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 THE MONEY PROBLEM. 
 
 inquiries Concerning 
 
 
 THE 
 
 NATURE AND OFFICE OF MONEY, 
 
 AND THE 
 
 SOURCE OF ITS VALUE: 
 
 REMARKS ON INFLATION, 
 
 AND 
 
 life 
 
 IS HENRY ISliONSON, M. D 
 
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 COMMERCIAL lunacy, 
 
 Til/ DOWNFALL OF PRICER. 
 
 
PREFACE. 
 
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 At the time the legal tender act was taken up for discussion, in January, 
 1862, the people generally took but little interest in it, and comparatively 
 few, as I apprehend, understood its fearful significance. It is charitable to 
 suppose that Congress itself (or a majority of it) was not fully aware of 
 what it was about to do. History had been forgotten ; the costly and bit- 
 ter experiences of the Revolution were set aside ; the remonstrances of a 
 few earnest men were unavailing, and an experiment repeated which a 
 hundred times had failed with disaster. When the law had begun to work 
 out the expected results, I undertook to write the early history of paper 
 money in Connecticut, hoping in that way to do my part in setting forth 
 the perils of the course pursued by the government. The work, entitled 
 “ A Historical Account of Connecticut Currency, Continental Money, and 
 the Finances of the Revolution,” 192 pp., appeared just at the close of the 
 war. It made a part of the first volume of the New Haven Colony Histori- 
 cal Society. 
 
 Twelve years later, after the law had wrought out the mischief it was fitted 
 to produce, and the speculating phrensy had run through its customary 
 ^ stages, culminating in the panic of September, 1873, 1 prepared and printed 
 fo for private circulation a small pamphlet, in which I attempted a brief ex- 
 position of the nature and office of money, and the laws which govern it. 
 
 * It bore the title of “ The Money Problem.” A few friends appeared to 
 € 
 
 J think so well of it that I have undertaken to write a second essay on the 
 ^same general subject, in the latter treating of topics not mentioned or barely 
 ^ alluded to in the other. Each was intended to be an independent article, 
 7 more or less complete in itself, which fact may account for occasional re- 
 0 petitions. Both will be found in the pages which follow ; but in some cases 
 P the last essay — “ The Money Problem Again ” — will be put in covers of its 
 own. If I have failed in any or in all, I have done no more than many 
 ' others who have written at more length, and spoiled paper in larger amount. 
 
 New Haven, CoNN.,Apn7, 1877. 
 
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Digitized by the Internet Archive 
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 :tps://archive.org/details/moneyproblemessaOObron 
 
THE MONEY PROBLEM. 
 
 Money is to most of us a familiar object, a necessity of our 
 daily life. It is used as an instrument or medium of exchange 
 by which the wants of trade, perennial as our industry, are sup- 
 plied. The representative of all material good, it becomes known 
 to us before we begin to reason, and in after years the facts 
 which are so old seem, as with all our early acquisitions, to need 
 little explanation, and none which appearances do not suggest. 
 Time-worn and seemingly simple, they excite in most men no 
 curiosity and no serious inquiry. Like the phenomena of our 
 own minds, their nearness and perpetual presence too often breed 
 indifference, and turn aside philosophical investigation. In this 
 manner, indistinct and erroneous views come to be entertained. 
 Another thing should be noted. Our business men who have 
 most to do with money have little time for study, none for ab- 
 stract thought. They are not trained to it, and can see no profit 
 in it. In the evening of life, when riches and some leisure have 
 been secured, new tastes and habits cannot well be acquired; 
 faculties long unexercised cannot be awakened, or will not work 
 effectively. There is, as I am aware, one splendid exception to 
 these remarks. David Ricardo, the profoundest of all the wri- 
 ters on Political Economy, was long and extensively engaged in 
 the business of the London stock exchange, and thereby acquired 
 a large fortune. But Ricardos are not a common growth, and 
 cannot be extemporized. Usually, men in trade, whatever their 
 natural gifts, are fully occupied in the management and super- 
 vision of their affairs; cannot devote themselves to science, and 
 would not succeed if they did. Notwithstanding this manifest 
 unfitness, caused by occupation, the banker or capitalist who has 
 spent his best years among money-bags and greenbacks thinks 
 himself specially qualified by his experiences to dogmatize con- 
 cerning the nature of money, and the laws which govern it. 
 Nor does the unthinking world question his authority to teach. 
 If the secretary of the U. S. treasury be in doubt regarding a 
 proposed measure or policy, he takes the “ fast train ” to consult 
 
2 
 
 the magnates of Wall street. He does well to get the impres- 
 sions of experienced financiers. They have much knowledge of 
 details which mere politicians and scholars have not, and are fa- 
 miliar with the practical working of the commercial machinery. 
 Some of them too are men of enlarged and cultivated under- 
 standings. To say the least, it requires as much intellect to or- 
 ganize and superintend, with the best results, an extensive trade 
 or industry, as it does to be a reputable professor, a senator in 
 Congress, or a college president. At the same time, it must be 
 admitted that no uninspired man, whatever his ability, can under- 
 stand, much more, safely teach, that which he has not studied. 
 Neither scholarship, professional eminence, or observation be- 
 hind the counter gives the requisite qualifications. One may be 
 a skillful helmsman or navigator and be ignorant of astronomy, 
 and vice versa. An astute lawyer, learned judge or useful legis- 
 lator may know little of monetary science. Too conspicuous 
 illustrations may be found in the speeches of bewildered con- 
 gressmen and the decisions of benighted courts. True wisdom 
 imposes silence, or at least modesty, at the point where knowl- 
 edge ceases. 
 
 The confusion and diversity of opinion which find a lodge- 
 ment in the common mind concerning money, have, for the most 
 part, come from false and incompetent teaching. Mischief has 
 been done by book-worm expounders and abstract thinkers, but 
 far more by persons called practical or business men. So long 
 as the multitude (the “talking” multitude) of the latter class, 
 without reference to natural or acquired fitness, continue to be 
 the trusted instructors of. the popular mind, writing on its blank 
 pages whatsoever they will, so long shall we have among the 
 people crudity of thought, contradiction and misguided perni- 
 cious effort, all of which will find a resting-place in legislation. 
 
 Though on questions of currency, the facts which first meet 
 the eye lie on the surface, there are others more recondite, more 
 fundamental, which reveal themselves to the reflective faculties 
 alone. These key-stone facts, to be understood, must be studied 
 with the advantage of all the lights which the best thinkers have 
 supplied. A new explorer in any field of science first endeavors 
 to learn what has been done by other inquirers. It is folly (or 
 worse) for any finite man, however learned and able, to neg- 
 lect external helps, and attempt to excogitate from his own brain, 
 untrained in that kind of work, a true theory of money. Yet, 
 
3 
 
 this is done exultingly by those who have never learned the ele- 
 ments of Political Economy; who have not read a page under- 
 standingly of Adam Smith, Malthus, Ricardo, Say or J. S. Mill. 
 It is not possible that anything but chaff should come from the 
 intellectual throes of these persons. 
 
 To the thoughtful, Political Economy, to which the money 
 problem belongs, is an attractive science. Its fundamental 
 principles are more durable than the hills, and its reasonings and 
 conclusions almost as exact as the demonstrations of mathema- 
 tics. Step by step, under the guidance of a few master-minds, it 
 has grown up within a century. A multitude of heterogeneous, 
 apparently discordant facts have been reduced to order, classi- 
 fied and traced to their sufficient causes. All this has been done 
 by trained workers — those who have been content to begin at the 
 beginning, to forget their prejudices and conceits, to crucify their 
 love of origiilality and invention, and to become patient, earnest 
 laborers in a neglected field of inquiry. Accepting all that has 
 been done by others, starting from the vantage ground the fore- 
 most have reached, they press forward cautiously, perhaps pain- 
 fully, but surely, each adding something to the growing mass of 
 knowledge. In our era, this is the course followed in all the 
 sciences. He who pursues it may hope at least to comprehend 
 what others have done. Raw recruits and three days’ volunteers 
 never reach this point. 
 
 The questions relating to money have been so long to a large 
 extent in unskillful hands, and are so overlaid with error and rub- 
 bish, that it will be necessary to go back for a moment to first 
 principles, and in the light of these, to examine the speculations 
 and assumptions which have been put forth so confidently, and 
 which at this moment are vexing and perplexing the nation. 
 To be obliged to do this is not a little discouraging, but to him 
 who would make himself understood there is no alternative. 
 Preaching on this subject can have no effect till there be some- 
 thing like agreement as to those primary truths which underlie 
 all our reasonings, and to which the last appeal must be made 
 in cases of doubt. Having placed before the mind these simple, 
 fundamental truths, and obtained for them that acceptance 
 which is inevitable, it will be easy to go forward and correct 
 mistakes — easy to overturn the card-houses which dreamers and 
 our ten thousand teachers have erected. Standing in the light 
 of these, it will be possible to bring forth order out of confusion, 
 
4 
 
 perhaps noon-day out of midnight. I do not mean that there 
 will be no dark corners left, but the field of distinct vision will 
 be greatly enlarged. 
 
 In setting forth the laws of monetary science, it may not al- 
 ways be convenient to ennumerate all the transient influences^ 
 which may slightly effect results. My object in writing the fol- 
 lowing pages is to show the tendencies of recognized and con- 
 trolling principles, sometimes overlooking momentarily disturb- 
 ing elements. 
 
 Among rude peoples and in the early stages of society, com- 
 modities exchange one for another without the intervention of 
 money. A spear, say, is given for an oar, two beaver-skins for 
 a salmon, or a wigwam for a canoe. This is barter. In each 
 case, the producer or proprietor parts with his labor, and expects 
 to get as much in return, or in other words an equivalent. If 
 gold be discovered, and become desirable for use or ornament, 
 the owner must be paid current wages for the time spent in ob- 
 taining it. On no other condition will he bring it to market. 
 In his just view, his labor is as valuable as that of the oar-maker 
 or trapper, and should be as well rewarded. If others think dif- 
 ferently, he will give up gold-digging, and follow some other 
 occupation. As is the fact with all products, gold may be re- 
 garded as embodied and condensed labor having a fixed relation 
 to other articles. If on the average, one day’s toil be required 
 to secure 23.2 grains of fine gold, this quantity will exchange 
 for a day’s toil in every other occupation, oar-making, beaver- 
 catching, &c. Of course allowances must be made for excep- 
 tional skill and risks — All this is obvious. 
 
 In process of time, on account of its many advantages — its 
 scarcity, portability, divisibility, imperishableness, &c., gold 
 was employed as a common measure of value, as the yard stick 
 was of length and the pound of weight. If a man had some- 
 thing to sell, he exchanged it first for gold, and then with that 
 bought whatever he desired, taking care in each case to get as 
 much as he gave. The great convenience of the practice — the 
 having a commodity which in the market would be accepted by 
 all, and the consequent saving of time and trouble — secured its 
 general adoption. From the moment the glittering bauble was 
 sought and held, not for its ordinary uses, but as a medium of 
 exchange, it became money. At this point government came 
 
upon the stage, for the moment beneficently. To save the cost 
 of weighing, proving, &c., and to meet more perfectly the wants 
 of traders, small and great, it invited the producers and holders 
 of gold to bring it to the mint and have it coined. It was divid- 
 ed into suitable pieces of determinate weight and fineness, 
 stamped, named, made a legal tender, and returned to the de- 
 positor as coined money. The unit-piece of our currency, by a 
 law of Congress passed in 1834 , contains 23.2 grs. of pure gold, 
 and is called a dollar. The government stamp is only a certifi- 
 cate and pledge of weight and fineness, while the legal-tender 
 provision compels creditors to receive it for what it claims to be. 
 It neither adds to or takes from its intrinsic worth. It is still 
 the product of, say, a day’s work packed in a convenient form; is 
 the necessary equivalent of a day’s work in the market, and 
 will everywhere be received in payment for oars, spears, shoes, 
 hats, coats, &c. Five thousand dollars will buy a house because 
 the sum named and the house represent and contain each the 
 labor of fifty men for one hundred days. They are commer- 
 cial equivalents. No matter how complex the product, the 
 aggregate of all the items entering into it will show its natural 
 value in exchange. The fixed relation of one thing to another, 
 which relative value establishes, cannot be changed by legisla- 
 tion. The law-makers may alter the forms, names and weights 
 of the coins — may call a dime a dollar, or make one dollar into 
 two or five — but they cannot cause 23.2 grains of fine gold to be 
 given for more or less than the labor it contains.* Herein is one 
 advantage of a metallic currency. In an important sense, it has 
 a stable value determined by its weight, and not at all by the 
 names it may bear. Once in possession, the holder may go to 
 sleep with the assurance that it will not turn to ashes. 
 
 But the administrators of governments are needy, often crafty 
 and depraved. They spend more than their income, and to eke 
 out a living, sometimes resort to plunder and deceit. To benefit 
 themselves, their retainers and supporters, they abuse the sover- 
 eign power, and debase the coinage. Though they cannot alter 
 the intrinsic and exchangeable value of 23.2 of gold, they can 
 
 * In all the products of industry, where society is at all advanced, the profit which is 
 obtained for the use of capital is one of the elements of value. But profit usualty bears 
 but a small proportion to the other element, and may, without disturbing the reasonings, 
 be ommitted. Accordingly, for the sake of simplicity, it is left out of the account in 
 this essay. For the same reason, no reference is made to the effects of monopoly on ex- 
 changeable value. 
 
6 
 
 put fewer grains into the coins. Having provided that “ dollars ” 
 shall be legal-tender, they can, without changing the name, make 
 four out of three or two, thereby reducing their indebtedness 
 one-quarter or one-half, and robbing their creditors to an equal 
 amount. (A pound of silver was originally coined into twenty 
 English shillings; it is now coined into sixty-six shillings.) 
 In this way, by a system of false naming, industry is deprived 
 of its reward on an enormous scale. As the cheapest and poorest 
 lawful or accepted currency is always used for paying debts, 
 debtors with gleeful hearts take advantage of the change. Every 
 man who lent dollars containing each 23.2 grs. of gold, and cost- 
 ing, say, a day’s toil and sweat, is repaid in dollars of three- 
 fourths or half the weight. Every laborer who bound himself 
 in law to work one hundred days for one hundred dollars, and 
 did as he agreed, receives payment for only seventy-five or fifty 
 days. If a husbandman sold his corn, his cow or his farm, the 
 merchant his merchandise, or the manufacturer his goods, made 
 or to be made, and were not paid till the new dollar appeared, 
 he is swindled out of a large proportion of his own. But this de- 
 basement of the coin would only affect those who stood in the 
 relation of debtors and creditors. Its retroactive operation 
 would be oppressive, but future contracts would not be embar- 
 rassed. He who had property of any kind to sell would ask and 
 obtain for it as much gold as before. The practice however of 
 making light coins is so plainly and contemptibly dishonest, that 
 reputable governments are not now guilty of it. The more cer- 
 tainly to prevent it in future, they should be compelled, when 
 possible, to stamp on each piece its weight and fineness, and to 
 apply the name to none of a different standard. 
 
 Hitherto, very briefly, I have dealt only with foundation-prin- 
 ciples, and the simplest elements of monetary science. They 
 will not be disputed; but there are other truths somewhat more 
 complex, logical inferences from them, and equally undeniable, 
 which must be considered. That the derivative truths may 
 be understood, the primary facts must be borne in memory, and 
 at every step applied. 
 
 Coin, which is itself given for the commodities it measures, 
 does not indicate values with quite as much certainty as the 
 yard-stick does lengths, the pound weights and the bushel solid 
 contents. Gold is not at all times the product of an equal 
 amount of labor. When a day’s work will produce more than 
 
1 
 
 23.2 grs., production is stimulated, and depreciation follows. 
 But the amount in currency and bullion throughout the world is 
 so large that hitherto the effect of any increase has been very 
 gradual. Since the remarkable discoveries in California and 
 Australia, more than twenty years ago, and the gross addition to 
 the treasure of the nations of, say, two thousand million dollars, 
 it is estimated that in England gold has fallen in value twenty 
 per cent, in New York much more than that, and in the neigh- 
 borhood of the mines still more. A man who loaned “trust 
 money ” twenty -three years since at seven per cent, returnable in 
 specie, has not probably received in interest more than five per 
 cent, while the principal is not now worth more than seventy 
 per cent of its former value. But recent events, on so large a 
 scale, are not likely to be repeated, and the precious metals 
 still remain, all things considered, the most perfect measures 
 of value now possible. Nor would it be difficult to prove that 
 they are the most economical. It is not true that they are un- 
 suited to a brisk, enterprising, commercial people like ourselves. 
 In the large cities, where the commodities of the country are ex- 
 changed, and trade is most active, there is little need of 'any 
 other currency. In these places, expedients are adopted — banks 
 and clearing-houses instituted — so that a much smaller amount 
 of money, in proportion to the exchanges made, is required than 
 any where else. By the agency of the clearing-house in New 
 York, the banks of that city pay to one another, in ordinary 
 times, one hundred million daily, by the transfer of less than 
 three million in cash. In the smaller transactions of a rural pop- 
 ulation, specie as the sole currency is not inconvenient, but on 
 many accounts the most desirable. No populous country in the 
 world is so abundantly and cheaply supplied with precious metal 
 as the United States. Yet we take the most effectual measures 
 to drive it from our shores, and to deliver over, chiefly to our 
 rivals in trade, all the benefits wdiich in theory it is supposed to 
 confer. For centuries, nations have been striving by custom- 
 house restrictions and prohibitions to draw, each to itself, the 
 treasure of the world; but we have been laboring with better 
 skill and more success to get rid of it. 
 
 Under the impression apparently that the amount of money in 
 use should be equal in value to the exchanges made within some 
 indefinately short period, say a year, it is often remarked by the 
 unthinking that “there is not money in specie enough in the 
 
world to do the business of the country,” meaning thereby that 
 other money is necessary to eke out the supply. Those who say 
 thus, some of them governors or judges of our highest courts, 
 forget that, of all the payments required in business, a vast ma- 
 jority, reckoned in dollars, is made by book-credits, bank checks 
 and drafts, and that the same coin may pay a dozen debts in the 
 same day. A rich people like the English, having a varied and 
 complex industry, and doing an unequaled amount of business, 
 are most economical in the use of a circulating medium. I sup- 
 pose that Khode Island, with its sixty-two banks, its active trade 
 and nimble sixpences, does not employ in proportion to its ex- 
 changes, a tenth part as much currency as Texas. An extensive 
 business then may not demand a very large circulation. 
 
 Again, it should be remembered that the efficiency or sufficien- 
 cy of a medium of exchange has no connection with its quantity 
 or volume, but depends solely on its value — in the present case on 
 its cost in labor. To meet the pressing wants of trade, and per- 
 form the office of money, a certain value, in other words, a given 
 number of days’ work, is required, and this cannot be increased 
 or diminished so long as the exchanges to be made remain the 
 same. As only a definite number of transportation wagons can 
 be used to carry to market a certain amount of goods, so only a 
 fixed value in money can be employed to transfer the same goods 
 from the producer or seller to the buyer. The cases differ how- 
 ever. The unused wagons would be left by the roadside to rot, 
 while the superfluous money would temporarily become a part 
 of the currency, swelling its volume without increasing (unless 
 momentarily) its value. As value does not determine the suf- 
 ficiency of the wagons, so quantity does not determine the suf- 
 ficiency of the money. Money has but one essential attribute, 
 and that is value — exchangable value. That it may perform its 
 office perfectly, volume is no more needful than length or color. 
 Unlike iron and coal and every other product, its usefulness is 
 independent of any common quality. The name too is nominal, 
 evanescent, but the value is real and permanent. In the business 
 of buying and selling, coined gold is fifteen and a-half times more 
 efficient than coined silver for the sole reason that it is more 
 valuable in that proportion. If the mines become more produc- 
 tive so that a day’s labor will secure more precious metal, say 
 thirty grains instead of twenty-three and two-tenths, the weight 
 of the dollar must be increased six eight tenth grains, or the coin 
 
9 
 
 will depreciate as compared with commodities whose cost has not 
 been reduced — so depreciated that the larger whole will have no 
 more value than the smaller had before. The two wholes will do 
 the required service equally well. In case the weight <ff the coin 
 be augmented, each man will carry more gold in his pocket, but 
 will be no richer than before, and can command no more of the 
 conveniences and luxuries of life. On the other hand, if the 
 weight be not changed, each person will have more dollars than 
 formerly, but will find himself no better off when he takes them 
 to market. The poor fellow who happens to have been a credi- 
 tor before the change — a creditor on account of labor — is indeed 
 poor. He is obliged to be satisfied with 23.2 grs. of gold received 
 at a time when the services previously rendered would command 
 thirty grains. He gave say one hundred days’' work, and gets the 
 value of seventy-seven days. The wrong is no less grevious be- 
 cause there is no remedy. 
 
