act of June 30, 1864, the amount of greenbacks 
issued or to be issued, was limited to 8400,000,000, and "such 
additional sum, not exceeding $50,000,000, as may be tem- 
porarily required for the redemption of temporary loans." 
The Secretary was authorized to issue $200,000,000 legal 
tender Treasury notes bearing interest, payable in three years. 
By the same act all bonds, coupons, national currency, United 
States notes, Treasury notes, fractional notes, certificates of 
indebtedness, certificates of deposit, etc., were declared to 
be exempt from taxation by or under State or municipal 


William P. Fessenden, United States Senator from Maine, 
was appointed to succeed Secretary Chase, and entered upon 
the duties of his office July 5, 1864. Secretary Fessenden 
raided tlie means to carry on the government to March 4, 
1865, by issuing greenbacks, 7-30 Treasury notes, interest 
bearing Treasury not -, eutificates of indebtedness, 5-20 
bonds, etc. Secretary Fessenden, while in the United States 
Senate, had played a conspicuous part in mutilating the 
greenback, and the following paragraph from his annual 

1 ier, 1 MM, in view of his course, cannot fail 

to strike the reader as n, singular admission. lie said: "Tke 

o of the past few months cannot have failed to 

convince the most careless observer that, whatever may be 

lundant circulation upon the price of coin, 
other causes have ext greater and more deleterious 

THE LE<;AL TI:M 217 

influence. In tin.- course of :i few days the price of this 
article ne *l.f>t) to x-J.sri in paper 1'or $1.00 in spe-i-, 
and subsequently fell, in as short a period, to $1.87, mill 
then again rose us rapidly to $2.50; and all irifhont any 
tuifsiy nable cause, traceable to an i> <>r decrease 

in circulation of paper money, or an expansion or con- 
traction of credit or other similar influence <n the market, 
tending to occasion a fluctuation so violent. It is quite 
apparent that the solution of tlic problem may be found 
in the unpatriotic and criminal efforts of 8jn:culator8 9 
and probably of secret enemies, to raise the price of coin, 
regardless of the injury inflicted upon the country, or 
desiring to inflict it." No man living, except John Sherman 

of Ohio, was better able to explain how and through whoso 
instrumentality these rascally speculators were enabled to 
prosecute their " unpatriotic and criminal efforts" than Mr. 
Feesenden himself. Under the circumstances Mr. Fesscn- 
den did not iind the position of Secretary of the Treasury 

.a very comfortable one; and at the beginning of Mr. 
Lincoln's second term he surrendered it with feelings of 
great relief. 


Immediately afler I 'resident Lincoln entered upon his 
second term of office Hugh McCulloch, a banker, of the 
State of Indiana, was appointed Secretary of the Treasury. 
Mr. Me('ulloch was unknown to the public, but it was 
hoped that, being a banker and of course familiar with the 
manner in which the government and people were being 
robbed by the money power, and not identified with the 
corrupt political ring at Washington through which it 
operated, he would endeavor to restore the finances of the 
country to a more healthy condition. Never were a people 


loomed t-> be more bitterly disappointed. McCulloeh not 
<nly entered into tin- de-i^ns of the money power, but 
became its most subservient tool, and retired with tlie repu- 
;ig tlie iirst Secretary of the Treasury of the 
Uni- 9 who had ever prostituted hb high olliee for tlie 

purpose of enriching himself and his associates. Henry C. 
CM ivy, wh-> had a conversation with him immediately after 
his accession to office, says that lie expressed himself then 
i favorable to contraction, and quotes him us saving that 
he ^.should gladly see it (gold) at 1.75," meaning that he 
would not favor contraction for the purpose of reducing the 
premium on gold. "Three months later," says 31 r. (.'a. 
k> he was instructing his representatives abroad to give- 
assurances that we should have resumed specie payments- 
before the 7-30\s became due. Two months yet later came 
the destructive Fort Wayne decree (a letter from McCulloch 
in which he expressed himself in favor of the policy of con- 
traction), ami from that hour did the Secretary persist in 
the ab>urd and injurious policy therein announced." 

Mr. McCulloch, at the same time that lie was giving 
instructions to his representatives abroad that we should 
have r.->umcd specie payments before- the 7-HO's became due,, 
was issuing 7-:50 Treasury jioles and compound inte. 
bearing Treasury notes-, made :i tender at their face value, 
to an enormous amount. The payment of the army, which 
inu.stcivd out of service during this period, alone 
re.juircd an sum, which was obtained by selling 
i-ury noles through the agency of Jay Cooke. The 
amount of 7-:;i) Treasury QOteS ouMaiiding October, 1SG5,, 
which were, convertible in ]e-> than thi into 5-'Jo 

nt. bonds, was $830,000,000. 

The following -it of the debt and circulation! 

Of tlie United Stato, U s it stood October 31, lb< 

Tin: LEGAL TI:MI.I: .-. 219 

Bonds, HMO'S, live per cent., due in 1 On t . . *i T-J, 770,100 00 

IJonds, I'a.-itic U. U., o percent, duein i i^:.s"oooo 

Bonds, 5-20X0 per cent, due in 1882/84/85 Ofi ) 00 

Bonds, C. per cent., dub in 18S1 .......... 265,947,400 00 

I'x.nds :> per (-nil., due in isso .......... is.i i.-,,nno 00 

ISonds, :> JUT cent., due in 1S74 .......... 2i.,>0uii0 00 

Bonds, 5 per cent, due in 1*71 .......... "> 00 

Uonds, percent., due in |s<;s .......... U 80 

Bonds, 6 per cent, dne in 1*07 .......... 9,415,25 

llnnds, Texas indemnity, jiart <liR' ........ " ><) ()<> 

s. Trc-asury notes, etc., part due- ...... oi 

Total IJ.nids .................... Ul, 103,769,611 8& 

Compound interest notes, 

.tui- in 1SU7-'08 ....... ^173,012,141 OO 

7-30 Treasury notes, duo 

in ISO? and isos ...... 830,000,000 00 

'IVmiiorary loans, 1( da\ -' 

notice. ' ........... .. 90,107,745 4G 

Certificates of indelted- 

ni-x. due in 1800 ...... 55,905,00000 

Tre-isurv notes,.") percent., 

I )ec. 'l, 1865 ......... 32,536,901 00 

United States notes ..... 4'js,h;i,r,o) 00 

Fractional currency ..... 20,057,409 20 1,044, 77D,s-J5 66 

Total debt October :J1, 1805 ...... x-J.-o-.:- I 1 .'. 437 55 

National Uank notes issued ............. $185,000,000 00 

State Bunk notes issued ................ 65,000,000 00 

Treasury notes, greenbacks, etc .......... l,044,779,s-j:, 

Total circulation* ............... $1,894,779,825 66 

Secretary McCulloch, in his lir>t annual n-port, Dec-eiiibt,-! 
4, 1865, argued that the legal tender acts were war measures 
and only temporary in character, and "ought not to remain 
in force a day longer than would be necessary to enable the 
people to prepare for a return to the gold standard; and that 

See table of circulation, Sept. 1, isco, yax'e 16. 


the work of retiring the notes which have been issued should 
bo commenced without delay, iind carefully and persistently 
continued until all are retired." On the 18th of December, 
1 865, Congress adopted a resolution " cordially concurring 
in the views of the Secretary of the Treasury, in relation to a 
contraction of the currency," by a vote of 144 to G. This was 
followed by an act of Congress, approved April 12, 1866, 
authorizing the Secretary to sell 5-20 bonds, and with the 
proceeds to retire six per cent, compound interest notes and 
legal tender notes (greenbacks), and other evidences of 
indebtedness of the government, but not to retire more than 
four millions of dollars of greenbacks a month, or forty-eight 
millions of dollars in a year, but without restriction as to the 
amount of compound sixes and seven-thirties. This net gave 
Secretary McCulloch unlimited control over the monetary 
affairs of the country. 

The banks and sharks of Wall street and their kind, at 
home and abroad, held hundreds of millions of securities of 
the government, which they had purchased at various prices 
ranging from thirty-five cents on the dollar upwards. During 
the war whilst these securities were being emitted, it was the 
policy of the money power to depreciate their value in every 
way possible, in order that they might be bought in ata sac- 
rifice. Hence it was that interest on the bonds and duties 
on imports were made payable in gold, and Subsequently, 
that the convertibility of legal tender notes into bonds \V;LS 
abrogated. It was for the same reason, too, that Congt 
instead of adopting a plain, simple system, easily understood 
by the public, SUCh as tli- Iciral tender Treasury note sus- 
tained by an interest bearing bond, JM i authorizing 
the S"i-ivt-i.ry of the Treasury to issue government securi' 
bearing interest, and mostly payable in three years, in all 
.sorts of forms and shape-. G . nnnent obligations were 

i in; LEGAL 1 BNDXB ACTS. ii-J 1 

issued during tin? w:ir by the Treasury Department in fifteen 
different forms. It wa> of course impossible for the general 
public to keep the run of, much less t<> understand, all t! 
various forms of indebtedness, nor was it designed that they 
should. It need scarcely bo added, that issuing the securi- 
ties of the government in these peculiar forms furnished the 
banks an additional opportunity to prey upon the people. 

As soon as the last batch of 7-30 Treasury not, > 
disposed of by McCulloch to raise means to pay off the ai my 
oil the eve of its disbandment, the money power changed 
its policy. It was now to the advantage of the holders of 
government securities to do everything in their power to 
enhance their value. Accordingly from this time on the 
efforts of the money power will be found turned in that 
direction. Secretary MeCulloch, who had informed Mr. 
Carey that he would like to see gold stay at $1.75, as we 
have seen, was soon brought to terms, and was now a xcaloiis 
champion of contraction, for the purpose of bringing the 
country back to "honest money." The Treasury n 
purposely made payable in three years, and which wen* 
convertible into 5-20 bonds, constituted the greater part of 
the public debt held at home. These notes were payable in 
lawful money (greenbacks), and it became an important 
object to have them converted into long time bond-, 
that the money power might have ample time to secure such 
legislation as would result in the principal as well as the 
interest being paid in gold. Mr. MoCulloch entered into 
this method of liquidating the outstanding obligations of the 
government with great zeal. The following items taken 
from his report of December, 1866, exhibit the ehara 
and extent of the contraction which took place (by Milti- 
tuting 5-20 bonds for Treasury notes, etc.,) from August 31, 
1865, to October 31, 1866: 


Temporary li.-m, !,."> and G per cent., arN >{' 

February 25, I 862, and June 30, 1804. . . $502,140,714 27 
C'crtilirates of indebtedness, per cent., acts 

of March 1, 1802, mid March 3, 1803 84,911,000 00 

Treasury notes, 5 per cent., one and two 

years," art of March 3, 1863 31,000,000 00 

Treasury notes, 7-:w, act of July 17, 1861 . . 295,100 00 

Compound interest notes, per cent., act of 

July 30, 1864 68,512,020 00 

Treasury notes, 7-30, acts of June 30, 1864, 

and March 3, 1865 105,985,700 00 

United States notes, acts of July 17,1861, 

and Fein-nary 12, 1862 134,610 00 

United States notes (greenbacks), acts of 

February 25, 1802, and March 3, 1863. . . U^::"J74_00 

Amount retired first year *;ii)5,.S15,318 27 

This policy was persisted in until all evidences of indebt- 
edness of the government bearing currency interest, and 
having hut a short time to run, "were converted into gold 
interest long bonds. The following synopsis of the public 
debt statement contained in Secretary McCulloch's annual 
report of December 1, 1868, will exhibit the progress made 
by him on the 1st day of July, 180*: 


r> per cent, bonds $221,588,400 00 

per cent, bonds 1,848,415,24 1 so 

Navy IVn.Mon fund 13,000,000 00 $2,083,003,641 80 

J>I:I;T r,r..\i:i\i; <TI:I:ENCY INTKKI 

6 per cent, bond*. $29,089,000 00 

:; yearcomp'nd int. notes 21,604,890 00 

7-::i) not.- 25,534,90000 

:; "per cent, eertiiicates. . 50,000,000 00 $126,228,790 00 

MA n i:n> DEBT BTOT P&B8EN1 i:i FI: ]-.\^ M i 
Treasury notes, com pound int'st n..t. >,<!<-. . j ;t 


reenbacks) -s;;;,;j \ 1.723 oo 
tional currency. ; i 75 

Gold oertific'sof deposit 1 7,678,740 00 $406,447,414 75 

Total debt XL> } ij:;o,207,149 19 

Tin: pBG \i. TKXDEB A< i >. 223 

In thi' meantime contraction lia.l dne IN work. IIu 
men began to suil'er ami the induM rics of the country to 
decline. "Hugh McCulloeh had tapped a great, artery ami 
let nearly all the Mood How from the body politic.*' Ue>idcs 
the hundreds of millions of evidences of indebtedness of the 
.government, used as currency, taken from the channels of 
trade, the greenback circulation was contracted from August* 
1865, to July, 1868, $70,730,630.76. The public began to 
realize, though only partially, the cause of the great ch mge 
that was going on in the business a flairs of the country, ami 
called a halt. Mr. J. A. Stevens President of the Chamber 
of Commerce of New York City, in a letter to the New 
York Times in 1873, thus refers to this period: '-The 
country at large had felt the pressure of the screw, but had 
not been able to discover precisely from what quarter the' 
pinch came, the contraction being confined to those outside 
forms of Treasury obligations which, though not currency 
in the strict acceptation of the \\ord, were still used as such 
in the larger transactions of trade and financial exchange. 
"When, in a time of general pressure, the currency itself 
became the subject of the pruning knife, the country not 
only felt the knife, but saw how it was handled, and refused 
to submit to the * heroic treatment.'" 

Congress was compelled, in January, 1868, by the force 
of public sentiment, to pass a law declaring "that from and 
after its passage, the authority of the Secretary of the 
'Treasury to make any reduction of the currency by retiring 
or cancelling United States notes (greenbacks) shall be and 
is hereby suspended/' But the mischief had already 1 
done. The greenback, however, was saved to the people. 

In 1865 and 1SOO, after the termination of the war, indus- 
try, by reason of the abundance of money in circulation, was 
rife throughout the country, and production went on as it 



hail never done In-fore. During the years 1863, '64, '65 ana' 
66 the failures throughout the country, as reporter! in Hunt's 
Magazine, averaged only 545 a year. In 1807 they run 
up to 2,386, and continued above that number until 1ST:',, 
when they reached 5,181, with liabilities to the, amount of 

In 1865 general prosperity prevailed, and as McCulloch 
himself lias since admitted, the people were individually out 
of debt. Business then was done for cask. But as money 
grew scarce business men were obliged, as in days before the 
war, to resort to the banks and borrow bank credit, i Business 
was no longer done on cash principles. As like causes pro- 
duce like effects, so the use of bank credit, rendered necessary 
by the scarcity of money, brought the business affairs of the 
nation back to the same condition in which they had been 
for sixty years prior to the war. A commercial crash was only 
a question of time, and accordingly it came in 1873. 



Every ;ict of Con - . ig to the financial measures 

of the government U. war was passed with a viewto- 

depreciating the public credit. So, now, after the war wa- 
over, and the money power had obtained possession of pll 

the outstanding obligations of the government, every act 
that was passed was pa-scd with :i view to increasing their 
value. The 5-20 bonds Of the government were payable in 
lawful money of the Tinted States. It will be remembered 
that when the first, legal tender act wa^ l-Vhruary 

.', the ch'n I' 1> 'Mention lielweeii the Senate and 

II<iiM> was the payment of tin- I "ii the bonds in 

ader notes were made a tender for "all 

as and demands . x ' cs of every 

THJ: I.KI.AI. TI MX i: ATS. 225 

kind whatsoever, except f <>i- interest /">K i>n<(.-< dud 

note*, which shall be paid in coin, and shall also In- lawful 
money and :i legal tender in payment of all debts, public 
and private, within the United States, except duties on 
imports and interest as aforesaid/' This language is per- 
fectly plain and explicit and leaves no room for doubt. 
When the bill was pending in the Senate, Mr. Collamer, of 
Vermont, offered an amendment depriving the greenback 
of its legal tender quality so far as the public debt was 
concerned, and, at the same time, said that if the bill did 
not mean that bonds were payable in greenbacks, it meant. 
nothing. His amendment was voted down. Senator Wilson, 
of Massachusetts, declared that greenbacks ought to be a legal 
tender for the payment of the public debt, and that if they 
were not lie would vote against the bill. The Hon. Thaddeus 
Stevens subsequently declared, that "when the bill was on 
its final passage, the question was cxpiv^ly asked of the 
chairman of the Committee on Ways and Means, and as 
expressly answered by him, that only the interest was pay- 
able in coin. If I knew," he added, "that any party in this 
country would g< for paying in coin that which is payable in 
money, thus enhancing it one-half; if I knew then- was such 
a platform, and such a determination on the part of any 
party, I would vote on the other side. I would vote for no 
such swindle upon the tax payers of this country; I would 
rote for no such speculation in favor of the large bondhold- 
ers the millionaires who took advantage of our folly in 
granting them coin payment of interest." 

The first mo\e made by the bullionists and bondholders 
was to educate public sentiment, through the press, in regard 
to the "sacrcdncss of the public, faith." The leading new- 
papers of the principal cities took up the song, and before a 
great while the gentlemen of the country prc<, who are 

L'_'t; I.Kti.M. TKXIK1I '. 

quick t> Irani which way the wind lilu\\>, were heard, 
together with the demagogues of both parties, joining in the 

chorus. In many (A' the Western States, whose peopk- arc 
not so completely en-laved by tlie money power as their 
brethren of the east, public opinion manifested a disposi- 
tion to demand tliat the five-twenty bonds should be paid 
agreeably to the terms of the acts providing for their issue 
in greenbacks. This was not confined to any particular 
party. Accordingly we find Senator Sherman, in a speech 
in the Senate, February -7, 1S08, uttering the following sen- 
timents. He said: u l say that equity and justice are amply 
v'ltistied if we redeem these bonds at the end of fi\ e year-. 
in the same kind of money, of the same intrinsic! value it 
bore at the time they were issued. Gentlemen may reason 
about the matter over and over again, and they cannot come 
to any other conclusion; at least, that has been my conclu- 
sion after the most careful deliberation. Senators are some- 
times in the habit, in order to defeat the argument of an 
antagonist, tO Say that this is repudiation. Why, sir, every 
citi/en of the I'nited States ha> conformed his business to 
the legal tender clan- Kvery State in the I'ni.m, 

without exception, has made its contract-, MM,-.- jhe legal 
J'-nder claii-e, in currency and paid them in currency." And 
itor Morton declared that, t% we should do foul injustice 
to the government and the people of the Tinted States, after 
we have sold these homN on an average for not more than 
-i\ly cents on the dollar, now to propose to make a new 
contract for the benelit of the bondholder." 

The Presidential campaign of |si;.s was impending, and 
it became neces>ary for the money power to report to extra- 
Miary efforts to obtain the direction of political affair-.. 
The JiotliM-hilds were in pO8fe881OH of several hundred 
of 5-20 bonds, purchased at about sixty cents on 

TIIK LEGAL F I.M.I i: A. TS. 227 

the dollar or lex>, :md were particularly interotc.i. Their 
agent, August Belmont, who had secured the position of 
chairman of the Democratic National Committee, was 
instructed by l>aron .lames Rothschild as early as March 13, 
1868, that unless the Democratic party went in for paying 
the . r >-'jo bonds in gold, it must be defeated. The fir>t step 
\vas to have the national convention held in New York City. 
It accordingly convened there on the 4th of July, 1808. 
IJelmont and his satellites were unable to control the con- 
\ention, at least in the matter of the platform. After a 
Monny session the platform was promulgated on the 7th of 
July, and contained the following plank: "Resolved, Third: 
When the obligations of the government do not expressly 
Mate upi.ii their face,' or the law under which they were 
issued does not provide that they shall be paid in coin, they 
ought in right i be paid in the lawful money of the United 
States." This resolution doomed the party to defeat. At 
this time Mr. Ilclmont owned a large interest in the New 
York H '"////, generally regarded as the leading Democratic 
newspaper in the country. About the first of October this 
interest is believed to have been transferred to Man ton 
Marble, editor and part proprietor of the paper. On the 
l."ith day of October, a few weeks before the general election, 
the ir<//-A/, to the consternation of the democracy through- 
out the country, came out in a leading editorial denouncing 
Horatio Seymour, the candidate of the party for the I'IVM- 
dcncy, as unfit and unavailable, and advising his withdrawal. 
This act of treachery has ne\er been equaled in the unnaK 
of politics; and, strange to say. the W<>r!<l, under the same 
corrupt influence, continues to occupy the position of a 
leading Democratic newspaper. The money power was 
more successful with the leaders of the Republican party. 
Through its aid (4rant was triumphantly elected. President 

228 TIM-: i.i-:; AI. 'i ) \i>i i: AITS. 

(ii-:mt wax duly inaugurated on tin? -it!) of March, 1869, 
and in pursuance of the programme marked out for him, 
thus alluded to'-the sacrcdness of the public faith'' in his 
inaugural message, lie said: "Let it be understood that no 
repudiator of one farthing of our public debt will be trusted 
in public place, aiwl it will go far toward strengthening a 
credit which ought to be the best in the world, and will 
ultimately enable us to replace the debt with bonds bearing 
less interest than we now pay." This was intended as a 
warning to all those who might desire to stand well with 
the administration. 

On the 12th of March a bill was introduced in the House 
by Mr. Schenck, of Ohio, entitled " An act to strengthen the 
public credit of the United States*" Indue tinw it pas^-d 
both branches of Congress, and was approved by the 1'rc-i- 
dent March IS, JHOO. It was the first act of Congress that 
received his official sanction. This act provides as follows: 

///; it enacted, etc.. That, in order to remove any doubt 
a^ to the purpose of the government to diseharge all its 
obligation-* to the public creditors, and to settle conflicting 
<|ii'stions and interpretations of the law, by virtue of which 
such obligations have Keen contracted, it is hereby pro\ ided 
and declared that, the faith of the I'nited States is solemnly 
pledged to the payment in coin, or its equivalent, of all tin; 
obligations of the 1'iiitcd States not bearing interest, known 
as Tinted States notes, and of all the interest bearing obli- 
gations, except in 0*061 where the law authorizing the issue 
of any such obligations has expressly provided that the sam- 
may be paid in lawful money, or in other currency than gold 
and Ml\er; but none of the said interest bearing obligations, 
not already due, shall be redeemed or paid before maturity, 
unlessatsuch tinn-sa* Tnited States note- shall be convertible 
> coin at the option of the holder, or unless at such time 

LOTS. 229 

bonds of the United States, bearing ;i lower rate of interest 
than the bonds t> lie redeemed, can be sold al par in coin. 
And the United States al><> solemn! v pledges its 1'aith to 
make provision at the earliest, practicable period for the 
redemption of the United States notes in coin." 

To show conclusively that the 5--JO six per cent, bonds of 
the 1 United States were not regarded either at home or 
abroad as payable in coin, Mr. Lawrence, of Ohio, called 
attention to the fact that, "on the 30th day of November, 
1867, (over two years after the war was over) iir five-twenty 
six percent, bonds sold in London at To;- cents, while New 
Brunswick and Cape of (iood Hope six per cents sold at 

i <)"> ; Russian five per cents at 86 :iud Brazilian live per cents 

at 75." 

Congress and the President had done everything in their 
power to make the 5-L'n's payable in gold, but the Roths- 
childs and the money power generally were apprehensive as 
to the future, inasmuch as the act of Congress of March 18, 
1869, was in violation of the terms of the contract under 
which the bonds had been issued, and might be repealed. 
No time was lost, therefore, in inducing the Secretary of the 
Treasury to pay off these bonds in gold. By means best 
known to themselves, .McCulloch had been induced to redeem 
about $150,000,000 of these bonds, during his administration 
of the Treasury, and the process t?as continued under llout- 

well and his successor^, until the 5- % JO bonds, issued under 
the original act of February 'J.~>, lsr-_', were all redeemed in 
gold or its equivalent.* This single act of robbery, for it is 
only one of the manv acts of robbery which have been 
perpetrated by the money power during the past few years 
under the guise of law, will foot up about as follows: 

'See public debt statement, p.-uro _ v :i. 


Amount of 5-20 six per cent, bonds $500,000,000 00 

Interest in gold at six JHT cent., compounded 

semi-annually, fur ten years 403,096,1 

Total 903,090,132 7 1 

Cost of $500,000,000 bonds at say sixty cents 

on the dollar 300,000,000 00 

Net profit in ten years, in gold $603,096,1::-' 71 


The next move of the money power was to have the public 
debt refunded, in order to place its payment in coin beyond 
all question. Accordingly an act entitled "An act to author- 
ize the refunding of the national debt," was passed and 
approved July 14, 1870. This act provided, u That the Sec- 
retary of the Treasury is hereby authori/ed to is-ue, in a -un: 
or sums not exceeding in the aggregate $200,000,000, coupon 
or registered bonds of the United States, in such forms a^ 
he may prescribe, and of denominations of fifty dollars, or 
some multiple of that sum, redeemable in coin of the 
present standard value, at the pleasure of the Tinted St , 
after ten years from the date of their issue, and hearing 
interest, payable semi-annually in such coin, at the rate of 
five per cent, per annum." $300,000,000 of like bonds, 
bearing four and a half per cent, interest, redeemable after 
fifteen years, and also a sum of bonds bearing f>r |'i' <^'' t - 
interest, redeemable after thirty year in all not t. exceed 
$1,000,000,000, were also authori/ed. The Secretary of the 
Treasury was authori/ed to sell the>c bonds at par for coin, 
and with the proceeds to redeem any of the bonds of the 
United States outstanding, known :t> live-twenty bonds, "or 
/" ///"// exchange the same / < j>>-< firenty bonds^ 

par for par." 

. IJy t lie act of January 20, 1*71, the act last n-cited was 

THE LK(iAL TEXDKR A 18, 231 

amended go a* to incrcaM- tin- amount of ti\e per eent. gold 
bonds authori/ed t.> be iwiied to *.~>nn,()00,000, and to make 
the interest ni tin- bonds payable, at the discretion of the 
Secretary, " 

Under these two acts gold IMUI.U to the amount of $465,- 
558,450 wore issued up to Novi-iulu-r, is;:,; and :i liill, 
of ;i like c-liaractc-r, introduced ly Sherman in the Senate, is 
now pending iu Con^rex, to coinpK'te the job. When it 
shall have pasvd ( 'oii^ r r-, the c-ntire jiuhlie deht, contracte.i 

in lawful money at a time when it was ^ivatly de|>ivciated 
as eomparud with i^old, will be transformed into a debt 
payable, principal and interest, in gold. 

The following table exhibits the amount and eharart 
the public debt, bearing interest, on the 30th day of Novem- 
ber, 1875. It will be observed that the ^reater part of the 
debt of the United States, incurred during the war, is now 
represented by bonds issued since the war: 

Loan of 1858, act of June 14, 1858, 5 per cent. $260,000 
Loan of February, 1861, (M*-) a. i of 1-Ybni'y 

8, 1861, per Vent. ..................... 18,415,000 

Oregon War Debt, act of March 2, '6 1, 6 per c. 945,000 
Loan of July and August, 1861, (81's) act of 

July 17, aiid Aug. 5, 1861, 6 per cent ...... 189,321,350 

Loan of 1863, (Si's), act of March 3, '63, 6 p. c. 75,000,000 

Ten-forties of 1864, act of .March :*, '64, 5 p. c. 194,566,300 
Five-twenties of June, 1804, act of June 30, 

1864, 6 per cent ........................ 46,891,100 

Five-twenties of 1865, a. -t of March 3, '65, 6 p. c. 152,534,250 

( ousels of 1865, act of March 3, 1865, 6 p. c. 202,663,100 

Consols of 1867, act ot March 3, 1865, 6 p. c. 310,622,750 

Consols of 1S6S, act of March 3, 1865, 6 p. c. :*7,474,000 
Funded Loan of 18SI, actfl of July 14, 1870, 

and January 20, I87l a ' per cent* ......... 465,558,450 

Total ........................ $1,694,251,300 

SPEriK i;i:>l MI'TIOX. 

It now only remains i'<r the money power to bring about 
sumption of specie payments and it will have accom- 
plished all its ends; and the American people will once 
again be completely under its domination. From the day 
that the old State banks suspended specie payments until the 
present, time, that object has never been lost sight of for a 
moment. No system of money lias ever been devised that 
confers such absolute control over the currency, and through 
it over the property and business affairs of a nation, upon the 
money power, as banks of issue; and hence the adoption of 
the National Banking scheme. But the greenback intern 
very materially with the workings of the system, and it is 
important that it should be got out of the way. There is 
also another great incentive to cause the money power to 
seek a return to specie payments. By a single stroke the 
bondholding and creditor class will be enriched to the 
amount of hundreds of millions of dollars. 

In January, 1875, the bullionists found themselves strong 
enough in Congress to pass a law decreeing spent- resump- 
tion .January 1, 1879. The composition of the House of 
UepreM-ntatives, at this time, is worthy of note, and should 
open the eyes of the people to the necessity of sending a, 
different class of men to represent them in that body. The 
Hon. Moses VY. Field, of .Michigan, in a recent speech Ljives 
a detailed statement of the professions and railings of the 
members of the 4:Jrd 1 louse, of which he was a member, 
a.s follow>: "Tin- forty-third Congress, t< which I belonged, 
was e.unpi.M'd of :;7! members. In this number there u 
-i\ lumbermen, thirteen manufacturers, seven doctors, foiir- 
i men-hunts, thirteen fanners, three millers, one land 
. one priest, one pn.fewnr of latin, one doctor of 

ft, One barber, iiiech;inic, ninety-nine lawyers, and one 

Tin-: i BO M i I:M'( i: \< i -. 

hundred and eight\ -nine bankers. \\hirh includes -mckhold- 
ers in National I>ank>." Almost ;l ,-lear majority of member^ 
were either hankers or interested in National lianks. The 
specie resumption act then passed restfl like an incubus upon 
the industrial interests ,f the country. Kver\ tiling, li\v-\ t-r. 
is working to tin 1 satisfaction of the luillionixix and the bond- 
holder-. As industry and production laiiL r uMi. property 
of all kindd depreciates in value, and when rt-xinnptioii takt-x 
place, the money power will he enahlcd to gather it in, to the 
amount of hundreds of millions more, on it- own tcrmv It 
seems hard indeed that the farmer, the mechanic, the manu- 
facturer, and the producing clasM-s LTenerally, who hear 
almost the entire hurden of taxation, should thn<- he oppressed 
by legislation, and millions of industrious people \n- dejin\ ed 
of the opportunity of even earning their bread, for no other 
purpose than to further enrich a single cla-s, whi<-h contril>- 
utes not one iota to the LTeneral wealth of the country. But 
the masses, as lonu: : s they sink the duties and privile;:v> p| 
freemen in a blind partisanship, and permit themselves to be 
manipulated bv demagogues through tlu- instrumentality of 
party machinery, can expect no better fate. The jueti"n 
of re-uinption is one of such vital importance that it is 
dexervin^ of more than a passing notice. It, will, therefore, 
receive more particular attention in a separate chapter, 
(Chapter VIII.) 


Ill 1SH1, whc-ii the 1-Vderal ( iovernment, unable t.. borrow 
money at home or abroad, uax obliged to ap]>eal to the 
masses, who wc-re l)0th able and willing to respond, the 
great question was : , s to how the reaonroefl f the people 
were to be rendered available to the _ r m crnnient. Taxation 
was impracticable in the begiiminir, because the iroverinnent 
did not possess the machinery for laying and collectinvr 

L'34 Tin: I.KU \i. TKNDKK A.< i B. 

Taxes, ami, moreover, there was not a sufficient amount of 
money in circulation at that time to enable the peopi. 
meet the extraordinary demands of the occasion. I'rud 1 
and labor the people possessed in abundance, but they could 
be rendered availably only through the instrumentality o 
medium of exchange. Besides it was necessary to establish 
new forms of production, requiring capital to a large amount 
in the form of money. The first requisite, therefore, 
manifestly :i medium of exchange. This t-mhl he supplied 
only by the Federal Government; for all power over tin- 
currency of the nation is vested in the Federal ( Tovcrnment 
by the Constitution. 

The Federal (rovernment wanted guns, ships, food, loth- 
ing, transportation, etc. The farmer could furnish fond; 
the manufacturer, guns, wagons, etc.; and the ship builder.* 
ships. Other classes did not possess such things as the 
government required, but they did possess property 
various; kinds and labor, which were wanted by the ship 
builder, the gun-maker and the farmer. The people collec- 
tively desired the gun-maker, the ship builder and tin- farmer 

to forniBh the Federal Government with such article- as ir 

required and they were able to supply, and were willing in 
turn to supply the gun-maker. The ship builder and the 
farmer with sii'-h property or labor as they might desire. to 
whatever amount they might be entitled, IJut how could 
this interchange he effected:' In no betler uay than by a 
medium of exchange representing the property of the nation. 
The people in their collective capacity, through the Li"Vern- 
Jnent, could issue public note-, repi-cM-nting the entire prop- 
erty of the nation, including gold, silver e\ erything in I 
word that could be reached by a tax warrant. The public. 
note, of the value of say one dollar, if paid by the u<^ -eminent 
to the gun-maker, would entitle him to receive one do]! 

UN: LEG \i. i IMT.I: \. i-. 235- 

worth of property, neither more nor less, iiut -nppose lh:it 

the people, after they had nade this anangOBQUt with the 

gun-maker, tin- farmer and the ship builder, in their collec- 
tive capacity, through the agency of tlie government, should 
refuse individually to rccei\e this paper dollar, representing 
the property of the nation on which it is a lien, what then:' 
This would clearly he acting in had faith with the gun- 
inaker, the fanner ami the ship builder, and would lie tanta- 
mount to the people repudiating individually what they hail 
done collectively. Hence it is nothing more than a matter 
of equity and fair dealing that the public note should be 
made a legal tender; in fact in no other way could the 
farmer, the gun-maker and the ship builder be reimbursed 
from the property of the rest of the people for the guns, 
food, etc., furnished to the government. A> N generally 
understood by lawyers, if not by political economists, the 
legal tender money of a country is the basix of all money 
contracts among its people and the measure of all value-: 
and necessarily conforms to the unit of value fixed in the 
minds of the people by usage and education. By making 
the public note a legal tender, it is clothed with all the 
functions of money. It possesses value (the value of the 
property which it represents), and by virtue of its legal 
tender quality the power to measure and exchange value. 
A public note, based on sound principles, it will be observed, 
therefore, is capable of pel-forming a two-fold ser\ ice. 
In the first place it enables the government which i>-iir- it 
to draw upon the resources of the people in advance 
taxation. The government pays it out for property or 
services, and receives it again for taxes. In the second 
place, whilst in circulation, it performs all the functions of 
money, and in the end furnishes the mean- for the tax payer 
,to meet his obligations to the government. The amount of 


greenbacks now in circulation is over $360,000,000. The 
annual revenues of the government amount to about $300,- 
000,000. It is apparent, therefore, that the greenback circu- 
lation could all be redeemed in the revenues of the govern- 
ment in a little over a year. From this it is evident that the 
clamor of the bullionists for the redemption of greenbacks 
in gold, or the funding of them in bonds payable in gold, is 
only for the purpose of enabling them to swindle the gov- 
ernment and people to the extent of the premium which tke 
government would be obliged to pay to obtain gold for that 

It is clear, then, that the iirst step for the government to 
take at the breaking <-ut. of the rebellion, to enable it r> draw 
upon the resources of the people, was to issue a legal tender 
public, or Treasury note, lint no more money can be u-ed 
by a people than is required by the legitimate operations of 
trade. Professor Bonamy Price, whom we are glad to find 
right occasionally, illustrates the point in this way: u Carts 
and money are both tools instruments of conveyanre, 
endowed with the same nature and subject to the same 
general laws. The question for each is the sanu how 
many are wanted for the work which they were invented 
to do. In the ea>e of money, how much gold (or legal tender 
paper money) can a nation use? How much can it find 
employment for? The answer, as with earts, must be sought 
from the special work money has to perform that is, from 
fchc amount of exchanging which calls for the agency of this 
tool, the quantity of property of which the ownership has to 
b,- transferred l>y this instrument. A cart tran-fcr- \\ciglit; 
money, owner-hip; and all tin- world knows that the cartage 
t" be done determines the number of cart-. In the same 
way. tin- ownership of property which requires to be trans- 
ferred by the actual employment of money iNclf, determines 

THE J.t '.Al. 'I KM.KK Ar'is. 237 

bow much money theiv .u-lit t<> ! in :i nation. No other 
answer is possible, unless it is denied that, money is only a 
tool; if BO, another explanation of the nature of money must 
be produced." For the government to issue legal tender 
notes in return for property to an indefinite amount after the 
channels of circulation had been supplied, would be contrary 
to all sound principles of finance, as well as political economy. 
The next step for the government to have pui>m<l was to 
draw upon the resources of the people by taxation. But as 
it was manifest at the time that the extraordinary expenses 
of the war could not be wholly defrayed by taxation in other 
words, that the government could not, under the circum- 
stances, act upon the principle "pay as you go" without 
causing oppression and interfering materially with the 
producing ability of the nation, the third and last step was 
to issue a bond bearing interest, in order that the govern- 
mernt might avail itself of the surplus capital of individuals. 
No more perfect system of money or finance than this has 
ever been devised. It is, moreover, simple and easily under- 
stood by the people. This system was embodied in the 
original legal tender act, as framed by the Hon. E. G. Spaul- 
ding, an able financier and statesman. It was ardently 
supported by the Hon. Thaddeus Stevens, who had thor- 
oughly acquainted himself with all the systems of money and 
finance of ancient and modern times, with all his powerful 
ability. It met with the hearty endorsement of the Boards 
of Trade and Chambers of Commerce of all the principal 
cities of the North and AVest. Its adoption by the House 
of Representatives was hailed with marks of approbation 
and satisfaction by the intelligent classes every where through- 
out the country. That it would have worked admirably in 
practice is abundantly demonstrated by the performances of 
the greenback in the most trying period of the nation's his- 

238 THE I.K<;AI, TKMH-:I: A- C8, 

tory, and by tin- manner in which the people took the loan 
of $500,000,000 of five-twenty bonds. 