 It follows from what had been said that no industrious, willing 
 people who have gold and silver mines of their own, or are in 
 commercial intercourse with nations which have such mines, can 
 be without a sufficient currency. This will be obvious when it 
 is remembered that value not quantity is demanded. The need 
 of gold, in other words the demand for it, will call forth a sup- 
 ply. No matter how scarce or difficult to be obtained, or what 
 the cost per ounce, so long as it is to be had, and there is a 
 market for it, it will come when called. One thousand grains 
 will go as far as two thousand, provided they represent as much 
 labor. Satisfying a nearly indispensable want, and bringing to 
 the producer an adequate reward, the supply of gold can no 
 more fail than that of iron or cloth. It is true it costs something. 
 To obtain its benefits, a nation must sacrifice, or rather sequester, 
 millions in labor, but the expense is little when compared with 
 the facilities and conveniences it provides. 
 
 In one particular, gold as money differs from every other com- 
 modity. The demand ceases when a certain value has been ob- 
 tained. More money may be coined, but the slight depreciation 
 it will undergo will cause its ejection from the circulation. Its 
 value in the arts and for exportation being undiminished, the 
 surplus will quickly disappear. Dollars will not be paid out for 
 goods when bullion is worth more than coin. Promptly they 
 will go into the melting-pot, and any disparity which may have 
 existed will be rectified. 
 
 2 
 
10 
 
 Much has been said in recommendation of an elastic currency 
 — one which will expand as the demand increases — and at this 
 moment the brains of our statesmen and financiers are vexed with 
 multitudinous ideas on that subject, and torn with the throes of 
 a wondrous parturition. The notion of an elastic measure of 
 value, in the popular sense, is like that of an extensible yard- 
 stick or “rubber” bushel, and my impression is that we have 
 had enough of that. I do not suppose it possible to invent a 
 safe method by which every man, or even every solvent man, 
 can, in a time of panic, have cash means enough to pay all his 
 debts at the moment when due. The only elastic currency which 
 an honest man should endure, or which pretends to be a measure, 
 is furnished by specie. As in a tempest the winds rush toward 
 the point of lowest barometric pressure, so in a money-crisis, 
 the specie of the world flows in copious, life-giving streams to- 
 ward the financial storm-center, filling a temporary void, and 
 comforting the afflicted. We are now only ten or twelve days 
 from the great treasure-stores of Europe, where there are hun- 
 dreds or thousands of eager eyes watching the barometer in 
 other lands, and looking for an investment. Goods will find no 
 market, but specie may be sent with beneficent results and a 
 telling profit. In the late panic in New York, the millions of 
 gold which came pouring in from Europe brought no relief be- 
 cause our local currency, often expanding but never contracting, 
 had “ demonetized ” it! When the vacuum in a specie-paying 
 country is filled, the incoming stream is first arrested, then 
 turned back; the precious, but now superfluous metal going 
 abroad, seeking a better market, and it may be, relieving the 
 violence of other panics. This perpetual ebbing and flowing, 
 this fiux and reflux, in obedience to the laws of attraction and 
 repulsion, preserves a just equilibrium, giving to each country, 
 according to its needs, its due proportion of the money of the 
 world. Under the influences named, no people, if government 
 will but stand aloof, can long be deprived of any part of the 
 currency which their best good requires; nor can they retain 
 more than their proper share. The to and fro movement by 
 which stringency is relieved and reducency cured, usually quiet 
 and decorous, but sometimes tumultuous, corrects inequalities, 
 and gives us a nearly uniform standard of value. 
 
 A government, not deterred by the fundamental law — a law 
 
11 
 
 so plain that the courts of last resort can not disregard it — 
 can make any thing legal tender — acorns, bits of leather or iron, 
 or scraps of paper — and calling it money, and giving it the names 
 the coins bear, compel creditors to take it in satisfaction of their 
 claims. In this way a great wrong may be perpetrated — one 
 class plundered and another enriched on an enormous scale, 
 while the all-important connection between industry and its re- 
 ward is shamefully severed. In our time, the thing which is 
 made a substitute for hard money is the product of the paper- 
 mill and printing-press. Pictured promises to pay dollars, called 
 notes of circulation, are issued. They cost nothing, have no intrin- 
 sic value and contain no labor. If, however, they come from a 
 source in which men have confidence, and are at all times and in 
 convenient places convertible into coin, they will rarely be pre- 
 sented for payment, will become a part of the currency, and have 
 the same exchangeable value as the coin itself. As an effect, this 
 addition will depreciate the whole mass of the circulation, now 
 part paper and part specie; at first slightly, afterward, if the 
 additions be continued, more conspicuously. More money than 
 before will be in the hands of the people; more consequently 
 will be brought to market to be exchanged for goods. Increased 
 competition on the part of buyers, and the comparative indiffer- 
 ence of sellers, will be followed, according to the well-known law 
 of demand and supply, by augmented prices. This appreciation is 
 in truth owing to a fall in the value of dollars; but it is attended 
 by enhanced, or seemingly enhanced profits, and succeeded by 
 additional production. More labor is sought and more wages 
 must be paid. This increased cost of production, if supported 
 by further issues of notes, will sustain prices, while the eagerness 
 of purchasers will continually advance them. Erelong, goods of 
 domestic growth and manufacture become too high for exporta- 
 tion. The foreign merchant, who compares specie values in dif- 
 ferent countries, and is quick to learn where he can buy cheapest, 
 goes to other markets. At the same time, imported goods have 
 participated in the upward movement. They have risen in price 
 and been quickly sold, filling the coffers of the importer. The 
 latter, improving his opportunity, sends new and larger orders 
 to his correspondents. Thus our markets and price-lists become 
 irresistibly attractive to the foreigners who wish to sell, but re- 
 pulsive to any who desire to buy. No fact shows this more plainly 
 than the augmented imports and diminished exports. Constantly, 
 
12 
 
 during the inflation, specie is leaving the country, driven out by 
 paper. It goes in search of a better market, and helps to pay a 
 foreign debt. This movement is salutary — in the highest degree 
 conservative. It depletes the currency, tends to drag down 
 prices, and does what it may to preserve a just measure of value. 
 But the outward flow is at first insufficient to accomplish the 
 desired object, otherwise it would cease. In some of its aspects 
 it is to be deplored, but it is the only thing which will compel 
 the note-issuers to take in sail, and restore trade to its customary 
 channels. Like the locomotive’s whistle, it is the signal of dan- 
 ger, — a warning which, if heeded in season, will save a nation 
 f 1 am disaster. Continue it must till its primary and chief cause, 
 a redundant circulation, is removed. 
 
 But the credit-system provides methods for staving off the 
 crisis. The banks (if these be the note-issuers) may be more 
 conservative than the average business man, but the facilities 
 they are unwilling to afford are supplied by private bankers and 
 others. In the meantime, excitement, stimulated and upheld by 
 the paper inundation, has taken hold of the people, and spreads 
 over the land. Honest, plodding industry is discouraged, and 
 thousands are tormented with the desire to become rich quickly. 
 Tillers of the soil turn their farms into building lots, and take 
 ventures in cunningly-devised schemes of wealth — in mining 
 companies, petroleum-companies, South sea-bubbles and railroad 
 swindles. Money-brokers, insurance agents and “ traveling mer- 
 chants ” crowd the business avenues. Every where men are run- 
 ning up and down, “ prospecting,” trading, borrowing and giv- 
 ing questionable notes. The restless people continually buy and 
 sell or exchange, cyphering out a profit on each transaction. 
 Economy is scouted, and munificent expenditure applauded. 
 New churches are built, towns “bonded,” salaries are raised (or 
 stolen), and the old-fashioned means of salvation and worldly 
 thrift despised; while over-reaching, fraud, defalcation, peculation 
 and bribe-taking are of frequent occurrence. 
 
 The day of reckoning at last comes. A foreign debt has been 
 contracted, which cannot be paid in high-priced goods. Specie, 
 which has been quietly leaving the country, and has now become 
 comparatively scarce, is still needed by the importing merchants. 
 To supply the demand, the holders of circulating notes present 
 them for redemption. The scanty store of the banks is soon 
 alarmingly depleted. The locomotive’s whistle, long unheeded, 
 
13 
 
 has now a terrible significance. Those joyous notes, finest work 
 of the engraver’s art, when once redeemed, are carefully locked 
 up, and a rapid curtailment in all directions is begun. At a 
 time when maturing paper to be provided for is most abundant, 
 when business is most expanded, and the wants of trade greatest, 
 discounts are refused, and the accepted medium of exchange is 
 largely withdrawn. For every dollar paid in specie, the banks 
 find it needful to retire five or ten in their own notes, always 
 doing as much in that Avay as their customers can bear without 
 breaking. Distrust follows, depositors become alarmed, and re- 
 ports of failures fill the air. In anticipation of a “ suspension,” 
 every one wants to exchange bank-credit for gold on the same' 
 day. The upshot is a panic, and grown men behave like a crowd 
 of children trying to escape from a school-house on the cry of 
 fire. Fortunes melt away, and a whole community goes down 
 in bankruptcy, the effects of which are felt in the remotest 
 corners of the land. 
 
 Many of us remember the order of events as they occurred 
 under the state-bank system in 1837, ’39, ’47, ’57 and ’61. 
 This system was not so bad as that of an earlier or later period. 
 In connection with the Suffolk redemptions, it gave for New 
 England an uniform currency, every dollar of which, in ordinary 
 times, was worth its face in gold. But it was not, as at the time 
 claimed, “ the best in the world,” much more, the best possible. 
 The banks (certainly in Connecticut) had practically the power 
 of almost unlimited issue, and were constantly striving to push 
 out and keep out their bills. They were only restrained by the 
 unwillingness of responsible men to take and hold them as de- 
 sired. The profit which was expected from an exchange of non- 
 interest-bearing bills for interest-paying notes was a constant 
 temptation to take inadequate security, which was not always re- 
 sisted. The losses from this source, in certain quarters, were not 
 without importance. There was an increasing flow of currency to 
 and from the redeeming agency in Boston, each bank gathering 
 up and transmitting at short intervals the notes of other banks, 
 and receiving its own. Balances were paid promptly by drafts on 
 New York. If any bank refused to take part in this arrangement, 
 its bills were still redeemed, and an agent dispatched to demand 
 the specie. The annoyance and frequent inconvenience of this 
 demand brought the offender to terms. The cost to the remoter 
 banks of the Suffolk system, and the loss on the permanent de- 
 
14 
 
 posit which each was required to keep with the agency, to 
 say nothing of the risks, were considerable. In times of strin- 
 gency, when discounts were most called for, the bills, sometimes 
 in unbroken packages, went tumbling into Boston, and the funds 
 which had been usually lent to business-men were largely re- 
 quired for redemption. To meet this new demand, contraction 
 was everywhere enforced. If an institution faltered, its notes 
 were “ thrown out ” at the Suffolk. Too often in the end credit 
 toppled over, and closed doors, suspended industry and financial 
 ruin followed. Then came a period of stagnation, dejection, low 
 prices, economy, discouraging profits and cheap money, some- 
 times lasting several years. The collapse which succeeded the 
 crises of 1837 and ’39 did not give place to moderate prosperity 
 till 1844. Recuperation was usually more rapid. 
 
 The Suffolk system, among those who supported it, did not en- 
 force specie redemptions, and therefore was not a safeguard 
 against expansion. It preserved uniformity, made the bills of 
 the remotest banks current at par every where in New England, 
 prevented each from keeping out more than its proportion of 
 notes, and did everything which the plan proposed; but good as 
 it was, it gave no security against a general expansion and in- 
 flated prices. If each and every institution chose, on the same 
 day, to increase its circulation ten per cent, there was no power 
 in the Suffolk to restrain the movement. In the memorable crisis 
 of 1837, when the Boston system was in full operation, when 
 prices had risen twenty or thirty per cent, and wheat was import- 
 ed from the Mediterranean, the New England banks found that 
 they were carrying (notwithstanding the checks provided by the 
 Suffolk) a dangerous amount of canvass, and like others were 
 wrecked in the storm. 
 
 Under the old banking system, the country, most of the time, 
 was going through a period either of inflation, high prices and 
 speculation, or one of contraction, falling prices and exhaustion, 
 followed by slow convalescence and returning thrift. There was 
 little stability, not much certainty; prosperity was spasmodic, 
 revulsions frequent, and success problematical. Though the cur- 
 rency were convertible, and coin could be had for it when no- 
 body wanted it, the proportion of specie to circulating notes in 
 the banks was ridiculously small — so small that an important 
 failure like that of the Ohio Life and Trust Co., in 1857, a run 
 upon a large bank, or anything which alarmed bill-holders or 
 
15 
 
 depositors, endangered the system. The moneyed fabric which 
 hypothetically rested on gold for its foundation, was poised upon 
 its apex, and fell with a crash when a few disks were. taken from 
 its support. It did well enough in fair weather when the ele- 
 ments were hushed, but went down when the winds were loosed 
 and the earth quaked, wrecking the fortunes and hopes of half a 
 continent. 
 
 A mixed currency, like ours before the war, consisting of pa- 
 per and specie, may be greatly improved by increasing the pro- 
 portion of the latter so that the removal of a few million to pay a 
 foreign balance, or to allay the fears of an excited populace, will 
 not enforce a severe contraction. The larger this proportion, 
 the more may be removed without inconvenience and insecurity. 
 But any reserve which it might be expedient to hold for extraor- 
 dinary emergencies should be within the reach of the banks 
 when most needed. In former times, the required proportion of 
 specie to notes (one to ten in Connecticut) must be kept , and 
 could not be used to redeem the latter without a violation of the 
 law. Thus the only legitimate object of the legal reserve — re- 
 lief in seasons of pressure and peril — was defeated. In its prin- 
 ciple, the English system is doubtless the best extant or now 
 possible. The Bank of England issues no notes under five pounds, 
 (nearly twenty-five dollars,) making it needful that much specie 
 should be in the hands of the people. Its charter does not allow 
 it to emit bills exceeding fifteen million pounds (seyenty-three 
 million dollars) except it retain in. its vaults an equal amount of 
 gold. This gold, against which bills are emitted, is sacredly 
 kept for the protection of bill-holders, and (as I understand the 
 facts) cannot be paid to any other class of creditors. For its 
 purpose, it has hitherto not proved inadequate. For the security 
 of deposits (now much larger and far more important as a means' 
 of making payments than thirty years ago when the bank was 
 chartered) there is, on the part of the institution, only a general 
 liability; and this seems to be the weak part of the system. Its 
 strong point is this: The bank can pay to bill-holders any part 
 or the whole of its gold reserve, amounting to, say, eighteen 
 million (eighty-seven and a-half million dollars) without taking 
 from the people more money than it returns to them — more in 
 paper than it give back in specie. It has no power to contract 
 or expand the currency, but leaves this to be regulated exclusive- 
 ly by the wants of the public and the laws of trade — leaves it 
 
16 
 
 with all the elasticity (if this he the word) which specie, as the 
 sole medium of exchange, could have. It is managed with con- 
 sumate skill, and, in an important sense, upholds the moneyed 
 system of Europe and the world. 
 
 No system — no possible system — can wholly prevent temporary 
 fluctuations in the demand for money. These sometimes depend 
 on physical conditions which lead to abundant or deficient crops; 
 and may be connected with mental influences. Men are subject 
 to excitements, sudden frights and periodical phrensies. These 
 are contagious or epidemic; seize hold suddenly of a whole com- 
 munity, and overthrow the reason. At times they control con- 
 duct in all the departments of life, and turn this world into a 
 bedlam. Human nature is made up largely of emotional, sen- 
 sational and sympathetic elements, and should not be expected 
 to exhibit prudence, common sense and good judgment, except 
 intermittingly. The stampedes among the horses and cattle at 
 the west are not more irrational than the panics to which human 
 beings are liable. Until we find some certain means of forestal- 
 ling these, we shall not always be able to control madness in 
 the money-market. 
 
 After the adoption of the Federal Constitution, and up to a 
 recent period, it was supposed that the general government, like 
 the states, had no authority to issue paper money, much more to 
 make it a legal tender. One of the objects of the convention of 
 1 787 was to get rid of it as an intolerable nuisance. Rhode Is- 
 land, which was profiting by its continued emissions to the anoy- 
 ance of its neighbors, sent no delegates, and held itself aloof 
 because of this known object. The convention tried faithfully 
 to do in this regard all that was expected. Not only were the 
 states inhibited, but it refused by a vote of nine states against 
 two to give the power to “ emit bills of credit,” afterward, by a 
 decision of the Supreme Court of the United States, January, 
 1837, defined to be “a paper issued by the sovereign power, con- 
 taining a pledge of its faith, and designed to circulate as money.” 
 Till the late Rebellion, it was supposed — it was even a matter of 
 self-gratulation — that we were secure against the possible, the 
 oft-proved danger, of “paper issued by the sovereign power,” 
 “ and designed to circulate as money,” and especially against all 
 laws making it a legal-tender. But the alleged necessities of a 
 great war prosecuted professedly for the sake of the constitution 
 
i 1 
 
 and its supremacy, overthrew the barriers which our fathers, still 
 smarting from the evil, had erected. The debate which followed 
 the introduction of the bill authorizing the issue of treasury notes 
 forcirculation, and making them lawful-tender, was (and doubt- 
 less felt to be) a solemn farce. The tender provision was stoutly 
 resisted in the senate, but in the house met with little opposition. 
 Mr. Fessenden justified it on “ the ground of absolute, over- 
 whelming necessity;” others cared only to know whether it was 
 “useful, convenient, profitable.” Our colonial and Revolution- 
 ary experience, and the history of paper money every where, 
 prove that the tender-provision — the worst part of the law — was 
 in no way essential, and did nothing to prevent or even retard 
 depreciation. In every point of view, it was a stupendous blun- 
 der. Its retroactive operation wrought profitless and gratuitous 
 wrong on a prodigious scale. Had it not been for this oppressive 
 provision, the sufferers would, long ago, have recovered their 
 rights, and by legal process, at the close of the war, have en- 
 forced resumption, at least by the banks. They would have 
 compelled Col. Scott’s railroads and other corporations to pay 
 their debts contracted before the war in dollars equivalent to 
 gold, according to contract. Of the remarkable decision of the 
 Supreme court of the United States reversing a m ost righteous 
 decision of the same court, and of the extraordinary means used 
 to procure it, I have an opinion which I shall not here express. 
 History will speak of -all in fitting terms. 
 
 On the fourth of March, 1861, the thirty-sixth Congress ex- 
 pired, not having made the smallest preparation for the now in- 
 evitable conflict which was to begin in April. Congress again 
 met in July, in special session. Its business was to ratify the 
 acts of the President, and provide ways and means to carry on 
 the war. As in the Revolution, the thoughts of the government 
 were immediately turned to paper money as an inportant resource. 
 Fifty million in treasury-notes, receivable for public dues, and 
 redeemable on demand in coin, were at once authorized and issued, 
 to which ten million were afterward added. These were declared 
 by the officials to be “ as good as gold,” u and for many purpo- 
 ses more convenient and valuable.” The amount was large, but 
 as the banks had curtailed their circulation, and mens’ minds 
 were gloomy and apprehensive, and indisposed to speculation, 
 they produced no excitement, quietly became a part of the cur- 
 rency, and did not depreciate, even after specie payment was 
 
18 
 
 suspended, at the close of the year. The success of the experi- 
 ment pleased the secretary of the treasury, Mr. Chase. He had 
 been beating about among the capitalists of New York with in- 
 different success; had harried the banks, and after pumping them 
 dry, driven them to bankruptcy. Very naturally, he sought re- 
 lief from the embarrassment and humiliation of his position. 
 Possessed, seemingly, of the prevalent idea that the war would 
 end “ in sixty or ninety days,” he resorted to temporary shifts, 
 was averse to long loans, paid reluctantly the market price of 
 money, and was pervaded with a passionate and costly desire to 
 save interest. The two hundred and two million, (one hundred 
 and fifty million in the loyal states,) which the state banks circu- 
 lated at the beginning of the year, with little cost and much 
 profit, were looked at with envious eyes. As the result, on the 
 twenty-fifth of February, 1862, Congress authorized the emis- 
 sion of one hundred and fifty million of legal-tender notes for 
 circulation, sixty million of which were to be used to take 
 up the outstanding gold-notes. If report is to be trusted, 
 however, the insertion in the act of the tender-clause was opposed 
 by the secretary. On the eleventh of July following, more 
 money was wanted, and one hundred and fifty million new notes 
 were authorized, fifty million to be reserved for the payment of 
 temporary loans. Another installment of one hundred and fifty 
 million of the same notes, for the payment of the army and navy, 
 were ordered on the seventeenth of January and third of March, 
 1863. At the last named date, Congress also provided for the 
 issue of four hundred million three year, legal-tender, interest- 
 bearing notes, convertible at their face value into legal-tenders 
 of previous issues. In this manner the work went bravely on — 
 eight hundred and fifty million of paper money in one year and 
 six days ! The whole of these amounts were never issued, while 
 the compound interest notes, after remaining in circulation till 
 considerable interest had accrued, were withdrawn and held for 
 investment. 
 
 Mr. Chase, the great finance minister of the war, indefatigable 
 and incorruptible in the midst of corruption, was fertile in expe- 
 dients, ingenious in his methods, sincere and always plausible. 
 But he was infatuated with the desire “ to place ” his five per 
 cent loan, and hesitated not to sacrifice two dollars in the cost of 
 war-supplies to save one in interest. Incalculable was the in- 
 jury which this insane policy inflicted on the nation. Though 
 professedly alive to the recognized evils of inflation, in order 
 
19 
 
 “to float” his five per cents, he used his optional power, and per- 
 sisted in pushing out his legal-tenders in the most reckless way, 
 till impending ship-wreck stayed his hand, and the country be- 
 came alarmed. When less than seventy-four million of his fa- 
 vorite loan had been placed at par, and after Congress had en- 
 deavored by a foolish law of thirteen days’ duration to check 
 the “rise” of gold, then at one hundred and fifty-four per 
 cent premium, he felt constrained, June 13th, 1864, to resign 
 his office. On the same day, Congress, in a new loan-act, 
 pledged itself to the people in this wise: “Nor shall the total 
 amount of United States notes issued, or to be issued, ever ex- 
 ceed four hundred million of dollars, and such additional sum, 
 not exceeding fifty million of dollars, as may be temporarily re- 
 quired for the redemption of temporary loans.” The war closed 
 with four hundred and thirty-one million of greenbacks outstand- 
 ing, which amount was soon reduced to the legal limit. But 
 the national banks were allowed to go on expanding the curren- 
 cy, carrying the total of their issues from one hundred and twen- 
 ty million, at the end of the war, to three hundred and thirty- 
 eight million in April, 1873. The fractional notes are now 
 nearly forty-five million of dollars. 
 
 The legal-tender issues authorized in February, 1862, began 
 to make their appearance in April, when gold stood at one and 
 three quarters per cent premium. Business was generally stag- 
 nant, and there was little demand for them. Existing obstacles 
 soon gave way, and erelong their proper effects in the usual or- 
 der began to appear. First gold and bills of exchange moved 
 upward. Then the sounder bonds and stocks, such as prudent, 
 suspicious men buy in boisterous times were effected. Still later, 
 the stocks of second quality, and the goods produced and con- 
 sumed within the year, felt the stimulus. Not long after, other 
 goods and real estate in the commercial centers commanded bet- 
 ter prices. When another interval had elapsed, securities of un- 
 certain value, and property which had long been unsalable, found 
 a ready market. As dollars became more plentiful and prices 
 more and more buoyant, men got excited, and a spirit of specu- 
 lation was engendered. Each had more pictured promises in his 
 pocket and a larger bank deposit than before, while those who 
 were usually straitened were in funds. The competition of 
 eager buyers gave sellers an advantage long coveted. Having, 
 in existing circumstances, no usages or precedents to guide them, 
 with no knowledge of the real value of property in current mon- 
 
20 
 
 ey, they were only anxious to fix the prices high enough. All 
 engaged in making or exchanging the goods or estate most in 
 demand were apparently getting rich. This of course intensified 
 the excitement, and led to changes of occupation. As is always 
 the fact, wages, for a considerable time, did not keep pace with 
 other things. Laborers received as many dollars as before, but 
 when these were exchanged for coats, shoes, fuel, provisions, &c., 
 the money did not hold out. They consequently suffered depri- 
 vation. In the meantime their employers — manufacturers, rail- 
 road companies, mining companies, &c., while producing at for- 
 mer cost, and selling at current rates, made large gains — gains 
 which took nothing from the ample shares of contractors, mer- 
 chants, and middle men of every name. At length the augment- 
 ed demand for labor caused by the increased demand for com- 
 modities was followed, always with an interval, by better wages. 
 Then laborers like others got more dollars, and in the end as 
 much purchasing power, as previously. The enlarged consump- 
 tion of goods, and the extravagance which a redundant currency 
 always produces, required additional production and more work. 
 This new work must needs be paid for, and the laborers too be- 
 came prosperous. Tardily and lastly, the advancing tide of 
 paper-mill prosperity reached — no approached — the country far- 
 mers — the owners of farming lands. At the close of the late 
 war, farms in the agricultural districts within my acquaintance 
 would sell for no more dollars than before. If our husbandmen 
 received more in currency for butter, eggs, poultry, and other 
 articles which could be conveniently transported, they paid more 
 for every thing they bought. Even now, ten years after the 
 flood, (or after the flood was highest,) their farms will fetch 
 little more in depreciated paper than they would bring in 
 specie (or its equivalent) fifteen years ago. The thrift (such as 
 it is) which inconvertible greenbacks have brought to the cities 
 and business centers has not yet reached them. 
 
 The effects of paper inflation may be set forth in this way: A 
 man in the second year of the war filled his stores with goods, 
 kept them under lock and key, and at the end of the year sold 
 off enough to pay his notes, and made a fortune out of the bal- 
 ance. At about the same time, a lumber merchant of this city 
 purchased his annual supply of lumber, and as was his custom 
 paid cash for it. When the year closed, he had apparently made 
 a good profit, but t^ie money and notes received would not buy as 
 much lumber as at the beginning. Then he went into the mar- 
 
21 
 
 ket and bought largely on credit, giving long notes. His next 
 balance-sheet showed an extraordinary gain, not in money mere- 
 ly but in purchasing power. After some costly experience, the 
 holders of property learned to sell for cash only, so that when 
 the war closed shrewd business men were generally out of debt. 
 The flagrant wrong which excessive paper issues inflict may be 
 illustrated thus: In December, 1861, a poor soldier’s widow put 
 into the savings bank two hundred dollars in specie, and then re- 
 moved with four young children and friends to California. In 
 July, 1864, when gold stood at two hundred and eighty, she 
 sent for her money. In return, she received a gold draft for 
 eighty-three dollars, accrued interest at six per cent included! 
 An instance (one of a class) of similar but greater injustice 
 caused by “ continental money ” is related in Gordon’s History 
 of the American War. It illustrates a principle.* “A mer- 
 chant of Boston sold a hogshead of rum for £20, hogshead 
 included. The purchaser did not settle for it till after the 
 seller applied to him for an empty hogshead, for which he was 
 charged £30. When they came to settle, the merchant finds 
 upon examining, that he had to pay a balance of £10 on that 
 very cask, which, with the rum it contained, had been sold for 
 £20.” 
 
 Except in a qualified and peculiar sense, money is not capital. 
 It has no direct agency in production ; does not enter as a consti- 
 tuent part into the products of industry, like iron or cotton. Of 
 itself, it produces nothing; brings no gain to the holder. What 
 is called interest is earned wholly by capital, and is paid exclu- 
 sively out of the profits of the latter. He who has money, and 
 wishes to obtain an income from it, exchanges it without delay 
 for capital. The exchange once made, it has discharged its last 
 office, and goes into other hands to perform a similar service. 
 For the purpose of hoarding, without reference to use, it is worth 
 no more than any other measure, say a bundle of yard-sticks. 
 Mr. Chase, in paying out his greenbacks, supposed he was pour- 
 ing capital into the country, while he did not so much as add to 
 the value of the circulating medium, (always unproductive,) as 
 shown in another place. His four hundred million took from the 
 value of the whole circulation, old and new, a sum equal to the 
 additional volume. 
 
 *1 have referred to this in “ A Historical Account of Connecticut Currency, Continental 
 Money, and the Finances of the Revolution, published among u Papers of the New Haven 
 Colony Historical Society,” in 1865. 
 
22 
 
 To set forth in the clearest possible light the nature and effects 
 of Mr. Chase’s measures, I will suppose that the country had in 
 circulation, in January, 1862, (no matter what the sum,) four 
 hundred million of dollars, specie value, all needed for the legit- 
 imate business of the people. I will again suppose that the sev- 
 eral new emissions, amounting to four hundred million, were 
 made on the same day; that no currency was driven out of circu- 
 lation, and that the effects, instead of being spread over several 
 years, were everywhere immediate. There would then be, with 
 the additions, eight hundred million of depreciated paper to do 
 the work of the previous four hundred million, and having the 
 value of four hundred million in coin. By this stroke of policy, 
 the secretary made a forced loan, and got control of two hundred 
 million, specie value, paying for it no interest. Now let us see 
 what (on the supposition) followed. The four hundred million 
 is paid out to the government creditors, mostly to soldiers, sail- 
 ors and others in the public service. As two of the new dollars 
 are worth no more than one of the old, and will exchange for no 
 more in the market, (all commodities having doubled in nomi- 
 nal value, according to a law already explained,) the government 
 creditors get but the half of what was their due, and are thus 
 cruelly wronged. 
 
 Thus far the loss has fallen wholly on one class, and does 
 not exceed the gain the government has made. But there is 
 another class, much larger, which is still more deeply involved. 
 The new notes are a legal-tender, and every debtor is authorized 
 to discharge his moneyed obligations, dollar for dollar, with a 
 much depreciated medium. The law says to him: “Notwith- 
 standing you agreed to pay dollars which contained each 23.2 
 grains of gold, or ten hours work, you are released when you 
 have paid dollars (half dollars) which are the equivalent of 11.6 
 grs., or five hours work.” The agreed measure of value has been, 
 thoughtlessly or wickedly, changed by the ' sovereign power. 
 The creditor may well say: “My hard earnings, perhaps the ac- 
 cumulation of a life-time, my dependence and that of my family 
 in causualty, sickness and old age, have been ruthlessly wrested 
 from me — wrested by a process of legerdemain which it is difficult 
 to understand, — and there is nowhere any compensation.” He has 
 placed his all in the savings bank, or a trust company, or had 
 bought? a little bank-stock, or a railroad-bond, or exchanged his 
 cow or horse or farm for a mortgage note, and while he slept, 
 his government, instituted for his protection, and administered 
 
by his chosen servants, has bereft him of half his property, per- 
 haps made him almost a pauper. Possibly he would be content 
 had his sacrifices helped to save the institutions once dear to him, 
 but of consolation from that source there is none. 
 
 While creditors feel that they have been unrighteously dealt 
 by, debtors are jubilant. They have reason to be. By a stroke 
 of the pen, wielded in their behalf, they have secured the pos- 
 session of a large part of the capital of the country, the title of 
 ownership to be enforced when, in substantial violation of the 
 agreement, they have paid for one-half of it! Without industry, 
 or economy, or good management, or any sacrifice, they have ac- 
 quired in an hour more wealth than others have obtained by the 
 toil and sweat, the wear and tear of many years. Creditors as 
 a class are (or used to be) laborious, prudent men, who use their 
 means productively, wasting nothing. Were it otherwise, they 
 would not be creditors. They employ their accumulations in build- 
 ing and equipping factories, ships, steamboats and railroads; in 
 erecting houses, improving lands and feeding laborers. In no 
 other way could they make a profit. Their savings constitute 
 the fund, the only fund, for the support of labor. The whole of 
 it, directly or indirectly, expenses excepted, is paid out for wages. 
 On the other hand, debtors as a class, are less industrious, econ- 
 omical and vigilant; do not manage as intelligently and prudently, 
 and are more given to scheming and wild speculation; otherwise 
 they would not be debtors. Possibly they live beyond their means 
 — are perhaps extravagant and negligent. They may be hard- 
 working, temperate men, useful and worthy members of society, 
 bearing cheerfully their- share of the burdens of civilized life, but 
 for some reason, perhaps not apparent to themselves, they have 
 not the thrift of others. The net profits of their business go to 
 pay interest on borrowed capital; or if they save anything in 
 prosperous seasons, to be used in hiring more laborers and pay- 
 ing more wages, the sum is small and uncertain. Of course I do 
 not speak of the general intelligence, honesty or virtue of the re- 
 spective classes, but view them from the stand-point of econo- 
 mic science, or as contributors to the wealth of the nation. It 
 cannot be doubted that every material interest in this country, 
 to say nothing of private and public right, requires (especially in 
 times of unusual strain, when the demands of a great war must 
 be met) that capital should continue in the hands of those who 
 have earned and preserved it, and will employ it skillfully and 
 profitably for the support of productive industry. To a large ex- 
 
24 
 
 tent, for many years, it has been in other hands, placed there by 
 act of Congress, and those handsomely engraved instruments of 
 transfer, vulgarly called green backs. Nobody can tell the pre- 
 cise amount, but hundreds of millions certainly, were thus trans- 
 ferred. 
 
 On the supposition that the effects of the paper expansion were 
 immediate, the sums transferred would be equal to the one-half 
 of the entire indebtedness of the country to be paid in legal-ten- 
 ders (deducting any compensations which creditors might re- 
 ceive). Nor would the amount be necessarily diminished by the 
 fact that the government notes were issued in installments, or 
 that the loss was in many cases shifted from one to another, and 
 distributed among a larger population, and spread over a con- 
 siderable period. If the depreciation were less than the propor- 
 tion supposed, allowance must be made for that. In any event, 
 the losses and gains were, in their aggregates, enormous. The 
 owners of permanent indebtedness alone; the holders of mort- 
 gages and bonds of different kinds, state, county, town, city and 
 railroad, to say nothing of the public creditors, were impover- 
 ished several times more than all the government gained. This 
 cancelling of obligations, making debtors half owners of the vast 
 amount of property which they had bought but not paid for, 
 giving them sudden but unexpected and unearned riches, pro- 
 duced of course the greatest excitement. To speculators and 
 gamblers, a novel and wonderful avenue to affluence was opened. 
 Colossal fortunes were acquired, while the new proprietors, un- 
 used to so much wealth, scarcely knew what to do with it. Ex- 
 travagance and visionary schemes; palatial residences, country 
 villas and splendid equipages; mammoth hotels, crowded steam- 
 ships and activity everywhere, were the legitimate fruits. When 
 men operate with other people’s money, with no restraints, busi- 
 ness is always lively, enterprise rampant. 
 
 All the seeming thrift which follows a currency-inflation may 
 be traced to transferred wealth. It will last as long as the fund 
 which sustains it. When this is gone, men recover their senses; 
 industry, frugality and good conduct in business receive their 
 just reward, and property returns, by a slow and painful but cer- 
 tain process, to its original owners, or their successors. There 
 it will remain till a new inflation (agrarianism by another name) 
 redistributes it, again giving it, or much of it, to speculators, 
 perhaps to the winds. 
 
 In specie-paying times, there is a fixed, or slightly yielding 
 
25 
 
 limit, beyond which circulating notes cannot he pressed. Con- 
 vertibility and a call for coin will check and force back upon the 
 issuers any excess. But under the reign of inconvertible paper, 
 there is no similar limit. Eight hundred and eight thousand 
 million may be circulated with equal ease. Once a part of the 
 currency, the excess will remain, having no way of escape. Bill- 
 holders are helpless, and there is nowhere any sell-controlling, self- 
 regulating power. The locomotive’s whistle, serving in specie- 
 paying times as a storm-signal, is not only not heard, but it is not 
 sounded. Nor will redemptions of bank notes with greenbacks, 
 at central points, have any tendency to preserve the limit and 
 prevent the depreciation of both, unless indeed, legal tenders be 
 greatly restricted — much more so than now. When prices have 
 been adjusted to volume, however large, every dollar will be 
 wanted, and there will be (as compared with the new prices) no 
 redundancy. As already explained, the exchangeable value of 
 the whole will not be increased, the units shrinking in value in 
 proportion to the additions made. This degradation of money, 
 whether by abstracting gold from the coins, or by excessive 
 emissions of paper, destroys its usefulness as a measure of value, 
 and makes it an instrument of injustice and oppression. Far 
 better would it be if government provided no measure, and left 
 the people to their own devices. To set up a standard, force 
 men to use it, and then falsify the pledge given to those who 
 put their trust in it — committing, perhaps, their all to it — is more 
 heathen than Christian. As justly could the yard-stick be short- 
 ened by law, and all those under contract to receive yards at a 
 stipulated price be compelled to take new yards for the old ones 
 without any deduction in price. Indeed, the wrong in the last 
 case would be of a mitigated character from the fact that the 
 dealers in cloth, &c., are comparatively few, while in the other 
 case all dealers are equally affected. One man who is forced to 
 accept half-yards, or half-pounds, or half-bushels, or half-acres for 
 whole ones, is no more injured than another who must take half 
 for whole dollars — five hundred grains of coined gold or their 
 equivalent, in. discharge of a debt for one thousand grains. 
 
 Among others, a well known bank president of New York 
 thinks we have not currency enough to do the large business of 
 the country. I have no doubt he thinks so, but he mistakes the 
 nature and functions of money and the source of its efficiency — 
 mistakes volume for value. If the currency be insufficient, it is 
 because prices are too high — so high that the circulating medium 
 
 4 
 
26 
 
 is absorbed before the needful exchanges have been completed. 
 But prices are just what a full currency has made them. They 
 follow the latter as faithfully as an effect does its cause, or a 
 shadow its substance. They would be still higher if money were 
 more abundant, while the latter would be no more plentiful after 
 prices had risen. The many who believe that they now pay more 
 than they should for coal, meat, rents, hotel fare, labor, &c., are 
 inconsistent when they call for more paper currency. Relief can 
 never come from that direction. 
 
 There are those who deny that our greenback-dollar is depre- 
 ciated. If they will ask themselves whether a dollar now will 
 purchase as much of the products of labor, or go as far in build- 
 ing a house, or in the support of a family, as it did before the 
 war, they will see their mistake. Every commodity may be used 
 as the measure of every other commodity, and even of money 
 itself, and when any one will exchange for less of every other, 
 when no special causes have been at work, the inference is inevi- 
 table that that one, for some reason, has been cheapened, or in 
 other words, is depreciated. The fact that the dollar of to-day 
 is the equivalent of only twenty grains of gold, instead of twen- 
 ty-three and two-tenths, ought alone to be satisfactory evidence 
 of this. 
 
 Too often the persons who call for inflation are crafty specula- 
 tors who want the property they have bought without the return 
 of an equivalent, and desire more greenbacks to authorize the 
 transfer. None but those who owe, unless by indirection, can 
 derive the least benefit from it. Not a shilling is added to the 
 wealth of the country. Each man’s possessions will exchange 
 for no more of those of others, or no more value, than before. 
 Those most importunate for more currency would not be helped 
 by any number of new dollars which should be worth as much 
 as those already in existence. If the latter be the equivalent 
 each of twenty grains of gold, and they can obtain others worth 
 but twelve grains, each “legal tender at its face,” they are lifted 
 out of the mire, perhaps made rich. Ought any enactment 
 which grants the unrighteous request of these men to be com- 
 mended ? Instead of adding in this way to our already super- 
 abundant paper money, placing in the way new obstacles to re- 
 sumption, had not Congress better “ make a clean breast of it,” re- 
 duce the weight of our coins, putting twenty grains of fine gold 
 into the legal dollar ? Then paper in its present volume would 
 be equal to gold. Prices would not be disturbed; there would 
 
27 
 
 be no necessity for contraction, and no difficulty in immediate 
 resumption. Once again on a specie basis, every note or obliga- 
 tion promising to pay money, would probably contain, at the in- 
 stance of the holder, the clause “payable in United States coin 
 of the present weight and fineness, or its equivalent.” As I un- 
 derstand the decision of our courts, this promise would be en- 
 forced according to its terms, and we should be raised from our 
 present prostrate and humiliating condition. It is true, this de- 
 gradation of the coin is disreputable; nations desirous of a good 
 name do not practice it. Nor would I recommend it; but it is 
 no worse (though the wrong may be more apparent) than the de- 
 gradation of the medium of exchange by paper issues. To go 
 plunging on in this reckless way to perdition is not to be en- 
 dured, if escape be possible. Whatever in our desperation we 
 may be tempted to do, it is to be hoped that we shall not repeat 
 the greatest mistake of the war by passing laws which impair 
 the obligation of contracts, making dollars of light weight legal 
 tender for those of full weight. 
 