But through the machinations of the money power, and 
the weakness and venality of the United States Senate, a full 
legal tender money system was rejected, and in its stead ua> 
.adopted a policy, which would have bankrupted, in a short 
time, any nation not possessing the boundless resource- 
the United States. 

During the war every act and measure relating to finances 
was calculated to depreciate the public credit; but as soon 
.as the war was over an entire change of policy ensued, cal- 
culated to render the burdens of the people doubly oppress! \ e. 
That this may be seen at a glance, we give below a recapitu- 
lation of the leading incidents and measures which marked 
the two periods during and after the war, as follow- : 


1. The banks of New York, Boston and Philadelphia pro- 
cured the suspension of the Sub-Treasury act, Aug. ~>. I ^; i . 

2. The banks of Xew York, Boston and Philadelphia com- 
bined to prevent lh<' passage of the legal tender act, and 
sent delegates i Washington City for that purposr. .Jan- 
uary, 1862. 

3. The representatives <>f the banks of \cw York, IJnsti.n 
and Philadelphia effected an arrangement with the S 
tary of the Treasury and leading members of the Senate 
to oppose a full legal tender bill, and to urge the p.-. 

of a National Banking 1 "'. 

4. The legal tender act parsed in a mutilated form int- 

on bonds and duties on import^ made payable in g.ld, 
February 25, 1862. 

&. Paper emissions authnri/ed by CoDgrett and i-- lied by 
the Secretary of the Treasury, to an enormous amount, 
in fifteen different forms. 

Tin: i EG vi. i i \ i: i: \ Rg, 239 

. The $500,000,000 of 5-20 six per cent. bonds held l.\ 
tin- Secretary of tin- Treasury for over :i year, until the 
country uas flooded \\ith paper cmU-ions of all kind-, 
and then jmt out as a popular loan at par amount the 
pe-.plc, to be bought iii by the hullionixt* at lit'ty cents or 
less on the dollar. 

7. Legal tender Treasury notes (greenbacks) further mutila- 
ted (March 3, 1863) by repealing the clause in the original 
act which made them interchangeable with ">-20 bonds. 

8. Immense sums of Treasury notes, bearing interest, pa\a 
ble in one, two and three years, issued, when it was well 
known that the Treasury Department was unable to make 
any provision for their payment at maturity. 

0. A bill passed (I-YbYy 4 2f>, 1S03,) authorizing the establish- 
ment. of National J>anks, which could render no aid t.. 
the government, and whose currency tended to swell the 
volume of paper in circulation. 

10. The $500,000,000 loan of si\ per cent, bonds no sooner 
taken than the Secretary attempted j,, put out a new loan 
bearing only live per cent, interest. 

11. Tht; failure to float the live per cent, bonds made an 
excuse for emitting additional sums of Treasury notes, 
bearing interest, and other forms of paper suitable for 
a circulating medium. 

12. The emission at the close of the war of immense sums 
of 7-30 Treasury notes, payable in three \ cars, and con- 
vertible at the option of the holder into long bonds bear- 
ing gold interest. 

BE< <>M> I'KKIOD -AFTKi: TIM-: V, \l:. 

1. "All bonds, Treasury not - and other obligations of the 
government shall be exempt from taxation by or under 
State or municipal authority." (Act of June 30, 1864. 

240 Till: I.K..AL TKNDKK A- 1 <. 

Although parsed before tin- termination of the war, this 
act belongs to tliis period. Like the* National Banking 
law, it simply anticipated events.) 

2. McCulloch issued his Fort Wayne decree, announcing 
his determination to contract the currency. 

3. McCulloch submitted his annual report, December, 1865, 
in which he recommended contraction. 

4. Congress passed a resolution, December 18, 1865, con- 
curring in the views of the Secretary of the Treasury 
in relation to the necessity of contracting the currency. 

5. Congress passed an act, April 12, 1866, authorizing a 
contraction of the currency. 

0. McCulloch began to pay off the .5-20 bonds in gold or its 

7. .McCulloch substituted long bon. Is hearing gold interest for 
Treasury note.-, etc., to the amount, of about $1,200,000,000, 
which operated as :i contraction of the medium of 
exchange of the country to that amount, occasioning grc.-n 
financial derangement. Also retire-. 1 over $70,000,000 of 
ureeiib.-icks between August, 1 s<;f>, ;,nd July, 1868. 

s. COII-JTC , compelled by public, sentiment, repealed (Jan- 
uary, l-'J-j so much of the act of April 12, ISO*',, M 
provided for the retirement of greenbacks, but took no 
note of the contraction in other forms of the currency. 

!). The people of both political parties began to protest 
against the payment of the 5-20 bonds in gold, as a viola- 
tion of the spirit and letter of the act under which they 
\v-rc i>xued. 

10. The money power selected a President of the I'nited 

tea i L86 

11. The I'rexident of the Cnite.l State*., in his inaugural 
message, March t, l^'i'., notilied the public that he would 

-.i-d all who did not fax or the payment of 5-20 bonds 

Tin: I.K;AI. TKNDI.I: li 241 

in gold as repndiators, who need expert no f':ivi>rs from 
his administration. 

12. Congress passed a credit strengthening , l( r, March l\ 
1869, the first act which received President ( Want's official 

13. The original loan of 5-L'o bonds paid <>tY in full in gold 
or its equivalent. 

14. Congrexx passed a law, July 14, 187", authorizing the 
Secretary of the Treasury to refund x500,OOU,Ono of the 
public del)t in bonds payable, principal and interest, in gold. 

15. McCulloch's contraction policy bore its legitimate fruits, 
and the country was visited by an old fashioned ...mmer- 
cial crash and money panic, September, 1873, 

10. The people demanded relief, and Coiigro*, at it* ne\t 
session, passed a bill authorizing the reissue of the -_ r i n 
backs which had been retired (44,000,000), and fixing the 
amount of the greenback circulation at $400,000,000. 
This bill was denounced by the money power a* an 

"inflation" measure, and accordingly was vetoed by IVe-.- 
ident (Jrant, April 'Jii, 1874. 

17. The people rebuked the action of the I'rexidcnt by 
electing, at the ne\l general election, in the fall of 

a Democratic. IIou<e of lJ-|re>entati\ *-. 

18. At its next session, Congress (the old Congre), under 
the pretense of affording relief to the oppived industries 
of the country, made National Uanking free to bond- 
holders, by act of January 1 I, 1*7 ">. 

19. And at the same time decree. I -peeie resumption, to 
take place January 1, ls70. 

20. An act to complete the refunding of the public debt in 
gold bonds is now pending before ( 'oii^re**. 

21. Bonds of the Tinted State-, which during the \\ar were 

bought and sold at a* low a* thirtv-ti\ e cent* on the dollar 

"242 THK I.Kii.YL TKXDKit ACTS. 

in gold, now sell for over Si. 18, or at a premium of over 

live- per cent, in gold. 

In 1865, when the Rebellion terminated, the producing 
forces of the Northern and Western States, the workingincn, 
the land, the machinery, the mines, the water power, etc., 
were developing wealth in every possible direction, and the 
people, individually free from debt, were in the enjoyment 
of unparalleled prosperity. The wealth of the nation, in 
spite of the ravages of war, had increased a* it had never 
done before. The assessed valuation of the property of the 
nation in 1870, notwithstanding the ruined condition of the 
South, was over $30,000,000,000, as against * 16,000,000,000 
in 1860. Out of the abundance of their productions the 
people were enabled to meet all the demands <>l' tin- govern- 
ment with ease. The Federal Government, indeed, began 
to pay off the public debt rapidly. But in carrying out the 
policy of the money power, it first paid off, by substituting 
bonds, all those forms of indebtedness of the government 
which served the purposes of money, thus depriving the 
producing forces of the nation of their most important tool. 

At this time the South, with all her magnificent resources, 
lia< I been restored to the Union. Money was m < -esaary to 
set the producing forces of that section at work. Instead of 
wisely taking this fact into consideration, and making some 
provision that would enable the people of that section to 
ivenve r from the disasters of the war, and contribute their 
share towards bearing the burdens of governmental! entirely 
opposite policy was purMicd. The production of cotton, 
the chief Maple of the South, in 1870 amounted to only 
3,011,990 bales, or a little over 50 per cent, of the amount 
raised in 1860. 

Now tin- American people are poor and in debt. Nearly 
all forms of productive industry are paralyzed, and the 

TIIK i.i... \i. 'i i:\i-i.i: A rs. i>43 

channels of trade are stagnant or sluggish. Real estate is 
rapidly depreciating in value, which \\\\\ inevitably 
in a general foreclosure of mortgages and transfer of 
erty from the debtor to the creditor class throughout the 
country. Instead of a million of non-producers carrying 
muskets, as was the case during the war, there are now 
several millions of people, who would gladly work for a 
mere subsistence, in a state of enforced idleness, living on 
the bitter bread of public or private charity. In a country 
possessing boundless natural wealth, tramps and paupers 
have become common. The nation is scarcely producing 
more now than the necessities of life. And yet the j 
are told that the present condition of affairs is due to over 
production and like causes. The only over production 
troubling the nation just now is an over production of fools 
and rascals rascals who teach such nonsense, to divert 
the public mind from the true source of the trouble, and 
fools who believe it. Since the attempt to re-establish a 
false monetary system by means of contraction has worked 
such wide spread ruin, it would seem to be but the part of 
common wisdom, on the part of the people, to demand a 
different policy, if not from conviction, at least as an experi- 
ment It certainly could not make matters worse. 



SECRETARY ('MASK, soon after lie entered upon the dis- 
charge of the duties of Secretary of the Treasury, became 
enlisted in a scheme to destroy the old State banks an<l rivet 
in their stead a system of National Banks whose circulation 
would be uniform throughout the country. In his first report 
to Congress, in December, 1861, he recommended the pas- 
sage of a law to accomplish this end. A bill was immedi- 
ately prepared by the Hon. E. <J. Spaulding, chairman of 
the Sub-Committee of Ways and Means, but it became 
manifest that the machinery of such a system could not be 
put. into operation in time to meet the demands upon the 
government, and Congress was obliged to pass a law author- 
izing the Seeretary of tho Treasury to issue Treasury notes 

The admirable manner in which the greenback per- 
formed the 1 uses of a medium of exchange aud its great 
popularity rendered it tolerably certain that the people 
would never willingly abandon it to return to the u-e of 
State bank currency. The money power Mas <juick to 
perceive this, and also that in no other way than through 
the instrumentality of such a scheme as that proposed by 
Secretary Chase and his advisers could it hope to again 
obtain its former control over the currency of the country. 
The National Hanking scheme, therefore, which at first, 
excited .-onie opposition on the part of the old State banks, 
MM, n came to be regarded by the majority of them as of the 

IHK \\llo\\l. i:\NKIN-. BYHTiCIf, 245 

highest importance. In December, L86S ,ry Chase, 

in his second annual report, again urged tin- pa-*age of a 
National Hanking law, for the purpose .,t e-taMihing "one 
sound, uniform circulation of equal value throughout tin* 
country, upon the foundation of national credit, combined 
with private capital." There was no expectation <.; 
pretense that the system could aid the government in any 
way in the war then pending. 

On the 2d of February, 1803, Senator Sherman n ; 
a National Currency Bank bill from the Finance Committee 
to the Senate. It was taken up in the Senate on the Oth, 
and passed on the 12th by a vote of 22 to 21. On the 1.1th 
it was sent to the House, but was not referred to the Com- 
mittee on Ways and Means. On the 19th it was taken up 
for consideration in the House, and was passed on the 20th 
by a vote of 78 to 64. It was approved by the Piv>i -lent 
and became a law February 25, 1863. 

The brief time given to the consideration of this important 
act, establishing a consolidation in the interest of the money 
power, compared with which the monster that .Jackson slew 
(the United States Hank) was a mere pigmy, cannot escape 
notice. The people were absorbed in the war, and the 
money power had full sway in Congress. The lion. W. P. 
Noble, one of the few members who protested against the 
passage of the act, alluded to this fact in the opening of hi* 
speech against the bill in these terms: "Mr. Speaker, it is 
not because I expect, by anything I ran say, to change a 
single vote upon this bill, that I now claim the attention of 
the House. On the contrary I am (satisfied, from the 
and untiring efforts that are being made by the Secretary of 
the Treasury in its favor, that the passage of this bill is a 
foregone conclusion; not because it, or anything like it, is 


demanded by the people, but simply because it is a pet 
measure of the present head of that department." 


The National Banking law provides: First: That any 
number of persons not less than five may form an association 
for carrying on the business of banking. 

Second: That any such association shall have corporate 
power, to have succession for the period of twenty years, to 
make contracts, to sue and be sued, etc. 

Third: The capital of such associations shall be not less 
than 850,000 in places whose population does not exceed 
six thousand; not less than $100,000 in places whose popu- 
lation exceeds six thousand; and not less than $200,000 in 
places whose population exceeds fifty thousand. 

Fourth:* The aggregate amount of circulation is fixed at 
$354,000,000, to be apportioned as follows: $150,000,000 
among the several States and territories according to repre- 
sentative population; $150,000,000 to be distributed by the 
Secretary of the Treasury according to his discretion; and 
the remaining $54,000,000f to such States and territories, 
having less than their share, as may make application prior 
to July 12, 1871. 

Fifth: No association is authorized to commence business 
until it shall have deposited United States bonds to the 
amount of 30,000 with the Treasurer of' the United State>. 

Sixth: Kvery such association is entitled to receive from 

the Comptroller of the Currency circulating notes to the 

amount of ninety per cent, of the capital stock, if it does not 

d *500,000; eighty per cent, if it exceeds $500,000, 

but do-s n.t rxoeed 1,000,000; seventy-five per cent, if it 

00,000, but does not c\cced $3,000,000; and 

per n nt. it' it exceeds $3,000,000. 

Mv Mir :i'-t II. 1ST.'.. Hli^ M-rtioi) \v;i< rrj.rnlrd. 

t*54,000,000 additional bank note* werp authorized by the act of July. 1870. 

Tin: \\IION\I. u \SKIN.. BTBTm. 247 

No National Hank currency was i^ued until about tin* 
beginning of IW4. It will he remembered that the #.V 
000,000 of 5-LM) bonds were not sold until tin- latter part of 
ist;:t; consequently matters were not yet ripe for the 1ml- 
lionists anl hankers. In 1SG4, ho\s-\er, their plans W( 
sufficiently matured to enahle them t<> run gold up to an 
enormous pivmium, in what .Mr. Ke^rii-leii, A\ ho was thru 
Secretary of the Treasury, considered a very v -nnpan-i" 
manner. For more than :i yi-ar -<'M lluctuate.l Lrtween 
ahout 1.50 and 2.50, at-ronlin^ to the suerrx which attended 
the efforts of the gold operators in controlliiiLC the market. 
.Bonds of the government were bought during this period at 
as low a price as thirty-five cents on the dollar in Lfold. 
This gave the bullionists and bankers an excellent opportu- 
nity to lay in, at low tiiritro, all the bonds that wen- needed 
to establish National Hanks. 

The amount of National Hank notes in circulation on 
January 1, 1804, was $280,000; on July 1, l*t)4, it \\a- 
$31,234,420; and on July 1, 1805, it wa- x| ;.::: > .r s 030. 
Shortly after this the whole amount authori/.ed by law 
was taken, and National JJank stock beiran to command a 
premium. Thus was the National Hanking sy>ten, 
upon the country at a time when it \\.i- neither ncedrd nor 
desired, solely for the purpose of enabling the money po\\rr 
to again usurp the right of supplying the na'iou with a 
medium of exchange. It only remains now to retire the 
greenback and resume .specie payments, and the money 
power of the Tinted States will be clothed with a more 
absolute control o\er the monetary alTair> of the country 
than it ever had before. 

OP TIIIC OK<,.\M/ATIO.\ or \MI"N\!. I'.ANKS. 

National Hanks are established on the theory of combining 
private capital with public credit. It will be found on 


examination, however, that this is purely a delusion. Private 
capital is not an essential element in the establishment of a 
National Bank; private credit will do as well. This may be 
illustrated in various ways. Suppose A. owns #100,000 in 
<> per cent Tinted States bonds. B., C'., I)., E. and K, five 
persons, jointly 1>orrow these bonds from A., agreeing to 
pay liim the interest regularly as it malure>, and return the 
>ame or like bonds at some specified time, say in five or ten 
years. \\.. ('.. I)., K. and I\ organize a National Bank, 
deposit the bonds with the Treasurer of the 1'nited States, 
and obtain 90,000 of National Bank currency from the 
Comptroller. So far as the bank or its currency is con- 
cerned, there is no element of private capital involved in 
the- matter. Its corporators or Stockholders have not paid in 
a dollar for the capital stock of the concern. A.'s bonds are 
not capital, because the people have already borrowed A.'> 
capital and are paying him six per cent, interest in gold for it 
('poll what capital then is the bank established? Upon no 
<thcr capital clearly than the public credit represented by 
the $90,000 of bank currency lent to B., C., D., K. and I-'., 
without interest, on the strength of what the government 
owes A. 

Tin-re are of course innumerable ways in which individu- 
als can utili/e their capital or credit in the establishment of 
National Hanks. The lion. S. S. Marshall, of Illinois, in :i 

sp.-rch on the iloor of Congress, .July 21, 1868, mentioned 

the following instance: "An association of gentlemen (in an 
Ka-t.-ni State) raised $300,000 in currency. They went to 
the office of the Uegistcr of the Treasury and exchan 
their currency for $300,000 in SIX. per cent, gold bearing 
bomK They then went to the otlice of the Comptroller of 
the Currency, in the same building, organi/.ed a National 


Hank, deposited their $:iOO,000 in bonds ami received for 
their hank #270,000 in national currency. They had let 
(he government have $30,000 in cunvney IIK.IC than they 
received fur hanking purposes, and hal on deposit *:{no,000, 
4111 which they reeei\ ed as interest from tlie government 
$ 18,000 :i year in gold (ami exempt from taxation.) Thi> 
wa- pretty good financiering for these bankers to receive 
1518,000 a year in gold on the $:JO,000 in eurrcney wliich they 
had thus loaned to the- roverniiient. J>tit this is not the whole 
story. Tliey had their hank made a puhlic ih-positury. 
Tlu-y so<n discovered that then- \va* x-an-i-ly ever le-s than 
^51,000,000 of irovernment money deposited within their 
vaults. They did not like to see thix V a*i *um lie idle. 
They, then-fore, took X!,(KMI.(MM of this u,.\ ernment mom-y 
and bought $1,000,000 of live-twenty homU with it. In 
other words they loaned * 1,000,000 of the u'o\ enuneiifs ,,\vn 
money to the government, and deposited the ImmU rei-ei\e.| 
in the vaults of their bank, on which they received from the 
same rovernment $00,000 :i year in ;ohl as interest. Thu> 
for the $30,000 in currency, which they oriirinallv loaned the 
irovernment, they received annually in all $78,000 in Lrold." 
15ut this was by no means the limit to the le<_rali/ed rohberv 
which these gentlemen were capable of perpetrating nmh-r 
the National Hanking law. Since they had no seruple^ about 
investing the- government deposit of $1,000, (inn in ">-.'( bonds 
and appropriating the interest to their own UM-, it iv not at 
all likely that they would stop there, when, hv simplv dep.>- 
iting the $1,000,000 in 5-20 bonds with the Comptroller of 
the Currency, instead of in their bank vaults, they could 
draw eighty per cent, more currency, or by starting two 
new banks of $500,000 each, they could draw ninety pel- 
cent, more currency, to substitute for that amount of the 
original deposit of the government iiM-d by them. 


The following table exhibits the number, nominal capital, 
etc., of the- National Hanks in existence September 1, 
together with the amount of their earnings, from March, 

. to September, is;:t: 

Ho. Banks. Capital. Surplus. Hot Earnings. 

New England States, -196 $157,014,832 $38,303,887 $10,103,7: n*. 

Mi.I.ll..- States, .'.'1 192,234,009 53,431,089 12,565,331 

Southern State?, Irtl 33,259,530 3,600,607 .t>>,024 

Western States, 707 10V>92,5SO 22,778,26-> 8,206,900 

Total*, 11)53 8488,100,951 $118,113,848 188422,000 

At this time, September, 1873, the National Bank circula- 
tion was as follows: 

Amount nf 'in-u1atioi 

Circulation. j>er r:ipit:i. 

New Knirland States $110,489,996 

Middh- States 124,008,139 12.82 

Southern States 38,160,308 'J.!H 

Western States 78,785,148 

Pacific Slate> and Territories 1,924,688 L.82 

Total for States ami Territories.. .$353,968,279 459. is 

The protit.s of tlie National Banks, according to their own 
rcpoi-T M>rth in the foregoing tables, are enormous. 

This will appear from the following: 

Nominal capital of National Hanks in 1873.. .$488,1! 
IJank note circulation furnished by the govern- 
ment, without interest :r> 

i: -a! capital *134.1::-J. 

Surplus earnings 1 Is. I I 3,fi 1 - 

Total real capilal and Mirplus earnings x-J.~--.VJ t; 

Net rarning.s from March \ lt September, Is73, (si\ mouths) 

-J,'xio. Tin* net carniiiLT- -on<e(|Uently amounted to 

25J per cent., .,r :>\ per 06ttt a year on the real capital 

: or l:{ per cent., or JU per cent, a year on the 

ij.ital and Mirplus earning adled to'_r r ther ($252,246,- 

C en..rmous proiits oj.erate ai a tax on the me<lium 


of exchange of the nation, :in<l enter into the price of :ill 
commodities. They also enable the bunks to control the 
circulating nicdiuin of the country, ami explain \vliy it is 
that periodically money leaves the channels of trade and 
becomes concentrated in the vaults of the banks. 


The enormous contraction of the circulating medium of 
exchange and evidences of indebtedness of the government, 
which were used as such, inaugurated and carried on by 
McCulloch, together with the operations of the National 
Banking system, began to affect the industries of the coun- 
try injuriously as early as 1807. Mr. Spanieling estimated 
the amount of paper issues which served the purposes of 
currency, on the 30th of January, 1804, at $1,125,877,0:54', 
and to this amount is to be added several hundred millions 
of 7-30 Treasury notes issued in 1804 and 1805. The greater 
part, of this vast sum was called in by the government prior 
to 1808, and its place supplied in part by bank note currency 
and bank credit. Business could no longer be done for 
cash, as was the case when the channels of trade were fully 
supplied with a medium of exchange, and business men were 
compelled, by reason of the growing scarcity of money, to 
resort, as in days before the 1 war, to the banks and borrow 
bank credit. During the year 1SGO the banks increased 
their loans (inflated their credit) $107,000,000. As contrac- 
tion went on, bank loans increased, and it was only a question 
<>f time as to when the bubble of inflated bank credit would 

That McCulloch and the bankers generally anticipated 
financial distress amongst the people, and probably a com- 
mercial crash and money panic, is dear from the conv<- 
pondence between Mr. Spauldin<_c and Secretary McCulloch, 

See pajje 20. 


in December, 1800, from which we take the following 
extracts: Mr. Spaulding, in a letter dated at his banking 
house in JiufTalo, December 4, 1860, to McCuUoeh, says: 
' Vu have no doubt no\v, to a large extent, control of the 
finances of the country (by virtue of the contraction act of 
April 12, 1866), and I think that you will, of iieees.Mt \ 
tract moderately, so as to preserve a tolerably easy money 
market, in order to be able to fund the compound G's and 
7-30's into long gold bearing bonds between this and the 
15th of July, 1868. There may be occasional spasms and 
tightness for money with the speculators, but generally I 
shall look for plenty of money for legitimate business /,,/ 
at least a year to come? To this McCulloch replied, 
December 7, 1866: "What we need is an increase of labor. 
If we could have the productive industry of the country in 
full exercise, we could return to specie payments without 
any very large curtailment of United State** notes. My 
object has been to keep the market steady, and to work 
back to specie payments without a financial collapse" 
Whilst thus prating about "having the productive industry 
of the country in full exercise/' McCulloch was straining 
his authority as Secretary of the Treasury to deprive the 
productive industry of the country of its most essential tool, 
a medium of exchange, and give to the banks the entire 
control of its monetary affairs. That a financial collap-c <T 
commercial crash did not immediately follow the Midden and 
complete retirement of the various forms of indebtedness of 
vernment n-ed as :i currency, was due, lii^t, to the pro- 
ductive strength of the country which had been enormously 
developed during and after the war, by reason of the abun- 
danci-of money in circulation; second, to the large increase 
of bank note circulation, and the great inflation of bank 
credit which followed; and, third, to the large volume of 

TIN: \MI.\AI, itA\Ki\<; SYSTEM, 253 

greenback money in the hunds of the people, which, not 
being burdened with interest, was as yet beyond the control 
of the hanks. 

In isw; the best 00 day paper ruled in New York City at. 
5 to 7 per cent. In .January, 1807, the same paper rated at 
K to 10 per cent., and during the following summer a great 
many failures occurred. The effects of McCulIoclfs policy 
of contraction began to he seriously felt throughout the 
country. In obedience to public sentiment, Congress was 
compelled, in January, istjs, to suspend the law authorizing 
the retirement of the legal tender notes (greenbacks.) The 
amount of greenbacks outstanding at this time was $356,- 
000,000. Congress, however, took no action in reference to 
the enormous contraction of paper emissions in other forms. 
The amount of paper emissions of the government which 
were actively employed as a tool of industry in the produc- 
tion and distribution of wealth in 1865 and 1806 was about 
* 1,800,000,000. When McCulloch, under the flimsy pre- 
tense of bringing the country back to "honest money," set 
out to retire this va^t volume of currency, what provision 
had been, made by the government to supply its place? 
JVoite whatever^ except the establishment of National 
/>V///,-.v, authorised to issue bank currency to the amount of 
$300,000,000. The practical effect of McCulloch's policy, 
t he re lore, was >imply to deprive the nation of any other 
circulating medium than bank currency. In view of these 
circumstances it is impossible to arrive at any other conclu- 
sion than that MeCulloch had deliberately conspired with 
the money power to enrich the bondholders and to give the 
National IJanks control of tlie monetary affairs of the nation. 
The history of the world furnishes no parallel to this gigan- 
tic scheme, having for its object the robbery of a nation 
under cover of law, so successfully carried out by McCulloch 
and his associates. 


The policy of contraction and the National Hanking sys- 
tem together soon wrought a complete revolution in the 
business affairs of the country. In 1865-66 the producing 
- of the nation were in active operation, producing 
wealth as it had never been produced before. "The Amen 
can people waked up each new morning to feel that there 
irreat duties before them.'' Labor was fully employed 
at the very time that McCulloch was hypocritically prating 
about "the need of an increase of labor"* and the necessity 
of having "the productive industry of the country in full 
exercise." Business was everywhere done cheaply, because 
it was done for cash, and, as McCulloch himself lias since 
admitted, the people, " individually, wero free from debt.'' 
The enormous productive strength of the country was in 
full, and the immense burden of taxation imposed 
by the war was scarcely felt. Indeed, the revenues of the 
government were so large during this period that the public 
debt was extinguished to the amount of about $500,000,000. 

\Ye now turn to what followed. All evidences of indebt- 
edness of the government used as a currency, except the 
greenback, had been retired paid off or converted into 
long bonds bearing gold interest. The National Hanking 
ii was in the full tide of successful operation. By 
the act of July, 1870, an additional i>Mie of bank notes, 
to the amount of $54,000,000, was authori/ed, making in all 
$354,000,000. The entire issue authori/ed by law A 
active employment, and bank stock commanded a high 
premium. The circulating medium of the country in 1869 
consisted of lawful money and hank currency as follows: 

I.eL'al tender note! $356,000,000 

National Bank Currency 300,000,000 

Kractional Currency about 

To this add amount of National Bank currency 

authorized by act of July, 1870 '. 54,000,000 


mi: s \ noN \i. I;ANKIN; BTWWBt 255 

The National Hanks of the principal cities were required 
by law to keep on hand in lawful money of the I'liiled 
States an amount equal to at least twenty-five per cent, 
of the aggregate amount of their notes in circulation and 
their deposits; and other associations fifteen per cent. As 
bank deposits and loans increased, requiring a proportionate 
increase of tin- reserve of lawful money, it is manifest that 
a further contraction of the circulating medium followed. 
The following table exhibits the inflation of bank credit that 
took place from 1866 to 1873: 


Jan. 1, 1866 $213, 00,000 $513,600,000 $498^00,000 

" 1867 291,000,000 555,100.000 608,400,000 

" 1868 294,300,000 531,800,000 616,600,000 

July 1, 1868 294 900,000 575,800,000 655,700,000 

Jan. 1 1869 294.400.00U 568,500,000 644,900,000 

1869 292,700,000 574,300,000 686,300,000 

1870 292,800,000 546,200,000 688,800,000 

1870 291,100,000 542,100,000 719,300,000 

1871 302,200,000 561,900,000 768,300,000 

July 1 






1871 307,700,000 602,100,000 789,400,000 

1872 333,400,000 625,700,000 872,500,000 

Sep. 12, 1873 339,000,000 622,600,000 940,200,009 

Instead of $1,800,000,000 of paper currency, a large por- 
tion of which bore interest in the hands of the holders, 
filling the channels of trade', the business of the country was 
now carried on with bank currency and bank credit (about 
$1,000,000,000), involving the payment of an enormous 
tribute to the National Hanks for its use. The business of 
the country was no longer done for cash. Money became 
scarce and commanded a high price, and the price of prop- 
erty fell in a corresponding ratio. New business enterprises 
were no longer thought of. Those already established, yield- 
ing small profits and requiring ready money for their suc- 
cessful operation, were obliged to succumb. The ability of 
the nation to produce wealth was enormously diminished. 
Taxes, which before were scarcely felt, now became a great 


burden. Merchants and manufacturers who were obliged 
to pay interest lor money and bank credit added the amount 
to the cost of their goods. The retail dealer was obliged to 
do the same, and the cost of bank currency and bank credit, times multiplied, had to be paid in the end by the 
consumer, whose ability to pay had, for the same reasons, 
been greatly diminished. Such is the natural course of 
affairs under a system of currency furnished and controlled 
by banks of issue. The same system had been tried for 
over sixty years prior to the war and had proved utterly 
unsound. It had inflicted upon the country a commercial 
crash on an average every six years. And the marvelous 
thing is, that notwithstanding all their bitter experience, the 
people of the United States should suffer such a system ta 
be re-established in a more powerful and dangerous form 
than ever. During this period the industries of the country 
were sustained and buoyed up in a manner that is worthy 
of special mention. Congress had granted a large number 
of subsidies in the shape of lands to aid in the construction 
of railroads. Uonds secured by mortgages on the lands 
granted by Congress had been negotiated, mostly abroad, 
to the amount of many hundreds of millions of dollar-. 
The funds thus acquired contributed largely to the support 
of many industries, which otherwise would have been 
obliged to succumb to McCuIlorh's policy. Among other 
corporations thus suhsidi/ed was the Northern I'acitic. Kail- 
'1 Company, owned and controlled by the banking house 
of.IayCooke and Company. Ft was confidently expected 
by .lay <'Hkeand Company that the bonds of the Northern 
ific Kailroad ( 'mnpany could be negotiated abroad. Tli< 
Austrian and (ierman bankers, to whom they were offered, 
r, sent 0\ xpertx to examine the road and the 

country through which it extended. They reported adversely 


to taking the bonds. .lay Cooke ami Company then 
attempted to dispose of their bonds to tin- American public, 
through the aid of the 1 religions pre<s and tin- clergy of the 
country. Their plan was only partially surro-ful. The 
times had become too stringent, and on the 18th of Septem- 
ber, 1873, the banking house of Jay Cookc and Company 
failed. The country had been ripe for a commercial crash 
for some time, and this brought matters to a crisis. The 
failure of .Fay Cooke and Company was immediately fol- 
lowed by the failure of a number of leading banks in New 
York City. The Stock Exchange of that city also closed 
its doors for a period of ten days. The premium on gold 
began to decline, and fell during the month to 7;j per (rent. 
Greenbacks commanded a premium over certified checks of 
from :{ to rt per cent. The suspension of payments by the 
banks of New York soon extended to all the principal cities 
and towns throughout the country. Exchange on New 
York, which usually commanded a premium, was at a dis- 
count, if not entirely unavailable. The su>pension lasted 
about forty days, and the industrial interests of the country 
received a shock from which they have not yet recovered. 
To the great mass of the people, who judge of the pros- 
perity of the country by the activity observable in its busine 
affairs, the panic of 1S7:> was wholly unexpected and came 
like a clap of thunder from a cloudless sky. The harvest 
of the year was about over, and the crops were good. Tlu- 
mining and manufacturing interests seemed to be flourishing, 
and to all external appearances there was abundant evidence 
of general prosperity. But, beneath the surface, matters 
presented a very different appearance. The industries of 
the country had been laboring from year to year since 1866 
under an increasing burden imposed by the banks. Busi- 
ness had ceased' to be done for cash, and business men 


TIM-: \.\TIo\.\l. BANKING >YSTEM. 

<'\erywhcre were carrying a load, more or less, of credit 
struggling <>n from year to year in tlie hope that the coming 
spring or the coming fall would in some way bring a cha; 
that would afford relief. A temporary spurt in busii 
might relieve an individual here and there; but under such 
a system of money there eould he no general relief. A 
commercial crash was inevitable. The reason of this i- 
i-asily explained. The average growth of national wealth 
is about three- and one-half per cent, per annum. Individual 
wealth cannot increase more rapidly than that. The higher 
gains of some are counterbalanced by the lower gain 
absolute losses of others. As money is an essential tool in 
the production and distribution of wealth, it is important 
that it should be abundant and rule at low rates of interest. 
But under .1 s\-tcm of banks of issue money scarcely circu- 
lates ; ,i .-ill. Jt is lurked up in bank vaults, and in its >teud 
the public is obliged to use bank currency. I>ank currency 
<-an only be obtained by the payment of a high rate of 
interest. It i-, therefore, far more expensive than even gold 
mid silver. ThcM- metals simply cost their equivalent in 
labor or product-. When mice obtained they will circulate 
in the rhanneN of trade, whilst they remain in the country, 
unburdened with interest. Individuals may acquire a sur- 
plus and lend it to others, but. this is an individual trans- 
action. The gold or silver thus lent is put to n-c by the 
horrouers and passes into the channels of circulation : 
of intere-t. The same is true of leg-'d tender paper money 
d by the government. It costs its face value in labor 
or products to obtain it from the government. It enters into 

circulation unencumbered by interest. Individuals may 

acquire a surplus of legal tender paper money and lend it to 
others. AH in the case of gold or silver, thi< is purely an 
individual transaction. Neither gold nor legal tender paper 


money can accumulate value except when employed. But 
bank currency constitutes a peculiar medium of exchange 
very different in its nature from gold money or legal tender 
paper money. Bank currency is not money. Bank notes arc 
simply evidences of indebtedness of the banks which is<u.- 
them promises to pay money. They enter into -/irculation 
encumbered with interest, and continue to accumulate value 
for the bank which issues them, whether they are performing 
the uses of money or not For the sake of illustration, say 
that A., a manufacturer, borrows a $100 bank note from a 
National Bank for sixty days at six per cent, interest IIe v 
uses this note in the prosecution of his business, and adds 
the interest which he is obliged to pay to the bank to the 
cost of the article manufactured by him. At the expiration 
of sixty days, A., unable to return the identical note bor- 
rowed by him, pays the bank with a $100 greenback. Tliis 
in turn is lent by the bank to B., and so on indefinitely. 
The bank is thus enabled to realize compound interest 
indefinitely on the original note lent to A., which was not 
money but simply credit no matter what becomes of it, 
whether it is occupying the channels of circulation or rotting 
ut the bottom of the ocean. It is apparent, therefore, that 
when the nation uses a medium of exchange consisting of 
bank currency it is obliged to pay compound interest for its 
use. As must be manifest this is a great burden upon the 
industries of the nation. The more this kind of currency is 
inflated the heavier will be the burden imposed upon the 
industries of the country. A great deal is said by the money- 
power and their organs in regard to the evils of inflation, 
whenever it is pi-op. -id to increase the issue of legal tender 
paper money, but nothing is ever said about the real danger, 
which invariably attends the inflation of bank currency and 
bank credit. By reference to the table given on page 255, 



showing the deposit^ ami loans of the banks from 1866 to 
1873, it will be seen that the banks inflated their credit from 
$498,800,000 in 1866 to $940,200,000 in 1ST;]. This immense 
sum of inflated credit, bearing compound interest, entered 
into ami ramified all tin- industries of the country, and 
added immensely to the cost of production. 