 Above all our present monetary needs, we want a fixed meas- 
 ure of value; one in which business men can place confidence; 
 one which will make the dollar of to-morrow, of next week or 
 next year, equal to that of to-day. We want it so that a trustee 
 or guardian can invest without loss the funds in his keeping. 
 Thus protected, the people can enter into engag*ements with safe- 
 ty, knowing what they are to receive and how much to pay. 
 Congress would not then be besieged by contending and inter- 
 ested parties asking for extraordinary legislation. 
 
 But whatever is to be done in the way of reform should be 
 done quickly. At this moment, the secretary of the treasury, a 
 subordinate in the government, on his own responsibility, and in 
 defiance of the declared opinion of a committee of the Senate, 
 is exercising the highest function of the sovereign power, and 
 daily pouring more than half a million into the swollen flood 
 of legal tenders. Serenely he sits, his implements by his side, 
 chipping off the yard-stick, chiselling bits from the pound-weight, 
 and forcing up the bottoms, or battering down the rims of the 
 bushel and gallon-measures. When his present work is done, 
 and the forty-four million emitted, he will have added, say, five 
 per cent to the currency. It is to be feared that this new inflation 
 will be permanent. Should it be, and should our railroad companies 
 pay all their debts (now amounting, it is said, to two thousand mil- 
 lion) in government notes, and should they not pay till the full 
 
28 
 
 effects of the inflation are felt, they alone will have gained, at 
 the expense of their creditors, one hundred million of dollars ! 
 The whole (domestic) indebtedness of the country is estimated 
 by Senator Fenton, in his recent able speech on the currency 
 question, at twelve thousand million, five per cent of which 
 would be six hundred million dollars ! The new depreciation 
 will make the greenback-dollar the equivalent of nineteen grains 
 of pure gold, and nineteen grains, besides alloy, must be the 
 weight of the hypothetical (not. proposed) new unit-coin. 
 
 One thing is certain. If there be any truth in enonomic science 
 and the reasonings of this essay, specie payments can never be 
 resumed and maintained so long as coin is at a considerable pre- 
 mium, currency redundant, and prices at their present level. 
 Nor can any legislation or any scheme correct the disparity 
 which does not contemplate the partial withdrawal of circula- 
 ting notes. No plan yet proposed which would not lead to this, 
 either immediately or as a result, can be effectual till the demand 
 for value in the currency is greater than now. We had better 
 face the difficulty here than deceive ourselves longer by plausi- 
 ble but deceitful schemes. Suppose the United States treasury 
 should adopt the plan often proposed, heap up gold to the ex- 
 tent, say, of four hundred million, and then in one day or one 
 week redeem the whole issue of greenbacks. By this process, 
 the remaining paper (bank-notes) has been raised to the level of 
 gold, prices have not yet been disturbed, and resumption is effect- 
 ed. But mark what follows. The four hundred million in gold, 
 worth, say, twelve per cent premium, have taken the place of 
 the same amount of depreciated greenbacks, and thus added to 
 the circulation forty-eight million. To that extent there has been, 
 on the supposition, an inflation, but the country has been placed 
 on a specie basis, and at once resumes its old relations to other 
 nations. If the currency were redundant before, it is still more 
 so now, and that movement at once begins which is designed to 
 cure it. The superabundant gold, undervalued as it is, flows out- 
 ward in search of a better market. This flow continues till prices 
 have been reduced, and the currency sufficiently depleted. No 
 more will be left than naturally belongs to the country, and no 
 more than would remain had legal-tenders been withdrawn and 
 cancelled, one by one, as convenience permitted. Whatever the 
 method, the result will be the same, if it be effectual. 
 
The Money Problem Again. 
 
 I. 
 
 Money — What is it? What gives it exchange- 
 able value? Prevalent Errors. 
 
 Money is the exchangeable equivalent of all property and 
 services, and has a double function. It acts as a medium of 
 exchange, and as a measure of value, its qualities as a measure 
 fitting it for use as a medium. Any substance or thing , passing 
 from hand to hand , which is capable of discharging this double 
 function , ( whether quite perfectly or not ,) and has been set apart 
 for that service , with the full consent and active support of those 
 who need its assistance , is money. It is one of the elemental 
 forces of Political Economy, in its office and purpose unlike any 
 other, and standing by itself. Of course it is not a commodity; 
 does not become merchandise till it ceases to be money; is not 
 bought and sold like goods in the market; does not of itself sat- 
 isfy any physical want; is not designed for consumption, and 
 when exercising its allotted and peculiar function does not like 
 capital reproduce itself. It may be the product of labor, but 
 labor is not its essential constituent, while its peculiar endow- 
 ments are derived from another source. 
 
 A wonderful instrument or device is money. In its more per- 
 feet form, the slow growth of the civilized ages, it is given by the 
 buyer and taken by the seller because it facilitates the exchange 
 of products, saving much time and labor. It is a human contri- 
 vance (called, not happily, a tool by Bouamy Price) employed to 
 diminish the friction, waste and delay attending the distribution 
 of wealth. In effect, it is like oil applied to the machinery of 
 trade. It saves time, power, patience and traveling expenses; 
 increases the net products of industry and commercial enterprize, 
 and secures exactness, certainty and mutual gain. Through its 
 instrumentality, the heavy charges incident to the transporta- 
 tion and transfer of goods— of getting them from the producer 
 
6 
 
 to the consumer — are reduced to a minimum, and the cumberous, 
 devious method by barter superseded. It opens an improved 
 way, as it were, to the exchange market; indirect, it may be, but 
 more quickly traversed and vastly easier than the old one — a way 
 which goes by a newly found cleft through the mountain instead 
 of over it. Without its agency, our present elaborate and diver- 
 sified industry, with its divisions of employment and multiplied 
 products would be impossible. More and more as invention and 
 the mechanic arts are introduced and perfected do its benefits 
 become apparent. 
 
 Money when analyzed, or viewed as money and nothing more, 
 may be regarded as a receipt, acknowledgment or voucher — 
 a certificate of admitted authority — the denomination indicat- 
 ing the amount. It signifies that the bearer has parted with his 
 earnings or savings, and is entitled from those in want of it to as 
 much in return. It is an order for goods or other property, or 
 for labor and services which none desiring an exchange will re- 
 fuse. He who gets it obtains the equivalent in purchasing power 
 of whatever he may have relinquished. If a man have wheat 
 and would exchange it for cloth, he sells it for money as the 
 readiest, most economical way of obtaining the cloth. He does 
 not want the medium except as the most effective means of get- 
 ting something else, and would not take it but for this instru- 
 mental use, as it would lead him away from instead of toward 
 his object. On its surrender in payment for cloth, its mission, so 
 far as he is concerned, is ended. It has helped him to get the 
 desired equivalent of his cloth, and now his claim is satisfied. 
 The draft goes into new hands to be held for a similar service. 
 To the parties in a bargain, it serves as a light-running vehicle 
 for the transfer of commodities. Or it may be likened to a me- 
 diator and go-between, having a lifting or tractive power equal 
 to its exchange-value, and sufficient for any emergency. Because 
 it does much excellent work cheaply and with dispatch, it de- 
 serves the name of a labor-saving instrument. Except as an 
 implement reserved for a single indispensable service (in which 
 service it changes hands), it has not the smallest attractions ex- 
 cept to the curiosity-hunter and the miser, and can be turned to 
 no enconomic or intelligible use. The charms with which the 
 popular mind has invested it are wholly due to its association 
 with unnumbered forms of material good. Hoarded, it is no 
 more useful, perhaps no more ornamental, than an assortment of 
 
7 
 
 yard-sticks or gallon-measures. Its undoubted benefits, the fruits 
 of its friendly offices, are not secured till the owner has parted 
 with it. 
 
 Were the rogues (including counterfeiters) all throttled, any 
 thing easily handled might become money — shells, stones, chips, 
 bits of leather or paper, etc. Whatever its material or form, its 
 circulation, as a medium of trade, will be found, when the case is 
 critically examined, to depend solely on consent — a mutual agree- 
 ment, tacit if not formal, among the holders of property and ser- 
 vices to accept it as the money of the country. Consent on the 
 part of giver and receiver confers the special endowment which 
 distinguishes it from everything else. Having this endowment 
 or quality, chips or rags may become money. Without it gold 
 and silver coins are mere merchandise. Sustained by consent 
 and general acceptance, money cannot fail. Cognizant of this 
 fact and confident of safety, every business man unhesitatingly 
 receives it, knowing that by doing so he becomes a creditor in 
 the market — acquires a general purchasing power equal to any 
 he may have relinquished, and far more available. With it, he 
 can command, in definite amount, any thing for sale which fancy 
 or necessity may prompt him to buy. So conspicuous are its ad- 
 vantages that the merchant lays hold of the first chance to ex- 
 change for it any part or the whole of his stock in trade, satisfied 
 that he obtains that which will not only replenish his stores, but 
 yield a surplus called profit. The conventional medium does for 
 him and his business all which it is possible for money to do. He 
 wanted exchangeable value, in the most current form, which 
 would not come to naught at a critical time, and this he has got. 
 For a special service, he sought an instrument the most effective 
 known — one that would do its work perfectly without wear or 
 waste, and has obtained it. What more can he ask ? For his use 
 it is not important what its material, its form or color; whether 
 it be the product of labor; whether it be the substantial, as well 
 as exchangeable equivalent of his goods or wares; whether or 
 not the coin may be obtained for it, unless, indeed, that fact 
 should make it more valuable as merchandise than as currency. 
 He may not know who the issuer may be, or whether solvent; 
 whose seal or promise it may bear, whose faith or credit pledge, 
 or what the sovereign power may have said or done. If it have 
 a known value in exchange, and be every where current, no mat- 
 ter whether it be hard or soft, yellow, white or green, it is the 
 
8 
 
 thing he needs. As an instrument or medium, as a receipt, order 
 or accepted draft, the wealth of a continent “ behind it ” and up- 
 holding it would make it no better. With the strength derived 
 from consent alone, it has all the lifting and tractive power re- 
 quired for the easy and rapid interchange of commodities and 
 services, and any new or additional force (were it possible to im- 
 part it) could not be utilized. Erelong, no doubt, we shall be 
 able to throw off the delusion that a currency which meets all 
 the requirements of both buyers and sellers — of the producers, dis- 
 tributors and consumers of wealth — needs adventitious support, 
 or bolstering of any kind. 
 
 I have been writing of money in its simplest, most elementary 
 form, chiefly of money as a medium of exchange, divested of 
 non-essentials, and having no intrinsic value. When stripped of 
 everything not a needful part of it, and the nucleus only remains, 
 it will be seen that consent — consent of those who give and those 
 who take — is its elemental principle, the source of the confidence 
 it inspires, and its usefulness as an economic force. An in- 
 strument thus endowed has marvelous power, and is fitted to 
 move the world of wealth and industry. Without consent, it is 
 impotent and worthless. Withdraw it when once given, and 
 the “ best currency in the world,” however fortified, loses its pe- 
 culiar virtues, and ceases to be money. Deprived of its support, 
 specie itself could not discharge its customary office. It would 
 be merchandise requiring money for its transfer. 
 
 I have endeavored to show that money derives the special 
 quality which fits it to act as a medium of exchange from con- 
 sent. But the world takes a different view. Without the small- 
 est show of reason, Prof. Price affirms that “ coin, metallic coin, 
 alone is true money, and nothing else is.” Others suppose that, 
 in this matter, the government is all-sufficient, the fountain of 
 power, and persuasive beyond control. “ That is money,” says 
 one, “which the law declares to be so.” But suppose the people, 
 usually submissive, in a preemptory way dissent. The law is 
 mighty, I admit, but it cannot compel one man to sell to another 
 his horse, merchandise or labor for some specific thing which the 
 latter does not want or prefers not to take. So said sturdy J acob 
 Collaraer, in the United States Senate, when the legal tender 
 iniquity was up for discussion. In this matter, if constraint be 
 attempted, the owner of property will circumvent the statute by 
 having nothing to sell. He may submit to robbery under pro- 
 
9 
 
 test, but will not be a party in a bargain which proposes this as 
 an end. A sufficient penalty, in a particular case, if the person 
 be timid, may secure conformity, but the needed consent (which 
 is an act of volition), and the confidence flowing from it cannot 
 be forced. This fact the statesmen (so-called) of our colonial, 
 Revolutionary and more recent history were slow to learn, and 
 never fully understood. During the war of the Rebellion, Con- 
 gress attempted many impossible things, but it was not foolish 
 or absurd enough to try, perforce, to make its tender-notes the 
 common medium of trade. Dishonestly, it set aside the old stand- 
 ard, made them the lawful measure of value, compelled creditors 
 to receive them in satisfaction of their claims, and inflicted un- 
 measured wrong in that direction; but to this day every man is 
 free to take or refuse them in exchange for his houses, lands, 
 goods or services. The monstrous wickedness of the bill as a 
 whole leads one to fear that any forbearance on a minor point 
 was not due to an unwillingness to do evil, but to practical diffi- 
 culties felt to be insurmountable. When, at a later period, our 
 law-givers essayed to limit the depreciation of greenbacks by 
 regulating the traffic in gold, the first words of indignation were 
 drowned in a general guffaw, and the act was incontinently re- 
 pealed. 
 
 It is idle to contend with Mr. Price that “ coin alone is,” or 
 with others that the greenback is not “ true money.” The two 
 exercise the same function, do the same work with equal dis- 
 patch, and expedite trade in the same way. They differ only in 
 matters which are not essential, and which do not relate to their 
 office. The differences are made sufficiently prominent when one 
 is called hard, the other soft, one metallic the otKer paper money, 
 etc. In the genuine sense both are money, as the language which 
 usage sanctions implies. They are varieties of the same thing, 
 fundamentally and essentially one. Of two dwellings, one of 
 brick the other of wood, one yellow the other green, it is not the 
 custom to deny that both are houses. I do not think it possible 
 to frame a just definition of money which will include coin and 
 exclude the greenback. If the latter be not money pray what is 
 it ? Have we been living (most of the time very fast) for fifteen 
 years almost without money, a feat hitherto thought impossible ? 
 During this time the products of industry and property of every 
 kind, to an enormous extent, have been bought and sold, and the 
 needful payments made. What name shall be given to the com- 
 
 3 
 
10 
 
 mon medium of trade which has been instrumental in this work ? 
 Will you follow certain precedents, and call it currency ? Then 
 please say what is meant by currency, and so define the term as 
 to exclude coin and include the legal-tender, and all those de- 
 vices, exercising other offices, which are used as substitutes for 
 money, like checks, drafts, and bills of exchange. The latter, 
 though conveniently called cash, or cash funds, cannot properly 
 be embraced in the same category as the greenback. They do not 
 “ pass from hand to hand,” do not circulate , but go directly from 
 the drawer to the drawee for payment. They are never the stand- 
 ard of value, but suppose a standard by which they are them- 
 selves measured. — In this paper I have usually employed the term 
 currency as synonymous with that of money, in accordance with 
 the best usage. 
 
 The legal tender part of the law authorizing United States 
 currency notes gave no strength to the greenback, as an instru- 
 ment of exchange. It did not, in the way expected, prevent de- 
 preciation or delay it. As a medium, the notes needed no spec- 
 ial legislative encouragement, and especially no coercive appli- 
 ances. Buoyed up by the circumstances of the time, and a 
 passionate longing for innovation, they had sufficient vigor 
 (popularity) of their own. The banks were suspicious for a short 
 period, perhaps because their own circulation would be curtailed, 
 but business-men and the people at large hailed them with en- 
 thusiasm, and, in exchange for their products and labor, accepted 
 them with a welcome, as they would have done with inferior in- 
 ducements. Said one, brimming with excitement, “even the 
 children cry for them.” Before there was much depreciation, 
 and before the tender provision had been generally thought of, or 
 could have had any practical effect, they had obtained a firm 
 foot hold. In more ordinary times, when patriotic motives do 
 not abound, and public opinion may be safely ignored, it is 
 not difficult, under favorable circumstances, to obtain the ac- 
 ceptance, as a medium of exchange, of almost any kind of money 
 which has a plausible exterior and promises energetically. The 
 people are naturally disposed to be easy and courteous in this 
 matter, and will receive from their customers, employers and 
 friends anything by which the end sought — exchange of commo- 
 dities and services — may be attained, without personal risk or 
 loss. If a man have shoes and want hats, he will take in pay- 
 ment whatever the hatter will take* and never hesitates when. 
 
11 
 
 assured of that. All others in like circumstances will do the 
 same. Consent then, to whatsoever it may attach itself, will 
 make a proposed medium good money in all commercial inter- 
 course between the consenting parties. Nor would it be neces- 
 sary to call on the government for any assistance except to give 
 the sanction of law to the customs and usages of merchants and 
 business-men. Certain superserviceable legislators may feel cha- 
 grin that the people should be able to help themselves in a mat- 
 ter they have been pronounced dependent on the bounty of the 
 government, and in their private capacity helpless; but those 
 who desire to live honestly by their own efforts should rejoice. 
 
 A government with large receipts and expenditures may, with- 
 out the use of law or the least constraint, exercise (sometimes 
 legitimately) a great if not controlling influence over the curren- 
 cy. Paper which it issues, and makes receivable for public dues, 
 creditors will cheerfully accept to a limited extent, though not 
 redeemable in coin, and never intended to be paid in cash. It 
 passes through several hands perhaps, and is then received into 
 the treasury to be again disbursed. It thus obtains a sure circu- 
 lation, more or less general, and does not depreciate as compared 
 with the money of the country, unless supplied in excess — in ex- 
 cess of the wants of those who make payments to the govern- 
 ment. Of this kind were the sixty million United States demand 
 notes, after the government failed to redeem them in specie, in 
 the beginning of the late war. They Were receivable for cus- 
 toms, and were at all times as good as gold. Those that remained 
 in the hands of the people maintained their ground when green- 
 backs were greatly depressed, at one time worth but thirty-five 
 per cent, of their face. Banks of discount and deposit, of good 
 reputation, are the centres of a similar influence, and can, by 
 concerted action, exert great power. Usually, whatever they 
 are willing to lend borrowers must accept, while the debtors are 
 glad to get any medium which will pay their notes. Doubtless, 
 each institution of great influence and large capital might circu- 
 late, at par value, a limited amount of paper bearing the words 
 “ Receivable on deposit, and for all dues to this Bank,” without 
 the promise of any kind of redemption. As nearly every business 
 man keeps his cash funds in some bank, and makes and receives 
 payments through it, it would be inconvenient for him to refuse 
 bank-money, and unsafe should he expect favors. What mer- 
 chants, manufacturers, contractors, etc., did not decline those 
 
12 
 
 with whom they had business relations, such as producers, em- 
 ployees, etc., would be slow to reject. To avoid depreciation, 
 however, it would be necessary to observe in strictness the single 
 or exclusive law which determines the value of inconvertible 
 paper — the law of limitation. The supply must not exceed the 
 legitimate demand. 
 
 So commanding is the position of the banks that a few score 
 of the largest and strongest could, doubtless, by united action, 
 if government would but keep its hands off, bring into general 
 use almost any kind of money suitable for its work, depending 
 for success solely on those moral influences which induce consent. 
 Would the banks of New England and New York, most of them 
 national institutions, give up their present charters, and organize 
 anew on a gold basis, under the law enacted for California and 
 the neighboring states, issuing notes payable in specie only, they 
 could initiate a resumption-movement, as they did after the war 
 of 1812, and again in 1837, ’39 and ’57, which would, at length, 
 as then, extend to the reluctant (or at least hesitating) states 
 farther west and south. Should the inflationists of Pennsylvania, 
 Ohio, the Mississippi Valley, etc., get control of the government, 
 and attempt to reduce their schemes to practice, the friends of 
 a sound and honest currency may be compelled, in self defence, 
 and by a sense of imperative duty, wherever they have the power, 
 to adopt the measure indicated, and, at a favorable time, carry 
 it forward to success. To those who would save the nation from 
 dishonor and the direst calamities, it would, in truth, be the only 
 course left. I am not insensible to some possible and practical 
 difficulties in the way of cutting loose from the banking system 
 of the country, and substituting convertible gold notes for depre- 
 ciated bank paper, but they might, I think, be overcome by 
 moderation and good judgment, provided always that the gov- 
 ernment shall place no fresh obstacles in the way of reformatory 
 efforts. 
 