The following table exhibits the discounts on nix mouths' 
notes for a term of sixty years. We copy it, along with the 
following explanatory remarks, from Kellogg "A thousand 
dollars in money are taken, and with this sum a note payable 
months is discounted. When the first note is paid, a- 
M-rond note having six months to run is discounted with its 
' <ls, and a third note with the proceeds of the second. 
This calculation is continued on six months' notes for sixty 
years. The table shows the accumulation on xi.noo for 
sixty years, at the various rates of 1, 2, 3, 4, 5, 6, 7, s, 1 -J, is, 
24 and 30 per cent, per annum, taking off the discount, as is 
always done by banks and broker>. 




10 years 

$1,105 45 

lOyenrs $1,65924 

10 years. 

. $3,417 1.: 

'20 ' 

: 02 

20 " 

2,753 06 

20 " . 


30 " 

1,350 87 

30 " . 

4.5(37 97 

30 " . 


1.493 33 



40 " . 



lA r >" 

M " 

12.575 87 

50 " . 

486.6 U <U 

r" - 

1,824 87 

60 " 


60 " . 





IS i 




10 yean 

$1.838 93 



20 " 

1,494 83 

20 " 

3.381 66 

20 " . 

43,485 4X 


1.827 63 

30 " 

6,218 65 

30 " . 

286.75S 62 

40 " 


40 " 

11.435 67 

40 - . 

I.KIW.'.IHS 71 

2.732 00 

50 " 

21,029 39 

50 *' . 




38,671 58 

60 " . 






B CEjrr. 


$1,352 93 

10 yean 


10 yean. 

. $!.'.- 

20 " 

1.H30 46 


4,158 22 

20 " . 

. I*'.. 


2,476 43 

30 " 

8,479 32 

30 " . 


40 " 

17,290 79 

40 " . 

fiO " 

4.583 vi 

50 " 

35,258 90 

50 " . 


U) " 

6,132 73 

60 " 

71,898 92 

60 " 4,592,819,317 8fl 






$1,497 89 


$2,262 43 

10 years, $25,80011 

20 " 

2.24S 66 

20 " 

5,118 59 

20 " 

3,360 75 

30 " 

11,580 46 

30 " 


40 M 

26,199 97 

40 " 443,084 

W " 

1 GO 

50 " ...t. 
60 - 

59,275 70 
134,107 05 

50 " 11,431,62<>. 
60 294,936,059,207 37 


"The highest rate calculated is thirty per cent. per annum, 
or two and a half j>er month, a rate not nearly so high as 
is often paid in Wall street. 

"In the foregoing table it appears that interest atone per 
cent, would transfer $824 worth of the products of labor to 
the eapitalists t<> pay for the use of $1,000 for the sixty 
years; at six per cent., 1537,671.58; at seven per cent., 
$70,898.92; and at thirty per cent., $294,950,058,207.37. In 
any community the rise of the rate of interest on all the, 
money used, whether for a longer or a shorter period, trans- 
fers from producers to capitalists a sum proportioned to the 
increase of the rate per cent., as demonstrated in this table." 

The power of money at interest to aceiimulate value is not 
fully understood or appreciated by the public. The follow- 
ing extract, which will further serve to illustrate this point, 
is taken from an able lecture delivered by Wallace P. 
Groom, Ksq., editor and publisher of the New York Mer- 
cantile Journal, on the subject of the ( 'urrency Needs of 

"Many carelessly infer that the increase of money at six 
per cent, is just, twice as rapid as at three per cent.; but in 
reality the increase is vastly more rapid than this. In ono 
hundred years, at six per cent., the increase on any given 
um is about eighteen times a,s much a.s at three per cent 

**Tf one dollar be invested and the interest added to the 
principal annually, at, the rates named, we, shall have the 
following result as the accumulation of one hundred years: 

One dollar. 100 years, t 1 ior iM-ut, fS' l 4 ' One dollar. 100 r'rs, at 7 per cent., $ 88S 

: TX 


: " MM 

i - XH, 

s - tjax 

o B,^a 

10 - 13,80 


4.V. " US - LS,1*S,007 

i * I31& SI 3^51,799,401 

- wo 


" There are probably few, however familiar with the sub- 
ject of the rapid increase of capital put out at interest, who 
would not be startled at the statement that the cost of the 
outfit of Cristopher Columbus in his lirst voyage of discov- 
ery, put at interest at six per cent., would by this time have 
amounted to more than the entire money value of this conti- 
nent, together with the accumulations from the industry of 
those who have lived on it. If any doubt this, let them 
reckon the amount, estimating the entire outfit to have cost 
only the small sum of five, thousand dollars, and remembering 
that money doubles, at six per cent., in a little less than twelve 
years or accurately in eleven years, ten months and twenty- 
one days. Allowing it to double every twelve years, this 
five thousand dollars at interest at six per cent-, since 1402, 
it will be found, will have amounted to $17,895,700,000,000; 
which, estimating the population of the entire continent of 
America (North and South) to be eighty-five millions, or 
Kevcnteen million families (averaging five members each), 
would give more than a million dollars as the possession of 
every one of these. The interest upon a million of dollars 
at MX percent, is sixty thousand dollars, which would n >\v 
be the princely annual income of each of these seventeen 
million families from the accumulations up to this time upon 
M> Mnall a sum as that named for the outfit of the discoverer." 

But it must not be forgotten that banks of issue do not 
lend capital or money, but simply credit; and iu this con- 
sists the, great injustice of the system. A hingle class is 
clothed with authority to emit bills of credit, and compel 
all other classes to use them as a circulating medium ami 
pay compound interest for their u-e. The fact that the 
government issues the National Hank notes to the banks 
does not change their nature. It is simply equivalent to the 
government guaranteeing their payment. The notes them- 


selves represent the credit of the institutions which issue 
them. There is no sound reason why the -o\ eminent 
should confer this privilege uj.ii the b<ndholdcr and the 
banker, an<l not upon the fanner, the men-hunt or the man- 
ufacturer. On the other hand it is in violation of the plainest 
principles of equity, as well as public policy, for the govern- 
ment to bestow such :i privilege upon any class. 

How long it. takes the money power, through the ma- 
chinery of banks of issue, to rob the people of their annual 
increase of wealth (3.V per cent.) is not. a matter of specula- 
tion. The experience of sixty years demonstrates that the 
system will bring about a commercial crash on an average 
every six years. A commercial crash is simply a general 
settlement and a re-distribution of property rendered neces- 
sary by the natural operations of the system by the manner 
in which the people are obliged to conduct their a flairs. 

The enormous cost of a medium of exchange, consisting 
of bank currency and bank credit, may be arrived at approx- 
imately in several ways. On the 1st of September, 1875, there 
were in operation 2,087 National Hanks. The net earnings 
of the banks for the previous six months amounted to about 
$30,000,000, or $60,000,000 for the year. The officers of the 
banks, including presidents cashiers, tellers, bookkeepers, 
clerks, attorneys, notaries, etc., constitute an army of non- 
producers. Averaging the number at ten for each bank 
would give 20,000 persons. The chief officers of a bank 
are usually large stockholders, and the subordinate positions 
are mostly filled by their relatives, and in no other busim , 
perhaps, do salaries rate so high. Averaging the salaries at 
$2,000 per year each for 20,000 persons will give a total of 
$40,000,000, which, added to the net earnings, gives a grand 
total of $100,000,000 a year. Or, again, the aggregate loans 
and discounts of the National Banks on the first day of 
October, 1875, amounted to $980,222,951. At ten per cent 
interest the amount paid for this sum would be over 
$98,000.000. To this add the interest paid by the people 


on the bonds deposited with the Treasurer of the United 
States about $390,000,000 at six per cent, in gold about 
$27,000,000, and it will give a grand total of $127,000,000. 
From this it appears that the people are paying annually to 
the banks the enormous sum of about $127,000,000, a sum 
greater than the interest on the public debt, for the use of 
some $350,000,000 of bank currency. This burden is entirely 
unnecessary. A medium of exchange could and ought to 
l>e furnished by the government; or, in the language of 
Jefferson, "bank currency should be suppressed and tiie 
circulation restored to the nation to whom it belongs." The 
people would then have a medium of exchange unencum- 
bered with interest, and, what is vastly more important, one 
that would occupy the channels of circulation, subject only 
to the natural laws of trade. 


The prostration of all forms of industry which followed 
the panic of 1873 still continues. Indeed, matters are grow- 
ing worse. The following table exhibits the number of 
failures, with the aggregate amount of liabilities, which have 
taken place since 1863: 


Number <>f A srorrejrate 

Year. Failure Liabilities. 

1863 495 $7,899,000 

1864 520 8,579,000 

1805 530 17,625,000 

1866 632 47,333,000 

1867 2,386 86,218,000 

1868 2,197 f>7,275,000 

1869 2,411 05,246,000 


1870 3,5.-> l 88,242,000 

187 1 2,915 85,252,000 

1872 4,<M)'j 121,056,000 

8 5,181 228,490,000 

\ 5,695 151,689,000 

7,404 195,289,000 

1870 (first ,u;irtrr) 2,806 64,644,000 


The failures during 1875, it will ho seen, numbered 7,404. 
The failures for the first quarter of 1875 numbered 1,733; 
.and for the first quarter of 1876, 2,806, or an increase of over 
60 per cent, over the corresponding quarter of last year. 
At the same rate the failures this year will reach about 

In times prior to the war, when bank currency was nom- 
inally redeemable in specie, the banks did not hesitate to 
expand their circulation as soon as a general settlement had 
been effected and "confidence had been restored " through 
the instrumentality of the Sheriff, which usually took about, 
one year. Business then began to improve, and the banks and 
the people together soon started on another era of inflation 
and speculation, only to wind up in a few years in another 
crash. But now a, different condition of affairs exists. 
Gold bears a premium over the lawful money of the country, 
because it is a full legal tender, whilst lawful money (green- 
hacks) is only a partial tender. It is true in ante-war times 
bank currency was at a discount as compared with gold, but 
then it was issued at par and the loss fell upon the people. 
Now, however, specie payments have been decreed to take 
place January 1, 1879, and the banks do not intend to 
redeem their notes in specie until the government has first 
furnished them with the specie. Consequently they are 
calling in their circulation. This contributes largely to the 
general depression All transactions, since the passage of 
the law decreeing forced specie resumption, except of the 
most limited character, both in respect to time and amount, 
.have naturally ceased. Money is appreciating in value by 
operation of law, and property of all kinds is depreciating in 
a corresponding ratio. No one, with forced specie resumption 
in view, will invest either in property or business. Money is 
borrowed only in cases of great urgency, or for a short period 


for purposes of speculation. As production diminishes the 
people grow poorer and failures multiply. The producing 
forces of the nation are paraly/cd for the want of a healthy 
circulation of money, and general bankruptcy and ruin are 
inevitable. As for the money power, it awaits the final 
convulsion with serene composure. The fall in the price of 
all commodities renders living cheap to all who have an 
income. As their investments are mostly exempt from 
taxation, they are not concerned about the burdens of gov- 
ernment. The appreciation in the value of money and 
bonds, as compared with property of all kinds, which is 
silently going on, is adding enormously to their wealth, and 
when the crisis arrives they will be enabled to reap where 
they have not sown and gather in a rich harvest. 


When the panic of 1873 occurred the bullionists and the 
money power generally raised the old cry of extravagance 
and over production. The same cry has been used to account 
for every crash that has occurred during the present century* 
The charge of extravagance scarcely requires refutation. The 
producing classes as a rule are anything but extravagant. 
The farmers, with the help of their wives, NOUS and daugh- 
ters, as is well known, are enabled only by hard labor and 
strict economy to come out ahead at the end of each year. 
The same is true of the mechanics, the trades people, the 
laborers, and the toiling masses generally. The only extrav- 
agance that has developed itself to any extent in the United 
States is among those who, l>y means of corrupt legislation- 
rind a false monetary sy>t< -m, arc enabled to riot in wealth 
stolen from the people. 


The cry of over production is equally groundless. Human- 
ingenuity is being constantly taxed to increase and cheapen 


production, in order that the good things of life miiy be 
within the reach <>f all. The production of commodities is 
govemed entirely by the laws of supply and demand. 
When it happens, us at the present time, that productive 
industry in many forms becomes paraly/ed, on account of 
the \vant of a healthy circulation of money in the channels 
of trade, large classes are deprived of the means of supply- 
ing their wants, and the markets become suddenly gorged 
with certain commodities. For the sake of illustration we 
give the following table exhibiting the comparative produc- 
tion of five staple articles in 1860 and 1870, five years after 
the termination of the war: 

l M, 1870. Decrease. 

Cotton, 2,200,000,000 Ibs. 1,200,000,000 Ibs. 4!) per cent. 

Hemp, 149,000,000 " 25,000,000 " s:j " 

Rice, 187,000,000 a 73,000,000 " 00 

Silk, 12,000 " 4,000 " <><> 

Tobacco, 434,000,000 " 202,000,000 " 40 

Total, 2,970,012,000 1,560,004,000 o2 

During this period the manufacturing establishments of 
the country increased in number from 140,433 to 252,148, 
and their products from $1,885,861,676 to $4,232,325,442; 
and the population of the country increased from 31,443,321 
to 38,558,371. 

That over production can produce a commercial crash is 
DOW acknowledged by all political economists, whose opin- 
ions are entitled to any weight, to be an exploded fallacy. 
John Stuart Mill, in his work on political economy, says: 

"A general over-supply or excess of all commodities above 
the demand, HO far as demand consists in means of payment, 
is thus shown to be an impossibility. I have already 
described the state of the markets for commodities which 
accompanies what is termed a commercial crisis. At such 


times there is really an excess of all commodities above the 
money demand in other words, there is an under-supply of 
money. But it is a great error to suppose that a commercial 
crisis is the result of a general excess of production." 

And E. Peshine Smith, a distinguished American political 
economist, disposes of the question as follows: 

"In treating of supply and demand, no reference has been 
made to the notion, by which some writers have been 
bewildered, of a general over production in commodities. 
The proposition that any good thing has ever been produced 
in excess of the wants of humanity will not bear a moment's 
examination; nor is there the slightest reason to apprehend 
that such an event is likely to occur. The truth of the 
matter may be quite as correctly rendered by the statement 
that the supply of other commodities is deficient, as that 
any particular one is redundant. Where has it been, in any 
community, sufficiently numerous to permit the application 
of the general consideration! in which political economy 
deals, that any product of industry has been offered in such 
:i quantity as to surpass what the comfort of all its members 
would require? The trouble is, that many of those who 
would gladly be consumers have not produced enough to 
enable them to be. The true remedy for what is called 
over production in any article is an increased production of 
other things." 

When Congress convened in December, 1873, there was 
a strong public sentiment in favor of inn-rasing the- amount 
of legal tender paper money. The people as a body have 
never failed, when an opportunity offered, to signify their 
preference for legal tender Treasury notes. This is undoubt- 
edly to be attributed to "the instinctive sagacity of the 
people," to use Benton's language, "which is an overmatch 
for book-learning; and which being the result of common 


sense, is usually right; and being disinterested, is always 
honest/' In obedience to tliis sentiment Congress passed a 
bill authorising the Secretary of tlie Treasury to reissue 
$44,000,000 of legal tender Treasury notes which had been 
retired under the policy of contraction. This step would 
undoubtedly have afforded great relief to the oppressed 
industries of the country, but it would have been only tem- 
porary. In a short time the whole amount would have been 
absorbed by the banks. Individuals here and there would 
have been benefited, but in the end the nation would have 
been as poorly off as ever. The money power, however, 
was unwilling to have its plans interfered with to even this 
extent; a howl was at once set up by their organs against 
inflation, and a large delegation of bankers, requiring a 
special train of cars, at once proceeded to Washington to 
induce the President to interpose his veto. They succeeded 
as usual, and on the 22d of April, 1874, the bill was returned 
to Congress with the President's veto. Five months prior 
to this President Grant, in his annual message, argued 
that the panic was due to the great contraction of the cur- 
rency that had taken place, and referred to the greenback 
in the following eulogistic terms. He said: "The experi- 
ence of the present panic has proved that the currency of 
the country, based as it is upon the- credit of the country, is 
the best that has ever been devised. Usually in times of 
such trials, currency has become worthless, or so much 
depreciated in value as to inflate the values of all the neces- 
saries of life as compared with the currency. Every one 
holding it has been anxious to dispose of it on any terms. 
Now we witness the reverse. Holders of currency hoard 
it as they did gold in former experiences of a like nature." 
Public indignation at this betrayal of the interests of the 
people by the President found vent at the polls at the next 


general election, and a Democratic House of Representatives 
was elected by an overwhelming majority. 

When Congivjss met in December, 1874, it was apparent 
that some measure, looking to the relief of the oppressed 
industries of the country, must be adopted. The result of 
the election also occasioned great consternation among the 
bullionists and bondholders. Their plans had not been fully 
carried out. Specie resumption had not yet been attained. 
They could manage Congress as it was then constituted, but 
their influence with a new Congress was not so well assured. 
An act to force specie resumption was at once prepared and 
entrusted to that subservient tool of the money power, Sena- 
tor Sherman. It was introduced in the Senate at an early 
period in the session, was passed by both houses and was 
signed by the President on the 14th of January, 1875. In 
order to deceive the public, banking was made free, a 
measure that had been contemplated from the beginning, 
and which, as has since been fully demonstrated, could con- 
tribute nothing to the relief of the public. The hanks at the 
time had abundance of currency, and there were several 
millions of bank note circulation assigned to States having 
le>s than their quota, not yet taken. It is now possible for 
the bondholders to inflate the bank currency of the country 
to the full amount of the bonded indebtedness of the Federal 
Government, about $1,700,000,000. That advantage is not 
taken of this act to increase the bank note circulation is due 
entirely to the specie resumption act. Hanks, on tin 
trary, are withdrawing their circulation and going out of 
business. Two hundred National Banks have already with- 
drawn their circulation, as i> disclosed by the records of tin- 
office of the Comptroller of the Currency, and four hundred 
more are engaged in doing the same. The amount of 
National Bank note circulation withdrawn during the past 


year is $13,482,540, ami the legal tender notes held on 
deposit for the redemption of National Bank notes in process 
of retirement, amount to $27,098,429, making in all a con- 
traction of $40,580,975. During the same period the green- 
haek cireulation has been contraeteil 11,244,752, and the 
fraetional currency $2,758,278. 


The specie resumption act, passed in January, 1875, pro- 
vided for the retirement of the fractional currency issued 
by the government. Long before specie payments are 
resumed the nation will be deprived of a circulating medium 
of any kind. Under the specie basis system of banking, as 
it existed before the war, the people were frequently driven, 
in times of great stringency, to use the notes of individual-, 
firms and corporations, which circulated under the name of 
shinplasters, and cities, towns and boroughs were obliged 
to issue promises to pay, which were commonly known a< 
scrip. To prevent the people, in the approaching stringency, 
from availing themselves of even this method of relief and 
to give the National Banks absolute control over the circu- 
lating medium of the country, an act, approved February s, 
1875, was passed by Congress, which imposes a penalty of 
ten per cent, on any individual, firm, association, city, town 
or. municipal corporation, except National Banks, that shall 
issue or use such notes. This bill was smuggled through 
Congress under the title of an act "To amend existing cus- 
toms and internal revenue laws and for other purposes," and 
reads as follows: "Section 19. That every person, firm, 
association other than National Bank associations, and 
every corporation, State bank, or State banking association, 
shall pay a tax of ten per centum on the amount of their 
own notes used for circulation and paid out by them." 

"Section 20. That every such person, firm, association, 


corporation, State bunk, or State banking association, and 
also every National Banking association, shall pay a like tax 
of ten per centum on the amount of notes of any person, 
firm, association other than a National Banking association, 
or of any corporation, State bank, or State banking associa- 
tion, or of any town, city, or municipal corporation, used for 
circulation and paid out by them." The National Banks 
evidently expect, in due time, to furnish the entire circulation 
of the nation, including fractional currency. 

When specie resumption takes place it will be found that 
the greenbacks will all be in the possession of the banks. 
The reserve held by the National Banks, on the first day of 
October, 1875, amounted to $235,000,000. They have still 
over two years to gather in the greenbacks that are still out- 
standing. On the 1st of January, 1879, the government will 
be called upon to pay the sum of $300,000,000 in specie to 
redeem the greenbacks. The banks will then be in pos- 
sion of abundant specie, furnished at the expense of the 
people, to enable them to begin banking on a genuine specie- 
basis, in the manner in which banking was conducted prior 
to the war. In the meantime the nation will be entirely 
stripped of a medium of exchange, involving an almost entire 
cessation of production, attended by general ruin and bank- 
ruptcy. The suffering, want and misery, which the people 
of the United States will be called upon to endure, during 
the next few years, on account of the machinations of the 
money power, will be terrible beyond that experienced by 
any nation in modern times, not even excepting the exjKv 
rknce of the people of Great Britain, under like circum- 
stances, in 1819-25. (See next chapter.) Beyond that it is 
idle to speculate, for then there will probably be no National 
Hanks, unless the liberties of the American people shall, 
in the meantime, have been entirely subverted. 



A PREMIUM was placed on gold by the first legal tender' 
art, passed February 25, 1862, which declared that interest 
on United States bonds and duties on imports should be 
paid in coin. This was nut only unnecessary, but was in 
violation of the plainest principled of public policy. The 
people were obliged to respond to the re<niircments of tin 
government, and a medium of exchange was absolutely 
necessary to enable them to render their resources available 
to the government. It was manifest that this medium of 
exchange had to be supplied by the government, and it 
could be done only by issuing public notes, made a full 
legal tender. In no other way than by making the public 
note a full legal tender was it possible to place the people 
all on the same platform with respect to the government 
and to each other, and compel each individual in the nation 
to bear his proportionate share of the public burden. These 
principles were fully embodied in the original legal tender 
act as it passed the House of.Reprcsentativo, but the sharks 
of Wall street and the money power generally perceived 
that if it became a law they would be deprived of all power 
to shave either the government or tho people. The passage 
of the bill, therefore, met with a desperate opposition in the 
Senate. In tho conference between the committee* of the 
Senate and the House which followed, the Senate committee 
was stubborn and tho House committee was obliged to yield. 
The Hon Thaddeus Stevens declared, whilst: hedding bitter 
tears over the result, that the House committee did not yield 


until it found that cither the banks must be gratified or the 
country be lust.* 

The only plea or justification offered for making the 
interest on the bonds payable in gold was that it would 
induce capitalists to invest in them. Subsequent events 
have wholly disproved the necessity of any such stop. A 
a matter of fact the war was carried on for over a year with 
partial legal tender paper money (greenbacks), and the 
$500,000,000 of bonds authorized by Congress were in the 
end taken at par by the people (not capitalists or bankers) 
out of a spirit of patriotism. If further proof is required it 
is to be found in the fact that the currency bonds of the 
government to-day command a higher premium than the 
gold bonds, simply because they have a longer time to run. 
Having made the interest on the bonds payable in gold, duties 
on imports were made payable in gold in order to obtain the 
gold to pay the interest on the bonds. This was also entirely 
unnecessary. No bonds, as we lia\ e mentioned, were issued 
for over a year, and as the interest would not fall due until 
six months after they, were issued, the government would 
then have had ample time to dcviM- a way to obtain the 
necessary gold. 

The effect of making the interest on government bond* 
and duties on imports payable in gold was to impose a tax 
on all foreign commodities for the benefit of the bank' 
bullionists and bondholders, and to greatly disarrange the 
monetary affairs of the country. A great many people are 
partially reconciled to the payment of this tax under the 
mi-taken belief that it inures in some way to the advant. 
of the government. Such is not the fact. Commodities are 
purchased abroad with American product >; and the {.rice of 
American products abroad is regulated solely by the laws of 

See page 200. 

OK 8P* M. I- \YMF.\T*. 

suppi\ .-iii.l demand. The total imports and exports of the 
United States for the years 1873 and 1874 were as follows: 

Imports in 1*7:1 .............. $642,136,210 

KxportH " .............. 575,227,017 

Balance againM t'nitr.l Suites. . $66,909,193 

Exports in is 74 .............. $633,339,30* 

Imports - .............. 507,406,:J4i: 

Balance in favor of I'nited State- $65,933,026 

Balance against the United States in two years, $976,167 

It appears, therefore, that the imports and exports of the 
United States during the two years (1873 and 1H74) balanced 
each other to within less than one million of dollars. The 
exchange of commodities between different nations is effected 
principally 1 y means of bills of exchange. The manner in 
which this is done is thus referred to by Colwell: "If the 
United States and Great Britain have mutually exported to 
each other commodities to the value of 100,000,000, the 
amount is adjusted by the familiar process of bills of 
exchange. He who has exported commodities to the value 
of $110,000 is paid when he sells a bill for the amount. The 
adjustment proceeds afterwards without any further trouble 
on his part. The bills are concentrated in a few hands in 
each country. If a house in London purchases in each week 
a million of dollars of American paper, and a house in New 
York with which it is in business relations purchases a 
million of dollars each week in bills on London, it is easy to 
see that it requires no money to pay to each other the two 
millions. As business is generally conducted, the bills are 
forwarded from this country, and the respective claims art- 
balanced and extinguished on the books of the London 
house." After an adjustment is thus effected the balance is 


paid in bullion. As this process is going on constantly, 
bullion (gold and silver) will flow into the country when 
the exports exceed the imports, and out of the country when 
the imports exceed the exports. In order to cause gold to 
flow into and remain in the country, it is manifest, there- 
fore, that the thing to do is to develop the producing forces 
of the country to such an extent as will enable it to export 
more than it imports. This fact was fully rccogni/ed and 
endorsed by President (Jrant in his annual message in 1S7:'>. 
lie said: "My own judgment is * * that a specie ba.M.s 
cannot be reached and maintained until our exports, exclu- 
sive of gold, pay for our imports, interest due abroad, and 
other specie obligations, or so nearly so as to leave an 
appreciable accumulation of the precious metals in the 
country from the products of our mines." 

When foreign commodities are received in the United 
States the merchant to whom they are consigned is obliged 
to pay the custom duties, established by law, in gold. 
Ban kern and brokers deal in gold, and sell it at the highest 
price that they can get. During the war it will be remem- 
bered that the btillionists succeeded in running up the pre- 
mium on gold to as high a $1.85 over the lawful money 
of the country, while the volume of the currency and the 
price of domestic products remained unchanged. This of 
course added greatly to the cost of all imported article*. 
The premium on gold, which was paid by the merchant in 
the fir.-t place and by the people in the end, was a clear 
profit to the bullionist*. Until 18(54 no gold was required by 
the government to pay interest on bond-*, consequently the 
burden thus imposed on the people was entirely unnec. 
:u.d inured to the advantage of no one except the dealers in 
gold. If the war had terminated in the early part of 1H63, 
f Jiere would have been no necessity for issuing any gold 

KKS[-MTM!.\ <} M'K. IK rWNfKVTS. 277 

interest bonds at all. The total funded and uiifuiiclcd debt 
of the government then uas only $783,804,252, consisting 
chiefly of legal tender iiotos, 7-,'JO Treasury notes and certifi- 
cates of indebtedness, all of which could have IK-CM railed 
in, or provided for, by taxation in two years, if desired. 
But the bullionists had their plans well laid. The Treasury 
notes bearing interest were purposely made payable in one, 
two and three years, in order that, as soon as the gold 
interest bonds were issued, they could be advantageously 
converted into money and the proceeds invested in bond.-,. 
With the gold of the country and the bonds both in their 
lK>ssession, the business of selling gold was wonderfully 
simplified. The bankers and bullionists sold their gold to 
the merchant to pay the government, and the government 
immediately returned it in the shape of interest on bonds to 
the banker and bullionist. ruder this arrangement it was 
not even necessary to transfer the gold from the vaults of 
the banks. The whole matter could be adjusted by means 
of gold certiticates ami checks. 

The amount of gold held by the National Hanks, at any one 
time during the past ten years, would scarcely have sufficed 
to pay the duties on imports at New York City alone for 
two weeks. On the 1st of October, 187~>, the gold held by 
the National Banks of New York City was $4,955,624, of 
which sum $4,201,720 was in T. S. gold certificates and 
only $75^,904 in coin. The amount received by the govern 
inent for duties on imports during the past ten years has 
*veraged|180,000,000 a year, or in all $1,800,000,000; the 
interest on the public debt for the same period has been 
about $100,000,000 a year, or in all * 1,000,000,000. It. is 
manifest, therefore, that if the payment of duties on imports 
and interest on bonds in gold was not a pure fiction, the 
government could have accumulated $800,000,000 of gold 
in the past ten years. 


Since specie resumption became desirable to the bullioniste 
and bankers, it is common to hour it asserted that the differ- 
ence between paper money and gold compels the people of 
the Unite. 1 States to trade with the rest of the world at a 
disadvantage. This would imply that foreigners are enabled 
to reap some advantage on art-omit of the premium on gold 
in the United States. A moment's consideration will satisfy 
any one that this is not true. Foreign commodities, as we 
have seen, are purchased with American products. The 
premium paid by Americans on gold and for bills of 
exchange is not an essential part of the transaction. The 
products of America are sold in foreign markets at the 
ruling price there, and with the proceeds commodities are 
purchased in turn. To say that American products sell for 
any more or less in foreign markets because of the premium 
on gold in the United States is simply absurd. As has 
already been suggested, not even the interest on the boiuU 
held abroad is paid in gold. It is paid in products, against 
which bills of exchange are drawn. When the exports of the 
United States fall short the balance is paid in bullion, the 
product of our mines; and this would be done just the >ame 
whether there were any bonds held abroad or uot. The 
same is true of the bonds held at home. Interest on them 
is paid in current money at gold rates. The conclusion. 
then, is unavoidable that the mily persons wh are benefits) 
by the premium n\\ gold, established by the legal tend 
are the bullionists and bondholders of the Tinted State-,. 

The bankers and biillionist* having secured possession 
of the bonds, their convertibility with greenbacks \\.-is 
then taken away, and they were also exempted from 
taxation. The original loan of $500,000,' HJO of f>-_'u bonds 
has been retired or converted into gold bonds. By the 
act of March 18, 1869, the Secretary of the Treasury ia 

L-I -i UPTION or SPECIE PAlClf] 279 

forbidden to redeem any of the -ViMi bonds, payable in 
law I ul money, still outstanding (>ome several hundred mil- 
lions) until greenbacks an- <>n a par with gld. The bonds 
of tin- I'nitcd Stairs now command a high premium. The 
following; is a liM of the (juotaliniix nf l"nhed States bonds 
on the -Jtith of April, 1870: 

U. S. 6 per cent, bonds of 1881 122 

U. S. a-ii() bonds of lst;r>, Nov 11^ 

IT. S. o-^O l)onds of 1865, .July 119 

I*. S. ,-i-20 bonds of 18(57, July 121J 

U. S. 5-20 bonds of l^tis, .July PJi'A 

U. S. 5 per cent. 10-40 bonds*. 118| 

IT. S. 5 per eent. funded lo:m bonds 117^ 

U. S. ti per eent. currency bonds 126^ 

The money power having thus succeeded in robbing the 
poople to the utmost extent in this direction, it is now pro- 
posed to continue the process by means of specie resumption. 
The action of the bullionists and bankers, in this particular, 
was hastened, as we have seen, by the result of the elections- 
in 1874. 


Soon after Congress convened in December, 1874, a specie 
resumption act was hurried through that body and was 
approved by the President, January 14, 1875. The act pro- 
vides as follows: 

The h'rst section requires the Secretary of the Treasury, 
us rapidly as practicable, to cause to be coined, silver coins- 
of the denominations of ten, twenty-five and fifty cents, of 
standard value, and to is>ue them in redemption of un cmal 
number and amount of fractional currency, until the whole 
amount of such fractional currency outstanding shall be 

The second section repeals the authority to charge a 
per ce-ntage for coining bullion. 

The third section repeals so much of the National Bank- 


ing law as limits the aggregate circulation of the banks to 
$354,000,000, and makes banking free to bondholders. It 
also provides that "on and after the 1st day of January, 
1879, the Secretary of the Treasury shall redeem in coin the 
United States legal tender notes then outstanding, on their 
presentation for redemption in sums of not less than fifty 

The greenback, although issued in a mutilated form, (not 
payable for interest on bonds and duties on imports) was 
made a legal tender for private debts. It was not, therefore, 
simply an evidence of indebtedness of the government a 
mere promise to pay money; it was something more than 
that, ft beeanie the measure of all values, the basis of all 
money contracts, and the standard of all payments among 
the people. For fourteen years it has constituted the 
lawful money of the country. All exchanges of property, 
during this period, have been made and all existing debts 
have been contracted on the basis of greenback money. 
If the standard of payment is changed, all existing indebt- 
edness will change with it. For example if A. owes II. 
$10,000 and he is compelled to pay the amount in gold, 
which rules at say 51.12, he is obliged to pay *1 1,200 
instead of 10,900. When the entire indebtedness of the 
country, individual, corporate and municipal, is taken into 
consideration, it will be seen that the amount thus added 
by changing the- standard of payment is enormous. Estima- 
ting the aggregate indebtedness of the country, of individ- 
uals towns, cities, townships, counties, states, railroads and 
other corporations, at * 10,OUO,UOU,000, the amount would be 
increased $1,200,000,000. 

The alteration of the coinage of a nation is universally 
rded as a matter of the greatest delicacy, only to In- 
attempted when absolutely required by the highest consid- 
erations of public policy. When the legal tender act was 


pending the only plausible argument offered by the money 

power against its passage, was that it would work injustice 
to the creditor class, by enabling debtors to pay their debts 
in a depreciated money. The specie resumption law, how- 
ever, compels the debtor class to pay one-eighth more than 
it contracted to pay, and the debtor class, owing to the 
workings of contraction and the National Hanking system, 
now embraces all the industrial classes of the country. N> 
alteration of the coinage was ever attempted by any nation 
that would at all compare with this. 

(The bondholders have provided against any alteration of 
the coinage so far as they are concerned. The act of Con- 
gress of July 14, 1870, for refunding the public debt pro- 
vides that the bonds shall be redeemed "in coin of the 
present standard value") 

Th amount of gold in the ountry, in view of the resump- 
tion of specie payments, has become a matter of serious 
importance, because the circulation of the country, whether 
the gold is actually used as a medium of exchange, or made 
the basis of a bank note currency, as in times prior to the 
war will necessarily be limited by the amount of gold on 
hand. On the 27th of February, 1870, the Secretary of the 
Treasury, in response to a resolution passed by the House of 
Representatives calling for a statement of the gold coin in the 
possession of the government, submitted the following report : 
Coin coupons ........................... $1,547,402 0(5 

Coin certificates ........................ 1,427,200 00 

Sinking fund and interest ................ l,873,sii;> 0<) 

Bonds redeemed and interest ............. 13,882,553 ;:> 

Interest due and unpaid .................. 9,254,034 50 

Outstanding bonds called for sinking fund. 2,548,000 00 
Outstanding coin certificates ....... ". ...... 33,908,300 00 

Silver coin' and bullion ................... 14,193,U1S 7<> 

$78,645,533 01 
Actual gold coin available ............... 13,34 1 ,423 7; 

Total .................... $91,980,957 07 



IJy tin- terms of the specie resumption act .the government 
will be required to redeem the legal tender notes outstanding- 
on the first of January, 1^7!), (x;jon.ono,000) in coin. Tin- 
will take nearly x-j IK), 000,000 more coin than there is avail- 
able gold in the Treasury. Where and how is this immense 
amount of gold to be obtained? The estimated product 
of the mines of the L'nited States for the past three \ear- 
lias been about $50,000,000 a year. The annual iiitt 
on the public debt, one-half of which, it is estimated, is held 
abroad, is about #100,000,000. As long as the imports of 
the country exeeed the exports, the difference will have to- 
be made up in specie. The imports of the Tinted States a^ 
a rule have exceeded the exports for many years past, and 
to such an extent, that notwithstanding the enormous yield of 
American mines, there is not at the present time $100,000,000 
of specie in the country. And now that the productive 
ability of the nation has been greatly diminished, and is still 
diminishing under the operations of contraction and of the 
National Hanking system, the excels of import- o\er exports 
must naturally increase, and thus augment the neces.-ity for 
sending the product of American mines to foreign countries. 
It i> dear, therefore, that until the producing forces of the 
nation are sutlieiently developed to enable it to export more 
than it imports, there can be no accumulation of gold 
obtained from the mines of the country. The amount 
required to resume specie payments then, if obtained at all r 
must come from other nation-. The demand for gold at 
the present time abroad is unusually great on account of the 
demonetization of silver in (iermain and other count; 
The government of the Tinted States has already had some 
experience in trying to obtain gold in Kurope. When the 
gold bond- of the I'nited States were put on the market in 
Kurope, $21,000,000, resulting from their sale, accumulated 


in the Bank of England The Bank of England objected 
to the traiisfi-r of this sum to the I'liilcd States, ami the 
government was forced to turn round an<l invest it in other 
bonds, which had been purchased pr.ihably at lcs than 60 
cents on tin- dollar. Senator Boutwell detailed the facts in 
this caM-, in a speech in the 1'nited States Senate, January 
22, IsT-l, a* follows: "When tin 1 negotiations were going 
on in London for the sale of the largot amount of United 
States bonds that have ever been sold then- at one time, it 
was foreseen by the Bank of England that a quantity of 
coin would accumulate as the proceeds of these bonds to 
the. credit of the government of the United States. As a 
mutter of fact, there was an accumulation of about $21,000,- 
000. The Hank of England, foreseeing that there would be 
an accumulation of coin to the credit of the United States 
which might be taken away bodily in specie, gave notice 
to the officers of the Treasury Department of the United 
States that the power of that institution would be arrayed 
against the whole proceeding unless we gave a pledge that 
the coin should not be removed, and that we would reinvest 
it in the bonds of the United States as they were offered 
in the markets of London. We were compelled to do it." 
Mr. Boutwell aKo mentioned another case in point, which is 
equally significant, as follows: "There is another fact, 
known to all. We recovered at Geneva an award against 
(i real Britain of 815,500,000. When this claim was matu- 
ring, the banking and commercial classes of (Ireat Britain 
induced the government, to interpose, and by diplomatic 
arrangements through the State Department here, operating 
upon the Treasury Department, secured the transfer of secu- 
rities and thus avoided the transfer of coin. In the presence 
of these facts, is it to be assumed for a moment that we can 
go into the markets of the world and purchase coin with 

284 r:i-:si-Mi*rioN OF SPECIE PAYMENTS. 

which we can redeem one, two, three or four hundred mil- 
lions of outstanding legal tender notes." 

If any further argument is required to show that it is not 
only utterly impossible for the government of the United 
States to obtain the requisite amount of gold to resume 
specie payment at a fixed time, but that it is also undesirable, 
even if it were possible, because it would disturb all the 
industrial and social relations of the world, it will be found 
in the following extract from an able speech delivered on 
the 2Gth of April, 1870, by Senator Jones in the Senate of 
the United States, in favor of placing silver on an equality 
with gold as a medium of exchange. lie said: 

"The world's stock of coin is $5,700,000,000, of which 
nearly one-half is silver. Of this sum Europe, America, and 
the rest of the Occidental world employ about $3,600,000,000. 
Previous to the late demonetizations of silver in the Latin 
union, and in Germany and the United States, these $3,600,- 
000,000 consisted of, let us say, $2,000,000,000 of gold 
and $1,600,000,000 of silver. They now consist of about 
$2,600,000,000 gold and $1,000,000,000 silver. By continu- 
ing to exclude silver from equal participation with gold in 
the currency of the United States and attempting to resume 
specie payments, we occasion a demand for say $350,000,000 
of gold wherewith to pay off the greenbacks and furnish 
bank reserves, and $50,000.000 of silver in lieu of the frac- 
tional notes. If we could obtain these $400,000,000 of 
metal without drawing it from other countries in Europe or 
America, they would add so much to the stock of coin in 
the Occidental world, which would then be $2,950,000,000 
of gold and $1,050,000,000 of silver. This is the answer to 
the question so far as the Occidental world i> << >nr ( -nied 
The quantity of the precious metals needed for money and 
the basis of credit in the Occidental world that is to say, 


tlii' quantity needed to maintain prices at their present le\el 
is at least $4,000,000,000. Of this sum the I'nit. -.1 S 

% it iracceeds in resuming specie payments, will hold about 
$400,000,000, of which $350,000,000 must be in gold. 
Where is it to come from:' % 

"Anticipating the argument that no such sum is nece-<-ai y 
to specie resumption, because prior to suspension in i 
our entire stock of coin included m>t more than $225,000,000 
of gold, he reminded the Senate that population since then 
had increased per 50 cent^, and that in 1801 oar whole circu- 
lating medium consisted of $300,000,000 in coin and $200,- 
000,000 in bank notes, which circulated within limited areas 
at nearly par; whereas now it consists of not more than 
$100,000,000 of coin and some $850,000,000 of government 
aud bank paper, the latter circulating (throughout nearly the 
whole country) at about 87J cents on the dollar; say total 
circulation at par equal to $850,000,000. This is 70 per- 
cent. more than the par circulation of 1801, an incontestible 
proof that the exchanges have increased in volume at least 
70 per cent. It cannot be doubted that the bulk of to-day's 
exchanges in this country is at least double that of a corres- 
ponding day in 1802. Put it at only 70 per cent, higher; 
then, in order to resume specie payments upon at least as 
firm a footing as specie payments in 1801, we shall require 
at least 70 per cent, more specie than we employed in 1801. 
Add 70 per cent to $300,000,000 and you have $510,000,000. 
Allow $100,000,000 for specie already in the country, in the 
banks, in private hands, and in the vaults of the Treasury, 
and you will need $410,000,000 in order to resume, say, for 
round figures, $400,000,000 of specie, of which, under the 
operation of the act of 1873, about $350,000,000 must be 

"I warn gentlemen to beware of making a mistake in 


respect to this matter, for a mistake will set us buck many 
years. The Jiritish government tried to resume in 1S17, 
after :i suspension of 20 years, but. it failed, ami sii>|>cn>i,<n 
was deferred until 1823. If we try to resume in 1S71) with 
$100,0001000 and fail, we may be set back a quarter of a 
century. Moreover, if we fail, some clique of stock gam- 
blers will make 15 or 20 per cent, out of the operation. 
Knowing that $100,000,000 was the limit of the government's 
ability to pay, they could easily make arrangements with the 
banks and depositories throughout the country to withdraw 
$100,000,000 of greenbacks on the eve of the day of resuni]>- 
tion, and present them for payment at the Treasury After 
having drawn the last dollar of specie out of the latter, they 
could, by presenting an additional note, compel it to suspend 
again. Then gold would go up once more, perhaps to the 
full extent of the figure from which it would have fallen, 
and the clique could sell their specie in the market and 
realize their profit. . We cannot resume with $100,000,000 
nor with $200,000,000. We have had $200,000,000 in - pect- 
in the Treasury on several occasions during the past ten 
years. If it is practicable to resume now with $100,000,000, 
why was it not practicable on those occasions with $200,- 
000,000? It was certainly not for lack of desire on the part 
of the- Secretary of the Treasury, but simply that both th<- 
Secretary and Congress saw that the thing could not bo 
done. Where are the nee. led *;550,000,000 in gold to come 
from? The annual gold product of the world is x!)7,mn),oiM). 
More than half of this is needed in the arts. One and a half 
per cent, on $2,600,000,000, the present Occidental >t 

1 for the maintenance of money to replace ahra-ion 
and loss. This is $39,000,000. Deduct thoe <ums and there 
remains a surplus of $10,000,000 a year, out of which our 
needed $350,000,000 must come, unless it comes out of the 

17KM MiTios 91 PA1 MI N i- 287 

existing stock in other count! -u >. It would take W yean t 

accomplish the result Upon the in>t fax Mi-able hypthr-i-. 
"But tin* increased population of tlie Occidental \v<>rl,l 

will make increased demand tor gold e\ehange> ami t'i- it- 

UM- in art- e.jual to at least $6,000,000 annually, ami the 
annual product of gold i.- diminishing instead >f inciva-ing. 
When these elements of the circulation are all -Moderately 
provided for, there will remain perhaps $500,000 per an- 
num of surplus, taking 7<n year> to get our fc:*50,000,000. 
And even this cannot be done unless Austria, Italy and 
Russia shall leave us to monopoli/e all the gold we need 
before they reform their own debased currency. I tell you, 
gentlemen, the thing cannot be done. Redemption in gold 
is out of the question. Tt is not practical tinancially, metal- 
lurgically, internationally, or politically; in short, it is not 
practical at all. 

"The stock of coin which forms the substratum of the 
world's prices is the accumulation of 50 centuries, and bar- 
gains are being made every day which cover long periods 
of time. To disturb these prices and contracts by forcing 
the exchanges of the country to be inea>uivd by a sum of 
specie so vastly less than its usual measure, as $ 100,000,000, 
or even $200,000,000, would be tantamount to the violent 
destruction of vast interests and a wrenching of all the 
relations of industrial and social life. 

"The Senator proceeded to argue that we cannot get the 
gold from Europe, with which to resume, becau>e its whole 
Mipply is only $2,600,000,000, and mi every one of tl, 
dollars stands a vast and almost toppling superstructure of 
credit in every conceivable form. Try to buy one sixth or 
seventh of that amount, and the rate of interest would go 
up in Europe in order to check the outflow of gold; and so 
the price of gold would rise until, in order to secure the 


amount required, we would be obliged to sell all our mova- 
bles at prices that would bankrupt every interest in the 
country. We might get $50,000,000 or $100,000,000 possi- 
bly, but it would be at the expense of a tremendous financial 
convulsion abroad, reacting with equally alarming disaster 
to ourselves. Recollect that the problem is that of taking 
$350,000,000 in gold out of a fully occupied and heavily 
overtopped basis of only $2,600,000,000 in the Occidental 
world. It is not the whole stock of metal, both in silver 
and gold, that we can now call upon. Silver has been 
demonetized in several countries in Europe, and here we 
have so thoughtlessly worded our laws that, until we alter 
them, we can only pay in gold." 

By the act of April 12, 1873, the silver coins of the United 
States were declared to be a legal tender at their nominal 
value for any amount not exceeding live dollars in any one 
payment. Silver as a commodity fluctuates in value agree- 
ably to the laws of supply and demand. The effect of the 
law above mentioned was to partially demonetize silver, and 
hence silver coins are now (May, 1876) quoted at about 3 
per cent, less than legal tender Treasury notes. 

There is no good end to be attained by specie resumption 
that could not be attained by simply making the greenback, 
a full legal tender, as should have been done in the first 
instance. By making the greenback a full legal tender, the 
product* of the country would be placed upon the same 
footing with foreign commodities, and that is all that is 
proposed to be accomplished by specie resumption* The 
public would then le relieved of the onerous tax imposed 
on gold to pay duties on imports, which redounds solely to 
the advantage of the bullionists and bondholders of the 
rnitcd States. If this method were adopted, no disturbance 
of the industrial or social relations of the country c6uld 

i;> M M!'Tlo\ Ml-' s|M i [I I- \\\\] 'JK9 

possibly occur. Koivcd -pecir resumption .:ui be a-rom- 
piished only through ;i complete revolution of all tin- husi- 
.iiul social relations of thr rountry. This will appear 
from a brief consideration ,,!' tin- Mcps that will nrrevsarily 
precede resunij)tion. Tin- circulation of the country mi the- 
1st of April, 1H7G, was as follows: 

Legal tender Treasury notes *?o7".7-vvj i^ 

Fractional currency 12,604,808 

National Bank notes 

Total 743,739,045 

The lawful money reserve of th- National IJanks on the 
1 8t day of October, 1S7.~>, \\a> a- follow-: 

Legal tender Treasury notes ..'_' I 

United State's ccrtiticatcs of deposit<),00(> 

Due from reserve agents S5,044. 

Redemption fund with Treasurer 10,23:'.. 


Specie 8,050,328 

Total >52:{.j,lor,,40U 

It will be seen that the lawful money reserve of the 
National Banks, exelusive of specie, now amounts to , 
two-thirds of the entire greenback circulation. The bunks 
have still two years and a half to i^tther in the remainder 
of the outstanding LTi-cen backs all that arc not locked up 
in private hoards. To call in their own circulation i> an 
easy matter. If the banks cease dix-ountiiii;- paper for six 
months there will scarcely be a bank note left in circulation. 
That they will do so is not to be doubted. The notes of the 

banks are simply evidences of their own indebtedness, and 

it is not to be supposed that they \\ill voluntarily add twelve 
per cent, or more to their o>\ n indebtedr.e-s \\lien they can 
easily avoid it. Long before the first day of January, 1879^ 
the banks will have i> --ion of the entire circulation of 


KKSTMl'TUiN <K Sl'KCJK ! V ^ MKN 1's. 

the country, both greenbacks and bank notes, and the 
nation will be completely stripped of a medium <f cxchai 

Tin- public will be helpless. The people will not pos- 
even the poor privilege of issuing and usin'j, shinplasters and 
scrip, because it. will be impossible to raise money enough 
to j:iy the ten per cent, fax imposed upon all notes not issued 
by National .Hanks. Forced resumption, therefore, means 
something more than adding I- per cent, to the amount of 
every debt owed in the Tinted State*. Without, a medium 
of exchange people will be unable to pay their debts at all; 
industry and trade will be completely paraly/ed; and bank 
ruptey. distress, starvation and riot, will ensue. 


The experience of the people of (ireat Britain from IK 19 
to 1825, under similar circumstances, is full of instruction to 
the people of the Tnit.ed States. In 1797 the Bank of K up- 
land was obliged to suspend specie payments."' (ireat Ilrit- 
ain at the time WAS engaged in war with France. In 179*7 
large sums of gold were required, abroad, and the price of 
Hold be^an to rise. In September, 1790, the standard price 
"f -_:old was I'::, I 7s., fid. per ounce, and in June, 1800, it wati 
L'4, 5s. per ounce. The war with France ended in |sl5. 
During I his period and for several years after the war the 
pi-<.ple of (ireat Britain were obliged to u>e an irredeemable 
paper currency for their medium of exchange. IVior to the 
suspension of specie payments the <-onditi<'ii of a flairs in 
Great Britain was gloomy indeed. Sir Archibald Alison, 
the historian, in speaking of the period immediately pn 
inj suspension sa\s: "Nor was the internal sullerin^ of this 
ill-ornened pi riod inferior to its external disaster. It bewail 
witli the severe commercial distress f 179:;, unprecedented 
;it rliat ]>eriod in intensity and duration, and which was only 

See Bank of I-ln^laml, ? 

KKM Ml'l IMS , , |< MMJ. I 1-. P\YMKN : 'J'M 

relieved !y an extensive loan to the trailing elas>es by gov- 
ernment; ami it terminated in the dreadful monetary critiis 
ami run upon the bank ami mutiny in the fleet, in tin? spring 
of 1707, which brought tin- nation to tin- brink of ruin, ami 
forced upon the overninent the neeoMty of su^pemlinj; 
rahh payments. 91 Tin* Hritish (Jovernment ami people had 
been vainly trying t> carry "ii ^n-at operations with :in 
iii:ti]c(ju:i(e. int'diuni of excluingc. The Mi<pcn>ion of th<- 

Hunk <>f KnirlamJ ii-d to the usr of irredeemable paj*'i- 

uidiii'V tc an enormous amount, or, to use :ui uxpi ^-i"ii now 
;rrratly ridiculcMJ ]y the hullionists, "to an amount equal t> 
The wants of trade/" The result was matrieal. AYe will 


;tLjain <[tiot; from Sir Archibald Alison. He says: "The 
next eighteen years of the war, from 1707 to isi.'i, were, as 
:dl the world knows, tin* mo^t glorious, ;md, taken as :i 
whole, the most prosj>erous, which (ireat liritain had ever 
known. l T sh-reil in ny a combination of circumstances the 
most calamitous, both with reference to external security 
and internal industry, it terminated in a bla/.' of j^lory and 
a ll->od of pi-os]erity whidi have never, since the beginning 
of the world, descended upon any nation. Hardly had the 
run upon the bank shaken t-> its center the whole fabric of 
our commercial prosperity, and the mutinies of the Norc. 
Plymouth and o!F Cadi/, paraly/.cd the arm of our naval 
defender*, when the victories of St. Vim-nit and Camper 
UOM.II a;_rain iv-torel t^> IM the dominion of the v,. i; aiid ere 
lonu: the thunderbolts of the Nile ami Trafalgar prostrated 
the naval strength of the enemy, and the \icf.rie< nf Wei 
lington lirst arrested, ami at leiiLTfh broke his militant 
]ower. Prosperity, universal and unheard of, pei'vadeil 

eveiy department of the empire. Our colonial porssions 

eiu-ircled the earth (he whole We^f. Tndi.-i Islands had 
falJen into our hands; an empire of sivfy millions of men in 


Hindostan acknowledged our rule; Java was added to oar 
eastern possessions; and the flag of France had disappeared 
from every station beyond the sea. Agriculture, commerce 
and manufactures at home had increased in an unparalleled 
ratio; the landed proprietors were in affluence; wealth to 
an unheard of extent had been created among the farmers; 
the soil daily increasing in fertility and breadth of cultivated 
land, had become almost adequate to the maintenance of a 
rapidly increasing population; our exports, imports and 
tonnage had more than doubled since the war began; and 
though distress, especially during 1810 and 1811, had :it 
times been severely experienced among the manufacturing 
operatives (occasioned by Bonaparte's decrees against Brit- 
ish goods), yet, upon the whole, and in average years, their 
condition was one of extraordinary prosperity. The revcnu 
raised by taxation within the year had risen to 72,000,000 
in 1815 from 21,000,000 in 1796; the total expenditure- 
from taxes and loans had reached in 1814 and 1815, th 
enormous amount of 117,000,000 each year. In the ycurn 
1813 and 1814, being the twentieth and twenty-first of th - 
war, Great Britain had ibove a million of men in arms in 
Europe and Asia, and remitted 11,000,000 yearly in subsi- 
dies to the continental powers. Yet was this prodigiou-r 
und unheard of expenditure so far from exhausting either 
thf capital or resources of the country, that tho loan in 1814 
was obtained at the rate of 4, 11s., id. per cent, being a 
lower rate than that paid at the commencement of the; 
although the annual loan at its close was above 35,000,000, 
and the population of the empire at that period was onlv 
eighteen millions." 

All this was accomplished in Great Britain during the 
early part of the present century by irredeemable paper 
money. The bullionists try to blunt the force of this argu- 


ment by attributing tin- prosperity of i during 

period to the vast outlays of the government, but if this 
the cause, why did it not produce the same effect during 
period prior to the suspension, when the government 
making similar outlays? The simple truth is that the people 
of Great Britain possessed patriotism and faith in the sta- 
bility of their government and institutions, and when fur- 
nished with industry's most essential tool, an abundant and 
cheap medium of exchange, they were enabled to devt 
the producing forces of the nation to their utmost ext* 
with the marvelous results above given. And the loiric of 
the whole matter is, that if paper money will perform such 
marvels in time of war, danger and uncertainty, it ean be 
made to perform the same or greater marvels in time of 
peace, when no uncertainty need attend its uaa 

When the several acts of Parliament were pa^-ed contin- 
uing Pitts' "bank restriction" (continuing the suspension of 
specie payments), one clause was always retained, and 
was that the bank was "to resume cash payments" within a 
few months after peace should be established. Doubloday, 
in his Financial, Monetary and Statistical History .f I 
land, says that " it has been asserted that Pitt never m 
this clause to be enforced, at least as far a* regard. -d tho 
fundholders (bondholders); and that he intimated a* much 
in Parliament on one occasion." However, it \\:is adhered 
to. The bullionists immediately began to clamor for a 
return to specie payment*. The bank of Kngland, u 
had "bales of paper money" in circulation, was obliged to 
Contract to an extent that would enable it to redeem the 
remainder in coin. This began to occasion distress amongst 
the merchants and manufacturers. In speaking of : 
period Doubleday says: * During former revulsions, sue: 
that of 1810, caused by the decrees of Bonaparte agu 


the admission of British goods, the hank had conn- promptly 
forward with loans and discount* to relieve the pressure. 
Now, ho wever, the directors .scarcely dared to move an inch. 
They knew that the political economists were strong in the 
House, and that they were bent upon c;ish payments at all 
risks. They knew that the Jews of Change Alley would 
secretly abet the same doctrine. Against a combination of 
usurers and theorists, one set all selfishness, the other all 
crotchets, there was m> defen>e l> be ma/lc. The country 
gentlemen, who were the duj>es of the economics. ^ 
tO believe that Cash payments wen; necessary for both the- 
interest and security of themselves. Those who had t. he- 
power were resolved, and nothing was left to the hank but 
to narrow its issues, and look about for gold and silver 
wherewith to meet the storm. This was altogether a diffi- 
cult business. In the year 1S10 alone thirty-seven coir 
banks had become bankrupt. The commercial world 
required additional propping. But the government ^tho 
bank) was in the same dilemma; and t< it the merchant.-* 
were sacrificed. Between February and April, 1810, the- 
directors lessened their discount from I'l-'^Ooi 1,000 to 
.11,000,000; and before February, 1817, to 8,000,000; and 
before August of tlie same year to- 7,000,000; whilst up t 
nearly the same period they held of Kx.-hequcr bill>, . .. 
25,000,000. * * This reduction of the bank issuo, and 
destruction and crippling of the ountry bank-, had another 
and still more important effect, ina-mu<-h as b\ causing the 
price of gold to fall to nearly the mint jri'f, it ciicour; 1 . 
the political cconomistn t> JHV-S forward, and at last, in 
1819, to pass an act, the most important in iss oonteqaei 
Mid extraordinary in its circumstances, that ever was decided 
upon by any legislature, in any ajv or coiintn . The 

Currency bill of (May) 18 in v, d at Uic insUiuce oi" 

RB8UMP1 I.N i pA\ MI T8, 

A Committee, amongst the members of whom were included 
all tin- parliamentary dabblers in political economy of unv 
name Or talent, and of whom IVcl was chairman. Hnrn-r r 
the chairman of the bullion committee .f isi.i. \\as dead; 
but in his htoad, they liad Kicanh>, a rich Jew stock-jol> ; 
who having made an immense fortune by this vsor-* 
of gambling, had also contrived to nhtain a reputation l.s 

the publication of some bookfl <n political economy. 

Hacked ]>y the authority of this rich and arrogant man, the 
economists obtained on this occasion an almi-t entire -om- 
rnand of the House of Commons. * * The HOUM- madc 
Ihe plunge "\vitli one accord. There Mas hardly the sem- 
blance of an opposition. Kicardo had the enormous folly 
id tell the House that the bill was* not worthy of half an 
hour of even tlieir consideration;" and assured them that tlu- 
Whole question was one of 'throe per cent:' this being the 
extent of the fall of prices, which this man calculated would 
take place, after all the one ami two pound notes in the 
kingdom were burned, and the remainder, of live pound 
notes and upwards, mat le -payable on demand in gohl. sover- 
eigns worth 3, 17s., lOAd. the ounce/ In short there was 
only one man in the Commons who really understood and 
opposed the measure, and this man was Mr. Matthias Att- 

wood, * * and Mr. Attwood was prevailed upon to quit 

the House that, the vote might, be unanimous. Tn the llou-.- 
of Lords, Lord (irey alone ventured t di-^cnt from til-- 
measure; * * The Houses, however, for once * \\ere all in 
one aeeord/ * * AH a bit of legislation, this e\ er-merao- 
ra-ble act is remarkably brief and to the point; consisting 
only of thirteen not very long nor wordy claiiM->. It repeal*, 
in the first place, all the acts for restraining the bank from 
paying its creditors, which bad been passed from 1707 up 
to that time, the repeal going into effect 'from and after the 



lirst day of May, 1823.' This was a repeal of all bank notes 
on demand for sums less than five pounds. It then provides 
for a gradual return, in the meantime, by the bank to cash 
payments; beginning with an issue of gold at four pounds 
one shilling the ounce, in 1820, and ending with the stand- 
ard mint price of 3, 17s., 10d." 

The premium on gold during this period fluctuated aa 

1814 30 per cent. 

1815 18} " 

1826 2 " 

1816, Oct. to Dec. r " 

1817 2 per cent. 

1818 5 " 

1819 6 " 

1820 par. 

Although the Currency bill passed Parliament unani- 
mously, it did not fail to excite great alarm and opposition 
among the industrial and business classes of the kingdom. 
The Directors of the Bank of England protested against its 
passage, declaring that < they could not venture to advise 
sin unrelenting continuance of pecuniary pressure upon the 
commercial world, the consequences of which it was impos- 
sible for thorn to foresee or estimate-," or countenance a 
measure in which ' tlu- whole community was so deeply 
involved, and which would possibly compromise the- univer- 
sal interests ,,f the empire in all the relations of agriculture, 
manufactures, commerce and revenue." Tin; hankers and 
merchants of London joined in a petition against it, in which 
they predict CM! the most disastrous results. 

The contraction of the currency, which was augmented 
by the passage of the bill, noon produced the most alarming 
rcMilis. We airain quote from Alison's History of Europe. 
He says: tk The effects of this extraordinary piece of le-_;i>l.i- 
tion were s<x,n apparent. The industry of the nation wan 
speedily congealed, as a flowiug stream is by the severity of 
an Arctic winter. The alarm became as universal 

Ml'IlMN Of x|'K< IK PAYMKNTs. 

spread us confidence ami activity had recently been. The 
-ountry hankers, who had ad\anced largely on tin- slock> 
of goods imported, refused to continue their support to their 
customers, and they were forced to bring their stocks into 
the market. Prices in consequence fell rapidly; that of 
e,:ton, in particular, sank in three months to half its former 
level. The country banker-^ association wax contracted l>y 
no less than five millions sterling ($24,000,000); and the 
entire circulation of England fell from $235,545,000* in 1818 
to $174,385,000 in 1820, and in the succeeding year it sank 
as low as $142,757,000. * * The effects of this sud 
iind prodigious contraction of the currency were soon appa- 
rent, and they rendered the next three years a period of 
ceaseless distress and suffering in the Uritish Inlands. The 
accommodation granted by bankers diminished so much in 
consequence of the obligation laid upon them to pay in 
^jM-cie, which was not to be got, that the paper under dU- 
count at the Bank of England, which in 1810 had been 
$115,000,000, and in 1815 not less than $103,000,000, sank 
in 1820 to $23,360,000, and in 1821 to $13,610,000. The 
effect upon prices was not le>s immediate or appall: 
They declined in general, within six months, to half their 
former amount, and remained at that 1<>\\ h-\rl f.-r the next 
three years. Distress was universal in the latter months of 
1819, and that distrust and discouragement were felt in all 
branches of industry which are at once the forerunner and 
cause of disaster." From Mr. Douhlcday's history we also 
quote as follows: "We have already seen the fall in price> 
produced by the immense narrowing of the paper circulation. 
The distress, ruin and bankruptcy which MOW took place 
were universal, affecting the great interests both of land 
and trade; but especially among land owners, whoso estates 
were burthened by mortgages, settlements, lc-_ r acie-, etc., 

Amounts are given in dollars instead of pound;. 


the effects were most marked and out of the ordinary oonr*<v 
In handreda of cases, from the tremendous reduction which 
now took place, the estates barely sold for as much as would 
pay off the mortgages; and hence the owners were stripped 
of all ami made beggars." lie-lore the close of the v 
1X10 the di>ln-ss became insufferable, (treat meetii! . 
held throughout England and Scotland dnrinir the summer. 
In August 00,000 people, men, women and children, assem- 
bled near Manchester. A collision occurred between the 
people and the troops, in which a number were killed and 
many wounded. This created intense e.veitcnicnt, and the 
meetings of the people held in Liverpool, York, Leeds, and 
various other cities, were attended by vast multitudes of 
Buffering j>eoplc, demanding vengeance. Serious riots 
occurred, which were only <juell.d by military force. In 
1820 a conspiracy was discovered, which had for its object 
the murder of all the King's Ministers, and which was only 
frustrated through the cowardice of one of the eonspira'< 
who betrayed his associates. Military training went on 
amongst the people, and th: government was obliged to 
provide a large military force to pr. v nt an outbreak. "On 
Sunday morning, the I'd of April," :ays Aiison, u a treason- 
able proclamation was found placarded all over the street* 
of Glasgow, Paisley, Stirling, and the neighboring tol 
and villages, /,; f /u: name t' a , -'I governn 

calling on the people to tlesist from labor; on all nianu 
turers to close their work>hop:; and <>n all the fr'n-ii'ls ,.f 
their country to come forward and effect a revolution },y 
force, with a view to the establishment of an entire equality 
of civil rights. Strange to say, this proclamation, D! 
and proceeding from an unknown authority, was widely 
obeyed. Work immediately ceased; the manufactories AS 
closed, from the desertion of \\ orkmeit; the streets were filled 

nm MPI ION v MM en tona 

with anxious crowds eagerly expecting neu s from tin- south: 
the sounds of industry were no longer heard, :m<l two hun- 
dred thousand persons in the hnsirst districts of the country 
were thrown into :i state of compulsory idleness hy the 
mandates of an unseen and unknown po\\-r." Ki\r thou- 
sand troops were immediately assembled at (llas-^ow, and 

tho immrgents were overawed IScforc the end of ih. 

tin* ^oviTiiinrnt had iiHMvaM-d it^ \oluntfi-r forrr 1-. : 
iiu-n. " \Vit)u)iit l>uht,"says Alison, "this powerful \olunti-rr 
forrr, or^ani/cd operially in flir maniifarturin^ tli^ti'irt-, 
at this period, and the derisive demonstration it afforded 
of moral and physical strength on the part of thti govern- 
ment, was tin- chief rau^e through which (ireat IJritain 
csrapi'd an aiariiiin^ (Convulsion." 

Thus wore the masses of Great Kritutn, whose valor and 
Jahor had <-arried the nation to the acme of iclory and pro 
p<-rity, ruthlessly and wantonly sacriiiced n tin- altar 
railed k * honest money," only to further enrich the nio:M-\-d 
chiss of the kingdom. l>nt after all forced specie resump- 
tion proved a failure. Parliament was ohli-^yd to retrace its 
Kfeps. In ls-J2 an act was p.-ixsi-d auf Iioi-i/.inic the issue of 
one and two pound notes for a period of ten \ears longer, 
and the one pound notes if ere ///>"/, ,t /> : /" ; -very 

where except at the bank of Kngland. ^This a. ." 
Alison, "coupled with the grant of 4,000,()nk K\rlie<jiu-r 
l>ills, which the government was authori/.ed to issue in : n,I 
<f the agricultural interest, had a surprising elTe.-t in rest^.r 
ing confi<lonce and raising prices; and by doing 
repealed, so long as it continued, the nn^t injurious parts- of 
the act of 1819." I>ut (he ruin, suffering :md misery \\hich 
had attended the attempt to Wee ipeCM payments could not. 
be undone, nor could the broken fortunes be restored. By 
a return to specie payments finally, the Npocie IKLS'IS banking 


>!};< 11-; I-AVMKM-. 

and credit system, the whole tendency of which is to con- 
centrate wealth in the hands of the few, was re-established ; 
and the industrial classes, especially the agricultural class, 
"have never since been able to recover from the blow then 

"Princes and lords may flourish, or may fade, 
A breath can make them, as a breath has made: 
Hut a bold peasantry, their country's pride, 
When once destroyed, can never be supplied." 

In 1822 the land owners of England numbered 165,000. 
According to the census of 1861 the number was about 
30,000, and one-half of the whole kingdom is now owned 
by not more than twelve persons. 

From this mere outline of the disastrous events which 
attended specie resumption in Great Britain, revolutionizing 
the whole structure of British society, and shaking to the 
center the foundations of the government itself, some ide:< 
may be formed of what the American people will be obliged 
to suffer during the next few years, (ireat Britain then 
Sfled many advantages which arc not possess, -d by the 
United States at the present, time. Her industries wen- i-; 
full operation; the balance of trade was largely in her favor; 
she had a lar^e Mipplv of specie to begin with; the premium 
on gold was only about live per cent.; and, as the country 
was limited in extent and densely populated, money circula- 
te*! ^ith great rapidity. On the other hand, the industries 
of the Tnited States :) re already prostrate; the balance of 
trade is against the country; the specie in the country \* 
Inconsiderable in amount; the premium on gold is over 
twice as high as : was in Knghmd; and the immense extent 
i' the country precludes :my possibility of money circulating 
with rapidity. In addition to this, British thought and 
liabit had been educated under the .pcci- basis :m ,l credit 

union 01 v,., , n. i-v, M, 

in of money; whilst, in the 1'nited States, BXporioncC 

baa fully demonstrated that the ysteni is inc,,iiMstent \\ith 

the genius of American institutions and repugnant to . \mer- 
ican habits and idea-. 