 Those who contend that the compulsory clause of the legal 
 tender act was required to make greenbacks current — current as 
 medium of exchange — know little of history and the common- 
 est facts. Everywhere, throughout the reign of unstable or de- 
 preciating paper money, it has proved far easier to assure than 
 hinder its circulation — to fasten it upon a people than loosen its 
 ever tightening grasp. Like certain reptiles, it has the power of 
 fascination, and a vitality which is as wonderful as pernicious. 
 
Baring the forty years which followed 1710, Comiecticut found 
 it easy enough — down grade all the way — to put out and keep 
 in use its steadily declining “ bills of credit ” (circulating notes) 
 without the support (except for a few months) of any tender-law. 
 There were attempts to force the settlement of old contracts 
 with specie, but these were uncommon and usually unrenumera- 
 tive. The “ General Court ” favored the debtors, and display- 
 ed no little ingenuity in devising indirect ways for escape. The 
 bills were equal in exchangeable value to the “ legal-tenders ” 
 of the other New England colonies in which they circulated to 
 a limited extent. For colony taxes* they were receivable at a 
 premium of live per cent., and hard money was unknown except 
 as merchandise. Notwithstanding the confusion and disaster 
 they had introduced, so popular were they, even when worth but 
 one sixth of their first value, that decisive action on the part of 
 the British government was required to stay the evil. This ac- 
 tion was deemed wantonly oppressive, and brought unaffected 
 grief to a large portion of the colonists. The first opportunity 
 to escape from this particular thraldom occurred in 1775, at the 
 outbreak of the war, and was assiduously improved. A season 
 of riotous liberty, then a surfeit, and lastly, a calamitous break- 
 down followed. Then came the Constitution with its prohibit 
 tions, and a partial immunity from an intolerable nuisance for 
 seventy-two years; then more rioting, and the grand final wreck 
 in the Supreme Court of the United States in 1871. 
 
 It is unreasonable to suppose that the government, with the 
 patronage and influence connected with the receipt and expendi- 
 ture of one thousand million dollars annually, upheld as it was by 
 the banks, the wealth of the “loyal states,” the courts and a large 
 majority of the people, and commanding a million armed men 
 impatient to do its bidding, needed the tender-provision to makp 
 its notes current. As a circulating medium, and against all the 
 supports and persuasives, moral and physical, which the circum- 
 stances supplied, a failure would have been impossible, certainly 
 while the war lasted. Had there been difficulty, the rapid de- 
 preciation of the greenback, (which shrewd men anticipated,) 
 and the prompt disappearance or displacement of other money 
 more valuable than itself, both caused by excessive emissions, 
 would have left the field in possession of the government. As 
 strange as it may seem to the unreflecting, there is nothing so 
 certain to fix a currency, momentarily, in the good opinion, if 
 
14 
 
 not the affections of a people as its steadily declining value; and 
 the nearer it approaches worthlessness, without extinction, the 
 more popular, with many, it becomes. The reason of this is 
 found in the fact that the very large class of money-debtors pay 
 easiest, that is, with the least sacrifice of toil and sweat, when 
 money has least value. All however which is gained by one 
 class in this way is lost by another. 
 
 As the constitution is now interpreted, Congress has the au- 
 thority (in certain emergencies, if not at all times) to make the 
 greenback or any thing else legal-tender, and to compel the peo- 
 ple, whatever the sacrifice, to receive it for what it claims to be 
 in satisfaction of debts. It can put forth a scant and contempt- 
 able measure of value, and force creditors to abide by its decisions 
 whatever the injustice; but this is the extent of its power for 
 mischief. It might do more, and prescribe the quantity of goods 
 which shall be given for the greenback dollar, but the end sought 
 in this way has in practice been found unattainable. The im- 
 mutable law which governs the proportion in which one com- 
 modity shall exchange for another — the law of equivalence — has 
 proved too much for it. Desirable it undoubtedly is that the 
 common medium of exchange, and the measure of value used in 
 the settlement of contracts should be the same, but it is not in- 
 dispensable. Had the tender-provision of the statute of Febru- 
 ary, 1862 , been omitted, government notes would, no doubt, 
 notwithstanding the omission, have become the money of the 
 country. Nor would creditors have refused to receive them till 
 over-issue had much impaired their value, or, perhaps, till the 
 close of the war, when undoubtedly the cheat would have been 
 discovered, and an effort been made to right the wrong. This 
 effort, persisted in, must have brought into use for a special pur- 
 pose (the settlement of old contracts) a large amount of the only 
 lawful or legal tender money among us, to wit, coin. We should 
 then have had, as now, two kinds of money in circulation; one 
 of metal for the payment of private debts and custom house dues, 
 the other of paper for the accommodation of trade, and all cash 
 transactions. The first would be the standard of value by which 
 obligations contracted on a specie basis would be measured and 
 adjusted. The other would be the common medium of exchange 
 in which accounts were kept. Under these conditions the busi- 
 ness of the country might be transacted, and something like jus- 
 tice done; but the inconveniencies of a complex system thus 
 
15 
 
 extended would be so great, and the position of the government 
 so embarrassing, not to say disgraceful, that it would be con- 
 strained to withdraw a portion of its notes, and so restore the 
 value of the remainder. The apprehension of untoward results 
 and deserved reprobation would doubtless do much to deter 
 from wrong-doing (inflation). 
 
 In estimating the effect of the compulsory part of the law giv- 
 ing birth to the greenback, it is important to remember that 
 nearly every well-informed man, who kept his head cool, consid- 
 ered the law unconstitutional and without legal force. Conse- 
 quently, it could not have had the eflect claimed by its defend- 
 ers — the effect of securing the acceptance of the greenback as a 
 circulating medium. Not till after the war, when interested 
 parties had had time to count the money which the law gave to 
 one party and took from another, that different views, owing, I 
 suppose, to clearer vision, became common. 
 
 Continental paper money, though confessedly issued without 
 any rightful authority and binding nobody, was current every- 
 where, and would buy anything, even when worth no more 
 than one per cent of its face. It was in universal use, not only 
 as a medium of exchange, but for a long time, as a measure of 
 value. Nor did state legislation giving it a legal status, and 
 declaring it “good in all payments” make it better or delay its 
 downfall. Consent, not the supposed solvency of the promisors 
 and their backers, or the hope of ultimate redemption, was the 
 source of all the strength it ever had, while its increasing weak- 
 ness grew out of over-issues. The state banks, at different peri- 
 ods, say in 1814, ’37, ’39, ’57 and ’61, suspended specie payment, 
 but their depreciated notes continued to be the common currency, 
 and as a medium of exchange were universally accepted. Bill- 
 holders, when assured of soundness, rarely attempted to enforce 
 their legal rights, but waited patiently and confidently for vol- 
 untary resumption under the pressure of law. The same result 
 would have followed the late war had not the government pre- 
 vented it by the tender-law and other legislation. 
 
 No doubt the legal tender-provision, when a currency is much 
 depreciated, will help indirectly to keep it in circulation and 
 sustain its value. It will do so by multiplying the uses, and ex- 
 tending the demand for it. The domestic debts of a people are 
 always, in the aggregate, very large, and no small amount is re- 
 quired for their payment. The legal measure of value, though 
 
16 
 
 notoriously false and fraudulent, creditors will (because they 
 must) accept, and whatever they receive the indebted class, 
 seeking ever the cheapest means of payment, is ready to take. 
 The larger sums are of course most conveniently paid by checks, 
 the smaller in money. The party which is wronged in this mat- 
 ter, and would be righted, is stripped of power; while a larger 
 party, having great influence, profits by injustice, and too often 
 wishes no reform. Those whose credits and debits are nearly 
 equal, or who use money only as a medium of exchange, work- 
 ing, buying and selling for cash only, are, not unfrequently, in- 
 different spectators. The experience of the last three years should 
 teach the unbelieving that prosperity which has no better founda- 
 tion than selfishness and fraud is delusive, and that private gain, 
 in the long run, is best secured by measures which promote fair 
 dealing and the good of all. 
 
 As a medium of exchange, it is desirable that money should 
 have a stable value, but not quite indispensable. It may fluc- 
 tuate moderately without becoming unfit for use, because the 
 change while in the hands of a single individual would be small 
 and insignificant. If the fluctuations were more' considerable, 
 but all in one direction, and could be foreseen, the prices of com- 
 modities would be adjusted to the expected alteration, so that 
 the receiver and holder of money would risk little. On the con- 
 trary, should the changes be great, sudden and capricious, so 
 that no estimate could be formed of their extent, direction or 
 time of occurrence, every exchange of goods or property for 
 dollars would be a speculation, a leap in the dark, the end of 
 which no man could divine. Before a reinvestment could be 
 conveniently made, the temporary holder of a treacherous me- 
 dium might be ruined. When this uncertainty exists, caused 
 by money which is not a reasonably stable measure of value as 
 well as an instrument of exchange, honest, prudent men, those 
 who desire to earn what they get and get all they earn, are greatly 
 perplexed. If. they have goods for sale they sell for cash, and 
 are in haste to buy again before cash has lost its purchasing 
 power. Cautious and conservative, they pursued this course 
 during the paper deluge of the late war, and more than others 
 were prepared for the financial cyclone of September, 1873, and 
 the day of judgment which is following it. But times of doubt 
 and surprises delight the adventurer in business. Of large faith, 
 courageous and ambitious, he fears not the risks which others 
 
17 
 
 dread. Having perhaps little to lose, he braves the perils of un- 
 known seas, expecting propitious gales and a prosperous voyage, 
 the rich returns of which will be exclusively his, the losses prob- 
 ably not. He buys largely, and as every movement of the cur- 
 rency attractive to speculators is toward expansion and higher 
 prices, he moves on confidently and grandly, borne up by inflated 
 values, till present wealth is achieved — or his notes become due. 
 When prices are capricious and luck determines destiny; when 
 labor is uncertain of reward, and riches have no sure connection 
 with industry and economy; when each moneyed transaction is 
 a venture, and the wisest precautions may prove fruitless; when 
 the legal defences which hedge about one’s savings are weak- 
 ened; then is the speculator’s opportunity. Finding the general 
 hold on property loosened, and much of it shifting and drifting 
 about helplessly, no claimant having a very clear right of owner- 
 ship, he throws himself audaciously among the conflicting forces, 
 hoping to bear off something. Till the “ panic ’’came — which 
 measurably cleared up titles and determined ownership — his suc- 
 cess was sometimes marvelous. 
 
 In illustration of the principles which govern an inconvertible 
 currency having no intrinsic value, suppose Congress, rioting in 
 unrestricted freedom under the authority of the Supreme Court 
 of the United States, should procure, without cost, a great quan- 
 tity of paper of the paste-board variety, cut it into strips having 
 a total length of ten thousand miles, and present it to the coun- 
 try as a new currency, withdrawing the old. Its universal ac- 
 ceptance would convert it into money, give it exchangeable value, 
 and qualifiy it to act as the common medium of exchange and 
 measure of value. It would be money without the usual accre- 
 tions or accompaniments — money without the promise to pay 
 other money, and without intrinsic worth. As no more (by the 
 supposition) could be had, its total value, called forth by the 
 aggregated demands of business, and limited by these demands, 
 would necessarily be “ equal to the wants of trade,” and suffi- 
 cient, without excess, for all the moneyed transactions of the 
 nation. Nor would it be more efficient were the quantity of 
 paper double, or less so were it but half as much. Its adequacy 
 would in no way be dependent on its volume (length). It would 
 be needful, however, in order that it might be employed as a 
 counter (medium) in commerce, to divide the strips into parts, as 
 the other counters, the yard-stick for example, are divided. The 
 
18 
 
 divisions might correspond with those of the foot rule, the 
 unit being exactly one inch. The units might be detached, or 
 united in groups of two or more, and the fragments numbered, 
 the number indicating the denomination or comparative value, 
 No. 1 denoting unity or one inch, No. 2, two inches, etc. So 
 soon as experience, or the competition of holders feeling their 
 way under new conditions, had determined the proportions in 
 which the new money should be given for the products of indus- 
 try, and trade had been adjusted to its divisions or denomina- 
 tions, the value of commodities could be measured, somewhat as 
 cloth is, by a strip of paper giving their contents in inches and 
 tenths. Each of the inch-fragments would exchange for a defi- 
 nite amount of goods and labor — an amount determined by the 
 rule of proportion. In other words, the value or purchasing 
 power of each when compared with that of the whole, would be 
 as one inch to ten thousand miles, or one inch to 633,600,000 in- 
 ches. Admitting these enormous figures to give correctly the 
 sum of all the units, the inch of card-paper, sustained by consent 
 alone, and accepted as the money of the country, would have 
 more exchangeable value than the greenback dollar — more be- 
 cause the number of the units would be fewer and the volume 
 less. Of legal tenders and national bank notes, exclusive of 
 fractional currency, there are now in use nearly $690,000,000. 
 If the bits of card-paper bore the seal of the government, were 
 called dollars and made legal tender, they would be worth no 
 more or less. A name could not change their character, or in- 
 vest them with a new property. If I am correct in saying that 
 consent and general acceptance will convert any fitting substance 
 into money, the units having a value inversely in proportion to 
 the sum of the whole, I cannot be mistaken in my positions. I 
 have only made deductions from the principles announced in the 
 beginning. 
 
 At this point, after all the adjustment had been made, and the 
 value of the unit become fixed, suppose population and business 
 were gradually enlarged till the needful exchanges were doubled. 
 While this change was going on, and not corrected by counteract- 
 ing influences, the demand for money would continually increase, 
 attended by stringency, falling prices, and an augmented value 
 of the circulating medium (inch bits). The effects would be the 
 same as those resulting from contraction in a financial crisis. 
 Owing to the pressure — pressure against an inflexible barrier — the 
 
19 
 
 inch-bit would constantly appreciate till its purchasing power 
 was doubled. When this result had been reached, and the new 
 measure of value become the established one, the currency would 
 be again equal to the demand, and sufficient, with the lower 
 prices, for the work assigned it. On the other hand, if the vol- 
 ume of the currency (the number of its units) were increased 
 simultaneously with the enlargement of business, and proportion- 
 ally to it, then there would be no augmented demand for a 
 medium of exchange, no stringency, no fall of prices, no rise in 
 the value of money, and no disturbance of any kind. Other 
 effects would of course be produced by a diminished population 
 and declining trade. There would be fewer products to be ex- 
 changed, and too much currency for the work till rising prices 
 had increased the demand for it. 
 
 It may be unnecessary here to say that I am not about to 
 recommend for adoption the currency described in the last two 
 paragraphs. I am in pursuit of a principle, and seek illustra- 
 tions. 
 
 II. 
 
 The Effect of Limitation or Volume on Value. 
 
 The effect of limitation or restricted issues on an irredeemable 
 currency — the same effect which follows restricted supply in 
 every department of trade— may deserve further elucidation and 
 remark. 
 
 In a rich country, with a diverse and complex industry, a very 
 large proportion of its wealth is created or held for exchange. 
 Though the exchanges to be made cannot well be estimated, they 
 are certainly limited, and definite in amount. They are effected 
 by the agency or intervention of money (or some substitute for 
 it), or rather of the exchangeable value which is its essential 
 attribute. Its efficacy or power for work is proportionate to 
 its value. As the exchanges to be made, and the services to be 
 performed are limited, the value which can find employment 
 must be correspondingly restricted. A sufficiency having been 
 
20 
 
 provided, there is no call or room for more. As the farmer in 
 tilling his acres can make use of only a certain number of plows, 
 so the trader who buys the crops has need of only a certain value 
 in exchange. In either case, the implements supplied and not 
 wanted would be useless surplusage. If I buy a cow for fifty 
 dollars, that is all the money that can aid me in paying for it. 
 So in every purchase or sale; so in the aggregate of all purchases 
 and sales; a certain number only of dollars of fixed value can 
 take part in the transfer. Were the currency gold and silver, any 
 additions beyond the demand for exchanges would go into the 
 melting pot or be exported. In this way is an over-supply, fol- 
 lowed by depreciation, prevented. But inconvertible paper is 
 worth nothing for exportation or in the arts; and as paper mere- 
 ly, of the finer sort, it is spoiled by the ink. But for circulation, 
 it is more or less valuable. However large, the new issues, be- 
 sides being cleaner, are as good as the old, and for that reason 
 cannot be ejected. A currency of this kind has no power of self- 
 protection and recuperation. Unlike coined money, when once 
 in excess, it cannot, by any process originating with itself, be 
 depleted so as to recover its natural volume and value. Its non- 
 exportable quality, so attraction to some, is fatal to it. 
 
 Though the total value of the circulating medium admit of no 
 increase, the volume of irredeemable notes may be indefinitely 
 enlarged. The enlargement and consequent cheapening of mon- 
 ey will not necessarily increase the demand; nor will the supply, 
 however great, glut the market. Demand and supply, in truth, 
 do no relate to volume but to value alone. When it is said that 
 money is in demand, and loans are sought at high rates of interest, 
 it is meant that for the moment more value is needed for the easy 
 transaction of business. Enhanced prices naturally keep pace 
 with enhanced volume, and absorb all the currency which may be 
 offered whatever the amount. A few years ago, the purchaser of 
 a horse was required to give, say, a hatful of confederate dollars, 
 the money price in the Southern States having risen in that pro- 
 portion. At the point named, the supply was not in excess of the 
 demand. For everything having exchangeable value, except in- 
 convertible circulating notes, the demand ceases after the want 
 which calls it forth is supplied. For them it continues unchecked 
 by the supply. When additions are made, the injury (decline 
 in value) falls exclusively and equally on the units, whether called 
 dollars, pounds sterling, francs, or inch-bits. Without altering 
 
21 
 
 the aggregate value of the mass, they degrade the parts, each 
 denomination losing in the proportion that the number is in- 
 creased. When taken to market, the depreciated medium, so 
 long as it continues to be money, will purchase anything found 
 for sale, but it must be given in greater bulk, or more volume, 
 five dollars, say, for four, three or two, as in the late war and 
 subsequently. The word dollar, when signifying a certain pro- 
 portion of the total value of a currency, has a definite meaning, 
 but is scarcely intelligible when it gives no clue to proportion, or 
 none which is constant. It is like the share in a railroad or min- 
 ing company. The latter may have an established value so long 
 as it represents solid capital well expended; but the word sug- 
 gests no certain idea when rogues and speculators — men with 
 large watering pots in their hands, and fraud in their hearts — be- 
 come directors and issue the certificates. Water has the same 
 effect upon an irredeemable currency as it has upon a railroad 
 share or the milk man’s quarts. In each case it increases the 
 bulk or volume; adds to the number of dollars, shares or’quarts, 
 but does not give more value to the whole. The loss falls wholly 
 on the units or parts, and the receiver is swindled to the extent 
 of the water he is served with and pays for. To make the unit 
 conform to the name it bears, and to restore its value, the water 
 must be squeezed out or drawn off. If our rulers, “ in Congress as- 
 sembled,” who too often reflect the errors, prejudices and passions 
 of the voters, or are controlled by sectional and class interests, 
 will water the currency they should be stripped of authority, and 
 their activities turned into less criminal channels. Hitherto the 
 government has been the great champion of the water-pot. It 
 led the way, and wears the belt. Corporate and especially rail- 
 road swindlers have been followers — successful imitators— but 
 scarcely rivals. 
 
 If there be those who desire augmented value and efficiency in 
 the currency, on the ground that “ the wants of trade ” demand 
 it, and seek to attain that object by further issues of inconvertible 
 notes, they ought to know that the means are quite inappropriate, 
 and that the end sought can never be reached by efforts in that 
 direction. Debased and crippled dollars cannot give efficiency. 
 Trade, in truth, never asks for dollars, though individuals may. 
 Value— exchangeable value — to whatever form of money it may 
 attach itself is the one thing needful. The wants referred to are 
 not the wants of trade but of certain traders and schemers who 
 
2 2 
 
 hare given notes for property which they wish to sell. They 
 seek not more value in the circulating medium, but less in the 
 units. They desire more dollars because these would carry up 
 prices, relieve adventurers who have bought on credit, and cause 
 a new distribution of the products of industry. Real estate or a 
 “store” full of goods will go twice as far in discharging obliga- 
 tions when the dollar is worth but fifty cents, as it will when 
 equal to one hundred cents. There are among us many more 
 who comprehend this truth, in all its bearings, than there were 
 ten years ago. Hence the frantic call in certain quarters for 
 cheaper money. 
 