There is e\ery reason, therefore, to helic\r that tin- di-:i-- 
ter and distress which will attend an attempt to fOTOC Bp 
payments in the 1'nited States will exceed in intensity that 
which marked the experience of lin-at IJrit.-iin an hundred 
fold. The contraction which took place just after tin- 
was earned on wholly by the government The evil DOOM- 
C|uences of this contraction were partially averted l>y the 
emission of over $350,000,000 of bank currency. Hut n>\\ 
a different kind of contraction is going on. The National 
Banking System has already enabled the banks to ac.juin- 
possession of over two-thirds of the greenback circulation, 
and it is a question of but a short time until they will hold 
almost the entire amount. Their own notes are em-umbered 
with interest, and are not subject to the natural laws of 
trade, but to the will of the banks. It will take but a shoi t 
time, therefore, to call them all in. The organ* of tin- banks 
arc constantly repeating the statement that there is plenty 
of money in the banks, and that any one can get it who has 
anything to get it with, and the statement is echoed and 
re-echoed by all the demagogies and weak minded tools of 
the money power in the country. Properly consider, d, we 
submit that this fact alone confirms all the objections which 
we have urged against the system of bank-* of i-xue. Why 
is money plenty in the banks, and why is it not occupying 
the channels of trade and honestly performing the functions 
for which money is designed? For the simple reason that 
a medium of exchange consisting, even in part, of bank 
currency will not obey the natural laws of trade, because it 
is burdened with interest which robs the industry of the 


nation of more than its average j>rotit. In ordinary time*, 
after industry had boon drivon to the wall ami a commercial 
crash had brought about an adjustment, the banks begun to 
expand their circulation, and the banks and the people would 
enter upon another era of inflation, only to end in the same 
manner. IJut now the spoeie resumption act not only pre- 
vents any such expansion, but compels both the banks and 
the people to contract in every way possible to prepare for 
the impending crash. True enough, money is plenty in the 
hunks, and it will grow plentier there before the nation is n 
year older. In fact the contraction of the banks has scarcely 
more than begun. lint as failures multiply, as they are now 
doing with startling rapidity, loans and discounts will grow 
l-s* eorninon, until finally the country is entirely deprived 
of ti circulating medium. This can end only in the complete 
destruction of all values. It will be as difficult to pay 
small debt as a largo one, for money will be everything and 
property nothing. Taxes cannot be paid, for there will be 
no money to pay them with. Not only will individual 
bankruptcy be general, but the decline in the public reve- 
nues, which must follow, will render it impossible for the 
Federal or State Governments to meet their obligation*. 
This is the only kind of repudiation that need ever be feared 
in America. The people are being rapidly deprived by the 
policy of the money power, not only of the ability to sustain 
the government, but of the ability to provide for themselves 
and families. That a nation pos*e*sing the \\onderful 
advantage* and the skill and enemy poxxt^xrd b\ the Amer- 

ic.-ui people should bo brought to even its present di<t 

condition in the pur>nit of a phantom, is simply monstrous. 
And when the crisis is reached, what will have been attained? 
'Honest money?'' No. Nothing but a circulating medium 
Consisting of bank currency, <.nly nominally redeemable in 

l-' s|M.. IK ] \ V Ml 
co'lll. A88UIIlilIg 1 1 Kit the L r <>N ''I'll I IK '1 1 t Will be able t. . i -i 1 1 -i -I II 

the greenback circulation 'nd that tin- amount is paid to the 
hanks, itis n.>t difficult to foretell tin- result. The hankn 
will i-sue bank currency, redeemable in coin. \Vlu-iir\- 

dernand for specie arises, American securities \\\\\ 
be thrown upon the market, :uul tin- iT"l<i in th- country will 
<li>:i|i]ic:ir in a I:iy. The )>anks will IK- (}>liLT'l to K I>|M-IH| 
vj.ri-ii' jKiyiniMits, precisely as the ol<l State banks of i 
were obliged t<> do. time anl ri^riin. nmler similar ciivuni- 
>t:mcc>. I'nih-r th- oNl State banking sytiMii the people 
-were compelled to use bank currency even whe'i they knew 
if was a fraud and a lie, because they had nothinu; else to 
use. l>uf under the National Hanking arrangement the 
notes of the banks will be taken without hesitation, not 
because they are convertible into coin, but beeause they are 
guaranteed by the rV.h-ral Government bused upon the 

faith ami wealth of the nation. In the end, therefor. . s,, far 
^is specie circulation is concerned it will prove, a^ in the 
lays before the war, a fraud and a delusion. The National 
Hanks, however, will have accomplished their end. They 
Will have obtained absolute control o\cr the monetary ami 
political affairs of the nation. The whole affair is in 
but a irrand scheme to accomplish that purpose, and it is 
marvelous that intelligent people can be dreie\ed in bcliev- 
tng Otherwise. In ITlll. when Hamilton oiiL r ht to establish 

his funding and banking scheme, the rrcat I'itt said: "L. t. 

tlie Americans adopt their fundini; system and L r < into their 
banking institutions, and their imlcpendene. \\ill be a mere 
phantom." What Hamilton, With all his genius and .. 
ability and influence was unable to accomplish in the 
Infancy of the republic, a pack <f venal dema^OLTues ha\e 
well niijjh accomplished nearly a century later. People are 
wont to say, and apparently seem to think that it is au 


evidence of their good sense, " tliat they don't know nor care 
anything about this financial question." It is high time that 
everybody should seek to understand this question, because 
until the National J>.-inks are destroyed and a system of 
money is founded upon sound principles, there can be no 
enduring prosperity in the country, and the "independence 
of the people will be a mere phantom." The demoralization 
which is now going on throughout the country in conse- 
quence of the enforced idleness and poverty of millions of 
people, is a matter of serious import, and one which should 
awaken to a sense of duty and action every Christian man 
and woman in the land, and especially ministers of the 
Gospel, who profess to follow Him whose tenderest care was- 
ever manifested for the weak, the lowly and the oppr 

There is another fact which may convey a warning t> 
those who are lending themselves to the ignoble rause nf 
enriching the money power at the expense of ruin, poverty 
and distress to the masses. When the American people are 
driven to the extremity that the English and Scotch people- 
were, by an attempt to force resumption, and gather in vast 
multitudes, as the English did at Peterloo and the Scotch at 
Glasgow, to demand redress, matters will assume a very 
different shape in tho United States from what they did in 
Great Britain. It is true that an organ of a notorious Waif 
street operator, the New York Tribune, has intimated that 
any such demonstrations would promptly be met with "shot 
and slaughter;'* but in the United States that is more CHM!;, 
Kuid than done. The day has not yet arrived when Ameri- 
cans can be intimidated by such threats. As yet they "their 
duties know, but know their RK;IITS, and knowing dare 
maintain them." AVhile the American people undoubtedly 
possess too much patriotism and intelligence to jeopardi/** 
the stability of their institutions, they nevertheless may 
f.,s^il)ly forget, in the hour of their distress, that* the Lord 
hath said, "vengeance is mine." In that day the Sherman* 
and McCulloclis had better never have been born. 



IT is a common error, inculcated by the bullionists, to 
suppose that metallic coins alone are money, and that money 
is the same thing in all parts of the world. Nothing could 
be further from the truth. Population, commerce and trade 
have long since outgrown the world's supply of the precious 
metals. Every nation builds up a monetary system of its 
own, and no two systems are or can be alike. The monetary 
system of a nation is an outgrowth of its civilization, pre- 
cisely as are its manners, its customs, its language and its 
government. For example, Great Britain and France both 
use metallic coins and paper money, and yet the monetary 
systems of the two nations differ in almost every particular. 
Several centuries ago the increase in population, trade and 
manufactures and the limited supply of gold and silver ren- 
dered it impossible for the people of Great Britain to secure 
a sufficient amount of coin to form an adequate medium 
of exchange. The true nature and functions of money were 
but imperfectly understood, and no effort was made, on the 
part of the government of that kingdom, to remedy the diili. 
culty under which the people labored in effecting their 
exchanges. The people were obliged to do the best they 
could. Exchanges of property and commodities thus came 
to be effected to a great extent by means of promissory 
notes, book accounts, and other de\ ices of the credit system. 
In the course of time the Bank of England was established. 
Soon after it was established its managers conceived the 


idea of issuing bank notes, to be exchanged for the notes of 
individuals. Merchants and others gladly availed them- 
selves of an opportunity to substitute the notes of a respon- 
sible and widely known institution for the notes of individ- 
uals, which could only circulate in a limited sphere. Bank 
notes were found to be capable of greatly facilitating the 
operations of trade, and became the chief medium of 
exchange of the nation. Bank notes, it will be perceived, 
are purely an offshoot or development of the credit system, 
invented to remedy the want of an adequate medium of 
exchange. In this manner a monetary system of a peculiar 
character has been developed in Great Britain, which has 
exercised a powerful influence upon the destinies of the 
people of that kingdom and also upon the rest of the world. 
The monetary system thus developed in Great Britain, 
although based on specie, is made up almost wholly of 
credit. The statement of Sir John Lubbock, given on page 
4S, shows that of 19,000,000, paid into his bank in a iV\v 
days, only one-half of one per cent. <-onsi>tcd of coin. 
Every dollar in coin in Great Britain thus becomes the basis 
of an immense superstructure of credit. Gold coins are the 
legal tender money of the country, silver being a tender 
only for small stim>. As the exchanges of the country 
are carried on with a medium of exchange only a small pcr- 

ge of which is coin, whenever a stringency occurs, or 
a want of confidence prevails, which inevitably happens :i> 
soon as the credit of the nation becomes fully inflated, 
everybody seeks to obtain PUSM-MOII of this small per- 
centage of the circulating medium, which alone is a tender 
in payment of debts. Coin consequently ri>es in value and 
is no longer a proper measure <f other values. In this 

t at least its functions as money are totally perverted. 
Money thus instituted is given a tremendou^ power over 

Sol Mi l'KIN< !]: 307 

property and labor, and tin- whole tendency of the system is 

lo make the rich richer and tin.? \>r \ vr. The s 

however, is in accord with the views held by the ari-t 
or governing class of Britain, and finds its champions 
in a school of political economists, who profits to believe, 
and strive to inculcate, the doctrine that it is natural and 
proper that poverty and want and disease and misery should 
be next door neighbors of wealth and unbounded prosperity. 
It is due chiefly to this system of money that su< -h 
extremes of wealth and poverty are to be found in < 

France, like Great Britain, uses both coin and 
monc}, but money in France is instituted upon entirely 
different principles. The policy of the I-Yem-h (iovemmeiit 
is to render money abundant and cheap, in order that the 
exchanges of the nation may be effected with the lea-- 
possible, and that the productlvo ability of the people may 
be developed to the utmost extent. The men who moulded 
the French system were wise enough to know that labor is 
the true source of wealth, and that the surot way to render 
the government powerful was to enable the ma- 
become prosperous. This was not accomplished without a 
great struggle. Colwell, in his work on The "\Va\ 
Means of Payment, says: "The system of public tina 
France, once so cumbrous and awkward, so e\j>cii-:-. 
otherwise disadvantageous to the nation, has, during t: 
half century,* under the able direction of Count M 
the Marquis ITAudriiTet and other eminent men, und< 
such radical changes as; have completely modified both its 
principles and its mode of operation. Thc-e reform! were 
resisted, in every d with every weapon, by the 

parties (the money power) interested in mamtainin 

*Tliis was written prior to 1860. 


abuses. The persevering efforts of honest and intelligent 
men for thirty or forty years overcame all opposition, ami 
France now enjoys a financial system, in not a few respects, 
superior to any other nation." The people of France have 
the cash system and pay as they go. The circulation of the 
country consists of about $1,200,000,000 in specie and about 
$5500,000,000 of irredeemable legal tender paper money, 
issued by the Bank of France. The London Standard of 
April 14, 1876, in commenting on the remarkable condition 
of the French finances, says: 

"The Bank of France at the present time occupies in the 
financial world a position more remarkable than has ever 
been held by such an establishment! Its notes enjoy a 
forced currency and are a legal tender in all l>uMnc>s trans- 
actions, yet those notes suffer no depreciation. They pa.v* 
from hand to hand for precisely the same value as gold. A 
sufficient explanation of this fact may, perhaps, be found by 
some persons in the circumstance that the bank has accumu- 
lated in its coffers at this moment the greatest quantity of 
the precious metals that has ever yet been possessed by a 
single establishment. That, however, does not really account 
for the undiminished credit of the bank. For even in the 
agony of the last war, when the veteran armies of the empire 
were prisoners in Germany, when Paris was closely in\ 
and one-third of the departments were occupied by the 
invader, the bank's notes were at no greater discount than 
two or three per cent., and almost immediately ro-e to par. 
It is, then, the admirable management of the bank, not the 
satisfactory nature of its reserve, which gives to it the confi- 
dence it commands. It adds to the peculiarity of the POM- 
tion that, although tho bank p.v M x., > u stock of gold and 
silver out of all proportion greater than is held by any other 
bank in the world, it does nut propose immediately to 


resume specie payments And what i* more remarkable 
still, nobody demands thai it shall do - 

A further examination of the monetary s\-tem <t 

nations would diselo-e >imilar peculiarities and dinVn-nces 
in some gold is the only tender, in others >il\cr, 
others gold, silver and paper. In Au*tria, for example, 
silver pieecs of the denomination of one and one and a hah' 
florins are a legal tender to any amount. <ild i- 
coined into pieces of the denomination of four and ei-^lit 
florins (about %L } and $4), but as gold is not :i tender, r 
is regarded as merchandise and fluctuate* in value like 
other merchandise. The Austrian *y>tem i* modeled after 
the British system, silver forming the ha*i* instead of ^ol-l, 
and it lias proved there as elsewhere a MU: 

From these facts it is manifest that a people >h<>uld b 
far more concerned about the manner in which their mone- 
tary system is instituted than ain.ut the material of which 
their money is made. The chief function of money is to 
exchange property and commodities, and it should le in^ti- 
tuted in such a manner as to enable this to lie -lone econom- 
ically and equitably, so that all rla**e< may be duly ivu 
in the distribution of the products of labor, according to 
their deserts. 

People strive to accumulate wealth, ami wealth, in it* 
ordinary signification, consists of property and mone\ . A^ 
money, by virtue of its legal properties U : m equivalent for 
all kinds of property, its pos>e'nm i- eagerly sought, and 
hence it seems that people are seeking solely for n 
which is not the fact. Money N -imply the mean* to attain 
the end, which is dominion o\er property. K<:il value 
belongs only to property or product*, and money is the 
medium by which it is represented, mea*ured and exchanged, 


and hence money, properly considered, is simply a tool of 

As has already been explained, the population, commerce 
and trade of the world lias long since outgrown the supply 
of the precious metals available for the purposes of a medi- 
um of exchange. Other forms of money are in use in all 
civilized nations. The larger operations of trade, both for- 
eign and domestic, are carried on almost wholly by means 
of paper devices or substitutes for money, which represent 
and are based on the value of the commodities exchanged. 
Bills of exchange constitute the real "money of the world." 
The trade between different sections of the country, like the 
foreign trade, is carried on almost entirely by means of bills 
of exchange, checks, drafts, etc., and no one will say that it is 
not more economically and safely done than if it was carried 
on by means of gold and silver. The volume and amount 
of the bills of exchange, etc., used are limited only by the 
exchanges to be made. If any one were to suggest that bills 
of exchange, drafts, etc., whether foreign or dcmicstic, should 
be limited in volume and amount by law, he would probably 
be denounced as a fool, and yet it is just as absurd and fin- 
more unjust, to limit the volume and amount of the legal 
tender money to an amount manifestly inadequate t> effect 
the exchanges of the nation. 

Money, by reason of its legal properties, under any cir- 
cumstances, has sufficient power over property to enable it 
to perform all the osential functions of money, namely, to 
exchange and accumulate value; but to limit it in amount, 
as by selecting ;i rare and expensive material like gold, or 
by arbitrarily declaring by law, as in the ca-c of legal 
der Treasury Dotes, that it shall not exceed a certain sum, 
without regard to population, extent of country, or exchanges 
to be effected, is to invest money with an extraordinary 


|K>wer over property, labor and trade, -und in princi- 

ple as it li;iv proM-d niinoii.v in pra< 


The issue presented lo tlu- American people, tii.-u, in t| K . 
present crisix, i> not between specie ami paper'-y, Imt 

BOH tWO systems of money, both in\ol\ 
pajii-r i-ui-iTiic-y. Xo IIKUV in|Mirtant ijm^t'nm c.'i!,i .. 
arise, for upon its |nipi-r solution dt-j.i-n.N .y the 

present prosperity of the nation, iut tin- wrlta: .t' the 

plb for i;vmTation> t conn-. " .Muiu-tary lau -," sayi K< . 
ure ^ le luost important that arc fiiai-tc-.l, for by these 
s money is made the temler for <lehts an-1 tin- nifliuin 
of exchange for products. All indivi-luaU arc < .inpcllcd to 
found their contracts for the necessaries oi' liu- upon the 
standard lixed by law. However good the intention of tin- 
panics, their contracts will partake of the evil of the mone- 
tary laws upon which they are founded, and every la\v that 
goes to support the fulfillment of the contract* will partake 
of the same evil. * * The laws make money tin- founda- 
tion for all business contract*. The value of thi> fotin 
is unjust and continually varying, so that parties in fulfilling 
their contracts are compelled to give either more Of ten 
than a just equivalent for their pur. 
all 'contracts are as varying and unjust as their foun-! 
The continual fluctuation^ in the value of money m 
sort of gambling system of all trade.' 

Tlu 1 distinguishing feature- of the t\\o i 
The Specie JJaMs or Hank Currency Sy>Um and The i 

Tender Paper Money System, which are now p. 

the American people for th-ir adoptioi, 

been duly explained in l!ie fore-join: If only 

remains now to bring them t< t the 


advantages and disadvantages of each may be fully dis- 


The specie basis or bank currency system originated with 
the Bank of England;* it was introduced into the United 
Stales about the time of the Revolution, and has exercised 
a powerful influence upon the business and social relations 
of the people of the United Stales since that time. 

The fact that bank> of issue have existed in the United 
States for over three-quarters of a century has led many to 
suppose that issuing and lending bank notes constitute the 
chief business of banks. Issuing or lending bank not 
the contrary, is a mere incident of the business of hanking. 
The great function of banking is the adjustment of pay- 
ments, growing out of the exchange of property and com- 
modities, by means of devices of the credit system, such as 
bills of exchange, etc. Banking, as we have explained.* is 
an agency of trade, second in importance only to money 
itself. For many purposes of trade the means of payment 
afforded by hanks are preferable to the use of cash, a< where 
they obviate the neceity of transferring or ret ran>f erring 
money between individuals, localities and nations having 
mutual dealings. The great error of the specie basil 
bank currency system of bunking consist* in thi>, that the 
banks, not. satisfied with furnishing the mean* of payment 
best adapted for carrying on the larger operations of trad-', 
seek to compel the public to use the same means of payment 
(device* of the credit system) in all the operation^, of trade, 
although for many purposes ca>h is preferable to credit. 
Xo dividing line can }>c established between the n*r of casi, 
and credit, and it is manifestly but the part of wisdom to 
have money -<> instituted that commerce and trade can avail 

See page v.t. tSee page 76. 

N BOOTH) ri:i\. IPLE8, 313 

themselves of either cash or credit in such proportioi:- 
Jiiay IK- most advantageous. If tin- circulation UQUfif( 
bank currency this cannot bo done, because bunk < in ivnr\ 
is credit and not cash. "The l):mks of tin* I'm'ted St.v 
Bays Col well, one of the mod oonscientioai a- \\ ! 

found writers upon the subject of moncx, "are, properly 
hpeakinir, dealers in credit. So far as their capital i- i 
up in LC'>ld or silver, it is reserved as a security l'.r their 
circulation. It is a rare thing that a hank lends i^-ld ni 
silver. Their business consists mainly in pun-ha*iiiur <-"in- 
inercial paper that is, the eviilences of debt taken by m< -;i 
of business in the ordinary course of their affairs; in pa;, 
for that paper with bank notes, or with credits granted upnii 
their books; in receiving upon deposit their own n.te- and 
claims or transfers upon other banks; in allowing a n mutant 
transfer of deposits, in the way of payment, amon^ their 
customers and those with whom they deal. The banks, 
then, are not lenders of money, though compelled to pay 
their obligations in money. They are founded on the idea. 
tliat an av-ociation of men, with a paid up capital, and a 
corporate existence-, is entitled to a higher credit than indi 
viduals, and that the latter mi-lit tind it ^really for their 
advantage tO avail themselves in their bu-inexs transacti'>n 
of this superior credit/' It is undoubtedly highly advanta- 
geous to individuals to be enabled to avail theniM-lvi-s of 
this superior credit in many of the operations of trade, but 
it is equally important that they should be enabled also t> 
avail themselves of the use of cash in other operations. 
Under the hank currency system cash does not circulate 
the channels of trade, hut bank notes and these are contin- 
ually beinu: returned to the hanks in payment of debts. 

The following extracts from The Wayt and M.-ans of 
Payment, to which we are already so much indebted, will 


convey 11 clearer idea of the leading principles, which 
underlie the specie basis system, than we could otherwise 
hope to give. It should be remembered that Mr. CohvelPs 
work was written prior to 1860: 

"We have seen," says Col well, "that the credit system 
rests upon the fact, that the business of purchasing ami 
selling commodities is separated from the business of pay- 
ments; and upon the further fact, that the commodities 
which men sell are made to pay for those they purchase. 
So far as credits and payments are concerned it is the main 
object of every man to apply his credits to pay his debts; to 
employ what is due to him by others in discharging that 
which he owes to others. The main agency in this is the 
banks. It is well known that all the large transactions of 
business are made upon the credit of the parties concerned 
in them; that the great staples of the country, as well as 
foreign goods in large quantities, are bought and sold upon 
individual credit. The market value involved in cvcry 
transaction is expressed in money of account, and appears 
on the face of the bills of exchange and promissory notes 
which the purchaser gives, and the seller tikes, as evidence 
of the debt incurred and credit given in each case. Tl. 
evidences of debt and credit, which represent, in various 
shapes, the market value of the commodities, foreign and 
and domestic, as they move in the channels of trade are the 
very articles in which it is the object and proper business of 
the banks to deal. The parties to these evidences of debt, 
or this commercial paper, having delivered and received the 
commodities upon which the credits and indebtedness 
alike founded, have the remaining duty of payment to 
fulfill." * * 

"Men extensively engaged in commercial and industrial 
pursuits are, by the very nature of their business, both buyers 

N BOOTD ri;i.s. n-LBS. 

ami sellers both del dors ami creditor-, [tlfl important to 
pay their debts, and realize their credit-, \\itii the least 
trouble, expense and waMe of time possible. When any two 
of them have mutual accounts against e:ieh other 01 
books, they compare and balance them; < 
paid, and credits so realized, Are a< xri-factorily paid and 

reali/ed as if gold liad pa-M-d <>n each tr.iii-.i 
man of business indebted upon promi^m \ note* and bills 
of exchange, and holding sm-h paper >!' othen t'-n- debts 
due to liini, is only desirous of applying his credit* to his 
debts. He never thinks of looking for gold or sihir to 
effect a discharge of his debts, and as little do.-* he think of 
exacting such payment from those who ;nv indebted t. 
him." * * 

"The banks of the United Stato are the cliict 
in this mode of payment. They offer t!u* means and f.i--i!i- 
lies of payment which the partie-; t.> thi* bii>ine p-iper- 
reijuire. They receive this paper., having some months to 
run to maturity, and deducting interest for the time, give 
the parties bank notes, or a credit on their book-* for the 
pyoeeeds. This is not turning indi\ idual notes into money, 
it is -imply turning them into promissory not. bank, 

or deposits; these being of higher credit, and lilted, from 
the manner in which they a:e issued, to ! u-ed a< :: m 
rency or a medium of payment. The real basis of the. 
individual notes discounted by the bank i- the .'inmodities 
which the person giving the not. d. Th> 

contracted debts to the .^evcral amounts of their notes, and 
against these debts they hold the purchased comnu> 
They offer the goods thus purchased to the public, and 
expect, from their sale, to realize the means of paying t he- 
debts. The discounted paper, therefore, exhibits on i: 
the true market value of thc commodities purchased by it; 


and the bank notes, or bunk credits, given for this individual 
paper have the same basis, with the added guarantee of the 
bank. All bunk notes and bank credits issued upon real 
business paper are virtually issued for commodities actually 
moving in the regular channels of trade. The purcha- 
of these commodities expect to realize enough, by their Hale, 
not only to pay for them, but a profit beside. 

"It is this process which is continuall,/ nhtorbiixj 
bank notes and returning them to the bunk*. The 
sellers of goods receive the paper of the purchasers, and 
dispose of it to the bank, taking therefor bank notes and 
bank credits, the latter of which they employ in paying their 
debts, and the former pass into circulation in the retail 
business, and in this way soon reach the hands of the 
debtors of the banks, to whom they are always as valuable 
as the equivalent, or same nominal amount of gold or silver, 
and even more desirable, because they pay debts to the 
bank equally well, and with less trouble, expense and haz- 
ard." * * 

"If the banks in any community have discounted notes to 
the amount of a million, averaging sixty day> to maturity, 
granting credits therefor to the amount of $990,000, they 
will promptly give up any or all the notes going to make 
up the million, for a return of their credits to the amount. 
The banks give nothing for the notes discounted but credits 
on their books: what they gave for the notes they are 
willing to receive in kind for them. The profits of the 
bank, being the intcre-t, for which they i ued no credits, 
must of course be paid when the notes are retired. The 
main business of the banks consists, then, in pnn-ha>in_ r 
Commercial securities and evidences of debt, paying for 
them with their own notes and b;uik credits, and deducting 
the interest for their profit In doing this, they not only 

i I-..N IOUHD ri:i\. ii 317 

furnish a medium of payment in which these < 
eeurities can be discharged, &til <-'ir,',',n<>y r/,,v/, 
be employed in the itift /<///, In-fore it is app! 
extinction of these debts. What chiefly make> th; 
available and effective is, that there is an acti\c and 
ileinuml for it, to the whole amount due to tin- hanks th:it 
is, for more than all the banks have ixxited. This demand 
is active, urgent, daily, unremitting: the ootei in hank are 
maturing daily, and the demand, tlieivfoiv, n. \.r flags; 
every day lias ils payments, which are to he enV.-ied with 

money, or the issues of the bank*. The latter, in any i- 

muiiity where there arc banks of circulation, hcin-_: tin* chief 
medium of payment, is the medium inoxt in demand. 

"We have shown that, in all casex \vhcre the> dix- 
counted by the banks were given by the makers of them fur 
commodities of daily use and consumption, t! ;. nodi- 

ties are immediately offered to the public for hank notes, or 
checks on bank deposits, as the proper fund with which to 
pay the discounted notes. The commoditie-, by their sale, 
give origin to promissory notes; the promissory int i s give 
rise to the bank notes and credits; these become, in their 
turn, a medium with which to purchase the commodities; and 
the bank notes and bank credits coming thu^, by circulation, 
into the hands of the debtors to the banks, are returned to 
the banks in payment of the discounted notes." 

"In cases where banks discount paper not given for prop- 
erty transt't rred at the time, it K or should be, on u- ii 
grounded confidence that the maker of the paper has tho 
power or means of redeeming from the hands of the public- 
an e|iial amount of the issues of tho bank. The hanks 
being large holders of individual paper, either discounted 
or deposited with them for collection, they are of course 
constantly looked to for the mca- nu-nt; a 


on the hook* of a bank, granted >y tho bank, or derived 
from another quarter, being .'ill that is required, it is earnestly 
sought for that purpose. Where there arc many banks, ami 

Tansaetions in business and upon credit, the movement 
of these payments in banks, and the consequent movement 
of bank credits or deposits, become far too complicated to 
be followed up by any process of analysis. One great fea- 
ture, however, must ever be prominent, and that the most 
effective of all in sustaining the present banking system; 
that is, that every debtor of a bank is an active agent in 
purchasing and returning to the bank its notes and credits; 
that the issues of the banks, whether notes or credits on 
their books, are more available, convenient ami economical 
for these debtor*, than the legal currency of coins. They 
.ire more abundant, more easily obtained, and equally 
effective. It is this which gives to bank notes and bank 
credits th< ir efficiency and rapidity of movement. The 
amount of the circulation of the New York banks avcra^'d 
over $8,000,000 in 1857, ami the deposits averaged over 
$87,000,000. These constitute tho medium in which the 
payments of the City of Xcw York are chietly made. With 

. there is a daily payment to be made of from $30,000,- 
000 to $50,000,000, and they are quite capable of making 
that amount of payments each day, for both notes and 
depo-ii> may be paid many times during the day. It ; 
safe to assume that over $30,000,000 of city bank not' 
depoftite are paid each btuinesfl day in New York. There 
is a demand, then, Upon these notes and deposits in 

i-aymenN, to tho amount of $200,000,000, and in 

month for $800,000,000. This demand daily, weekly, 

monthly, constantly pressing upon a- fund of bank not 

deposits, which may at no tin 1 $100,000,000, is 

certainly active and proving enough p up the value 

ri:i\ IIM i>. 319 

of a fun<l MI min-h n-ed, ami s<> indispensable to tin- men 
who have *-JOO,000,000 to pay every week. 

"That these sums an; far within the actual daily payments 
of New York is apparent from the operations of the C'learing- 
hou>e. The amount cleared daily, in 1 80 7, was over $20-, 
000,000, and these clearings are but the balances on the 
transactions between tho banks. A vast stun of payments 
is made every day in the business of sa -h a city as \e\v 
York, which is in no way embraced in the transactions of 
the Clearing-house. If we assume that the whole of the 
payments effected yearly through the agency of banks in 
the United States, is only ten times greater than the amount 
paid yearly in New York, wo shall have an aggregate 400 
times greater than the amount of tho precious metals in the 
country; 500 times the amount of the bank note circulation 
of the United States; 400 times the amount of bank deposits; 
and oU times the annual value of the whole productive 
industry of the country." 

"In the great movements of industry and trade, goods 
and services pay for goods and services; the promissorv 
notes, bank notes, bank credits, or other currency^ which 
intervene, are devices of adjustment) and not the very pa v- 
nu'iit ultimately aimed at. Men give what they have t- 
spare, to obtain what they .desire. If they do not, in the 
first instance, sell for money, and with that purchase what 
they want, they tike a security or evidence of debt; thev 
make their purcha>es upon their individual credit, and give 
evidences of debt. The debt and credit extinguish each 
other in the banks, and the parties have, in substance, 
exchanged goods; all the rest is merely keeping and bal- 
ancing accounts between them. These securities are issued, 
in this country, to an amount not less than 1,000,000,000 
every three months, in which period this amount continually 


runs off and is renewed, making ^4,000,000,000 in the year. 
Of this $1,000,000,000 of securities, the banks become the 
owners and collectors; and for half this amount they are 
under a constant engagement to pay money on demand. 
To meet this engagement, the banks hold 860,000,000 
against #500,000,000, or twelve per cent, of the amount. 
Of course, absolute convertibility of all this fund of securi- 
ties into specie, on demand, is an impossibility. If all the 
gold and silver in the country, estimated at $250,000,000,, 
were in the banks, it would be an impossibility. It must. 
therefore, continue to be impossible; and IK-IK-" arises one 
of the gravest difficulties connected with banks of circula- 

"If bank notes, like checks upon banks, were confined in 
their use and circulation to those at whose special instance 
they are issued, and whose debts are to be adjusted by 
them, there would be less occasion for any public interven- 
tion or concern. For the public have little interest, whether 
men thus mutually indebted discharged their debts by bal- 
ancing accounts, by bank notes, or by checks on banks. 
I>ut the experience of a century and a half lias sho\vn that,, 
where bank notes are offered as a currency, they are fr. 
received, and BOOB become the chief medium of exchange. 
It is almost invariably true that, wherever bank notes are 
offered as a currency, with even the slightest pretentious to- 
regularity and security, they are accepted, and pa>s rapidly 
into 'general circulation. This facility of converting bank 
paper into a currency is a strong temptation to ivxirt to it, 
and accounts in p:trt for the multiplication of banks of 
circulation in this country and eKewhere; but it lias given 
, also, to that ceaseless jealousy with which this system 

of banking has b.-ni \vat.-lie.l. There N, perhaps more 
ground for this jealousy than many friends of the 


have been willing to a<-kno\\ K -.1^,.. If the < in-ulation of 
bonk notes had been confined to the payment of the 

in whicli they originate, n<> more mi~ >:ild cn-ue tlinit 

now arises from the cmplo\ nu-nt of oheokl upon 
which the parties using them are interested to ke, ], 

legitimate and safe bounds. Hut as hank not,-, wl* 
Offered, Secure 8 wide circulation, it is n,,t t-ii.Mfjh 
let people take them at their ri-k, a- tlu-y take them at their 
discretion." * 

"We have said, and the ti^mvs uc ha\i- addm-.-d >ho\v, 

that convertibility of tle notrs and d-p.-iN <f our ! 

impossible, evi-n when the hanks are in tlie lu--t nutditiuii. 

And that this must, continue t In- tin- 

the banks of the I'nitcd Statt-^ aiv, i- U certain, 

feiltitn- of the bu>im-v> of tlie>i- lianks i> the di--<,unt of 

notes maturing at ft future time: Wv i have previously assumed 

that the average time to nuiy ol the paper ilm^ i 

is ninety days, or one-fourth of n veai-. Tlu-y i>^iu- t> the 

jiarties at whose instance thr-- di^eount- an- m.idi-, their 

notes payable on <lemand, or v irive tliem eredit on : 

for the proceeds, payable in like nianm-r on demand. 

lejMiits of the banks are made up, almost altogether, from 

the notes thus issued, and the credits thu granted. The 

circulation and deposits <.f l^:>i; amounted to $443,000,000, 

for which the banks, by this modi- of doin-_r bu>ine--, '(HMMIHI- 

liable on demand; that is, they i from their 

mers claims on tin- public malurinir in three months, and 

they become liable t> |>ay a rertaiu amount on di-mai 

the 'year 185G, for instance, in e\cry tlim- mouth*, * 4 43,000-, 

000, and in 1837, in every like jHiioil, ^500,000,000. The 

paper discounted by the banks not feeing payable on demand 

would only be paid, and could only be demanded 

matured from dav to day; whether the stuns thus paid into 


the banks were eiglit or ten millions daily, it was all the 
banks could exact, and if the notes had not been discounted, 
the amount required to pay them would have been the same. 
But the banks became liable to the payment of from $445,- 
000,000 to 8500,000,000 in any one day in 1S5G and 1857 
a position, stripped of the mists and prejudice which con- 
stantly surround it, which should be called, as it really is. 
stupendously absurd; and, in times of commercial revulsion, 
not less dangerous than absurd." 

"Banks of circulation, however, here and elsewhere, are 
and continue to be placed under stringent legal obligations 
to pay their liabilities in coins. If any law could compel 
them to do this, and still leave them power sufficient t 
carry on the business of banking with the same advantage 
to their customers and the public as at present, the currency 
they would furnish would indeed be the best attainable for 
circulation. For a paper currency of sufficient amount, 
absolutely and at all times convertible, would combine 
almost every conceivable advantage. The obstacle is, that 
such a convertibility is impossible; no legislation can a 
plish it; the omnipotence of the British Parliament could 
not achieve it. Even the unusual provision in the constitu- 
tion of the State of New York, which denies the power to 
the Legislature of legalizing a suspension of specie payments, 
availed not in 1857, during the tearful panic of the hundred 
days, This precaution about the notes did not extend to 
the deposit-,. The bank* suspended upon their deposits, 
which were ten times the amount of their note-. They have 
since resumed, and have now $31,000,000 of specie t< 
$90,000,000 of notes and deposits. With this enormoii- and 
unusual accumulation of gold, payment on demand AMU 
only on the forbearance of the people. The depositors 
could bring the banks to a fckite of Mi>pcn>ion in two hours. 

UPON 801 M> I'KIN. II 323 

Upon tliis MHIOM phrase that .Mir bank 

circulation ix haM-d ,,., -,,] I an. I .silv.-r i* absoluti-ly uiitrur. 
If our paper currency had no otln-r I:IM* than l\\\^ 
uncertain. iiiM-cure, ami ultimately impo^'ibl,- convertibility. 

d not be upheld f..i- a ireekyDor even .-i day. Tin- 
real ba>i> nt' mil- paper currency, that \vhi-h <l<H-s M^taiii it 
through extraortlinary cnicpj-rn. !(-. i- tin- imliviiluiil 
issory n.'.tes, and other t-\i.K-nci-> of ,1,-l.t, in e\-han 
which it is issued. The>i- inu>t all ! pail, or the debtors 
must fail or sus])enl. The l)iisines< nu-n of th- I'nitr.l 
States owed the banks, in 1850, the MUM of $684,000,000; 
and the hanks were indebted, for their eirrulatiiui and 
deposits X44.-> ? 000,000. If we supjM.^e that tlioe debtors to 
the banks wen- 100,000 in number, '\\in-_: an a\er:ige of 
$6,840 each, all this mass of bosinesa m n would be :n-ti\r 
agents in redeeming the iaraei <>f the bank-, -f which the 
average burden of eaeh would be ^4,450. The products of 
the industry of a country being sold, indiv'ulnal paper being 
given therefor, and the iin-x <-f the bank bein^ _riven fu- 
that individual paper, it is evident imt only that the : 
are based upon that paper, but it is equally evident that the 
commodities for whieh the individual* i^>u-,l their paper 
have eonie into their hands, that they have these commodi- 
ties t--- offer to the public for the notes in eilvtilation, and 
for checks on the banks, with whieh to pay their debts. The 
real strength of the banks is in this that their business IB 
founded on the trade and industry of the country; and all 
the. business men, with the eommod- -ump- 

tion in their hands, are under the stnmgt-t in.lneenn 
offer these commodities for the notes and d t the 


"It must not, then, we repeat, be supposed that the basis 
of our paper currency i- ipecie; the fact is, and must be, 


otherwise; that is no foundation to be relied upon, which 
must go with the tirst flood. No superstructure like our 
banking system should be reared upon a quicksand. We 
do not urge this as an argument against convertibility on 
demand, in the aspect of a check upon tlie banks. It may 
be necessary or expedient, but cannot be so on the ground 
of its being the basis, or adequate security, <>t* bank issues 
We should not make the concession even by implication, 
that $50,000,000 or $60,000,000 of gold and silver can be 
any proper basis for issues or liabilities of the banks to the 
amount of $445,000,000 to $500,000,000: it is a mere delu- 
sion, to regard the former amounts as sufficient to sustain a 
demand for the latter/' 

u \Ve object, then, to a phrase so likely to mislead, as that 
of calling gold or silver the basis of paper currency, under 
the present constitution of our banks. The obligation to 
pay on demand can be nothing more than a check on the 
abuse of banking, or a security to the public, and as such 
only should it be regarded and discussed. If it be indi 
pcnsable, it is upon the ground that no other adequate 
security is attainable. \Vo do not believe this, and regard 
tli is attempt to place the credit system on the back of our 
coinage system, as partaking of that caution and wisdom 
which would place a locomotive, for its best service, upon a 
one-horse cart." 