 Enlarged volume or inflation means more units at a reduced 
 value, $ 900 , 000,000 say to do the work of $ 600 , 000 , 000 . To 
 make one of the larger sum equal in value or purchasing power 
 to one of the smaller is physically impossible, though there are 
 those who claim to think otherwise. The obvious way to correct 
 the disparity is to reverse the process which occasioned it, and 
 remove the intruding and superfluous units. This is the natural, 
 most sensible course to pursue with the present currency of the 
 United States. The additions — those not demanded by the con- 
 siderable increase of production and the exchanges — which have 
 been made since the date of the legal tender law have at no time 
 added a dime to its value or purchasing power. The unit (dol- 
 lar) lias been so degraded by excessive emissions that it is now 
 worth but eighty-seven cents,* with no better result than injus- 
 tice and dishonor. Like the frog in the fable, the medium of 
 trade has been inflated indecently. It has more circumference 
 than formerly, a wider diameter, but the increase is due to wind, 
 or at best water. Nor would more expansion, as advocated by 
 certain mischief-makers, cure or mitigate the evil. On the con- 
 trary, if the disease be dropsy, as the evidence indicates, it would 
 intensify all the symptoms, and make still more imperative the 
 conclusive surgery so much dreaded. It would, when the times 
 again favor, renew the speculation, infatuation, disaster and dis- 
 grace of the past. 
 
 As those familiar with underlying principles will admit, all that 
 is necessary to maintain the value of the irredeemable United 
 States note, or to raise it to the level of specie, is to restrict the 
 
 * This part of the essay was written in the winter of 1874-5, when gold was worth about 
 115. The remainder was prepared at different times, as leisure permitted, often with long 
 intervals. 
 
23 
 
 issue. It is not the bad faith of the government, its broken 
 promise a thousand times repeated, the wide-spread doubt of its 
 ultimate redemption, or our large foreign debt that keeps it in 
 the mire, and perpetuates the evils of depreciation. So long as 
 consent is not withdrawn, and the total emissions continue un- 
 changed, a better credit could not improve it, or a worse one 
 harm it. Convertibility sets up a barrier to depreciation, but 
 what is called public credit, or the faith of the nation, in an ac- 
 cepted, irredeemable tender-note has no influence whatever, and 
 no meaning. The promise to “pay to bearer one dollar” signi- 
 fies nothing so long as the note itself is, in law, the dollar prom- 
 ised. Those in ignorance of the causes of depreciation, including 
 some orators in Congress, talk in a dreary, meaningless way 
 about the inherent excellence of the greenback, the vast “ wealth 
 that lies behind it,” the great resources of the country, the un- 
 doubted solvency of the nation, etc., as if these were sufficient 
 reasons for a higher value. The legal tender note has in truth 
 nothing behind it — nothing, I mean, which the bill-holder can 
 take or even touch with safety — nothing but a dreamy, intermit- 
 tent hope that at some time or other, in this century or the next, 
 the government may redeem it or curtail the supply. On the 
 fourteenth day of January, 1875, Congress, catching through the 
 mist of politics a glimpse of truth and duty, attempted (so I am 
 willing to believe) to put something behind it, but with poor 
 success, if outward appearances and the most dismal forebodings 
 are indications. The “ resources ” so much vaunted are excellent, 
 but what are they to him who is without coercive means, and 
 whose claim the law scouts? But the public faith, it will be 
 said, is pledged in this matter. In answer to this, it may be re- 
 plied that that faith which does not secure conversion into some- 
 thing more substantial than itself, or will not prevent deprecia- 
 tion by limitation, is not an element of value. Not in the small- 
 est degree can it compensate one who is continually suffering, 
 getting lean and gaunt from short measure, and pleading for re- 
 form. In point of fact, the government does not promise to pay 
 its circulating notes in specie, but in “dollars,” and the highest 
 court of the land, in defiance of its own record, has decided that 
 a note for dollars, even when given before the tender-act, is a 
 note for greenbacks. Congress can be more just than the court, 
 and pay in coin as in duty and honor bound, but will it? Its 
 promise, so called, has been broken more than ninety-nine thou- 
 
24 
 
 sand times, certainly as often as payment to the note-holder has 
 been denied or deferred since the war, and every one can judge 
 for himself how much that commodity is now worth. But the 
 new promise, explicit in its terms, formally pledging payment, 
 in specie, on the first day of January, 18 * 79 , may if politicians 
 and misguided economists will permit, and the courts do not de- 
 cide that that too may be discharged with greenbacks, may lead 
 to something important. At the present writing, however, 
 the outlook is not assuring. The persistent attempt, not to 
 amend, but to repeal the act, and repudiate the pledge given 
 to return, without interest, the value received from the public 
 creditors fourteen years ago, does no honer to those making it. 
 
 [The recent very considerable appreciation, or increased pur- 
 chasing power, of the greenback (equal to a fall in the price of 
 commodities) is not due to the act of January, 18*75, nor even to 
 the voluntary surrender of their circulation by certain banks, but 
 to the great depression of business. While the demand for goods 
 and property, owing to misfortune and the “hard times,” has 
 been much curtailed, holders, for many reasons, have been striv- 
 ing to sell, and in the attempt to do so have run down prices so 
 that two dollars now will buy as much, in most cases, as three 
 would five years ago. The depression referred to has extended 
 to Europe, and over the civilized world, producing a degree of 
 the same effect on specie as on the legal-tender. The latter has 
 been appreciated more than the former because the business of 
 this country has suffered more than that of other countries. For 
 loaning, greenbacks are plentiful and cheap, but scarce and dear 
 when wanted in exchange for commodities and estate.] 
 
 Mr. McCulloch, in the New York Tribune , writes for the most 
 part sensibly on the money question, but falls into several grave 
 errors and inconsistencies, and sometimes forgets his own admis- 
 sions. Alluding to the legal tender-note, he says: “No act of 
 Congress can give it a value beyond its convertible value.” “ Con- 
 gress is utterly powerless in fixing a value upon it without provi- 
 ding for its redemption.” This he affirms with the greenback 
 staring him in the face, which has to-day (January, 1875) an ex- 
 change value of eighty-seven cents per dollar in gold without any 
 certain “ provision for its redemption.” The truth is the govern- 
 ment has complete control over the value of an irredeemable and 
 accepted treasury note, not by giving it a respectable name, not 
 by enacting how much it shall be taken for, but by limiting the 
 
25 
 
 suppty. Mr. McCulloch himself proceeded on this theory when 
 he undertook to appreciate these notes by withdrawing a part 
 from circulation. Notwithstanding his assumption that the gov- 
 ernment can give no value to paper which is not convertible, or 
 none “ beyond its convertible value,” he concedes value from 
 another source than convertibility when he affirms that the ten- 
 der-note is worth as much as it is, or “ is not greatly depreciated 
 because the United States are a great nation, rich in undeveloped 
 resources, if not in actually acquired wealth,” etc. While it is 
 true that Congress cannot create value in money or anything else, 
 it is a mistake to suppose that convertibility is the only founda- 
 tion and stay of that value. The supposition is in conflict with 
 our daily experience, and of course destruction of the claim that 
 national greatness and abundant “resources” are elements of 
 value. Writers on this subject are led astray by assuming that 
 an inconvertible currency note and an interest bearing bond, 
 both issued by the government, and reading somewhat alike, owe 
 their value to the same causes. Because the bond is worth more 
 in proportion to the established credit, financial ability and abun- 
 dant resources of the government, they hastily conclude that the 
 same is true of the note. The two have a similar appearance, 
 and bear the same signature. Both promise to pay dollars, but 
 they differ widely in other respects One carries interest, and 
 to that fact is its value due. For that alone is it sought as an 
 investment. Did it not afford an income, and were it payable 
 at pleasure or never, it would be worth nothing. The other is 
 peculiar in everything essential. Its promise is unmeaning. It 
 pays no interest, furnishes no income, and has no value as an in- 
 vestment. Were the facts otherwise its character would be 
 wholly changed. Consent and general acceptance have imparted 
 to the note an unique quality — converted it into money. Thereby 
 a new function has been acquired which is specific and distinct — 
 one fitting it to become the medium of trade, the measure of 
 value, and the exchangeable equivalent of whatever is offered 
 for sale. Investing it with the qualities most desirable in the 
 bond would divest it of its qualities as a medium and measure. 
 
 Convertibility, as I was about to say, fixes a limit to deprecia- 
 tion. It does so by preventing over-issues, or, in other words, 
 by keeping down the volume of the currency to the point where 
 the law of limitation, intelligently applied, would place it. N otes 
 which are certain to be presented promptly for redemption will 
 
 4 
 
26 
 
 be withheld or withdrawn because unprofitable. Convertible 
 paper, near the place of issue, can never fall below that for which 
 it may at will be exchanged. But something as decisive may be 
 said in favor of accepted inconvertible notes. Limitation or re- 
 stricted volume is a barrier to declining value quite as certain as 
 coin redemption. By regulating the emissions, and in no other 
 way, can a government whose pledges (so called) are of the green- 
 back stripe control value. All those who desire resumption, and 
 contend that restriction or cancellation will prepare the way for 
 it, concede the principle. Others who oppose it too often do so 
 because the method urged to secure it would be effectual; would 
 appreciate legal tenders, give them more exchangeable value, 
 and perhaps diminish the resources of many waiting to sell prop- 
 erty which has cost more than it will fetch. Instead of contrac- 
 tion, they may want measures which will renew speculation and 
 carry up prices — measures which will enable them to shift their 
 burdens to the shoulders of others, and thus escape loss and 
 financial wreck. Very naturally, men loaded down with estate 
 which they can neither carry or sell desire relief, and sometimes, 
 without thinking of the general results, favor a policy which 
 leads to over-issues and depreciation. Because self-interest ob- 
 scures the vision, impending danger is overlooked. Constant 
 watching and the most strenuous efforts are required to preserve 
 the usefulness of inconvertible paper money, and defeat the 
 schemes of those who would degrade it for selfish ends. When 
 supplied in excess, its diminishing value meets with nothing to 
 arrest it. Once in the gutter it is helpless, with no recuperative 
 power. The strong arm (untrustworthy in most cases) which 
 controls the emissions, alone can lift it and sustain it. 
 
 Facts then which will not be denied, and arguments none can 
 meet show that legal tenders owe their continued degradation 
 not properly to inconvertibility but to excessive issues — issues 
 for which there is no outlet or possible way of escape. The notes 
 are now worth as much as eighty-seven per cent, not “ because 
 we are a great nation, rich in resources;” not because “ the pub- 
 lic credit is pledged ” for their redemption; not because they are 
 “ legal tender at their face;” but for the better reason that Con- 
 gress has been more conservative, or rather less foolish and 
 wicked than it might have been in the use of the watering pot. 
 Had the supply been checked reasonably, as in the case of France 
 in her late struggle with Germany, there would have been no 
 
27 
 
 depreciation, no difficulty in resumption, and no opposition to it 
 from any quarter. In this matter the French government ex- 
 hibited more knowledge, and sounder statesmanship than ours. 
 The inconvertible paper it permitted in a time of unparalleled 
 embarrasment was so limited by inexorable law that its value 
 has scarcely declined for a period of six years. Managed with 
 equal prudence, it would doubtless be as good as gold till the 
 end of the century. To raise the greenback to par, it is not ne- 
 cessary to do more than retrace the steps which led to its dis- 
 grace, and cancel a hundred or two million. Were this course 
 further pursued, provided no other currency were attainable, it 
 could be made more valuable than specie. 
 
 When I affirm that the volume of the currency determines its 
 value, I of course refer to that portion of it which is in circula- 
 tion. If a part for want of use is stored away in the vaults of 
 banks or in private safes, as always happens when business is 
 depressed, that should be left out of the account. Greenbacks 
 or national bank notes thus disposed of are for practical purposes 
 retired, and can have no effect till called forth for service. The 
 two kinds of notes — those of the treasury and the banks — are 
 equally active and efficient, and as money have in ordinary cases 
 nothing to distinguish them. In this essay I have kept the green- 
 back prominently in the foreground because that, and that only, 
 blocks the way to reform. 
 
 The effect of limitation is seen in the sustained value of the 
 subsidiary coins of a country which are usually made propor- 
 tionally lighter than the unit-pieces. Nothing is required to en- 
 sure their circulation at their face value but to stint the supply. 
 Government credit and the wealth of the people have no more 
 to do with it than with the flowing of the tides. The copper 
 cent and the five cent nickel-piece have many times more ex- 
 changeable value than the metals they contain. If limitation, as 
 in these cases, can add to intrinsic value several hundred per 
 cent, it may add to it indefinitely. The quantity of metal, in- 
 deed, is of no account. Whether much or little it goes for noth- 
 ing. A bit of paper inscribed “ one cent ” or “ five cents ” would 
 do as well, as we have abundant opportunity to know. Were 
 the coins named much heavier than now, they would be worth 
 no more till their increased weight made them more valuable as 
 copper and nickel than as money. Not till their commercial ex- 
 ceeded their nominal or conventional value would they cease to 
 
28 
 
 circulate. It is usual to make a subsidiary currency convertible 
 into money of a higher denomination, but this is not important 
 except that an outlet is thereby provided for excessive issues, 
 and depreciation prevented. Unquestionably, the gold dollar, in 
 places where that is a part of the currency, might be made lighter 
 by one-tenth, one-quarter or more, without impairing its value, 
 were the supply sufficiently restricted. Thus restricted, the new 
 would circulate by the side of the old coins till supplied in suffi- 
 cient number to satisfy the whole legitimate demand, when the 
 last of the older and heavier would disappear. Were the re- 
 striction at this point removed, and the new issues continued, 
 there would be progressive depreciation till the exchangeable 
 value of the pieces was equal only to the gold they contained. 
 Whatever is true of the dollar is equally so of any or all the 
 other coins. So indispensable are they, so intense, in the absence 
 of other money, would be the demand that scarcity-, artificial or 
 natural, might force up the value ten fold. When thus forced, 
 their exchangeable would exceed their commercial value in the 
 same proportion. Under such circumstances, they would be too 
 valuable for conversion into bullion, or for exportation. Worth 
 more for money than for anything else, they would, like irre- 
 deemable, depreciated notes, obstinately continue in circulation. 
 Curtailing the supply, then, may add to convertible, intrinsic or 
 conventional value indefinitely. When this fact is fully under- 
 stood, and appropriate legislation is no longer withheld, suitable 
 preparation will have been made to raise greenbacks to the level 
 of gold. Mr. McCulloch’s management was not always discreet, 
 but his method by contraction was the proper one. Had he been 
 allowed to proceed, the inevitable catastrophe — inevitable be- 
 cause its causes were already in existence — though probably oc- 
 curring earlier, would doubtless have been less disastrous than 
 that of 1873, and not as provokingly lasting in its effects. 
 
 At the present moment, (fall of 1876,) the change which for 
 some time has been going on in the value of silver is attracting 
 much attention. Considered as bullion and comparing it with 
 gold, its depreciation, owing chiefly, as is claimed, to the adop- 
 tion of an exclusive gold standard in Germany, the smaller de- 
 mand for exportation to India, and the increased production in 
 our western states, now amounts to fifteen or twenty per cent. 
 The facts connected with this extraordinary change illustrate 
 the preceding remarks. 
 
29 
 
 To-day the metal, silver, is worth several per cent less than 
 greenbacks. This accident, pregnant perhaps with very import- 
 ant results, has led to its reintroduction among us as a substitute 
 for fractional paper currency. Having the legal tender quality in 
 small sums, the coin of course circulates freely at its nominal 
 value. Two fifty cent pieces containing three hundred and eighty 
 four grains of standard silver are to-day worth intrinsically 
 eighty-one cents in gold. This is their convertible or commer- 
 cial value; yet as money they are equal to the ‘‘trade dollar” 
 weighing four hundred and twenty grains, or to the greenback 
 dollar worth eighty-nine cents (gold). Were paper out of the 
 way and gold the only legal tender, they would at once rise to 
 par. They would do so though the public credit should go to 
 the dogs. But the only condition on which a subsidiary coin (or 
 indeed any other currency) can rise above its convertible value 
 is its limitation in volume. Issued in excess — in excess of the 
 legitimate uses for it — it will not be received in exchange for 
 property except at a rate proportioned to its depreciation. In 
 this case, whatever their short-comings, governments are wont 
 to provide a sufficient safeguard against that contingency. So 
 far, at least, they all understand the principle and effect of limi- 
 tation. The only way that a double standard of value, say of 
 gold and silver, can long be maintained is by the application of 
 this principle. Should one of the metals decline in value, a re- 
 stricted coinage will prevent its fall as a medium of exchange, 
 or as money, and make it equal to the dearer metal. Since this 
 decline, France, it is understood, has put in practice with entire 
 suceess the limitation-method to preserve its duplex standard. 
 When the inequality is caused wholly by the depreciation of one 
 of the metals, used as standards, the other remaining fixed, as 
 seems to be the fact in the present instance, the French method 
 is the proper and just one. But if, on the contrary, one have 
 appreciated while the other is unchanged, justice requires that 
 the cheaper and more stable metal should become the standard. 
 A coinage supplying the latter to the extent of the demand 
 would secure the desired end — secure it by driving the more 
 valuable money out of circulation— -leaving the least valuable 
 to fill the void. In our case, a law giving silver dollars of the 
 old pattern their former legal tender quality for all amounts, the 
 mint being free to all, could not demonetize or force out of use 
 our irredeemable, and intrinsically valueless paper currency. On 
 
30 
 
 the contrary, the silver coins would mingle harmoniously, as they 
 were issued, with our now more valuable greenbacks, increasing 
 the volume, and reducing proportionately the value of the units, 
 till the whole mass had been degraded to the silver level what- 
 ever that might be. If afterward silver happened to rise, the 
 other conditions remaining the same, it would carry up legal ten- 
 ders to their old position, but could not give them a higher value 
 than they had before so long as the volume was undiminished. 
 If at this point the upward movement of silver were continued, 
 paper, unable to follow, would again become the sole medium of 
 exchange and standard of value, while silver coin would be demon- 
 etized as gold is now. 
 
 With an unrestricted coinage, a double standard of value is 
 practically impossible — impossible because the relation of the 
 two metals is perpetually changing. Suppose to-day, gold as 
 compared with silver be worth in the proportion of one to six- 
 teen. If in that case the gold dollar should be made to weigh 
 25.8 grs, standard fineness, the silver dollar must weigh 412.5 
 grs. Undoubtedly they would circulate together so long as they 
 remained of equal value; but let the smallest change occur in 
 either of the factors— a change sufficient only to pay the cost of 
 melting or exportation— and the double standard would disap- 
 pear. The cheapest metal alone would be used to discharge debts, 
 while the dearer would become merchandise. The saving of so 
 small a proportion as one-quarter of one per cent would, as in other 
 business transactions, be a sufficient ground of preference. Many 
 times have governments (including our own) attempted to so 
 adjust the weights of the respective coins that both metals would 
 continue in use, but in every instance has the attempt signally 
 failed. 
 
 Limited supply, from whatever cause, increases the exchange- 
 able value of commodities as well as money. Producers and 
 dealers understand this too well. Whenever they get the power, 
 whether by monopoly, combination or otherwise, they always 
 manage to understock the market, and thus increase their gains, 
 while consumers suffer. The principle applies to every thing 
 held for exchange. The demand given, the less there is of the 
 thing sought the greater the value of its units or parts. A de- 
 cisive way to test the efficacy of any of the untried schemes for 
 resumption (their name is legion) — schemes which often prom- 
 ise to reach the desired end by easy, pleasant ways without any 
 
31 
 
 disturbance of values or business interests — is to show what ef- 
 fect will be produced on the currency-supply. If, as a result, 
 no notes would be cancelled or retired no progress will be made. 
 The sufficiency of limitation is conceded when so much evil is 
 apprehended from restricted issues. 
 
 Should the government pledge itself (giving as individuals do 
 ample security) to redeem its currency notes in specie in ten years, 
 the secured pledge alone would not, for a considerable time at 
 least, raise their value so much as a mill. But if the time were 
 made two years, and no one doubted prompt payment, green- 
 backs (estimating the gold premium at ten per cent.) would 
 be worth five per cent, per annum to hold as an investment — 
 to hold as one holds a note coming due in two years. Under 
 these circumstances, they would be withdrawn from circul- 
 ation till the growing scarcity had carried up the value of the 
 remainder to a point which made hoarding less profitable than 
 loaning at current rates, when the former (contraction) would 
 cease, to be again renewed as the period for redemption ap- 
 proached. The fact that Mr. Sherman’s bill of January, 1875 , 
 requiring the government to pay its notes in coin on the first of 
 January, 1879 , has had no more effect on their specie value, is 
 doubtless due to a suspicion that it was not passed in good faith; 
 that it lacks provisions essential to its best success, and that it 
 will not be carried into execution at the time designated. Were 
 the promised resumption confidently expected, greenbacks would 
 be sought as government securities redeemable in two years, 
 and paying to the holder five per cent, per annum in coin. 
 
 The men who are so alarmed at the thought of retiring legal 
 tenders, and the consequent shrinking of nominal values are us- 
 ually those who strenuously contend that no depreciation or other 
 injury can result from expansion. When reminded of the exist- 
 ing inferior purchasing power of circulating notes, and the pre- 
 mium which is paid for coin, both decisive indications of currency 
 degradation, they attribute the disparity to the altered value of 
 gold, or to any cause but the true one. They devise futile plans 
 to force down specie, as if specie value could be manipulated as 
 successfully as the paper supply, and at the same time oppose 
 fervidly the only method by which equality can be established. 
 Of two possible alternatives, we can take our choice. One re- 
 quires a liberal cancellation of notes; the other, their convertibil- 
 ity, on demand, into coin or something equal to it. Whichever 
 
32 
 
 plan is pursued, the same result — limitation of supply — follows. 
 It is folly (or worse) to try some middle course, to attempt the 
 impracticable, to waste time on shams, or to cheat one’s self with 
 false hopes. 
 
 The advantages of our irredeemable paper currency should not 
 be overlooked. It is convenient, portable in large sums, and 
 may be counted with great facility. Its first cost is comparative- 
 ly little, though the constant outlay for repairs or renewal is a 
 more serious matter. It is doubted whether the annual expense 
 is less than that incurred by the use of coin. When the issues 
 are confined within impassable limits, and the other forms of 
 credit are not abused; when the exchanges to be made from 
 year to year are nearly the same, and goods are never bought 
 and sold except for “ distribution,” it is a trusty measure of value, 
 as perfect as any yet devised. Under the infrequent, and almost 
 impossible circumstances named, it is not inferior to the precious 
 metals whose value is largely dependent on the productiveness 
 of the mines, the methods of extraction, the consumption in the 
 arts, etc. Its inflexibility too would tend to keep trade within 
 its legitimate limits, restrict speculation, and clog with the weight 
 of a stringent money market the initial steps which lead to ex- 
 citement, inflated prices and devastating panics. Under its re- 
 pressive influence, the financial sky-larking of the years preced- 
 ing 1837 and 1873, and the disasterous fall which in each case 
 closed the exhibition, would have been very difficult, scarcely 
 possible. In addition, it may be said that an accepted, irredeem- 
 able, legal tender currency, designed for permanent use, cancels 
 obligations, leaving no debt behind; while a convertible treasury 
 or bank note pays (it has been said) by transferring to the cred- 
 itor a claim against a third party. There is always left, as a 
 residuum, this unsatisfied claim; but that does not prevent the 
 note from discharging other claims — does notin the least disable 
 it as a debt-paying instrument. 
 
 The advantages are undeniable, but the objections to the 
 money in question are of the most serious, if not decisive char- 
 acter. If it admit of no increase, it cannot adapt itself to the 
 natural, ever varying wants of population and trade. If the de- 
 mand were continually augmented by enlarged industry, and a 
 more extensive business, there would be a scarcity of money, a 
 high rate of interest, declining prices, and hardship to the debtor 
 class — conditions discouraging to producers, and fatal to general 
 
33 
 
 thrift. It is true the sovereign power might, did it but know 
 when and how to do it, remove the barrier, and supply the defi- 
 ciency in the circulating medium; but the practical result of 
 this interference would be to destroy the good belonging to the 
 system, and the introduction of a sure element of uncertainty 
 and confusion. No government of whatever name has wisdom 
 or honesty enough for so delicate and responsible a work. Our 
 government, at least, was not intended, nor is it competent for 
 that or any similar service. So tremendous a power, to be ex- 
 ercised at discretion, especially when the legal tender principle 
 is involved, can with safety be lodged nowhere. Least of all 
 ought it to be confided to political parties, each striving to cap- 
 ture the popular vote, and each ready, perhaps, to sacrifice truth 
 and justice. On this subject, Mr. Ricardo remarks that “ neither 
 a state nor bank ever had the unrestricted power of issuing paper 
 money without abusing that power;” and the history of the fu- 
 ture, in this matter, will doubtless be that of the past. Congress 
 has proved its utter unfitness for so important a trust. Now that 
 the supposed barriers to paper money emissions by the govern- 
 ment have been broken down, nothing but a constitutional 
 amendment, prohibitory in its character, and positive in its 
 terms — one which, if the legislative department prove recreant, 
 the courts will feel constrained to respect — can save this country 
 from one of the direst, most seductive evils of modern times. 
 
 III. 
 
 Money as a Measure. Coin, its Stability and 
 the Confidence it inspires. 
 
 As a means for the satisfaction of debts and contracts, it is 
 vastly important that money should be a “reliable ” measure of 
 value, as exact and stable, were this possible, as the yard-stick 
 is of length, or the bushel and gallon of capacity. Equally of 
 all, invariableness is the intended characteristic, and the ground 
 of usefulness. Like the other measures, money should be the 
 same to-day, to-morrow, next week and next year. Hundreds, I 
 may say thousands of millions are dependent on its trustworthi- 
 
 5 
 
34 
 
 ness. It has been objected to the precious metals that they are 
 not quite constant, not as trusty as the foot rule and pound 
 weight, but this is not a good reason why they should be discard- 
 ed till something better is found to take their place. Were not 
 money a measure reasonably certain, the whole credit system 
 would break down hopelessly. No “time bargain” involving 
 the use of money could be prudently made. No capitalist could 
 safely lend, no business man borrow, no banks of discount exist, 
 no notes be wisely taken or given, no “ trusting ” over night. 
 In the absence of a proper standard, a life or fire insurance policy, 
 an annuity, a salary or fixed income in money can have no cer- 
 tain value, and can provide no sure means of indemnity o'r sup- 
 port. Its necessity when justice and fair dealing are sought must 
 be obvious. If I buy of a farmer one hundred bushels of corn, 
 and agree to pay at the end of thirty days one hundred dollars, I 
 make a bargain satisfactory to myself, promising to return in 
 money a value equal to that received. But if, when the debt 
 become due, I offer mutilated coins worth but seventy-five per 
 cent., and which may have cost me but that, I attempt a trans- 
 parent fraud. The proposal, as it ought, would be received with 
 indignation because the value tendered was but three-fourths of 
 that promised. To make imposition and dishonesty more difficult, 
 and furnish a measure which will supply the wants of debtors 
 and creditors alike, worth as much several months or years hence 
 as now, and serving as a safe basis for contracts, government has 
 fashioned a coin containing 23.2 grains of fine gold, stamped it 
 with its authority, called it a dollar, and placed it in the hands 
 of a too confiding people as a trusty and uniform measure of 
 value. Relying on its stability, a man may sell his house, his 
 merchandise or services without the risk of loss from a treacher- 
 ous standard. When payment is made, he will get as much 
 value or purchasing power — as much labor or labor’s worth — as 
 he had before the sale, and in a more available form. Each party 
 has secured his object, and holds in possession the full equiva- 
 lent of the thing surrendered. The utility of an honest measure 
 of value — one that no man or set of men, speculators or politi- 
 cians, no class whether debtor or creditor, no people in the inter- 
 est of a section, can alter or set aside — is thus illustrated. No 
 one denys that the other measures having equal but not greater 
 impotance should be uniform, and that no changes of a kind to 
 affect outstanding contracts should be allowed. 
 
35 
 
 When I purchase one hundred yards of cloth, delivery and 
 payment to be made at the end of twelve months, justice can no 
 more be done by paying defective dollars (hard or soft) than by 
 the delivery of abbreviated yards. If the dollar be short in 
 weight or value, the yard, pound, gallon and bushel should be 
 short in proportion. If the standard in one case be changed “ to 
 meet the wants ” of buyers, it should be in the others to meet 
 the wants of sellers. The wants of a man who sells pounds, gal- 
 lons and bushels may be as pressing as the wants of one who 
 pays dollars. The person who promises coal, wheat or acres, is 
 entitled to as much indulgence as he who promises money. If 
 the farmer, shoemaker, clergyman or laborer be compelled to take 
 “ cheap money,” he should be allowed to give cheap potatoes, 
 cheap shoes, cheap sermons or cheap labor. It is as reasonable 
 that the measures of cloth, iron, wood, etc., should be short when 
 you sell on credit, as the measure of value when you buy on 
 credit. The fact that the tailor who makes you an honest coat 
 consents to wait a year for his money is not a reason why he 
 should accept dishonest dollars. If each of two parties be equally 
 meritorious, and in need of means to do right, and pay ac- 
 cording to promise, why should they not be served alike ? Why 
 should one be the beneficiary of the government and not the 
 other ? All legislation sought for the advantage of a particular 
 class should be as comprehensive as possible, for we are a people 
 purporting to have equal rights. The benefits accruing to cer- 
 tain individuals from depreciated money are obtained at the ex- 
 pense of others quite as worthy. When three years ago Boston 
 lost heavily by a conflagration, some unthinking or selfish per- 
 sons urged that government should help that proud city by 
 issuing more greenbacks, seemingly on the supposition that those 
 who had contracted to deliver dollars were the only debtors or 
 persons that had lost or deserved assistance. Had the desired 
 issue been made and the currency been degraded, all the holders 
 of money-contracts in the greenback states would have suffered 
 for the benefit of a class of persons ninety-eight per cent, of whom, 
 probably, resided out of Boston; while the merchants and capi- 
 talists living there, in consequence of large credits elsewhere, 
 might have lost, in the aggregate, more than all the inhabitants 
 gained. 
 
 Cheap (depreciated) money is a cause of cheapness every- 
 where— cheap patriotism, cheap legislation, cheap statesmanship, 
 
36 
 
 cheap morality, cheapness in Washington and Albany, cheapness 
 in the courts and at the polls, and cheap service, public and pri- 
 vate, wherever service is due. Scarcely had Congress passed the 
 tender-law of February, 1862, than cheap performance and cheap- 
 ness in all directions spread like an epidemic. During the war 
 it was called “ shoddy,” and a famous character did it become. 
 As the law of retribution required, the government was the first 
 to suffer. It was cheated, robbed and plundered, on a magnifi- 
 cent scale, by its professed friends — by contractors, speculators, 
 politicians, patriots, middle men and rings of every name. The 
 practices thus introduced prevailed without intermission till 
 checked (scotched) by the panic of 1873. The appalling magni- 
 tude and frequency of corporate (particularly railroad) unfaith- 
 fulness are largely due to cheap money, and the phrensy it be- 
 gat. Without it, our Tweeds and Jim Fisks, the mushroom 
 growth of a profligate era, would have been comparatively un- 
 known. 
 
 Having suffered severely from “ governmental ” tampering 
 with the currency, the framers of the Constitution of the United 
 States, rejecting a provision authorizing Congress “to emit bills 
 of credit,” or notes of circulation, placed the different measures — 
 those of value, length, weight and capacity — on the same footing, 
 hoping, doubtless, to remove all from the peril of legislative in- 
 terference, and to make them alike inviolable. After full dis- 
 cussion, the convention refused to dc more than give the power 
 “ to coin money, regulate the value thereof and of foreign coins, 
 and fix the standard of weights and measures.” The “value” 
 of the coins thus authorized was “ regulated ” when, in April, 
 ] 792, Congress enacted that the American dollar (silver) should 
 weigh 412 grains, and the eagle (gold) 217 grains, each to be of 
 a certain fineness, etc. The stamp served as a certificate of 
 quantity and quality. Subsequently, new coins were minted, 
 and slight alterations in weight made, that the inequalities grow- 
 ing out of a double standard might be corrected. Thus was the 
 authority of the Constitution, (in this matter,) as then and for 
 seventy years thereafter understood, exhausted. 
 
 Of course, the dollar might, before it had come into use, have 
 contained any number of grains of silver or gold — might have 
 been made as “cheap” as the greatest stickler for cheapness 
 might desire, without inflicting injury on anybody. The wrong 
 consists in changing arbitrarily, perhaps wantonly, a standard 
 
long fixed, on which a vast number of unexpired contracts have 
 been based, without any protection to those who must be robbed 
 by the change. The people, it may be, take the new (watered) 
 money in ignorance of the debasement. Finding that it bears 
 the same name as the old, and is authenticated by the seal of the 
 government, they very naturally conclude, till bitter experience 
 proves the contrary, that it has the same value. Paper money, 
 especially if it be inconvertible, though it pledge the “ faith of 
 the nation,” and wear the symbols of justice in its face, furnishes 
 peculiar facilities for fraud and robbery. Fair to look at, insin- 
 uating, insidious, surchanged with promises and deceit, it is a 
 potent instrument of mischief, “ a gay deceiver,” slaying while 
 it captivates. There is something in its early and more superfi- 
 cial effects which is mysteriously seductive and delusive, and 
 quite bewildering to the popular mind. If a man wish to lead 
 astray, and befog an enthusiastic person hopelessly, he has but 
 to ask his solution of the money question. 
 
 The “ faith ” spoken of and the symbols in vermilion, like the 
 promise before mentioned, do not impart the smallest value, mul- 
 tiply them as you will. It is sufficient to say they are not con- 
 vertible, and do not imply limitation. Considered as a reason- 
 able basis and ground for confidence, faith, pure and simple, cost- 
 ing nothing and representing nothing, is too etherial for any 
 service in the economic world. In one sense, it is a delusion, in 
 another, a pit-fall and snare. 
 
 Long experience has shown that the precious metals have un- 
 equalled advantages as the material of money. Everywhere are 
 they known, their uses understood, and their good qualities 
 acknowledged. Manufactured into coins, they constitute the 
 circulating medium of many countries, and a standard of value 
 in nearly all. When uncoined, passing by weight, not by tale, 
 they are the only international money recognized and employed. 
 In this form, they are used as a fixed measure by which the value 
 of any local currency is determined. With their assistance, the 
 merchant in New York or London, holding in his hand the price 
 lists of his own and of foreign countries, is able to compare one 
 with another, and tell at a glance what commodities can be ex- 
 ported with a profit, and where they should be taken. He can 
 also decide what goods his ships can bring home with advantage, 
 and in what markets they should be bought. Should the foreign 
 exchanges, so called, be disturbed, he can see whether gold and 
 
38 
 
 silver will not make a more lucrative shipment, one way Or the 
 other, than merchandise. As every people having a foreign 
 trade must hold a stock of precious metal for international uses, 
 or as a fund out of which merchants can pay adverse foreign 
 balances, etc., it is desirable that local currencies should, as far 
 as possible, be metallic. Where this is the fact, the store in a 
 country thus favored will be so enlarged that the removal of a 
 few million will not cripple business by embarrassing the money 
 market. More than other people, we of the United States have 
 been accustomed to suffer, in the great commercial crises of the 
 world, partly because our business is done, even in specie-paying 
 times, almost wholly with paper money, so that when a moderate 
 amount of gold is wanted for exportation little can be taken 
 without producing extraordinary effects — great scarcity of the 
 metal, a rapid fall in the prices of exportable commodities, and 
 commercial distress. This is especially true when the paper in 
 use is the convertible note which is marvelously sensitive to the 
 smallest unusual demand for specie. Panic stricken, it retires 
 precipitately to its hiding places, leaving the producing and 
 trading classes without facilities for the transaction of business. 
 No doubt the laws requiring custom-house duties and interest 
 on the public debt to be paid in coin have tended to moderate 
 the “ gold famine ” when foreign exchanges have been adverse. 
 
 Gold and silver, considered as metals, are commodities. They 
 are the product of the industrial forces, labor and capital, or say 
 labor. Toil and sweat are expended in mining, transporting and 
 fitting them for market. They contain labor in a concentrated 
 form; may, in truth, be called labor materialized and solidified. 
 Labor is the sole ground of their value, intrinsic and exchange- 
 able. Could they be obtained without effort, they might be use- 
 ful, but would not have value. In exchange, they will command 
 as much labor, say in the form of goods, as they themselves con- 
 tain. The cost of production determines the proportion in which 
 every industrial product shall be given for others. A week’s 
 work in the form of gold is the natural equivalent of a week’s 
 work in the form of cloth or shoes. The two have equal value 
 in exchange. Of course I do not forget the temporary fluctua- 
 tions which proceed from the altered relations of supply and 
 demand. 
 
 Gold and silver coins of known weight and fineness are ad- 
 mirably fitted to perform the functions of money. Costing labor, 
 
39 
 
 and always in demand, they have a solid and permanent value, 
 themselves being the evidence of it. When taken in exchange 
 for goods or services, the holder knows that he has obtained a 
 substantial equivalent. In them is stored up ready for imme- 
 diate or future use whatever labor or value he may have parted 
 with. Connected with them is no blandishment, mystery, trick 
 or cheat. Plain people can comprehend their office and opera- 
 tion. They are not dependent for their goodness on some con- 
 vertible privilege, on the solvency of the issuers, on broken 
 pledges, promises without performance, the faith of the nation, 
 or on anything outside of themselves. The “nation ” might be 
 quenched in brimstone without harming them. Their purchas- 
 ing power is not crippled when the government chooses to make 
 others like them. Hard work alone, not the power press, will 
 suffice for their production. They are not of a bibulous nature, 
 and cannot be successfully watered, or cannot in the same way 
 as paper money. Were individuals at liberty to manufacture 
 them, the makers could earn no more than ordinary wages, and 
 would obtain less were the market temporarily overstocked. 
 There is no motive on the part of any body or any power to 
 multiply the national coins to the extent of depreciation. Should 
 this be done, unwittingly, the owner, finding them worth less as 
 money than for bullion, would convert them into the latter by 
 means of the crucible. Thus the currency would be depleted, 
 and volume be made to conform to intrinsic and commercial 
 value. Inflation, therefore, as usually understood, with depre- 
 ciation and its attendant evils, is impossible. As much may 
 be said of contraction. Should there be, temporarily, a short 
 supply of coin, an intenser demand would present sufficient 
 inducements to augment the quantity. Bullion would be taken 
 to the mint for coinage, importations be stimulated, and min- 
 ing become more profitable than before. In this manner, the 
 evil would be steadily counteracted and soon cured. A scar- 
 city of money produced by enlarged population and more extend- 
 ed industry and trade, making needful a lower range of prices, 
 w r ould be corrected in the same way, almost in its inception. 
 Thus is the supply adjusted to the demand, and the accepted 
 standard of value preserved by a mechanism which is self-regu- 
 lating, and as certain in its effects as the motives of human con- 
 duct. The acts involved are automatic, as it were, securing the 
 end without special aim or intention on the part of the actors; 
 
40 
 
 and no sooner does the necessity arise, and the familiar signals 
 are given, than a movement is initiated to supply what is needed, 
 and forestall threatened disorder. Human beings, prompted by 
 the love of gain, are instruments, perhaps unconsciously, in a 
 most important work — a work too nearly connected with the 
 great industrial concerns of a people to be committed to heads 
 and hands less intelligent and energetic than those prompted 
 and guided by self-interest. 
 
 The expression — “ The supply of money should be equal to the 
 wants of trade,” is at least intelligible, provided the money re- 
 ferred to be specie. It means that the business of a country 
 should have its proportion, and no more, of the circulating me- 
 dium of the world; that unnatural scarcity should be met by 
 greater abundance, and super-abundance by greater scarcity; 
 that the volume should not be changed arbitrarily or capricious- 
 ly; that any new demand growing out of an enlarged industry 
 should be relieved by an ampler supply; all for the purpose of 
 preventing fluctuations in the standard of value, and of holding 
 prices at their normal level. Every legitimate demand for value 
 should be satisfied, but this will be done by virtue of the inevit- 
 able law which governs the movement of specie — a movement 
 which may be embarrassed but cannot be helped by supervision 
 or outside interference. Government, in this matter, as in some 
 others, can do nothing but blunder. Its whole duty is discharged, 
 and its useful ability exhausted when it gives honest coins for 
 all the bullion offered. It might as well attempt to control the 
 tides as superintend the ebbing and flowing of the precious 
 metals. The tidal current, obedient to the slightest impulses, 
 moving always from the places where money abounds toward 
 those in want of it, repelled in one case and attracted in the 
 other, furnishes in all instances a natural remedy, safe, prompt and 
 sufficient, for unequal distribution. This restless current, reach- 
 ing every shore, arriving and departing in ceaseless alternation, 
 provides the long sought and much vaunted elasticity of which 
 certain statesmen and politicians are so enamoured, and which 
 they are hopelessly striving to impart to irredeemable paper. 
 Though the supply of the precious metal and consequently of coin 
 has reached its limit when the cost of producing it exceeds its 
 value, this limit will yield indefinitely for the good of all under 
 the pressure of any new demand raising its value. Hitherto, dis- 
 covery and invention, bringing into use more productive mines 
 
41 
 
 and improved machinery, have kept pace with the enlarged con- 
 sumption of the metal, and the enhanced demand; and there is 
 reason to believe that these will prove sufficient for any new 
 emergency. The danger which is now most threatening is that 
 of depreciation from the diminished cost of production. That a 
 degree of this effect has already been produced will, I think, be- 
 come more apparent than ever when the extraordinary financial 
 influences now at work shall have given place to normal condi- 
 tions. 
 