I'nder the specie basis system the money of the country- 
is- locked up in bank vaults as the basis of bank currency, 
and the business of the country is necessarily earned on with 
credit and currency. The amount of credit and currency 

IB limited, not by the amount of specie held by the bank-, 
but by the amount of property and commodities moving 


in tin' channels of trade. Tlic cost of such .1 medium of 
exchange is enormous. The amount of the loans and di- 
counts of the banks during the year is;.") amounted, on an 

average, to nearly * 1,000,000,000, the interest on which at 
10 per cent, is $100,000,000.* The loans and discounts 
made outside of the banks doubtless exceed the loans and 
discounts of the banks, but assuming that they are the same 
(* 1,000,000,000), and that the rate of interest averages 15 per 
cent, f.u- the year, it would amount to * 1">0, 000,000, or in all 
$250,000,000 paid yearly in the way of interest. 

there is another method of arriving at an approximate 
cost of the syMem, which makes the amount much larger. 
The clearings of the banks of New York city average 
about $20,000,000 daily. Estimating the payments of the 
city of New York at 40,000,000 daily, and the payments 
of the whole country at five times that amount, or $200,000,- 
000 daily, will give $60,000,000,000 for the year. If this 
vast sum of payments costs the payers on an average 60 
day*' interest, or say one per cent, on the whole amount, it 
will make the sum paid yearly under the credit system 
$000,000,000. This vast sum is paid by the industries of 
the country. AVith a medium of exchange occupying the 
channels of trade, unencumbered by interest, such as specie 
or legal tender Treasury notes, the greater portion of this 
enormous sum would be saved to the producing classes of 
the nation. The interest paid for a inodivm of exchange 
furnished by the banks and for the use of credit rendered 
necessary by the bank currency system, is a burden upon 
production and trade, that can only be removed by tin- 
extinction of banks of issue and the substitution of legal 
tender Treasury notes for bank currency. 

See Page 2GO. 



When the business affairs of the country are in . 
operation, the whole amount of credit and currency available 
for the purposes of trade is in constant demand. A 
increases the demand for credit and currency i: 
until it becomes inflated to a dangerous extent, or a demand 
for specie may arise abroad. In either event the banks arc- 
obliged to provide for their own safety, and the withdrawal 
from business men of the required amount of currency and 
credit produces a stringency, which inevitably leads to d: 
ter. The manner in which this happens is thus explained 
by Col well: 

" It is not difficult to see what abundant food for panic there 
is in such a condition of things. Persons in the Unite' I S; 
have claims to the amount of 8400,000,000 on the hunks, 
payable on demand; these claimants know that the hanks 
cannot pay in specie the fifth part of them, and often not 
the tenth part. And although the specie is not what they 
need, or would ever have asked, yet they know that the 
hanks may stop payment in an hour; that they will then be 
branded as bankrupt; and that they may thereupon be sub- 
jected to injurious and damaging legal proceedings: panic 
becomes, therefore, inevitable. Men in such ciivui: 
feel themselves to be involved in a widespread, complicated 
calamity. They fear the roult, not only for the amount of 
their present dcp>iN, and the bank notes they h<ld, but 
they tremble for oilier debts due to them, and are in equal 
dread about what they owe. They know that if this 
machinery of the credit system i> Mopped, or seriously 
diMtirbed, debts cannot be paid. The banks, under the 
influence of a panic, knowing that they can neither trut one 
;hcr, nr the unreasoning public, for an hour, adopt what 
ins to them the only >aic OOHT8e; th- 6 in payment 


all their issues a> t'a-t a> cunviit payments return them, 
without, however, as usual, keeping up the currency liy 
fresh discounts. If the payments at the banks amount in 
the- 1'nited Stato, for each day, to $300,000,000, tin- with- 
drawal of the iiMial facilities at the banks by contraction, to 
the extent of even one-half, would rapidly al)sorb the stock 
of bank notes and deposits applicable to current payni- 
and of course make thoe payment^ daily more difficult, and 
finally, to a large extent, impossible. High interest, such 
a> eighteen, twenty-four or thirty-six per cent, per annum, 
supervenes in this hour of trial to check still further the 
circulation of that portion of the bunk notes and dep* 
not absorbed by the banks." 

"The contraction in New York, in the panic of 1857, is a 
specimen of what the banks are constrained to do, to save 
themselves. They can only protect their coffers by refusiiiir 
to issue the usual supply of currency. The diminution of 
loans and deposits in the banks of New York stood thus in 
August and October, 1857: 

Loans. Deposits. 

loth of August $121,241,472 $92,356,328 

19th of September 108,777,421 75,772,774 

17th of October 97,245,826 52,894,623 

"This exhibits a reduction of discounts, in one month, of 
$13,000,000, and the succeeding month of $11,000,000; that 
is, 824,000,000 in sixty days: in one month dep>ii< ran 
down, under this operation, $17,000,000; in the succeeding 
month, $23,000,000; making, in the two months, a redue:i"ii 
in the chief medium of payment of $40,000,000. The 
deposits were thus reduced nearly one-half. It cannot U 
surprising that, under such a process of contraction, interest 
went 14) to between fifteen and thirty-six per cent., and 
exchange down to nine or ten per cent, below par. \Vhat 
the banks did in New York was done, in a greater or les> 


degree, in other cities; bankruptcy, ruin and destruction 
followed. It is estimated that from five to six thousand 
failures occurred, involving an indebtedness of from $280,* 
000,000 to 8300,000,000, with a loss to creditors of more 
than 150,000,000. But this loss bears no comparison with 
that arising from the depreciation of securities, and from 
the fall in price of real and personal property, which, judg- 
ing from the results of estimates carefully made, cannot be 

than ?"> 00,000,000, and may not improbably be t\\ 
that sum. The loss sustained by the men who labor for 
their living is even more severe in its consequences, if not 
equal in pecuniary am unit. A million of men idle for 
six months involves a loss to the country of $150,000,000, 
besides the loss upon the machinery, shops, tools and facto- 
ries which stand idle when the workmen are unemployed. 

"Tlie late panic has inflicted, in all its bearings and rami- 
fications, a loss upon the country which may be variously 
estimated from $500,000,000 to $1,000,000,000. No doubr 
the ill effects of the panic- were much enhanced by the piv- 
vious abuse of credit, ami that a considerable portion of this 
devastation should be set down to that account. With 
every allowance in that respect, \ve shall have a vast -um of 
lovs to charge, to the panic; and whether this sum be $400,- 
000,01 HI, ,,i- $800,000,000, matters not to our view. The LoM 
\va, to jjivat extent, unnecosary, cruel, terrible a lo-- 
which ha> can-led privation, di-trcss and ruin to a million 
of home-. For a time, at lea-t, not yet passed, it reduced 
hundreds of thousands of the best people to a state of entire 
lence, if not beggary. 

44 Wlial was the occasion of the-e dire calamities;' The 
bank- i,f the United States had a reserve of specie f,.r sev- 
eral years previous to H.57, and during the fiiM half of ' 
year, amunting lo somewhat over $50,000,000; and of tin-, 

\ BOUND PI:IX< iru>. 329 

tho banks in tin- city of New York held a little more than 
one-tifth. To save this amount of specie, tin- banks con- 
tracted the currency one-half, denied the usual facilities 
upon tlieir books, put up tlic rate of intercut from twelve to 
thirty-six per cent., put down exchange upon Kngland t> 
nine or ten per cent. In-low par, reduced the revenue from 
customs to less than half the usual amount, drew a surplus 
of $20,000,000 of gold out of the public, treasury, and drove 
the government to an issue of paper promises to pay it- 
current expenses, deprived hundreds of thousands, perhap> 
millions, of their customary employment, caused some live 
r s':\ thousand failures among men of business, and finally 
inflicted a loss on the country, in the depreciation of securi- 
ties, in the reduction of prices and by insolvency, of several 
hundred millions. Not to save this sum of fifty millions 
from being lost, sunk in the ocean, or thrown away, were all 
these evils encountered, but merely to prevent it from pa 
ing into circulation among the people, or at the worst, to 
prevent it from being exported in payment of debts due in 
foreign countries. Nine-tenths of the debts of the country 
are paid, as we have seen, by the agency of discounts and 
deposits, with some aid from the circulation of the banks; 
but the banks have been placed under such heavy penalties 
to pay all their liabilities in specie on demand, that when 
they are threatened with a panic, a commercial revulsion, or 
a heavy export of specie to foreign countries, they an- com- 
pelled, like Sampson in the temple of the Philistines, to pull 
down the whole fabric of credit, public, and private, ;ib. nit 
the ears of the people, to disturb and check the progress of 
industry in all iUs departments, to make bankrupts of their 
customers, and to sow pauperism broadcast in the field of 

"This compelled policy of the banks, under the stringency 


of the l:i\vs which govern them, has been called p;r 
-pecie. JJut with how little propriety. Instead <>f p:r 
their liabilities with eoiiiuiercial promptness anl tin- faith- 
fulness of those who are discharging a legal and moral 
obligation, they resist it with all the power and wea: 
they can command. In the struggles incident to tl 
ance, they strike down friends as well a> enemie-s, and 
deprive the public, of an amount >f currency neceary to 
businessmen times greater than the specie they are unwilling 
to pay out. Ami this is the convertibility so long aimed at, 
and to secure which so much legislation and so \\ 
thought has been expended! This is the triumph < banks 
which pass through a season of panic and revulsion without 
suspending] a triumph like the victory which leaves 100,000 
dead bodies on the Held of battle, which rnako lu,uoo 
widows, 50,000 orphans, and 200,000 pauper-." 


With the clear and comprehensive analysis of the princi- 
ples of the bank currency system, contained in tl. ing 
extracts from The Ways and Means of Payment, before us, 
it IB not difficult to understand how public notes i^m-d by 
the government can perform the functions of a medium of 

The great object of trade i> the exchange of commodities 
and M-rvici--, and it is immaterial to the parlies ii/ 
whether this exchange i> effected by means of a medium 
possessing intrinsic, value, or p-pre>entative value, a- i 
as it i> done with equal safety, convenience and C 

Public notes, like bank notes, are virtually based on com- 
modities moving in the channels of trade. There i 
stant interchange of commodities and services <>i 
scale going on between individuals, growing out of the 

8Ol M> I-IM.N" IPLB& 331 

necessities of government, Federal, Slate and local. To 
effect tliis exchange a medium is rctjuired. On the one >ide 
arc the people, who :ire obliged to contribute out of their 
substance in proportion to their means towards the expenses 
"I" government. On the other, there i a va>t multitude of 
people to whom the government, r'edcral. State and local, 
is indebted for commoilities and services. The people 
possess abundant property and products desired Ivy the 
creditors of the government, and the only problem to be 
solved is as to the manner in whieh the exchange can be 
equitably, speedily and economically accomplished. This 
can be done, and as it is a matter in which the entire nation 
is directly interested, it is eminently proper that it should 
be done, through the instrumentality of public notes i>sued 
by the government. Individuals engaged in trade employ 
the superior credit of banks to enable them to exchange 
commodities and services; and this superior credit of the 
banks, for reasons which have been fully explained, sei\ e< 
the purposes of money, in the interval between the time it 
is issued, in the form of bank notes, to creditors of the 
banks, until it is returned by the debtors of the banks. In 
the same manner the superior credit of the government, 
issued in the form of public notes to the creditors of the 
government, performs the functions of money, until it is 
returned to the Federal Treasury by the debtors (tax payers) 
of the government. The bank notes n >t upon the credit of 
the institutions which issue them, and are a lien upon the 
assets of the banks, which consist of the property of the 
banks and of their debtors. The public notes rest upon the 
credit of the government, and are a lien upon the whole 
property of the nation. Thus far the analogy between pub- 
lic- notes and bank notes is complete, with the advantage 
largely in favor of public notes, for two re-i^on^: in the first 


place, public notes constitute a more economical ^medium of 
< -\ change, because they do not bear interest, and in the 
second place their security is more ample. There is not 
an objection to the use of public notes, as a medium of 
i-xchange, that does not apply with ten fold more force to 
the use of bank currency; while there are a great many 
objections to the use of bunk currency, which cannot 
be unveil against the use of public notes. It is said 
by the bullionists and bankers that the "security, though 
ample, is too general and intangible for the purpose; 
ami that the 'whole property' can only be reached and 
applied through the slow process of taxation." Tin 
begging the question. The process of taxation is going on 
constantly, and in point of fact the "whole property" of the 
people can be reached by a tax warrant much more speedily 
and certainly than the property of the banks and their 
debtors can be reached by process of law. 

A'_ r ain it is contended by the bullionists and bankers that 
a paper currency, in order to perform the functions of 
money, should be convertible into gold on demand. It has 
already been sufficiently explained that this is impossible 
under the bank currency system, unless the amount of notes 
i>sued does not exceed the amount of gold held for their 
redemption; and in that event there is no need to issue any 
notes, for the public ini^ln as \\-ell use the gold. Nothing 
ran be clearer than that paper currency is used chiefly for 
the purpose of supplying the deficiency of money occasioned 
by the scarcity of the precious metals; and to issue paper 
notes to the amount of three, five or ten times the amount of 
1 held for their redemption, and say that they are con- 
ible into gold on demand, is nothing more nor le>s than 
a fraud and a delusion, which inevitably leads to di>;: 

There is but one way to make paper money equal to 


>pecie, ami that is t> clothe it with the ability to perform 
the same functions that specie will perform. That this can 
be done is fully demonstrated by the instances referred t< 

by Jefferson* and ( 'alhoun, f ami by the experience of the 
French people at the present time. The partial legal tender 
paper money of the United States now in use fails to circu- 
late at a par with gold, because it is not clothed with the 
ame powers as gold, That Treasury notes of the govern- 
ment, when made a full legal tender, will circulate at par 
with specie was clearly established by the "old demand 
notes" issued in 1801, which, after they were made a full 
legal tender, went up with gold to $2.85, as compared with 
greenbacks; and at the present time we find the currency 
bonds of the United States government quoted at a premium 
of three or four per cent, over gold bonds. 


Much confusion arises in regard to the nature and func- 
tions of money, from the fact that people have been led t< 
believe that gold, in some way or other, has been made a 
standard of value. Such is not the fact, either theoretically 
or practically, as will be fully shown. 

The idea of value is something that exists in the miinN of 
the people independent of coins. The unit of value, which is 
established by custom and education, whatever may ha\v 
been its origin, is used abstractly. When once a unit of 
value becomes fixed in the minds of the people, or in other 
words has passed into the "money of account," it measure- 
all values and is capable of measuring the value of gold and 
silver, the same as any other commodities. "The value of 
the unit, or beginning point, being once firmly fixed in 
men's minds by constant use," says Colwell, "remains there 
wholly independent of subsequent changes of price which 

*See page 56. tSee page 19. 


may affect the specific article from which it took its 
Thus if it sprung from a coin, or a certain quantity of gold 
or silver, it becomes afterwards so independent of the^< 
to In- <jnite capable of expressing the changing prices of that 
or any other coin. It is, then, a matter of fact that all com- 
mercial people, keep their accounts, compute money, and 
express prices by the use of a money of account. The 
naming a price with them is not naming a coin, or any 
specific quantity of gold or silver; but it is the employment 
of the denominations of the money of account, which all 
understand to express a price. There is scarcely any mental 
operation more generally and constantly in exercise than 
that which is used to express prices." It was thus that the 
people of Great Britain came to keep their accounts in 
pounds, shilling> and pence. The unit of value with them 
had its origin in comparing values with the value of a pound 
of silver, which was divided into twenty parts denominated 
shillings. This unit of value was changed by successive 
changes in the silver coinage, until about a century ago, 
since which time the unit of value in England has remained 
unchanged. From about 1660 until 1816, the pound sterling 
had no corresponding piece of coin. The Knglish guinea 
had been intended to represent a pound, but it had not been 
proporly adjusted, and, owing also to the fluctuations in the 
price of gold, it varied in value until 1717, when its value 
was fixed at twenty-one shillings. In 181(5, after much delib- 
eration, it was decided to fix the weight of the sovereign at 
" I icnny weights, .'! grains and 171-U-j: 1 , thousandths of a grain. 
It i- manifest that the whole difficulty was in establishing a 
coin whose value should correspond to the unit of value 
of the money of account, carried in the minds of the people. 
The Knglish sovereign has since been changed Several til: 
The people of the United States have undergone a -imilar 

s BOUXD i'i:is. i: 

experience. Prior { tin- [Devolution the money of account 

of tlu coloiiic< wa- i xjuv-M'd in pounds, shilling-** and pence. 
The unit of value, the pound, not only differed from the 
Knglish pound sterling, lut wa< different in different colo- 
nie>. The pound in the following named coloniex \aried 
from the present money of account in the I'nited ^ 

I'l New England and Virginia, $3.33 or 6s. to the dollar. 
\. \v York and North Carolina, -2.~>() or 8s. 
Penns\Tnia and Middle States, 2.66 or 7>., r,d. 

^ South Carolina, 4.28 or 4s., sd. 

There \vcrc no coins in existence correspond ini: to tln-se 
amounts. These different units of value had their origin in 
vari-'iis causes, which we will not stop to dU<-u-s; lut when 
industry and trade had Become sufficiently advanced they 
hccanu- fixed. The trade of the colonies with the \\Y-t In- 
d'n-< had introduced into the country a considerable amount 
of Spani>h coins. The names and values of these coins did 
! ! -]n)iid to the money of account of the people, and 
their value was estimated in the money of account of the 
several colonies precisely as that of wheat, or any other 
-commodity, wa> estimated. Fn IT'.* 1 -' an act was passed by 
Con L r rex with a view to estalili>hin'_r a uniform money of 
unt throughout the country. I'eopK- reckoned in pounds, 
shillings and jx-nce, and paid in Spanish dnllars. It will be 
rememnei-eil that continental money \va^ payable in "Span- 
i^li milled dollars, or the value thereof in ^old or silver." 
The Act of CongreW of April, 17!'_\ ,l,.rlar.-d "That the 
money of account of the I'nited States shall le expressed in 
dollars or units, dimex or tenths, cents or hundreths, and 
mills or thousandths; a dime beinir the tenth part of a dollar, 
a cent the hundreth part of a dollar, etc.; and that all ac- 
counts in the public offices, and all proceedings in the courts 


of the t'nitcd States, shall be kept and had in conformity to* 
tliis regulation." This is belie\ ed t> be the first time that :i 
money of account was ever established by law moneys of 
account having in all nations grown up in the minds of the 
people. The word dollar, however, expressed a value which 
was fully understood by the people, without any reference to a 
fixed amount of gold or silver. The great difficulty consisted 
in fixing the amount of gold and silver that would be equal to- 
il dollar. By the same act a coinage of gold and silver was 
provided for; "Dollars, or units, each to be of the value of a 
Spanish milled dollar, as the same is now current, and to 
contain 371 4-16 grains of pure, or 410 grains of standard 
silver. * * Eagles, each to be of the value of ten dol- 
lars, and to contain 247^- grains of pure or 270 grains of 
standard gold." Other coins were to be in the same propor- 
tion. It was then declared and established, that 371 4-T5 
grains of pure and 416 grains of standard silver, shall be 
current as money at the price of one dollar, the value of the 
unit of the money of account; and gold eagles and half 
eagles were made current in like manner. The act further 
provides, "that the proportional value of gold to silver, in 
all coins which shall be current as money within the United 
States, shall be as fifteen to one, according to quantity in 
weight, of pure <_>-ohl or pure silver."* 

This attempt to li\ the price of <^ohl and silver bv law 
proved ;t failure. The price of u'ohl as compared with silver 
was fixed lower, as it proved, than ihe market price, and the 
roull was that gold ceased to circulate as monev to anv 

extent, until L884,when the amount of pure gold in the e , 

was changed from L'-lT.'i grains to L':;L'. After the dN<-<>\<Ty 
f gold in California and Australia, gold depreciated in value, 

and silver, becoming the more valuable metal of the two, 

I'diiiLC to the standard otablished bv ( < 

\ BOVHD ri;i\. in i >. 337 

the channels of trade. This wa- remedied, in a measure, by 
the act of ]>.':'., wliirli changed the coinage of >il\ er :il M Mlt 
Bevdn percent Tin- weight of silver half dollars \\asti\ed 
:it 19'J grains, and tin- smaller coin-* in the same proportion. 
Tho simple fact i>, that u'ld and silver fluctuate in value 
like other merchandise, beiiiLC jjoverncd entirely ly tlic 
uncontrollable law of snp|ily and dnnand, and it i< alnuit a< 
abMird to attempt to fix, by law, an unchangeable price on 
LT'ld or silver as upon a bushel of wheat or a day's labor. 

Sir James Stewart, in his work on political economy, says: 
u Money which I call money of account, is no more than a 
>cale of equal parts, invented for measuring the re-pective 
Vftlae of thingfl vendible. .Money of account pel-- 

forms the same otlice, with regard to the value of thi: 
that decrees, minutes, M'cond>, etc., <h> with regard to an^le<, 
or as scales do to -fo^raphical maps, or to plans of any kind. 
In all the>e inventions then- i< >'mc denominative taken for 
the unit. In angles, it is the- de^n-e; in LrcoLrraphy, it U the 
mile; in plan*-, it is the foot or yard; in money, it is the 
pound, livre, florin, etc. The decree has no determinate 

length, so neither has that part of the scale upon plans or 
maps which marks the unit; the usefulness of all the^e beinir 
>olely conh'iu'd to the marking of j)ro})ortionv. .h^t >o, the 
unit in money can have no invariable determinate proportion 
to any part of value; that is to sa\, it cannot be ti\ed in 
pei*petuity to any j>articular <|uantity of u r old or silver, or any 
other commodity. The value of commodities depend" 
circumstance^ their value ouirht to be roiiMdered 

in4 with re>pect to one another only ; consequently anything 

which troubles or perplexes the a-M-ertainiiiLC these cliai. 
of proportion by the means of a ireneral determinate and 
invariable scale, must be hurtful to trade; and this is the 
infallible consequence of every \ ice in the policy of money 


or coin. * * It does not follow, from this adju- 

of the metals to the scale of value, that they themselves 

should, therefore, beOOmfi the scale." 

It i> of course denied by the Imllionists that any such cur- 
rency can be established, as will naturally conform to the 
money of account; but upon what other hypothesis can the 
gncoess (> f the greenback, as a currency, be accounted for? 
During and since the rebellion the greenback lias performed 
all the functions of money. Gold in the meantime lias ranged 
from par to 82.85. If gold was the standard of value the 
price of all commodities would fluctuate with gold; but com- 
modities rise and fall in price, as measured by the greenback, 
without reference to the price of gold (except articles on which 
duties are paid in gold.) It is said, however, that now that 
matters have become settled the price of gold shows the de- 
preciation of the greenback; and only recently a distinguished 
ex-United States Senator,* in a letter to the Hon. S. S. 
proposed to change the unit of value (the dollar) from Ku 
pentfl to say 85, or the supposed present value of the g 
back as compared with gold. If gold coins and greenbacks 
::ie footing, such reasoning might carry sonic 
weight, for then- would be reason to believe that the D 
of account of the country had undergone a change; but until 
greenbacks are made a full legal tender, it is entitled 
consideration whatever. If gold was only a partial 
tender and greenbacks were a full legal tender, greenbacks 
would probably bear a premium over gold, ju-t as CUT 
bond- bear a higher premium than gold bond-, bcrau-e they 
-light ad vai it ::_:< "Vcr gold bonds in point of time. 
The inconvertible inscriptions of credit of the JJank of 
Venice were at a premium of 20 per cent. M for 

centuries, simply because they \\, .-\ved with superior 

- \r Cowan, of Pennsylvania. 

ri'M\ BOUND I'KIM [FLE& 339 

powers t< coin; and for centuries these inscriptions ,,f credit, 
conforming as they did by law to the money of account of 
Tin- people, con-titut -d an unvarying standard of value, by 
which all commodities, including gld, were measured. 

.-tndard of valuo of the Venetians thus instituted 
changed only with the money of account of the country. 

!, if not made a legal tender in payment of debts, 
performs the functions of a medium of exchange simply as 
an equivalent; but when made a tender it is invested with 
additional powers. If the amount of gold put in a dollar 
is less in value than the money of account, injustice is done 
to the creditor; if more-, injustice is done to the debtor; 
and when too much gold is put in a coin, it will cease, if 
there is any other tender, to circulate as money at all. The 
fact is that the precious metals, considered in their true 
light, have simply come to perform, in the commercial 
world, the functions of an universal equivalent, ami pavs 

'._rhl, except when made a tender in the shape of coin^; 
and are Mil.ject, in regard to price, to the >ame la\\-> which 
govern other commodities At the pre-eni time silver is 
some two nr three per cent. In-low par. while gold is about 
twelve per cent, above, as measured by the greenback. 
This is due almost entirely to the character of the legislation 
which regulates the circulation of gold, silver and paper. 

(told, then, performs the functions of a medium of 
exchange by reason of its imrin-ic value; and public notes 
und bank notes perform the same olliccs by reason of their 

-iiiLT representative value, not of gold, but of property 

"iimoditie-, includiiiLT -_T>ld. (It will be ohx,. r ved that 
in using the words "public notes." Treasury notes are 
referred to, not as a legal tender, but as a device of the 
credit system, the same as bank notes.) The bank note 
virtually represents the commodities niovin-_r in the channels 


of trail o, which brought it into circulation, and rests upon 
the credit of the institution which issued it; in like manner 

the public note virtually represents the property or commod- 
ities levied by the government to defray its e.\pen>es and 
discharge its obligations, and is backed by the credit of the 
government and the entire property of the nation. It was 
in this sense that Calhoun asked, u \Vliy not use its own 
credit (the credit of the government) to the amount of 
own transactions? Why should it not be safe in its own 
hands, while it shall be considered safe in the hands of 
eight hundred private institution*, scattered all over the 
country, and which have no other object but their own 
private profit; to increase which they extend their business 
to the most dangerous extreme^ And why should the 
community be compelled to give six per cent, discount 
the government credit, blended with that of the banks, when 
the superior credit of the government could be furnished 
eparate, without discount, to the mutual advantage of the 
government and the community'.-'"* 

Public notes issued by the government for the purp<> 
effecting the exchange of property and product* constantly 
taking place between the people *>u the one side and the 
creditors of the government on the other, should naturally 
conform to the money of account in which they are. stated, 
and would undoubtedly do so if founded upon sound princi- 
ples. The nation pottettef abundant property and prod . 
of almost every description, subject to the demands of the 
Lfovernment; and the government Unquestionably ]< 
the ability to command every dollar's worth of property and 
products befonir'niLT 1o the nation. The credit of the LL 
eminent, therefore, should be beyond <jiicsfi<>n, and iN paper 
^hould reproent and command property and products to the 
t amount Mated on its face. A note of the government 

BOUND riMNfii' 341 

i> virtually :iu order given by the people collectively n 
themselves, payable in property and products. To n. 
tltis order payable in precioux metals, when the people ha\.- 
no precious metals, or only a very limited amount, i- 
to render it impossible for tin* people to comply with the 
order, and compel them to dishonor the public credit. A 
law making public notes payable in diamonds of a certain 
degree of purity and weight Would be eolith-red very 
oppressive, as well as absurd, and yet it is upon precisely (In- 
sane principle that the public note is made redeemable in 
gold. The public note will command property and products, 
if properly instituted, to the preci-e amount inscribed on its 
face, and gold coins can do no more. The creditor of the 
government wants property and products, and the tax payer 
must have money (public notes) to pay his taxes. It is thi*. 
that, in the first instance, gives circulation to public note-. 
The tax payers constitute ;i vast army of agents en^a^cd in 
selling commodities for public notes, with which to dis- 
charge their obligations to the State, just as the debtors of 
the banks form a large body of agents engaged in collecting 
bank notes to pay their debts in bank. 


People cannot be compelled to part with their property 
for money, bat public policy requires that some equivalent 
of property should be established as a tender in payment of 
debts, and this equivalent is styled money. To the creditor 
it should be immaterial whether this equivalent pOMOf 
intrinsic or representative value, provided it commanded 
property to the amount attached to it by law. A dol! 
worth of gold, when coined and declared the only ten.l-r, 
is endowed with great advantages over all other kind- 
property, as well a< over the public note which repre- 
property. C'rediturs can refuse to take property or public 


notes, at no matter what valuation, but gold coins they 
obliged to take at the price fixed by law. Hence it is that a 
public note, which represents property to the amount in- 
scribed on its face, and should command property of any 
kind, including gold, will not command gold. The gold 
lias been transformed into money by being made a legal 
tender. Gold being clothed with special powers over prop- 
erty, as well as over the public note, comes to be in great 
demand, and, as it is limited in amount, is absorbed by 
capital, to be used as an instrument to control property and 
public notes; its functions as a medium of exchange are thus 
capable of being perverted, and the object of the 
tender law is consequently also perverted, greatly to the 
injury of society and of the public credit.' 

The public note is intended to perform the functions of a 
medium of exchange for the exchange of all kinds of prop- 
erty, including gold, and should, therefore, be made a legal 
tender. If any commodity is to be made a tender, it should 
be such a commodity as the people possess or can readily 
acquire at its market value. The great object of trade i> the 
exchange of property, not property for money or money for 
property; and money which is designed to effect this ex- 
change should be instituted in such a manner as to form 
an unvarying representative and measure of value, conform- 
ing to the money of account of the nation. ]>\it, if money is 
made of a commodity, it will rise or fall in vali 
to circumstances, and will render trade uncertain, or, 
Kellogg aptly expressed it, will make a gambling system 
of all trade. 

The responsibility of furnishing a medium of exohl 
or declaring what shall be a tender, rests with the I-Ydi/ml 
eminent. It is a matter of vital importance l> the 
nation, individually and collectively, to have- money so insti- 

.cr\i> r!:!\< ii-i 
tilted as to ci.. U ' the production and exchange- of the nation 

as little at possible. In this advanc.-d age credit is every- 

where uvrd in trade, when ere.lit can In- u-ed t-> exchai 

products more advantageously than a medium of exchai 

->sing intrinsic, value. It is nut only eminently proper, 
but it is a matter of public- advantage, therefore, for the 
gOrernment tO U0e itB own credit, at l<-a-t, to the extent of 
its own operations. To do this its notc< sliould l>o male 
a full leiral ti-ndcr, otlier\\'i>e tin- people can repudiate 1 
individually what, they have done collectively, which ine\ it- 
alily works injustice to the creditor of the jjovenmient, and 
impairs the credit of the nation. 

The bullionists assert that a paper money, not redeemable 
in gold, issued by the government, can p > value; 

and that it virtually consists of bits of paper with tig; 
and words printed on them; and political economic are 
found so shallow, or worse, as to adopt this theory. If this 
is true, then are all the paper devices of rivilixation, l.y 
means of which property is held or exchanged, a IVaud and 
a delusion. But public notes are not simply bits of paper, 
to be issued to an unlimited extent. Kvery dollar emitted 
by the Federal Government in payment for property, Cer- 
vices, or in discharge of its obligations, eo^ts the people 
precisely one dollar in property or products, to redeem it 
and return it to the public Treasury. When publi- n< 
representing commodities moving in the channels of trade, 
are issued by the government to the extent of its own trans- 
actions and arc made a, legal tender, they conform to the 
money of account of the nation, ami become the measure of 
all values, the standard of all payments and the la-U of all 
money contracts; they, therefore, perform all the offices of 
money, and pass into general circulation. They are paid 
out by the government for property or >erviees at their 1 


value; being :i tender they pay debts at their face value; 
and in the end arc re-turned to the Federal Treasury in the 
shape of taxes, in lieu of property, to the amount inscribed 
on their face. Xo evidence of debt or device of the 
credit *y*tem ever devised possessed greater elements of 
strength and security than the public note of a rich and 
powerful nation, made a legal tender and issued to the 
ut of its own transactions. The notes of the Bank of 
France, as we have seen, although not redeemable in specie, 
circulate at par to the amount of hundreds of millions of 
dollars, when made a legal tender and backed by the credit 
of the people. Who will say that the revenues of the t'nited 
States are not as certain as those of France, or that the ability 
of the American people to produce wealth does not equal 
that of the French people, or that the Federal Government 
is not as stable as the French Government;' The French 
people are uncertain as to whether they will be living under 
a monarchical or ji republican form of government in ten 
years from to-day, and yet we see, at the present time, 
$500,000,000 of inconvertible notes of the Hank of France, 
made a legal tender, circulating at par, on the credit of the 
government; while in tho United States the notes of the 
government, not exceeding $400,000,000 in amount, circulate 
at a depreciation, as compared with gold, of over twelve per 
<-ent. This is clearly the fault of legislation making the 
notes of the government only a partial tender, when in order 
to conform to the money of account of the nation, they 
ought to be made a full tender. 


The |iie.xtion as to how much money a nation needs has 

led t< a great deal of mystification. A nation evidently 

need* a *ntlicient amount of money to enable it to effect it* 

exchanges in the most economical manner possible. A* ha- 

t I'oN RO1 M I'IMN. II- 

been explained, many of the operation- of trade, exp,.,-ia!ly 
of a larire character, can In- conducted m* lily, 

economically ami safely by means of tin- dexicrx ..t' 
err. lit xystem, Midi a- bills of exchange, note-, cheek-, 
while, on the other hand, in other operations cash i^ an 
alinoNt imlNjen>alle aui-ncy. 1 Iy i-a^li i> meant nnnn-\. 
Mich as LT"1<1 "i- silxer <->ins, or j.ulilic note*, ma-lc a !--al 
tender in j)aynuMit of debts. Tlicre should, thi'ivt'Miv, IM- 
a sutVu-icnt amount >!' nmiiey in eireulation to -nal>lc t 1 
en^aired in exehaiiiriniLr projH-rty or servires to avail tlu-in- 
selves of either cash or credit, or both, in Mich 
as may be imt ad\ anta-_:'eou-. 

Under the bank currency system, money, ux we have 
scarcely circulates at all. Tin- medium of e\chaii'_ r ' conxi>t> 
of bank eiirrency, which is u>cd a^ a substitute for ca>h. 
Jiank currency bears interest, and it, therefore, con-titute> 
a very expensive medium far more expense than L r <ld 
or silver, >r Ic^'al tender public notes which bear int* 
only when used as capital in individual transaction-. The 
volume of bank currency is regulated, not by the want- of 
trade or the exchanges to be effected, but by artificial cir- 
cumstances; and it frequently happens that bank cunvnc\. 
as at the present time, will desert the channel- of circulation 
almost entirely, because industry cannot afl'ord to pay tin- 
tax which it entails upon the community. 

The precious metals can be obtained only by di_ 
them out of the ground in localitic- win-re they exi-t, or by 
oxi-han.irinLf products for them at their market value; and 
when obtained can be retained in the country only b\ 
importing commodities to a le-< amount than are exported. 

l.i--_r:il tender juibTu- notes, like- bank note-, can he i--iied 
to an unlimited amount; and the only ijucstion to be con- 
sidered is as to the amount which tin- ifvcrnmeiit ou^hf t'-> 

346 A MOM-:TAI:Y SVMKM Kr.\nEn 

issue. It is perfectly clear lliat tlio government ought to 
issue, at least, an amount sufficient to conduct its own 
transactions with the people. This amount is based on 
commodities moving in the channels of trade (l>ct\veeu the- 
tax payers and the creditors of the government), as certainly 
and as securely as any commercial paper or hank currency 
was ever based on commodities, to which they owed their 
origin. The revenues of the government, for example, 
amount to about $300,000,000 a year. This require- 
exchange of property or products to that amount. H<>w 
inuch money will it take to effect this exchange? Who can 
tejl? The public, note, when issued by the government to 
effect this exchange, passes into circulation and performs the 
offices of a medium of exchange, not only for the purposes 
of the govern iiient, but for the trade of the nation. Its 
offices are limited, therefore, not by the immediate transac- 
tions of the irovernment, but by the exchanges or trad 
the entire nation. It follows, then, that the amount of pub- 
lic notes put in circulation by the government should 
limited only by the exchanges of the nation. This theory, 
as to the amount of money required by a nation, is fully 
recogni/cd and endorsed by political economists, who stand 
high with the bullioni>t>. PnitVssor Pxinamy Price, in the 
quotation given on page -''*>, says: " A cart transfers weight; 
money, ownership; ami all the world knows that the 
to be done determines the number of cart-," etc.; and airain, 
in speaking of the amount of bank notes that will circulate, 
lie says: ''The answer is the same as that which has already 
been given to the parallel question respecting coin, 
many bank notes as the public has a distinct \vant for will 
circulate, and no more. It is the universal law of all com- 
modities in use, the law of demand and supply '' 

should be instituted in such ;i manner that the 

UPON sorNn IM:I\. MM us. :H7 

amount in circulation will conform to tin- \\-.\ ,dc, 

Otherwise it Will not prove an unvarying standard of meas- 
ure ami payment. If money is scarce ami interest U high, 
all exchanges become difficult and expensive; properly an. I 

products depreciate in value; wages fall and production U 

diminished. On the other hand, if money is redundant, it 
will depreciate in value, and property., products and wages 
will appi-eciate in value in a corresponding ratio. In either 

\ent, money fails to conform to the money of account of 
the nation, greatly to the derangement of all value-, and 

specially of exchanges of property founded on conn 

It is far better, however, for a nation that money should 
be too plenty than too scarce, for when money is scarce pro- 
duction languishes, wages are low, and idleness prevail-; hut 
when it is too plenty capital alone sutlers and it i- better 
for the interests of the nation and of >oci.-ty that capital 
should bo idle than labr. In the one instance (if capital is 
idle), people are deluded with the idea that they are much 
better off than they really are, because property rules at 
high figures; and in the other (if labor is idle), the m:,- 
are much worse off than they ouirht to be, because property 
and labor are at a great discount; individuals are brought 
to want; the public revenues an- cut down; the e\j. 
government become oppressive; and demorali/.ati.n is rife. 

It is said, however, that, in any cxeiit, the amount of 
public notes issued by the g.i\tM-nment should not exceed 
the annual revenues of the government; othcrv\i-e the\ 
will become redundant. Why limit the amount by the 
revenues <f a year, instead of a shorter or longer period'/ 
This is illusory. The public note performs the oftic ..i a 
medium for the entire trade of the nation, and to limit it- 
issue to an amount corresponding to the evict am-. in ' 
the immediate transactions of the government would be 


similar to limiting the aiuouiit of bills of exchange u>ed in 
trade t< tin- exact amount of property to be exchanged. It 
is possible that a less amount of public notes would suffice 
to effect the exchanges of the nation; it is probable that a 
larger quantity would be required. Whether the public 
--ued can be redeemed in the revenues of the govern- 
ment in one, two or three years, is a, matter that will not 
effect their value in the slightest degree, as long as their 
security is undoubted and their use is required in the chan- 
nels of trade. This lias been abundantly demonstrated by 
the greenback, both during and since the war. 

It is idle, therefore, for people to speculate as to how 
much money should be issued by the government with a 
view to fixing the amount by law. As already sug'j 
innumerable contingencies are constantly arising which will 
cause the amount required to vary. How much is needed 

can never be known until money is properly instituted, and 
then people will not care to know. Some idea may be 
formed of the vast character of the exchange** constantly 
taking place in the nation, when w<- reflect that the annual 
product of industry, agricultural and manufacturing, in the 
I'nited States exceeds $6,000,000,000 a year, ami that, this 
mighty mass of products is exchanged many times and in 
many forms. All that can be safely said is that money, 
the principal tool by means <,f which these exchanges : in- 
efl'ected, should be commensurate in amount with the work 

to be performed. 

When money becomes too plenty, or, as :* ;- f'-""-d, 
redundant, prices go up, property enhances in value, and 
tagefl become high. This is detrimental to trade, works 
injustice to creditors, and impairs the public credit, if public 
nstifute the money of the nation. It is therefore, a 
matter of almost as much importance to the public, that 

I po\ 8O1 \i> ri:is< M'l.i.x. 

money should not he redundant MX that it should n..t he 
ICarce, How ix this to he remedied? 1'uhlic notes are 

issued by the government I'm- property or ser\ ices, and are 

returned to tin- Treasury in tlie shape of taxes. An inei < 
in tin- rate of taxation would soon relieve the nation of any 
redundancy in the currency, jiM ax hank currency U P8- 
turned to the hanks under similar circumstances. Hut in 
this connection another <juestion arises, which lias an im- 
portant hcarini: upon the suhjeet, and that ix the <|iicMioii of 


1 \TKEE8T. 

The price paid for the use of money or it> suhstitutex i> 
ternu'tl interest. When money posM-^ses intrinsic value, 
in the eax.- ,,f --, -Id coins, the value of the metal of which 
the coin is made ix one tiling, while the rate of int. 
which the coin will hear is juite another. The fluctuation 
in the price of the precious nietaU hears no relation to the 
fluctuation in the rates of interest of money. The prii < 
-old depends upon the laws of demand and .supply, which 
u"\crn the commerce of the world; hut the rate of int' 
of money, as money is now instituted, is regulated hy causes 
of a local character, (iold may not vary a fraction in the 
markets of the world, and yet money and its Mihxtitutes 
may, at the same time, he in such demand for the purpo>ex 
of trade as to command exorhitant rates of interext. It then 
fails to continue an unvarying measure of value or standard 
of payment. A dollar that will command TJ per cent, inter- 
69) is a very difTerent tiling from one that will only com- 
mand (5 j>er cent. To make money an unvarying measure 
of value and standard of payment, it is necessary that it 
should hear a uniform rate of inter. 

That money should hear interest is not only legitimate, 
hut essential to the performance of its function^ as a medium 


>f t -M-hange. Money represent* value and should be able 
to accumulate value; otherwise it would not be accepted in 
exchange for property. But, as has been suggested, its 
power in this respect should be uniform, in order that it 
may prove an unvarying measure of value and standard of 
payment. It has long since been discovered that usury laws 
are in vain, because they are not based upon sound principles. 
But money can, and ought to be so instituted as to com- 
mand only a uniform rate of interest, proportionate to the 
profits of labor. Money, by reason of its legal tender 
property, naturally possesses a command over property 
and labor, and if it is instituted, as at present, so that it 
can be made to command any rate of interest that can be 
extorted by capital, its functions are not only perverted, but 
it is enabled to rob labor of its entire profits. 

On the other hand, if legal tender public notes are issued 
by the government in excess of the wants of trade, they will 
lose the power of money to accumulate value, and their 
functions as money will be totally perverted, greatly to the 
disadvantage of the nation and to the injury of the public 
credit. It is, therefore, as necessary to provide airaiust a 
redundancy, which will lead to such results, as it is to 
puMic notes to supply the want of a medium of exchange. 

Inflation, in the sense in which the word is now used, is 
undoubtedly an evil, second perhaps only to contraction. 
The application of the term, however, is limited by the 
bullionists to an over issue of public notes, which leads to 
error and confusion. Public notes, if properly instituted. 
do not* depreciate in valuo when over issued, because the 
people do not possess sufficient property to redeem them, 
but because the excess is not required for the purposes of 
trade, and they, therefore, fail to accumulate value. It is 
not on account of the weaknos of the credit of the people 

VPON SOI-M. ri:i\. ir; 

that jlil>lic notes under Midi riivinnstam-t - 
on a, ]>ar with the money of accouni, but IxfCfttlM >f their 
redundancy. This is evident iV..iu the fart that bonds 
bearing interest, wlii<-li rest upon tin- same f..imdati. >n (tin- 
pnbllO credit) can he i^iied j, a much L r reater amount than 
])ill)iic notes. An excess of public notes U ],,,t, tin-re! 
strictly speaking, an intlati":i il' jmhlic cre.lit, l.ut >iinply a 
6UperflllOU8. amount of in*ne\', an e\ il NN'hic'n can eaM'lv le 
remedied. l>nt it IS Otherwise with hank cnnvnc\. '1'hen it 
is not money that heemne^ intlated, hut it is cre.lit, in all IN 

lorms, that becomea e\jainlni. This is real inflation, and 

is iar more dangerous to the interests of >ocictv than a 
redundancy of money, because it inevitahlv leads to com- 
mercial crashes and money panics. The advocate^ of the 
specie basis <>r hank currency M'Mem are, therefore, the real 
inflationists of the nation. It is pMxxiUlf, as tlu 1 la\v no\v 
stands, to isMie hank currency t. the full amount .f tlie 
bondeil LndebtedneSf <f the counn v, aliont -S 1,7 I'M, 000,000, 
and .">11 that is wanting to call that amount, of hank currency 
into circulation is an oj)portunity. The loan- and discounts 
of the banks in l^T.") am<>unte<l t> ah..m xl.non.iino.inMi, 
Which indicated the amount of credit uen 'iirposes 

of trade at that time. 

Bonds of the government hearing interest can he i-Mied 
to a larger amount, than ]>ullic notev, Kecaii^e the ability of 
the ]iihlic note to accumulate \alne i^ limited to its u-c as a 
medium of exchange, \\liile the amount of bonds which can 
be issued depends upon entirely different <' -iisiderat : 
PnbllQ notes will not seek investment in a bond as loiii as 
they are needed in the dianneU of trade. ] hiring the- \sar 
^500,000,000 of 5-20 bon.N, with which -rcenbat !, 
conyertible, were in the market, for o\er a \car. and the 
Secretary <>t the TreaMiry wa unable to di^po-e of more than 


$25,000,000. The reason is obvious. The greenbacks were 
needed for the purposes of trade, and could accumulate value 
more rapidly in the production and distribution of wealth 
than a six per cent, gold interest bond; and it was not until 
the channels of circulation were amply supplied with a 
medium of exchange that the ">-20 bonds could be sold. 

We have already .suggested that a redundancy of money 
(legal tender public notes) could be remedied by incrca.-ed 
taxation; but it may happen, as was the case during the war, 
that taxation cannot be resorted to, to the extent of the wants 
of the government, or the necessities of the occasion, with- 
out producing distress and defeating the ends of the gov- 
ernment. It then becomes necessary to employ the credit 
of the government in another form in the shape of an 
interest bearing bond. This bond or evidence of indebted- 
ness represents property or products, payable i.i the form of 
money in the future; while the public note represents prop- 
erty in the process of exchange between the tax payer and 
the creditor of the government, ami is virtually payable in 
the present. 

When money (legal tender public notes) becomes redun- 
dant, it is manifest that there are more notes in circulation 
than there is property or products moving in the chain 
of trade to be exchanged through their instrumentality, ami 
consequently more than the exchanges growing nut of the 
transactions of the government will justify. Taxation must 
be increased to increase the transactions between tax p.-* 
and creditor; or, if that is inexpedient or unnecessary, the 
form in which the government credit is issued muM In- 
changed, that is, the public note, not bearing interest, iued 
in excess of the wants of trade, must be converted int 
bond bearing interest; or in other words, as the government 
note is no longer payable in the present, it must be made 

N SOUXD ri:i\ ir 

payable in the fiifuiv, and justice re,|iiiivx that it shoiiM bear 
interest (accumulate \ alue), ju-t as tin- public note. when 
not redundant, was capable of accumulating value, ami this, 
U i- oh\ ioiix, ,. :m ,,iily he done in the t'nn of a lion. I. 

A l.on.l, inter-converiible with the public note of th- 
eminent, is capable of performing a two-fold v,. r \ i.-, ; it will 
prevent a re.lun.laney .f pnldie note-, and it will regulate 
the rate of interest which nioiiev will c<innianl. \V!ien 
public notes become iv.lumlant ami are unable to accumulate 
value, the 8X0688 woiil.l naturally seek investment in an 
interest bearing boml; ami when money (public in>' 
able to accumulate value more rapidly in production and 
trade, and intercut ri^ex, the inti-re^t hear'niLr ImmN of the 
iiment would airain be < inverted into money, and thus 
the equilibrium would be restored. 

Money thus instituted could not do otherwise thai 
form, in value, to the money ..f a-'-nnnt of the nation, and, 
in amount, to the wan;> of Tide. It would then always 
circulate on a par with money of account a dollar note 
would mean a dollar, neither more mr lew, :md would 
always command a dollar's worth of property; i: 
would not vary a fraction lor any length of time; and 
money would prove, what it i- designed to be, a:i mnaryinir 
standard of measure and payment. I'ndcr such a BJ 
of money the excl of the nation could be efl 

economically and equitably, and capital and labor \\.uhl 
e;ich secure a due share of the products of industry, and 
commercial cra>hc* and money panic- coiild not 


The amount of interest which an inter-eon\ ertiblc 
should bear is a matter of detail which can be settled fully 
only by experience. Interest on in- lias been IOg- 

i, should be in j.roportion to the profits of industry, 
- j . i 


otherwise capital will be enabled to reap more than its lu 
share of the profits of labor. The average rate of increase 
of wealth in the nation is estimated at about 3^ per cent. 
Capital is entitled to a proportionate share of this inciva>-, 
and hence the rate of interest of money should not exceed 
greatly, if at all, the average increase of wealth. For the 
>ake of convenience in computing interest it is BUgg 
that a bond bearing interest at the rate of one per cent, a 
day on $100, or 3.65 per cent, per annum, should be isMu-.l. 
This, as well as other details, can only be settled by expe- 
rience. The important point is the institution of a monetary 
system based on sound principles, and its details can be 
safely left to the government, if its affairs are placed in the 
hands of capable and trustworthy men, in sympathy with 
the wants and interests of the nation. 

It is urged by many who are favorable to the use of the 
public credit, in the shape of public notes, that a bond is not 
< ntial part of the legal tender paper money syMem: 
that it would be absorbed by capital, and in the end would 
constitute a burden upon the nation. This is borrowing 
trouble. The public notes of the government would not be 
funded in an interest bearing bond as long as they could 
accumulate more value in production and trade; and, when 
funded, they would return to the channels of trade U 
as their services were required. 

The inter-COnvertible bond plan is greatly derided by the 

bnllionists and their tools, who lo not fail to misrepresent 

tin- principles upon which it is based in every way ].ov-ibU-. 
The pub lie note is treated by them as simply a promise to 
pay money, and upon this hypothesis it is not difficult to 

l-"\< that it is a very worthless piece of paper. The public- 
note, as has been sufficiently explained, i> a representative, 
not of money but of property, and a> the great ol> : 

-'i M- ri:i\. in M, 355 

trade is to exchange property ami not iii<>nc\. it U far more 
important tliat tin- public ntc should represent property 
than money (irold coins). Tin- amount of property in the 
country is estimate*! at $40,000,000,000; tin- amount of jn.ld 
at $100,000,000. It is to exchange this $40,000,000,000 of 
property tfaat money i* required ami not the $100,000,000; 
and to base the public cre.lit on $100,000,<>oo ,,f ^.M, when 
it should he hased on $40,000,000,000 of property, is in utter 
violation of the plainest principles of the credit system, t 
which all paper devices for the exehange of property, 
whether public or private, belong. 

Airain it is asserted that the inter-convertible note and 
bond i> simply paying <>ne 1'ajM-r d-bt witli another. If the 
public note was simply a promise to pay money this would 
le true, but the public note, properly understood, is not a 
promise to pay money, but is a representative of property to 
the amount inscribed <>n its face, which the government i- 
entitled to demand and re.-eive forthwith from the people, 
and in this sense was described by Calhoun as a "promise 
to receive," and not a "promise to pay."* 

HOW Tin-: rrr.i.i. ffOTE BE! PO m-: i'i 1 INT" n: i I.AII.'N. 

How the paper money of the government is to be put 
into circulation is a matter worthy of consideration, Mpe- 
cially as friends of the system, with the best intentions in 
the world, have frequently allowed thcniM-l\i-s to be led 
into error by failing to carry the principle- of the system to 
their logical result-. A- the public note represrnts property 
and products which the iro\ rnment is entitled to demand 
and receive forthwith, in the way of taxation, to the amount 
inscribed on its face, and 5> virtually bas.-d -m such 
erty or products in the process of transfer from the M\ payer 
to tlie creditor, just as other de\ ice- of the en 

See page CO. 


:.iv based on commodities moving in the channels of trade. 
it is. clear that it (the public note) should only be 
by the government for property or services. If the g 
ment should issue public notes without reference to the ability 
of the nation to respond in property and products in the way 
of taxation, as for example, to pay oft' the public debt in 
paper money, when a corresponding amount of property and 
products COuld not be transferred at the same time to tin- 
creditors of the government, would, as is manifest, be a 
infraction of the principles upon which the legal tender 
paper money system is founded. The creditors of th- 
'rnment are paid in property or products, and the public 
note must not only represent such property, but must be 
able to command it, which can be done only to the extent 
to which the people are able to respond in the way of taxa- 
tion. Hence it is idle to talk about liquidating the public 
debt with paper money, or any other kind of moii- 
more rapidly than the people are enabled to produce wealth 
(property and products), which can be applied to that pur- 
It has already been explained that the amount of money 

which the government can iue is limited, not by the 
amount of the transactions of the government for any 
tied time, but by the transactions of the entire nation, which 
are constantly varying in amount, lint when the channels 
"f circulation are supplied with a medium of exchai, 
more public notes can be used; it i- e^ential, the! 
that their emission by the government should go hand in 
hand with taxation. 

i in: NA i IMNAI. i.i:i;i. 

Debt, whether individual r national, is inconsistent with 
true independence, and the payment of the national debt at 

\ 8O1 M' I'IMSi I!': 

LiTiext 'lay practicable should nc\er be i..-t -i-ht 
:l moment. 

It' tin- hondx of the I'nited State- ire payable in lawful 
money, it is then jh.xxiU,. jo redeem them in prop, 
product-, iii which they should be redeemable, a.x rapidl\ 
as tin. 1 nation can produce- a surplus of products, luit if 
made payable in jr'll, Nvh'u-li <lot-s not cin-ulatc in tlu- 
<-lianiR-ls of traK-, tln-ir redemptiOD U rc-mlcrc.! \\rll ni-_'li 
iinjHisxihlj'. If forced rc-uiii]>tion takes j.lacc tin- jnihli- 
of tin- 1'nitrd States may IK' ri-^ardrd as ju-nnaiu-nt, and itx 
incrrasi- ini'vitaMi'. Tlio c\i.cri.'iic- of Kn^laiid in this 
iVxjHM-t L8 Worthy Of llOte. At the cloe of the NajM.h-ojii. 

n L8 15 the producing foroefl !' Kn.irland \vnv in full 

'XiT<-isf, and thr ivvi'nik-s of tlu- xoviTiiiiifiit \\-n- -no|-iuou-. 
KiiLchnnl immediately In-iran to reduce her jmMir di-lit; luit 
tlie money powi-r interfered and n-xinnptinn \vax d. 
and the li<|iiidation of the public del>t ci-a>ed. When the 
Kel.ellion ended in the I'nite.i production ran on, 

OWing tO the abundance of m-.m-y in circulation, to a mar- 
velous extent, and the Federal (iovernment wax ,-nahled t- 
reduce the pul.lic del.t some ^500,000,000. Hut the policy 
of contraeticn soon ciirtailfd production, the revenue- ol 
the government lie-an t) decline, and the payment of the 
public debt practically 06a0ed, It remains now to return to 
>pecie payments to render it permanent, and to accomplix'n 
this end the money power is e\ertinr its he-t etTort>. It ix 
to the advance of the money ] M. \\er to ha\e natioiix i :i . 
volve<l in debt, as \\ell as to have money scarce; in this 
way LToyernments and nations are rendered subservient to 

N > event in modern time- ha- spread -uch alarm amon- 
the money kiiiLT> >f the wt.rld a- the adnpt'mn of 
tender paper money by the people of the Tun 


None know better than the money kings that if tlic s 
is adopted in its entirety, it will ultimately release tlie maes 
from the bondage in which they have been held for ages by 
capital, and hence the bitter opposition with which th 
tcm meets. For several hundred years past commerce and 
trade have been engaged in a constant struggle to <! 
money, the tool of exchange; but it was not until the 
United States made the public note a legal tender that any 
progress was made, except in the use of substitutes for 
money, which were controlled entirely by bankers and money 
lenders. When the American government began to N-ue 
legal tender paper money, the money kings of the world 
perceived the necessity of taking measures to reverse the 
tendency of affairs, and they organized not only to d- 
legal tender paper money, but also to demonetize silver, in 
order that they might be. able to maintain their rule. That 
an organized conspiracy exists to demonetize silver for the 
purpose of increasing the power of money, is evident from 
what has occcurred in Europe and in America within the 
past few years. Silver has been demonetized in England, 
Germany and Holland, and practically in France and in the 
United States. 

No country in the world produces so much gold and silver 
as the United States, and yet the people of the United S 
are unable to retain it in the country. The same condition 
of affairs prevailed prior to the war, when we had the - 
basU system of money, so that the inability of the peopli- to 
retain gold and silver cannot be charged to the use of public 

The simple fact is that gold and silver cannot be retained 
in the country until the producing forces of the nation are 
sufficiently developed to enable the nation to export more 
than it imports; and in the second place gold ami silver and 

i I-MN KM \i. nuH in ES, 350 

paper money will not. all occupy tlu ' <-hannels of circulation 
at the same time, unless tlu-y arc all clothed with 
: -\\ers as money. 

[f specie Circulation is de^m-d, therefore, it can only be 
.ittainc.l by making g"ld, silver ami tin- public note e.jnal 
iciral tender-; then, af SOOn M tin- nation is al)!c t. retain 
thi' jrccius metals, they will occupy the channels of trade 
as a matter of c<>m>c. The l)ullii>iii>ts ami !ai,kci> thein- 
M-lvos are comjtellud to ackn<>\\ Icd^e tliat forcrtl rc-umption 
will not give specie rireulation, but tlu-y say it will fix prices 
at a gold standard. This, as ha* Keen fully shown, is not 
only a delusion but a barefaced fraud. The notes of banks 
f i^Mie, which the public will be obliged to u>e, cannot be 
maintained on a par with coin, if redeemable only in coin, 
unless the bunks ean retain the coin to redeem them, and to 
say that the banks can retain specie in the country, when 
the nation cannot retain it, U absurd, as well as contrary to 

The only way in which the people can hope to reduce and 
eventually liquidate the public debt, is by the adoption of a 
system of money, such as has Keen described, which will 
give industry free development) mod enable the nation not 
only to largely increase its production of wealth, but to 
render it available when produced. 


Those who desire to fully understand the money <|ii. 
an only hope to do so by always keeping in view the fact 
that the great object of commerce and trade U the exchange 

of property and products, and that inonty is designed to bo 
simply a tool to accomplish that end. M . is nothing 
more than "one of man's \\ n inventions, a contrivance 

which lie lias himself de\ i-ed for rendering an indispensable 

360 \< i.rsii.%. 

M-rvicc to the practical life of every civili/cd people."* Its 
institution is a governmental duty, and as political sover- 

j in the United States, theoretically at lea>t. iv>ide< in 
the prople, it, is incumbent upon them to take hold of this 
question and compel their servants to dispose of it in such 
a manner as will best subserve the interests, not of a single 
class, but of the entire nation. Thus far almost the entire 
rourse of Federal legislation has been controlled and 
directed by the few, in utter disregard of the rights of the 
many and of the honor of the government, and especially 
was this the case during the late Rebellion. Eulogies, it is 
true, are frequently heard from servile or subsidi/cd sources 
<>f the patriotism of capital during that trying period. They 
ore utterly false. "Not a patriotic act can be found in its 
history. It neither volunteered its services nor submitted 
t< a draft. Its support of the government was purcha>ed at 
tin- highest price ever paid by a bleeding people. It was in 
truth a traitor to the existence of the Tnion a baser traitor 
than lie who fought to destroy it upon the field of battle-. 
Tt hid itself from danger, and sold its assistance only for 
enormous pay, while the rebel soldier offered his life on the 
field of battle for nothing, except his devotion to an errone- 
ou> principle. While the soldiers of the North, too, were 
freely going to the front by the million, the capitalists, who 
now trample upon them and their children, were allured 
from their safe retreats in the midst of their hoarded treas- 

nly by vat golden briber Ncilher in law or in 
equity, neither in the sight of human court < or courts di\ ine, 
have they any claim upon the forbearance or gratitude of 
ti American people." And then, not content with the 

jains wrung from the people in the hour of their 
.ity, they perfected a plan, to quote again from the 

CiiiTrm-v :unl Hanking, hy linn.imv I'ri< . 

CON i 

eloquent champion of tin- ], j,l,-'> cailC/ u tO hold the 
bonds uf tin- Lrovernment :is a foundation for hanking. Tin- 
\s ' althy classes \\erc unwilling that tin- pivcriniiciit -InniM 
deal directly with tin- people and furnish them \\ith a ! 
and safe currency. They insisted upon s!andin-_r bct\\- 
the u'overnment ami people. They insisted uj,..ii hcc,,niiie_: 
the 'middle men' in tin- matter .f l'urni>!iiie^ a in-iilatin-j 
juediiun; and the jirntit> that have ac.-ni.-.l t,, th.-ni as x U ,-h 
*niilillr men' and have hern paid l.y the ta\ j.a\ 

without a parallel in tin- hiitoiy of any other financial 

tem Upon the face of the ;_ r l"l>c. * * \ _>,.!: 
policy \\hi.-h thus taxes i;.. p,-,,plc in <irder to fulfill a plain 
<luty to them, can only he properly character! /ed a- h- 

Since the war every energy ha< luvn direi-ted ly the 
money power tow:ird> the destruction of the ^reeiiliai-k 
and :i return to the sp r ,-i,. L.-i^is >\xtmi of IIHHM-X. Tin 
machinery of tht' govern ment is in its hamU, and it is n,,\\ 
aiming to control the two -ivat political or^ani/..! 
the country, in or.ler that it may i-oiiMiiuniate it- piirp..- 
'The i.sMie has l.cen forced upon tin* nation ly the Bullion 
the bondholders and the money lenders, who-,- tools an 
be found in every party convention and caucus held in the 
country. Thr crisis has arrived, and tin- masses mitt ariw? 
ill their majesty and as>rrt their rights, or liherM in America 
will be a mere phantom. It is not from kings or emperors 
that the American people m-ed fear the IOSH of liberty, but 
from a moneyed aristocracy, who*,, hand now rests heaviU 
upon the nation. The question is one of paramount impor- 
tance, involving as it docs not only the j. resent welfare of 
the people, but the well bein^ <f tin- nation f>r many jjener- 
itions to come. It is a question, too, i:i which the do 

*Hon. I). AV. Vor, 


trodden masses of other nations have a deep interest, for, 
if the money power is able to accomplish its designs in 1 
republican America, where else can the people hope to 

tpe its bondage':' 

The contest will undoubtedly be bitter, surpassing in that 
respect the memorable contest between the money power 
and the people under the lead of General Jackson in 1 3 
but "the flower safety is only plucked from the nettle dan- 
ger." The political organizations of the country are no 
longer faithful exponents of the popular will, nor can they 
be until the money changers are driven from their tern; 
The people must regain control of their party machinery, 
or be led like sheep to the slaughter. But it is to be hoped, 
in the language of Jackson's farewell address touching the 
same subject, "that, while the people remain 
uncorrupted and incorruptible, and jealous of their rights, 
the government is safe, and the cause of freedom will con- 
tinue to triumph over all its enemies." 


BELOW we give an able article from the pen <>f Horace 

(ireelcy, oil the subject of till* intcr-CollN crt ible bt>lld. \\llicli 

appeared in the New York TVt&tm* of November 9, 1871. 

It will be oh>cr\ i-l that .Mr. (ireelcy sugge-: d tliat tin- bond* 
should bear a moderate gold intcrot. Tliis is n: 
and would be taken advantair*' t' by the L r "M .irainllrr>. 
Tin- currency bonds of the- Unit. < i- >\ crnnu-nt to-ilay 

bear a larire ]iiviiiiiun over the Lrold bmids. siniply In-cattSO 
tliey pO8868fl a slight advantage in point of the time they 
have to run. It may be, however. tlat,if the public im- 
properly instituted (made a full leiral tender and sustained by 
a bond), it WOQld practically make no difference whether the 
OOndfl of the gOVemmeiU \\<-re payable both principal and 
interest in gold or leiral tender notes. Thi- view U held by 
many eminent per*nn>. The lion. Fr:m.-ix \V. Huj 
Pennsylvania, a di^tiii.u r i^hed leader in the democratic party. 
as well as one of me mo>t profound lawyer*, in tin- . ..imtry, 
in a speech at Scranton, 1'a., in October, 1875, in di*cu*Mn^ 
this jioint, said: 

-What better ^ysteni could be de\ i-,-d and what 
guarantee could he afforded, that our paper lei_ r al temh- 
always remain e.jnal to par with L r old, than that 
there -hall be an eXOejM of eurreney it can and \\ill go into 
iiment bonds j><i>f<if>l> in //"/'/. 1 i. 1.. ,-ati- 

I regard i: M immaterial wliether under me] n the 

bonds be jiayable in gold or not either way they can be 
made, as now. /" tf r ////- ;//>l. Our gi.vernmeiit bon 
at I'M and 1'4 ]er cent, above par in our r <irf',,il legal tender 


currency, and from three- to eight per cent, above par in gold. 
Did OUT government not discredit, our greenbacks by refus- 
ing to take them for duties on imports, and did it not thereby 
inake a market for gold, the paper legal tenders would I 
always remained at par with gold. The $60,000,000 of full 
legal tenders 1irst i-siied remained at par with gold, when the 
latter wa- as to partial legal tenders at a premium of _ 
Let t lie bonds be payable in gold, and what then? "Why, 
whenever the is>ue of legal tenders is in excess of the 
wants of business, by a law of its own nature as fixed as the 
law of gravity, such excess of currency will go baek into 
such gold bonds. Can such legal tenders ever get below 
par in gold? Never, so long as government bonds shall be 
at a given rate of interest. Let experience determine this. 
I believe that under such a system the government credit 
would be so assured that 3.05 bonds, as have been proposed, 
would go above par in gold. In such case the int< 
should be less. Let results determine the proper rate of 
interest, or, if need be, perhaps some functionaries under 
careful guards, might be aulhori/ed to lessen or increase the 
rate of interest. This is a subject for legislation, and from 
the many suggestions that have been made a proper method 
can readily be adopted." 

"It is not proposed to abolish gold as a legal tender. 
Whether as an article of merchandise or as a coin, let u- 
have the benefit of it to the extent we may. Hut let us also 
have a NATIONAL CUI:KI-:N-V. () ne that will not keep us 
involved in Kuropean money complications, but secure to 
u- perfect independence therefrom." 1 

The following is Mr. Grccley's editorial: 


".Mr. KoiitweH'M plan of funding the national debt has 
had a pretty fair trial. True, the times have been ad\ CI-M-, 
but we have generally found them so when we needed to 
borrow money. 

The Mini and substance of the Secretary's success is the 
funding of x _>o 1 1,()00,000 at 5 per cent, on the payment >f 
the bonus of 11 per cent, to the syndicate of foreign banker- 
who ha\e airreed to take the loan. We would not disparage 
this achiexenient, for \\e regard if as decidedly better than 
nothing. Add to the interest (*3,000,000) $1,000,000 more 
for the a. of printing the new bond-, ad\ erti^ing. 


explaining and commending tin- l:m, ami the 

tm i.l in- the $2oo,ooo,' 

$4,000,ooM. It 9CH iiis to iiu- that this des M,,I jii-:n\ a h..p,- 
that our $1,500,000,000 of instantly or presently redeemable 

sixes ran IM- promptly funded e\e|| at ~> per n-ilJ. 

Having gi\eu to the Secivtai . ;-po,t 

throughout, WO urge that ;i radically different plan ni.-r. 
ha\e a fair trial, I'.efore we send another bond abroad to be 
ha\vkc(l from hanking IHUIM* to liankiiiLf hoiis ( . thr..u-h..iit 
EurujK', >\c ask the government to try ju>t rann -sfl\ 
to fund the bill* of our drl>t at hom. . \V, ro'uld mit 
have sold our ImmU durinir tin- dark ln.urs of mir -i\ il war 
to Kuropu at any price, m> matter lo\v ruinous, if \\ had 
not first shown our faith in them by taking liundi- 
millions of tlu-iu om-M-lvi-. s., no\v, havii lm\v 

reluctantly they tiikc our n-i^^uex at ."> per rent., uit!: 
count, let us show them that we stand ready to tak 
amount at a lo\\.-r rate of interest at par. ll< T. ID I 
of our proposition. 

Let Congress make our _ r reen hacks fumlable, at the pleas- 
ure of the holder, in bonds of $100, * 1,000 an i 
drawing interest at the rate of one rent per day <>h 
$100 (or 3.05 per annum), and e\dianeable in LTI eenl.a-k> at 
the pleasure of the li older. NOW authori/e the Treasury to 
purchase aud extinguish our outstanding lm-i- 
is supplied with the means of s,, doing by receipts .f nin- 

tOniS Ol* Otherwise, and to isv llt . m-w grerllbacks \\in-ne\er 

larger amounts shall be required, every one being fundable 
iii sums of $100, 1,000 or $10,000, a aforesaid, at the 

ure of the holder, in bonds drawing an annual intei 
3.65 in coin per annum, and thes,. b-.n-U exehan^rai.U- into 
greenbacks win-never a holder shall de-ire it. 
The benefits of this system Would be these: 

1. Our greenbacks, which are now virtual raNrhoodt, 
would be truths. The government would pay them on 
demand in bonds as aforesaid, which is in substantial ac- 
cordance with the plan on which the c first 

2. Every person having greenbacks for which he had no 
present need would present them at -omr Sub-Treasury and 
exchange them at par for these bond-. Suppose he had 
$10,000 which he exprrted to use a month hencr. he can 
make them earn him *:JO meantime, >\ ithout incurring the 


smallest danger of loss by bank failures or otherwi- 
with a positive certainty tliat the money would be really for 
him whenever he chose to take it. 

3. A merchant leaves New York with a million of dollars 
which he proposes to invest in wheat at the West or in cot- 
ton at the South. He calls at our Sub-Treasury, exchange- 
his greenbacks for these bonds, and takes or sends t! 
Chicago, Saint Paul, New Orleans, or <4alveston, t> be 
exchanged for use when needed. After looking about for a 
month, he buys half the produce he originally intended, 
converts half his bonds into greenbacks, receives $50 per 
day or 81,500 in all, as interest, and makes his payments. 
After traveling and looking for another month, he invests 
the remainder of his capital, receives $3,000 as interest 
thereon for the two months he has held the last half million 
of bonds, and lays his course homeward. His bonds may 
have lain nearly all the time he owned them in the vaults of 
some bank; but they were earning money, not for that lank 
but for him. 

4. Our greenbacks, no longer false, but convertible at 
pleasure into bonds bearing a moderate gold interest, and 
exchangeable as aforesaid, could not fail to appreciate stead- 
ily until they nearly reached the level of gold. Indeed, they 
would, unless issued too profusely, be really better than 
gold. Drawing a higher rate of interest than British con- 
suls, and convertible at pleasure, as these arc not, they 
would in time obtain currency even in the Old World. 

5. The trouble so inveterately borrowed by thousands 
with respect to over-issues, redundant currency, etc., would 
(or at least should) be hereby dispelled. If there wen- at 
any time an excess of currency, it would tend to precipitate 
itself into the bonds aforesaid. If there should ever be a 
scarcity of currency, bonds would be exchanged at the 
Treasury for greenbacks till the want was fully supplied. 
Black Fi-idays and the locking up of greenbacks would BOOB 
In- numbered with lost :ir ts and hobgoblin tcrnr>. 

J. Though the demand for tlie-e bonds might for month* 
t>6 moderate, their convenience and manifest utility would 
S.M.M dilTiiM' their popularity and stimulate an ever widening 
demand fur them. They would be a favorite investment 
with guardians and trustees win. would expect to be required 
to pay over the funds held by them at an early day, whether 
fixed or uncertain. They would say, though I illicit invent 

APT! N : Ml 

>r deposit thcM- funds when- tliry \\.-uld .-..111111.111.1 :i .' 
interest, I ohooae t< pla<-- them uhnv 1 km\\ tli-y will be 
>afe ami at hand when called i',r. 

7. ritimately, we hi-lir\- i'n.-\ ironld '-me *o popular 
that hundreds of million! of them would ! ab-- 
very near the par of >pecir, ami that \sith tin- pri..-,-.-,u an 

ftjual amount of our out-tand'ni- 

.ami cancelled, without ad\ eriNin^ f .r L.ans or pa\ ini; 
Itankcrs to shin for us thrmi^hmit Km-']*-. Tin- i: 
thus saved to our country woull In- au Jmportant it-m. 

Such are the rude outlino ! a plan which w- <lil not 
originate, but which we heartily eml.r--. \Vh\ : 
a trial? We should dearly like t< int'.nn Kuropr that. 
she seems not to want any more of our liomU at .~> per < -nt., 
Ave have concluded t> take the bal:. :*f." 


The following is a copy of the principal MM-HOMS <>f the 
iirst legal tender bill as it passed the House of li 
lives, February 6, 1862: 
"An Act to authorize the issue of United States notes, 

! for the red*', ,</''-.< < / 
funding the floating debt of '/; Cnit< ! 
SECTION!. Be i' s '*eof 

Representatives of the i' ^ \ 

s.n.hled: That to'meet the nc. , iti-> ,.f the T 
the United States, and t<> pro\ ide a -urn-n.-y receivabh- fnr 
the public dues, the Secretary ..!' the Trea-ir\ i- i 
authorised to issue, on the ereCUl of the Vnit. - . $150- f 

000,000 of I'nited State* ootet, nol beari 

to bean-r at the Trea-ury ..f the I'ni' Oiinvr- 

ton or New Fork, and of such dflnominatkmi a^ he m.i\ 

dt-em expedient, not lr-s than ti\e dollars each, i 
ho\\e\er, that $50,000,000 of said nor,-> M.ail 1- in ' 

the deinand Treasury notes aothoriied to ted by the 

Act of July 17, 1801; which -aid demand tioh-s shall be 
taken up as' rap idly a- prarticablr, ami 11. i^eivin pro- 

vided for substituted for thum: And j>r.> irther, 


that the amount of the two kinds of notes together, shall, at 
no time, exceed the sum of $150,000,000. And such n< 
herein authorized, shall be receivable in payment of all 
taxes, duties, imports, excise, debts and demands of e\ 
kind due to the United State-., and for all salaries, debts and 
demands owing by the United States to individuals. <-,,rp<,- 
rations and associations -within the United States, and shall 
also be lawful money and a legal tender, in payment of all 
debts, public ami private, within the United States. And 
any holders of said United States notes, depositing any sum 
not less than #50, or some multiple of #50, with the Trea- 
urer of the United States, or either of the Assistant Tr- 
urers, shall receive in exchange therefor duplicate certihV 
of deposit, one of which may be transmitted to the Secretary 
of the Treasury, who shall thereupon issue to the holder aii 
equal amount of bonds of the United States, coupon or 
registered, as may by said holder be desired, bearing interest 
at the rate of six per centum per annum, payable semi-annu- 
ally, at the Treasury or Sub-Treasury of the United St- 
and redeemable at the pleasure of the United States, after 
twenty years from the date thereof. Provided, that the 
Secretary of the Treasury shall, upon presentation of said 
certificates of deposit, issue to the holder thereof, at his 
option, and instead of the bonds already described, an equal 
amount of bonds of the United States, coupon or regi>tered. 
a* may by said holder be desired, bearing interest at the rate 
of seven per rent, per annum, payable semi-annually, ami 
redeemable at the pleasure of the United States, after the 
years from the date thereof. And such United States P 
shall be received the same as coin, at their par value, in 
payments for any loans that may be hereafter sold or in- 
Mated by the Secretary of the Treasury, and may be reissued 
from time to time, as the exigencies of the public inter 
.shall require. There shall be printed on the back of tin- 
United States notes, which may be issued under the provi- 
sions of this act, the following words; 'The within is a h/_ral 
tender in payment of all debts, public, and private, and i* 

exchangeable for bonds of the United State-, bearing >iv 

per centum interest at twenty ye.-ir-. or in seven per cent. 

bom Is at th e yean. 1 

Jj '2. Ami '/,,' it further enacted. That to enable the 

Tetaiy of the Treasury to fund the Treasury notes ;md 

floating debt of the United States, he U hereby authorized 

A i i i BTDIZ. 369 

to U-UC, mi the credit "f tin- I'nitcd States, coupon bonds, 
of registered bonds, to an amount not - iim: *"'" 

000, ainl iv. len nalile at tin- pleasure of t In- 'j.\ en mien r. 

twenty years from date, ana bearing interest at ih r 

MX per centum JUT aniiinii, pa\ able scmi-annually ; ami the 
bonds liiTrin authori/ed shall be of such denominations. n,,t 
less than fifty dollars, as may be determined ii|<>n b\ flu* 
Secretary of tin- Treasury; ami tin- Secretary of tin- Treasury 
may dispose of Mich bonds at any time for lawful money of 
the United States, ,r for any of tin- Treasury notes tliat liave 
1> rii, or may lu-reaftor In-, is>uel nmU-r any f^n-mn- a-t of 
C'oiiirn-, or for I'liiti'ti Stairs notr< that may ! i--ur<l 

under the provisions of this act; anl all stocks, bonds, and 

other securities of the l'nite.1 State-, liehl ly imlivi.Iuals, 
eorjtorat ions, or associations, within the l"nitel States, shall 
ie evemjit. from taxation ly any State or county. 

g 3. And b* it frtlii r < nocted: That the United S 
mite< ami the coupon or registered bonds, aothorued ly this 

act, shall be, in Mu-li forms as the Sn-rrtary <f tin- Trra^ury 
may .lirect, an<l shall hear the u ritten or i'm_rra\-.| Slgnatarefl 

of the Treasurer <!' the l'nite<l State-, ami the Keni-try <t' the 

Treasury, and also as evidence <f lawful issue, the- imprint 
of a copy of the M-al of the Tr.-a>ury Department, which 
imprint shall be made under the direction of the Secretary, 
after the said mites or homls shall he received from the 
engravers, and In-fore they an- i^ncd: or the said note- and 
homls >hall he signed hy tlu i Treasurer of the I'nited Statr^, 
or for the Treasurer hy such persons a< may he imperially 
appointed ly the Secretary of the Trea-ury for that pnrpOM, 


and sliall he eounteiNi^neil hy the Ke-_ r i^ter of ihr Trra-ury, 
or for the Ife^i^ter hy -uch persons as the Secretary "f the 
Treasury may e-perially appoint for that purpose; and all 
the provisions OX the act entitle-1 An act to authori/.e the 

isMie of Treasury note*, 1 approved the -'--I day of December, 

1857, SO far a> they can he applied to this act, and imt 
inconsistent t hereu ith, are hen-hy revixed and i 
ami the sum of $:l(>0,000 is hrreKy ap|ropriate<l, out of any 
money in the Treasury not otherwise appropriated, to enable 
the Secretary of the Treasury to carry this act into effect." 

Two penal section! (jj ^ ami jj'o irere adopted as part of 

this bill, to guard airainM counterfeitinir, but it is not impor- 
tant to insert them here, as they do not affect the principles 
of the bill. 



"An Act to authorize the issue of United State* / 
dud for the redemption or fii,,</i,i : i thereof^ ndfor 
funding the floating debt of the United States. 

Be it enacted by the Senate and House of Represen- 
tatives of the United States, in Congress a**> ////;/< <// 
That the Secretary of the Treasury is hereby authorized t< 
issue on the credit of the United States one hundred ami 
fifty millions of dollars of United State** imte-. not bcarin<L: 
interest, payable to bearer, at the Treasury of the Tinted 
States, and of such denominations as he may deem expe- 
dient, not less than five dollars each. 

/'/'tvicled, however, that fifty millions of said notes shall 
be in lieu of the demand Treasury m>Us j uthori/ed to be 
issued by the act of July 17th, 1801, which said demand 
notes shall be taken up as rapidly as practicable, and the 
notes herein provided for substituted for them; and 

d further^ That the amount of the two kinds of 
i< 'Aether shall at no time exceed the sum of one hun- 
dred and fifty millions of dollars; and such notes herein 
authorized shall be receivable in payment of all taxes, inter- 
nal duties, excises, debts and demands of every kind due to 
the United States, except duties on imports, ar.d of all 
claims and demands against the United States of every kind 
whatsoever, except for interest upon bonds and notes, which 
shall 1-e paid in coin; and shall also be lawful money and a 
leiral tender in payment of all debts, public and private, 
within the United States, except, duties on imports and 
interest as aforesaid; and any holder of said United States 
note* depositing any sum m>t less than fifty dollars, or BODIfl 
multiple of fifty dollars, With the Treasurer of the United 
States, or either of the Assistant Treasurers, shall receive in 
exchange then-tor duplicate certificates of deposit. <mc of 
which may be transmitted to the Secretary of the Treasury, 
who shall thereupon i-^ue to the holder an ejual amount of 
the bonds of the United States, coupon or registered, aa may 

by said holder be desired, bearing interest at the rate of six 
per << ntum per annum, payable semi-annually, and redeema- 
ble at the pleasure of the United States after five year*, and 
payable twenty year* from the date thereof; and such United 
all be received the same a* coin, at their par 

\ I' I' I . N . M71 

value, in payment l'..r :uiy lo 

or negotiated hy ti . ,ry ..t' th- .. and n 

d from time tO time a* tin- 
interest* -hall rcijuirc. 

.I"-/ / '//,/ tnaettdi That to enal.le the 

taryof the Tn-a-m-y to fund the Tn-a- 
floathlg debt Of the 1'nited State-, he i* herehy aiirl,. 

te on the credit of the Unit - coupon I ...... I- or 

registered bonds, to an atnoont not -\-cr.iin u r ti x ,. ),,, 

million dollars, anl n-.lcniialiK' at tin- |>l< i In- I "nil. ! 

States after tivi years, ami payal.le twnr 

and lieai-iiiir interest at the rate ot M\ j,, i ,-. niiiin JM-I- aiiniiiii, 
jiayal.le >enii-annually; and the hoinU }i-r<-in anil . 
shall )>e of >uch denomination, not h-^x than fifty dollars, as 
may lie detenniiu-d u|*on ly t!ie Seen-tai-y of the Treasury; 
and the Secretary of the Treasury may di~ 
at any time at the market \ aim- li ; lawful money. th- 

coin of the t'nited Statr^, or for :m\ of the Trea>nry 
tli.-tt have lieen,or may liereaftrr I" . i^u. d undrr an\"t- 
act of Conirivss or tor the I'nitrd Statt-s notes iliat "n. 
is>ued under the jn\ i^ioiis of this act; and all MH-k-, lniU, 
and other securities of the t'nited States held ly indiviiluaU, 

corporation A or associations within the l*nit . - 

eiiipt from taxation l,y or under State authority. 

fl/r*A0r< ,'/-'../. That the I'niti-d States 
notes and the coupon or registered iimUauti .\ thi-* 

net nhall lc in sueh form as the Secretary of the Treasury 
may direct, and shall lu-ar the written or eii-,'i ' ' 
of the Treasurer of the Tnitcd Stati-x and the Keu r i-' 
Hi" Ti-easiiry, and aNo, as e\ iden.-e of lawful i-xu,-, tl 
print of a eopy of the seal of the Treasury Deparlineiit. which 
imprint shall l>e made under the direction of the Sec: 
after the said note* ,, l,.,nd- >hall be received from the 
eiiLTravers, and l>efore they are i--ucd; or the said notes and 
bonds shall l>e signed l, v d,, t| M . I*,, 

or for the Treasurer, by such pcr-ons as may be special ly 

a]ijointed 1>\ the Secretary of the Tiva-iiry for that jur|o>-. 

and shall l>e eniuiter-iirnetl ly t! 1 ,' 

or for the IJeirister. ly >u.-h ].er*onx . g ,f the 

~:iry may appnint for that purjose; and all : 
of the act entitled *.\n act to authoi'i/e t(. 

-ury notes, approved the fu enty-third da\ of Deer 
(iirhteen hundred and tifty-evi-n, -o f;iras they can 1e applied 


to this act, and not inconsistent therewith, are hereby 
revived and re-enacted; and the sum of three hundred thou- 
sand dollars is hereby appropriated, out of any money in 
the Treasury not otherwise appropriated, to enable th- 
retary of the Treasury to carry this act into effect. 

g 4. And be it farther enacted, That the Secretary of 
the Treasury may receive from any person or persons, or 
any corporation, United States notes on deposit for not less 
than thirty days, in sums of not less than one hundred dollars, 
with any of the assistant treasurers or designated deposito- 
ries of the United States authorized by the Secretary of the 
Treasury to receive them, who shall issue therefor certificates 
of depo>it, in such form as the Secretary of the TreaMiry 
shall prescribe, and said certificates of deposit shall bear 
interest at the rate of five per centum per annum; and any 
amount of United States notes so deposited may be with- 
drawn from deposit at any time after ten days' notice on the 
return of said certificates; r,-<>vided, that the inter* 
ail such deposits shall cease and determine at the pl 
of the Secretary of the Treasury; and Provided further^ 
that the aggregate of such deposits shall at no time 
the amount of twenty-five million dollars. 

$5. And I>< 'it further enacted, That all duties on ini] 
goods which shall be paid in coin, or in notes payable on 
demand, heretofore authorized, to be received ami by law 
receivable in payment of public dues, and the coin so paid 
>hall be set apart as a special fund, and applied as follows: 

First To the payment in coin of the interest on the bomK 
and notes of the United States. 

Second To the purchase or payment of one per centum 
of the entire debt of the United States, to be made within 
each fiscal year after the first day of July, 1862; which is to 
be Bel apart as a sinking fund; and the interest of which 
shall in like manner be applied to the purchase or payment 
of the public debt, as the Secretary of the Treasury shall 
from time to time direct. 

Third The residue thereof to be paid into the Treasury 
of the United States." 

The penal sections ( 6 and 7), in relation to counter- 
feiting, etc., of no importance here, are omitted. 


W H K.\ Congress convened in I>e. -,, i*ij-j, the 
Thaddeus Stevens, Chairman of the Committee of Ways and 
Means, offered a bill similar to the original 1,-,'al tender bill, 
whieh passed the IIou*e of Uepre*entatives, February 0, 1- 
This bill was intended to remedy the evil* whieh had re- 
sulted from the partial le^al tender act, but the m..iu-\ 
power raided a -real hue and cry, and Iff. fi . lindm- 

that it, was impossible to carry the measure, \va* t 
abandon it. His remarks upon the occasion were ax fol- 

Mr. STI-:VI-:\S. I a>k the gentleman from Maryland. 
Cristield,) who is entitled to the floor, to permit me to in. 
a statement in reference to the national tinan 

Mr. CKISFIELD. I yield to the gentleman for that purpose. 

Mr. STKVENS. The bill which I introduced some days 
since, to provide mean* to defray the expen*c* of the irov< 
inent, produced a howl amon^r the money-chan_ Ic- 

ons as that sent forth by their Jewish cou*in* \\heii they 
were kicked out of the temple. It produced, what 
to me, an unaccountable excitement in tinancial circle*. Thi* 
wa< eau*ed, 1 suppose, by wronir information a* to it* origin, 

and a misunderstanding as to its object, 'r i* partly 

the fault of letter writers, and partly the fault of stocK-j 
biiiLT money editor^. I j.ereei\e the money article of the 
1'hiladclphia Piv**, of Monday of this \\,-, k, r. pri-xent* the 
bill as reported by the Committee of \Va\ * and Means, not- 
withstanding the papers of la*t \\ -in. 
I *uppose these money-article editors are BOine d 
brokers who make rain by their mi*v- tfoaa The 
bill, as all knew who wi*hed to know, was introduced by m- 
on my individual responsibility, n the call of the States, 
with the sole object, as I then stated, of referring it in 
Committee of Ways and Mean*. Neither the 9 
the Treasury nor the Committee of Way* and M .id 


ever been consulted with regard to it; nor, although referred 
to them on motion of the mover, has it ever been cons! 
by the committee. 

So much for the origin of the bill. 

IT- contents and objects s.-cm to be equally misunderstood 
or misrepresented. 

It is known to this House that I do not approve of the 
present financial system of the government. When this 
Congress ;: '-mbled a year ago, all the banks of the Union,. 
as well as the government, had suspended specie payments. 
The last *;io,( loo.ooO of loan, which had been taken by the 
hanks at a discount of 15,600,000, payable in coin, was no 
longer paid in anything but the currency of suspended banks. 
The immense expenses of the government, (from $2,000,000 
to $3,000,000 daily,) were to lie provided for. It was impos- 
sible to negotiate' loans, except at a ruinous discount. The 
( 'oinmitlee of Ways and Means were expected to provide the 
means, without any suggestions from any imartcr to aid 
them. After careful deliberation, the committee, or rather 
as it turned out, the one-half of them, determined to inaugu- 
rate a system of national currency consisting of legal tender 
receivable in all transactions bet ween individuals, and 
hetween individuals and the government, and convertible 
into bonds of the- United States, bearing six per cent, inter- 
est, payable semi-annually in lawful money, and redeemable 
in twenty years in gold or silver coin. The is>ue of $150,- 
000,000 of such notes was authorized, ami of $500,0< 
of twenty years bonds. 

The system was -imple in its machinery, and easily un- 
derstood. It formed a uniform currency, sustained by the 
faith of the government, and furnishing but one currency 
for all classes of people. It was believed that as the 
tender notes accumulated in the hands of bankers and capi- 
talists they would invest them in six per cent. bond*. 
U> realise a profit from their capital. The instinct oi 
rice and gain would never allow them to remain hmir idle. 
This coii\crsion and reconversion would have absorbed the 
$500,000,0<M) within the fiscal year, and supplied all tin- 
wants of government. So long as the legal tender 
remained unconverted the government would have had the 
benefit of the circulation without interest. This wa> the 
plan of the committee. The currency has proved the most 
able ever offered to the people. This was the 

\ IT 1 \ I. I \. 

lion <>f tlu> liills us presented ori/mally, :unl as they passed 
tin- House. 

Hut the simplicity an. I hannuy of thi- 
doumed t<> iu- manirled and desjro\ed a- if pa .-d through 
tin- Senate. They began by making t\\o kinds 
lor tin- same community a fatal mistake when\ 91 
They provided tliat bonds issued a s ah,.\e stair. I sh-.uld re- 
tin 1 interest, iii pll, while the interest of all other 
bonds should he pax able in leu'.tl tcii-lcr n..trx, thii^ 

tlu- niitM-t a (Irpivriati.Hi nt' tln-rnit. i - 
and rrr:itin^ a (Ifiiiand 1'. r 'j"M t< - I " taken ad\ ant., 
st-iui-aiiiiually l>y Imllion nnii'_rT>. Without Mich i'f.\i>ion 
tlu-ri- would ha\f IKM-II no demand for a MULT!*' dollar of 
to In- u-'-d ill tliis country. If merchants wi.-i 

import rMds IM-VOIM! .uir r\pnrt>, and that iv|uiivd .ir-li, I 
should feel hut little sympathy for them, \\hate\er premium 
they were ohliired to pay. IJeiiiL? unal'le to defeat tiii- pro- 
vision, I procured to I,.- in>t-rte.l a pi..\i-i..n making the du- 
i imports payable in Lr <( ld. 'I'hi- ualle the 

jfovernmrnt to meet the payment of interest in coin. That 
had one good and one lad etl'e.-t. It innvasrd ,, M r tariff 
soim- thirty j>er cent., lut it conipi-lled our mm-hants logo 
:iinonu r Hi*- Shyloi-ks to pmvha>r coin to pay their duties. 
The-e comhined form :i mine of wealth for 
brokers and hanker^. Tin- duties and int-rest \\ ill ivi|tiiro 
$60,000,000 of go Id annually, and >>on douhle that amoimL 
N.'\\, our hanks and hroker> h:i\ iy that ft] 

han.l. Tlu-y may jut the price as hiu r h as they p! . 
must l>e paid. Sup|.ose the l.anks in our three irrea; com- 
mercial <-itie> to have ju^t that amount. If half-yearly they 

sell the half of it tothegovetnmeal and nu-rchants at thirty 

per cent., nMiiL? the other half to the i-nd of the \.-ir and 

thru selling it, they would clear by th;~ 

thirty per cent. >n their capital, and have all the pr.*' 

loans, on deposit-*, and currency circulation betide*, The 

irold would rrturn to their \ault-, poxxihly, hy the payment 

of interest, on the \ery l.oiids they held tlicniM'h 

to he for the same operation at the n. .nmial 

]>ayment, tloiiblin^ their capital in three years. If a finan- 

cial system \\hieh ]ro, luces MU-|I re-u!t- 1- \\i^, -. t!u-n I am 

laboring under a ureat mistake. 

The ne\t error was to , -h^ ir bonds into 

boiuls redeemable at the option of the government in live 


years, and payable in twenty years. We all know these long 
loans sell much higher than short ones. But the most un- 
salable kind of bond is that payable in a short time if the 
obligor choose, or at any intermediate time up to a distant 
day at his option. Every man wishes to know when his in- 
vestment will fall due, so as to know how to arrange for busi- 
ness for re-investment. The very uncertainty of the day of 
payment is a great fault; hence our bonds sell some five per 
cent, lower than an absolute twenty-year loan would; yet no 
one believes that we shall be able to redeem them short of 
that time. The only justification for this change would be 
the expectation of being able to pay in five years. He must 
be a very hopeful man who can indulge that idea. 

Another change, which seems to me equally injudicious, 
was the allowing the holders of legal tender notes to deposit 
them with the government agent at interest not exceeding 
five per cent., and payable on call after ten days. This ef- 
fectually destroyed the hope of any very speedy conversion 
of them into bonds. A holder of them would much prefer 
lending them on short call at a smaller interest, and wait for 
emergencies to speculate, than to fund them in government 
stock. The consequence is, that while $80,000,000 have 
been deposited on short loan, only about $20,000,000 have 
been invested in bonds. One singular feature of this pro- 
vision is, that when $50,000,000 or more of these notes are 
thus borrowed by government, the Secretary of the Treasury 
shall keep on hand $50,000,000 of legal tender notes to meet 
the call, either by not issuing the amount authorized, or 
holding others. It is, in effect, the same as if the govern- 
ment agreed to take a loan of $50,000,000 at four per cent., 
and keep it in their vaults without use until the lender called 
for it; in other words, paying four per cent, interest for the 
privilege of holding unused a special deposit. How these 
short loans and the pressing demands for other claims are to 
he paid, at least after all the greenbacks are once issued, I 
do not well see. Had they twenty years to run, I should 
feel easy. These are the objections which I have to the 
present system. 

I will now briefly state the provisions of the bill which I 
introduced. It was intended to restore the law just to the 
condition in which it left the House of Representative^ and 
nothing more. 

The first section provides that the Secretary of the Treas- 

API- :177 

ury shall p:iy off and cancrl all the tive-t\v 1ft and all 

others whose inteiv-t i- payable in ir-'l-l, and to exchange 
new bonds for tin-in on -urh torn ill IH* agreed 

pay tin-in in leijal tend' 

Certain money cditr- ha\e professed to 8e< :i Vio- 

lation of public faith, which promised tin- payment in gold. 

Nothing & more fata, It pnp..M-d to HfttMM bonds, by 
negotiating with the holder*, at Mich -u Id be agreed 

on. If the holder declined to >dl. In- would ! -ntr 
receive hi* interest in gold, according t tin 

tract. I suppose in* man nuiM IM- fnuml in thi- H.>nM*bMe 
iMnu^li to nro|M>si i repudiation. N"in- lur fupid U1AII 

COtlhl BO misn-ad tin- dill. True, it pmpoM-d t. iaUM n niorr 
- ti' that kind, and repealed the law aiitlmri/inu' it- And 
yet it has heen thought 'f Mitl'n-icnt inn jravcly to 

introduce the resolution hen- de<-larinu r in adxatb. t ; 
intended to make no rhaiiiri* in the law. NVIiat Im-iness Han 
nnyhody to iiKjuire whetlu-r in onr future i-xn ot l.oi 
intVnd 'to pay the inteivM in ein or h-_r ; ,| tender'.' It i-* 
enoiiirh for them to knw that in contract> al: 
the L r <'Vernment will keep its faith. 

It further pn.po-ed to pay olT the li-iral tender interest- 
liearinLf deposits, and to repeal the law anthori/in'_ r 
loan. It has turn<-d out ju>t as the emnini" ::- t-d, 

that such demand loan ha> : i the conv.-r-.ion to any 

ieralile amount. While $80,000,000 of legal tender 
are deposited on call, hut about *20,000,0>o have been 
invented iii homU. It i> ol\ioiis that at that rate the Hale 
f bonds will aid but little in carrying <n the war. 

It proposes to repeal the law re.juiring the payment of 
<lnties in coin, as well a- the interest on future w*ii* of 
})ond-. OXOep4 "iie-lifth of the amount of du'i- -. Thi-. i-* 
retained -o a- to furnish the government with c>in to '. 
the foreign diplomatic and <-onsular expenses, and the 
<-har<_res of our courts in foreign jorts. anl the costs of des- 
titute seamen. Thus the whole currcn.-y n.M-drd in thi 
country would be leiral tender l'nite.1 Stat-s not.-s. The 
bullion monirers would lose; the merchant* and government 
would L, r ain. 

Saving restored the law to its original shape, it proposes 
to raise money to pay the pressing aebts due to dep 
and gold-bearing bonds, the pay due soldiers, ana oth-r 
expenses, by issuing K-iral tender notes, not exceeding 


$200,000,000 beyond those already authorized, and to i>sue 
* 1,000,000,000 of bonds, bearing six per cent, interest, pay- 
able semi-annually in lawful money, and redeemable in 
twenty years in coin. With $500,000,000 of legal tender 
notes in circulation, they would accumulate sn faM with 
capitalists and banks that the holders would be glad to turn 
them to profit by purchasing the loans; and I dmb: 
before the year would expire the whole $1,000,00' 
bonds would be called for at par. In my opinion, with the 
present law this amount can never be sold except at rui: 
discount. I believe that this disposes of the provision- of 
this bill, which were intended to restore the committ. ' 
project, and which was sanctioned by a large ma; 
the House. 

The balance of the bill refers to State banks, and im: 
a tax of fifty per cent, on all their circulation beyond one- 
half of their capital. This tax is obviously intended for 
prohibition, and not for revenue. I incline to think it sh 
have taxed all above three-fourths, instead of one-half of the 
capital. The object of this provision was two-fold: first, 
to give a wider circulation to United States notes, and thus 
induce their conversion; secondly, to prevent the undue 
inflation of the currency. I suppose that such a law would 
drive at least $1 00,000,000 of bank notes out of circulation, 
leaving about the same amount afloat. Those, together with the 
United States notes, would give a circulation of $(500,000,000. 
I believe the business of this country reouires that amount. 
Before the rebellion the paper issues were over $200,000,' 
and the coin was at least $300,000,000. I suppose svhat 
may properly be called the present circulation amount - 
more than that sum. The checks which pass as currency in 
our large cities are as much a paper circulation as bank 
notes. They amount to some $200,000,000, I imagine, and 
almost entirely supersede bank notes in New York and 
Bo-ton. When it was said that the currency necessar; 
do the businr>s of (ireat Britain was near two billion dol- 
lars, the hank note circulation was less than four hundred 
millions. The re-t was supplied by bills of exch.v 

But in time> of -u-pen-ion of specie payments, bank* will 

md to an unlimited amount unless re-trained I-;. 
national law. I can account for the present high pric-- 

rything in no other way than by such expansion or the 
expectation of it. I fear the true amount of present ciivula- 

A i- 1- i:\nix. 

t'.on 1- not ascertained. Take, as :ui example, :i very sound, 
well-managed bank in my own district; it \IM a capita 
0,000j it In. 1,1s .il.oiit $150,000 of V md 

fteven-thlrty per cent bonds; it has on vi,,,rt i,. , 

il tender; it has $80,000 in coin; ami its cireu 
^000. In an adjoining district a hank \\ .oQO 

capital has more than its \\hoie capital nm-M,-! i :i TI, 

Statt-s l..aii-, ami lias a rirnilation ,.f f> 
isMu-s nnixt inflate the mnvin-y. 'I'lu- p.-.,p|,. will run niad 
\\itlj >piMMiIalin, anl in a tW \cu- I noenU rr.-i-h will 
folln\\ . My jiropoMtimi \v>ull riot rr.liu-f Uank profit^ lie-low 

a fair train. Wlme suspension continue* tln-y mi-^lit hold, as 

tlu-y now liavc, th-ir wlioK' capital in LT>\ cninu-nt stocks, 
l)c'ariiiiX at least six p<T cent. JKT anninn. Tin \ c..ul.| 1, 
Tho profits of a circulation c.jual to three-fourth of th.-ir caj- 
ital, and hank on whatever deposits tliey ha\e. Tlii- would 
irivc tlu'in at lea^t ten per cent. infeivM t,, j, :t y their expenses 
and dividends to stockholder^ This i> 

15ut I ouuht perhaps to - ay. Let.. re I olose, to my country 

iVirnds that tlie nccil n>t !, alarmed. 'I'liei- 

no i^ivat prosi.eet that we shall return to p 
indicated, nor do much to protect the people from their own 
i-aiTer speculation*. \Vlieii, a fe\\ yssn In-nce, tin- people 
sliall liave heen hroii-jht to ireneral hankruptcy l.y their 
unre<?ulated enti-rpri-e, I shall have- the -ion to k: 

that I attempted t prevent it. 

Mr. Steven^' views in regard to the defects of the partial 

Legal tender system have IH.H fully continnetl by fourt. 
\ -ca i -s' experience, and his prediction^ h :t'ud in 

markable manner. Notwithstanding the defects of the 

system, h<> \\e\ci-, and in spite of hostih- legislation and the 
existence of the National Hanks, it has proved im: 
superior to the specie l.asis or hank eurn-n- . . whicli 

cursed the country for o\cr half a centui-y prior to the 
Rebellion, and which the hullionists and bankers are now 
seeking to re-establish. The people ha\e Ix-en bn.u-ht t- 
the verge of bankruptcy by the machination* ,,f the money 
jower, and the intcrcM* of the nation demanl that a fuU 

380 A 1' PKX DIX. 

legal tender money system In- no\v given a fair trial. Thi< 
end can only be accomplished at the poll*. The bullion 
and bankers, and their tools, are already in the field, manip- 
ulating party conventions and caucuses all over the country, 
to carry out their designs. The masses must organize 
against them, throw party prejudice aside, and vote for no 
man for any official position, from the lowest to the higli 
who is not known to be honestly in sympathy with the peo- 
ple's cause, and in favor of full legal tender money. 

A I'l'I \ |.| \. 

Monthly Kaiik'o of tin- (...M Premium for FmurtMB Yfan. 

Tin- following table shows tin- l..\\,-t ami hi-jhet prices 

ofgoM at \.\\- York, for ,-.i-li m.-nrii in tin- lat foAt66O 
years. Tin- l.-ft-li.-m.l lumn of t-:u-l \- n- -Imwn the lowest 
price, ami the right-haml column the highet* 




Sr :: 

-i -i ; 

- H aSlll MNHM 

From the Tribune Almanac tor MW, 

to to tc :.- ^ i - 



FRENCH A>signats and Continental money are ghosts 
which have been conjured up to frighten the public by the 
bullionists and bankers, who wish to monopolize the right to 
furnish the circulating medium of the nation. The subject 
of Continental money was fully disposed of in the chapter 
on Banks of the United States;* and a word of explanation 
in regard to French Assignats seems to be necessary. Thiers, 
in his life of the celebrated John Law, tells what Assignats 
were as follows : 

" Assignat was a name given to a peculiar species of paper 
money, issued during the first French revolution. 
The first issue of assignats was made on the security of 1 1n- 
forfeited [confiscated Ecclesiastical] property; and was 
.adopted as a preferable alternative to throwing the forfeited 
lands on the market; which, * * so large an amount 
of property would glut. The holder of the assignats might 
use them as money or claim the land which they repre- 

"The French revolutionary government wished to pay the 
debt of the monarchy and the expense of a universal war 
with the national property [confiscated church property], tin- 
property not being disposable, on account of the quantity 
and want of confidence, it anticipated the sale, and repre- 
sented the results by papers called assignats. 
But as the success of the revolution began to be distrusted, 
and doubts arose as to the; maintenance of the national sale, 
they declined, and, as they declined, the government, t< 
supply the deficiency, in value, was obliged to double the 
issue, and the repletion contributed, with distrust, to depre- 
ciate them." 

Upon the overthrow of the revolutionary government and 
the formation of a responsible government, under Napoleon, 
the church property was restored to its lawful owners, and 
the ai'_rnats became wurthlc^. 

To compare the legal tender money of the I'nited 8 
to assignats, is simply an insult to the intelligence of the 
American people. 

See page 112. 


i\ ii:\< IN IKOM KI:I i IM.I.. 

::!: nio>t fundamental and important tnr ition 

! in. Mi. \ , h:t\e ah| ip by 

hnicalities of la\v as com: 

tltli.iiivrli tin ;. 
known :ilil t'clt that tilde Ua- sometime,' 

Writers upon political economy, public in 

jrfncral, have taken it for granted that tin* 1 

iiirlit in founding thu value of money in tin- innate 
value of the <rold aiil sil\-r metal which r 

<Miim-il: lu-nce the onnrluMoiK at whirli th-y mn^t all ani\r* 
are ju-: a- false as the premi-e< npuii which ti \ i 

political rcomimi-N may contii the public 

may cuntimie to ar the-r pr- 

C.MIIC, ami le ju^t a^ far from tin- truth a- \\ ! 
instituted Upon thill bai N - Aith-taii.lii;^ thi- my-titi.-a- 

ti'ii about inom-y. r ami |".u . r :t; t 

dimple, an<l ncc.l only TO U- drarly and f:iirl\ m-ct 

the approval (!' the common mind; and then the public imM 
know that the present ccntrali/iicj is as 

an imposition upon the eonmion ene of ID 
upon the common rights pf labot. and propi-i"- if tlie 

material of neither ^o!d, >ilver no" paper inon-y i-an ii 
be uxt-d av food, clotliinir <>r >helter, then certainly the 
scarcity or abundance of money, or the scarcity or 'abundance 
of the niateriaU of money, oii^ht never in the le:i-t t. 
fere \\ith a LTeneral and full >upply of all the nej-e-^u 
life. l-'or thcvc nccr^arie- .f !:' dcntlv the pmduet 

of labor, and not the pn'duct .f m..m-\. Vet th- j. 

powi-r of money U Mich that the people are comjH-lh 

to work for money, and then to depend upon tin- 

money to Mipply the m of life. Tim- the j...\.. 

money i< first,' and tlie jMiwer of labor i^ 

money i-ominand^ the labor instead of lalmr eoiiunandini: 

the nionev. This ix ezaOtljf '--N r-in-_r the trn 

thinirs f"i' it x niakinir a lea-l 

ami tyranni/e over the li\ ; 

the productive ouirht always to < ommand the unjroductive 

power. If any writer* upon political economy, or any finaii- 

. have discovered the true nature, jower and 
money, they have not made Mich discovery manifest to the 
Understanding <d' the public. For the laws of nations, as 
well a* the newspapers and other publication* of th< 

384 Al'l'KNDlX. 

are still carrying forward and enforcing the idea that money 

is a productive, living power. Yet the power of money i< 
entirely a dead power, and totally unproductive, notwith- 
standing its legal, accumulative powers." 

"THE avarice that pervades the civilized world has IK-CM 
ingrafted upon society by the too great power of money. 
In most countries it has made production by labor degrading 
to the child whose necessity compels him to perform it. 
The skill to gain by lending money, and by taking advan- 
tage of others in bargaining, lias been, and is taken as evi- 
dence of superior talent, until, by example ami precept, 
avarice has been instilled into the minds of childern. It 
lias grown with their growth and strengthened with their 
strength until it has corrupted the very foundations of 
society. The percentage incomes on bank, railroad. State, 
and other stocks, and the rates at which money can he bor- 
rowed and lent, are the great leading topics of a bu>i: 
community. The topics are not, How shall we contrive to 
produce by our labor the greatest supply of all the nce< 
ries of life for the general good? but, on the contrary, How 
shall we contrive to get the largest possible per cen; 
income with the least possible production on our part':* This 
state of society is directly at variance with such a one a- a 
just monetary syMcm would naturally induce. It is as much 
opposed to the natural rights of society as falsehood 5*. to 
truth; and no continuance of competition in production or 
distribution, under the present monetary laws, will be any 
more likely to remedy the evils of this deba>ing ny>tcm, 
than competition in false-hood would be likely to produce 
aixl sustain truth. We must begin improvement by doing 
away the- great gain by unrighteous per ceutage interot on 
money; and then theVealth will naturally be widely di- 
tributed among those who do the most for the good of man, 
instead of being gathered in by a few, who thus become the 
great oppressors of the human family." 

Berkey, William Augustus 

60$ The mone -r question