 I have said that a specie currency, unlike inconvertible paper, 
 offers no inducements to an increase of volume by injecting into 
 it new dollars like the old. Nobody expends his strength with- 
 out an object, and that object with every person of whom Polit- 
 ical Economy takes account is gain. Though the inflation (pro- 
 perly so called) of a metallic medium be impossible because 
 unprofitable, there is no inflexible barrier to any needful expan- 
 sion. The expansion and contraction which it permits are con- 
 servative and safe, giving it special fitness for its chosen work. 
 In this regard and for other qualities, it has far more to recom- 
 mend it than any other currency yet discovered or invented. 
 
 The business of making or issuing hard money of standard 
 weight and fineness, has no attractions for the criminal classes. 
 No man can be cheated by it, or wheedled out of his earnings. 
 Not by its agency can his savings or property be confiscated, or 
 transferred to others without his consent. But there is a way, 
 now unfashionable, of so manipulating metallic money, as to in- 
 flict wrong and injustice. For the sake of illustration, suppose 
 Congress, instead of enacting the legal tender law, had adopted 
 its principle, and concluded to experiment with the constitution- 
 al currency then in existence, making more dollars out of the 
 same quantity and value of metal. In place of continuing to is- 
 ' sue coins of full weight, it might have divided the pieces, making 
 four dollars out of two, at the same time declaring the fragments 
 to be true dollars, “ legal tender at their face.” Bating the tender 
 provision, this is the method of the counterfeiters, (they remove 
 the precious metal with the drill, and fill the holes with lead,) 
 and would be both in theory and in fact, a genuine inflation — in- 
 flation of the same sort as that from which we have suffered so 
 much and so long. As a reward for its ingenuity, the govern- 
 ment, in its straits, would have gained great power, and placed 
 itself in a position to make forced loans, and u borrow without 
 
 6 
 
42 
 
 interest.” Receiving as now old money for import duties, and 
 paying out the new, it would have bagged fifty cents for every 
 dollar disbursed. The public creditors who were obliged to take 
 it would have suffered no more than those victimized by the 
 greenbacks. As the result of the measure, the debased coins 
 would have become the common currency, and prices have risen 
 say 50 per cent. The man who bought a cow or farm under the 
 old dispensation, and paid for it under the new, would have ob- 
 tained it for half its value. As happened during the war and 
 subsequently, property, to an enormous extent, would have been 
 wrested from the industrious and provident, and given without 
 consideration to others, largely to the spendthrift class. Great 
 excitement must have been produced, and “ cheap money ” have 
 become vastly popular. The rising prices would have given 
 birth to a race of frantic speculators, each afraid of being last in 
 the race for sudden wealth. At the close of the war, many would 
 have said, as they do now, and as they did in continental times 
 a century ago, that the new money was a necessity of the crisis, 
 issued in conformity to the fundamental law, and indispensable 
 to success, the Supreme Court of the United States concurring 
 in the opinion. In conclusion the government, as in honor bound, 
 and disdaining (seemingly) to profit by its own wrong, would 
 have paid its enormous debt in the dollars of our fathers — dollars 
 having twice the weight of those borrowed. It must do this or 
 lose forever its ability to borrow again. When at length reac- 
 tion and a panic had come, some of those caught in the storm, as 
 in lS^, would have said in explanation that there was not money 
 enough in the country, that more inflation was demanded, and 
 that the dollar should be again divided. Some Secretary Rich- 
 ardson, probably, would have approved the suggestion, and at- 
 tempted its reduction to practice; while a supple Congress, 
 instead of striking down the offender, might have winked at, and 
 then sanctioned the usurpation. 
 
 The phenomena above described can in no way be distinguished 
 from those of a paper money inflation. Springing from the same 
 cause, following in the same order, and proceeding to the same 
 conclusion, their essential identity must be conceded. With 
 equal propriety and in the bitterest vein of irony could the de- 
 generate dollars be called “ the money of the people,” “ the 
 poor man’s money,” etc. The iniquity of debasing the gold dol- 
 lar is no greater than that of degrading the paper dollar, nor 
 
43 
 
 is the act more contemptible in itself. In both cases, the old 
 standard of value is overthrown, and measureless wrong and in- 
 justice inflicted. 
 
 There is, comparatively speaking, one important advantage of 
 metallic over paper inflation. Coins of half weight cannot de- 
 preciate or in any way injure those of full weight. The latter 
 will have as much value as they ever had, and, so long as the 
 coinage is unrestricted, will exchange each for two of the former. 
 Of course they will pass out of circulation when sufficient provi- 
 sion has been made for a cheaper currency. Nor will any addi- 
 tion of light dollars do damage to other pieces like themselves. 
 The last issues will be worth as much as the first, each coin hav- 
 ing a purchasing power equal to the gold it contains. When 
 once established, its value will not fluctuate from day to day. It 
 is hard money still, and, according to its weight, a truth-telling 
 measure, quite as trusty as before. Nor will it command less in 
 the market because still cheaper emissions have driven it from 
 circulation. In these particulars, the facts connected with an 
 inconvertible paper currency are profoundly different. Every 
 dollar added to it drags down all the others. All are depreciated 
 according to a law already considered. As there is no way for 
 its escape — nothing better into which it may be converted — the 
 mischief is usually remediless. Controlled by selfishness and the 
 baser elements of human nature, the tendency of such a currency 
 is invariably toward a lower level without reaction till the sure 
 and final catastrophe forces reform. 
 
 IV. 
 
 The Convertible Note — Its Advantages and 
 Defects. 
 
 Specie is a costly currency. Were it used as the sole means of 
 payment, all substitutes having been abolished, the amount of 
 labor and capital required for its production and renewal would 
 be vast almost beyond computation. In a country like ours, 
 where the industrial forces are not superabundant, the work of 
 providing it, even from our own mines, would make a heavy 
 
44 
 
 draft on the resources of the people. Nor is its weight a matter 
 of small consideration in the larger transactions, so moderate a 
 sum as $225 in gold coin weighing more than a pound (troy). 
 To promote convenience and economy, the convertible note, pay- 
 able on demand in specie, has been invented, and is now largely 
 used among the more civilized nations. It is a great favorite of 
 the commercial classes, particularly in this country. Hitherto, 
 in the United States, it has been issued by the banks, usually 
 under state laws. When the circumstances are favorable, it is 
 readily accepted by ‘the people as money. Even when not legal 
 tender, if it be made payable in specie on demand, and the hblder 
 have unshaken confidence in the good faith and ability of the 
 promisor, experience has proved that it will not depreciate as 
 compared with coin, and will not be presented for redemption, 
 except in rare instances, mostly when the metal is wanted not as 
 money but as merchandise. Fittingly enough (if the distinction 
 be important) notes of this kind have been called a credit cur- 
 rency, sometimes a debt currency. Besides being money, they 
 are promises to pay other money, and their comparatively stable 
 value depends on the credit of those who issue them. Should 
 the latter fail, or be suspected of insolvency, the conditional con- 
 sent which has given them circulation is immediately withdrawn. 
 This withdrawal divests them of the quality of money, and they 
 become only private notes of hand — a discredited asset against 
 an embarrassed estate. Credit is their vital principle, and the 
 coin supposed to be somewhere waiting for the holders their sup- 
 port. Unlike specie they possess no intrinsic value, have cost 
 no labor, and differ wholly from irredeemable paper. In their 
 constitution is a provision — rather an abiding principle — intended 
 to control the issues. Convertibility checks the supply, limits 
 volume, hinders inflation and thus sustains value. Their safety 
 is in the self-interest which constrains those who for profit have 
 undertaken to furnish the circulating medium, and to make it 
 what it pretends to be and should be. 
 
 In quiet times, experience will determine, with sufficient cer- 
 tainty, the frequency with which convertible notes will be pre- 
 sented for payment. When this is known, practical rules may be 
 framed for the guidance of the issuers. What proportion of coin 
 is required to place credit on a firm basis, and to meet any prob- 
 able demand may be easily learned. Having provided itself 
 with the due proportion, a bank may prudently exchange a cer- 
 
45 
 
 tain amount of circulating notes for short business paper, or any 
 paper not too long which will be paid when due, confidently ex- 
 pecting that the promised payments will make seasonable pro- 
 vision for any notes which may be returned for redemption. As 
 the bank notes loaned draw no interest, there is an enduring 
 temptation presented to over issues; but the custom of prudent 
 borrowers to ask for no more money than can be usefully em- 
 ployed will operate as a perpetual curb. Money in hand yields 
 no profit, and none but spendthrifts and speculators will take 
 (to pay any thing for it) more than they can use to advantage. 
 If an unwonted amount be called for to meet a temporary and 
 special want, say to “move the crops,” the theory is that the ex- 
 cess will be returned so soon as the emergency is past — returned 
 when the additional paper discounted is taken up. Thus expan- 
 sion, whatever its limits, caused by the irregular perhaps periodi- 
 cal movements of business and trade, will cure itself. The cur- 
 rency which is required to supply the permament wants of a 
 people remains in circulation, while any which is called forth to 
 meet a transient demand disappears as soon as its special work 
 is done. It retires to the vaults of the banks, and cannot find 
 its way out till suitable work is again provided for it. Thus in- 
 flation by convertible notes is prevented without practical con- 
 version. 
 
 Views somewhat like the above are presented by several wri- 
 ters on monetary science. Prof. Price in his recent work on 
 “ Currency and Banking ” alledges that “ an inflated circulation 
 of bank notes payable on demand is a pure absurdity, nothing 
 better than nonsense.” But surely Mr. Price forgets some things 
 with which every one who writes on this subject should be famil- 
 iar. His remarks might have the color of truth were banks always 
 discreetly managed; were they never led astray by cupidity; did 
 borrowers never ask for money except for their legitimate busi- 
 ness; did superfluous middle men never interpose between the 
 producer and consumer, buying up goods, and selling to other 
 adventurers at enhanced prices, thus increasing artificially the 
 volume of trade, the aggregate number of the exchanges, and 
 the demand for the medium of exchange, or money. Were all 
 the ifs out of the way, and men of all classes forever kept their 
 heads cool, his declarations might be sustained, but, notoriously 
 the facts are otherwise. Too easily may a speculative or infla- 
 tion-movement be initiated by circulating notes payable on de- 
 
46 
 
 mand. Let a bank of large capital and influence, anxious to 
 win public favor, add to its customary discounts, loaning on 
 “ accommodation paper,” or on inferior security, or in some other 
 way place more of its own notes in the hands of the ardent, con- 
 fiding and impatient — those waiting to make ventures — than they 
 have before thought it safe to do, and a beginning is made. Not 
 often seen in the market as prominent purchasers, the happy re- 
 cipients, thus equipped, go there, and with smiling faces and 
 defiant air bid against the old buyers, raising prices. So soon 
 as other banks did the same (example is contagious), inflation 
 would have made important progress. Institutions having but 
 little reputation, but credit enough to make their promises cur- 
 rent could contribute largely to the movement, as much in truth 
 as those in better standing. The increased volume of notes, from 
 whatever source, would all be absorbed by the enhanced prices; 
 nor would they be returned for redemption so long as the specu- 
 lative excitement lasted. 
 
 Or the excitement might originate outside the banks, having 
 its commencement perhaps in one of those inward tidal impulses 
 which periodically make shipwreck of reason and common sense, 
 and waken in a community a passion for buying, or gambling in 
 goods and estate, always in the belief that a new era is at hand, 
 that circumstances and the times have changed, and that prop- 
 erty will rise, making those who shall be owners a week or month 
 hence rich. At first not much money or bank credit will be 
 needed, small cash payments, personal credit or secured notes 
 serving in its stead. To set the ball in motion, all that is need- 
 ful is to place new purchasers in the market armed with sufficient 
 means of any kind to bid effectively. It would not be necessary 
 they should finally buy. Striving to buy, or seeming to do so, 
 would do as well, as may be seen at an auction sale, or among 
 the stock-brokers in Wall street. Were no purchases made, the 
 movement would prevent those in want from obtaining their in- 
 dispensable supplies except at enhanced prices. When so much 
 has been done the greatest difficulty is overcome. The rest fol- 
 lows naturally, and if no mishap prevents, the result is assured. 
 Advancing prices generate and strengthen speculation, and make 
 necessary more money for the transaction of business. More 
 money sustains prices, feeds the excitement, and prompts to more 
 buying. New emissions of circulating notes are required at 
 every stage of the upward movement — notes which cannot or 
 
47 
 
 will not be withdrawn so long as “ confidence in the future 
 (faith in false prophets) is unimpaired. If a small class, suspi- 
 cious of appearances, sell out and retire, a more numerous one 
 steps to the front and forces up prices again, making needful 
 still more money, and so on till shipwreck breaks the spell. Be- 
 fore 1862 , when the convertible note was in its glory in this 
 country, we so frequently witnessed the progress of the juflation- 
 lunacy that the events are familiar. We were then on a specie 
 basis, but on every notable occasion the banks ia were ^largely, 
 often ruinously extended in circulation and deposits, the giddy 
 ones joining in the race early with rejoicing, the doubting and 
 more conservative, at a later period, perhaps in self-defence — I 
 speak here of banks issuing convertible notes without sufficient 
 restrictions. 
 
 It is a note-worthy fact, explanatory of other facts, that specu- 
 lative purchases, when prices are advancing, put an unusual 
 amount of money in the pockets of the purchasers, enable them 
 to control more of the funds of banks and individuals, and give 
 them additional power in the market. By their influence as bid- 
 ders, every day increasing, a commercial excitement, once begun, 
 gains rapid and dangerous headway. Thus trade and the indus- 
 trial interests of the country, to a large extent, are placed in the 
 hands of speculators — a class often unfitted by habit, tempera- 
 ment and experience for any responsible and independent position 
 in the world of business. 
 
 Bank officers are in a position of great influence, and can by 
 concerted action do much to shape the course of business, but 
 they are not omnipotent, are not always discreet, and have the 
 longings of other men. They are expected to earn dividends, 
 and the best of them cannot resist the temptation to do it in the 
 approved way. If their customers, by reason of enhanced prices, 
 stand in need of more currency, they are constrained to meet the 
 demand. If more money than usual is offered on deposit, as there 
 will be when more is in circulation, they will thankfully receive 
 it, and loan that proportion which is deemed prudent, paying out 
 their own notes, according to custom. In this manner, perhaps 
 unconsciously, they are drawn into the vortex of excitement, 
 and, while engaged in a regular business, and performing only a 
 prescribed duty, do their part to encourage speculation and in- 
 flate prices. Bank men should be judged by the rules laid down 
 for other people in responsible places, but it should also be re- 
 
48 
 
 membered that their conduct draws after it consequences far 
 graver and more extended than do the acts of ordinary mortals. 
 Within certain limits, they have in their control the common 
 currency, the accepted medium of exchange and measure of 
 values. By means of convertible notes and loans, they can, if 
 united, make money abundant or scarce, put up or down the rate 
 of interest, increase or reduce prices, expand or contract the 
 measure of value, plunge into or save from bankruptcy, stimu- 
 late or paralyze industry, etc. Perhaps it is not quite sufficient 
 to say that, as a general rule, they are not disposed to abuse their 
 privileges, and that ambitious and irregular action is opposed to 
 the best good of themselves, their stock-holders and customers. 
 Nor is the feeling of insecurity and apprehension at all relieved 
 by the fact that other classes, strong in a financial sense, may 
 exert a degree of the same influence. Combination with power 
 is, in truth, a perilous instrumentality, capable of the most varied 
 and grinding tyranny, by whomsoever employed, as we have fre- 
 quent cause to know and deplore. One of the main objects of a 
 good government is to deprive individuals and classes of the 
 ability to do wrong, withholding dangerous power even when 
 self-interest would be against its abuse. 
 
 For common uses, the convertible note is the most convenient 
 and efficient form of a circulating medium pretending to have 
 an uniform value. It is cheap in cost, easily counted, light, 
 portable and comparatively safe; a hundred thousand dollars 
 may be carried about the person, without exciting suspicion. It 
 will do more work, that is, it will settle a greater number and 
 larger amount of business transactions in the same time, with an 
 approach to equity, than any other kind of money. In the com- 
 bined qualities of easy movement, celerity and complete adequacy 
 as an implement of the market, it is without a rival. For heavier 
 work and perfect security, the check has an important advantage. 
 A check drawn against a deposit or bank credit is not itself 
 money, properly so called, as before remarked, but an order for 
 money. Once for all it serves as a substitute for the latter, and 
 is seen no more. It does not pass from hand to hand, except 
 occasionally in the way of barter, but goes by the shortest road 
 directly to the party addressed for payment. It is however an 
 instrument of vast power, effecting by virtue of a few strokes of 
 the pen the exchange of tens of thousands. The deposits of 
 which it is the key have great mobility — an expansive and con- 
 
49 
 
 tractile power next in rank to convertible notes, with advantages 
 and disadvantages too conspicuous to be overlooked. In specie- 
 paying times they are themselves convertible into coin (now into 
 greenbacks), at the pleasure of the depositor, and at the present 
 day usually constitute the greatest share of the immediate liabili- 
 ties of the banks. They grow out of fresh discounts, or the daily 
 cash balances of merchants and business men, and are paid in 
 money or by ledger-transfers. In most cases paying no interest, 
 there is an unquenchable desire for their accumulation, and an 
 inducement to loan them in too great proportion, or on inadequate 
 security. When this is done, enhanced prices, an increased 
 volume of business, speculation, and all the phenomena of infla- 
 tion, daily becoming more apparent, are produced or promoted. 
 When more checks, doing the work of money, are offered in the 
 market, prices are enhanced, and the currency as effectually de- 
 preciated as it would be by the issue of more paper dollars. 
 Under these circumstances, when the reserves or cash resources 
 are much reduced, having gone into bills discounted, as always 
 happens in a time of expansion, if a sudden call be made by timid 
 depositors looking out for rough weather, some of them in want of 
 gold for exportation, a stringency followed perhaps by tumbling 
 prices and a crippled business, is the result. Though an increase 
 of loans may proceed a certain length without the aid of more 
 currency, the enlargement is greatly facilitated and extended by 
 the issue of additional notes. A restricted supply of the latter 
 not only embarrasses the loan market, but is a constant drag on 
 the upward tendency of prices — squeezes the life out of specula- 
 tion; and it is doubtful whether large progress could be made in 
 a skyward direction whilst the restriction continued. 
 
 In succeptibility to impressions, and the power of prompt ex- 
 pansion and contraction, called elasticity, the convertible note 
 ranks first, deposits controlled by checks second, and specie third. 
 Any needful qualities which the two former may have, as meas- 
 ures of value, are due to their convertibility on demand into the 
 latter. They are exceedingly flexible. With headlong haste 
 they yield to pressure, and adjust themselves to the oscillations 
 of industry and trade. But these qualities, so liberally provided, 
 are not easily controlled. They are indispensable, or nearly so, 
 but the question is whether, in the cases referred to, they do not 
 exist in excess; whether the attendant evils do not transcend and 
 over-balance the good. So far as the convertible note is con- 
 
 7 
 
50 
 
 cerned, my conviction is that the evil preponderates. The rea- 
 sons for this may in part be gathered from what has already been 
 said. The remarkable flexibility of the note is due to a precarious 
 and explosive element, credit, which is its basis and support, and 
 which in critical times, when confidence is wanting, is not suffi- 
 ciently stable. When the skies are particularly bright and en- 
 terprise needs curbing, it yields to the slightest impulse, and 
 proffers aid without stint; but in seasons of storm when the strain 
 is applied, breaks down utterly, or retires to the caves whence 
 it came. When the people are crying lustily for more money, a 
 forced bank contraction deprives them suddenly of that which 
 they before had. It is a note-worthy fact that panic comes 
 at or near the time when confidence is greatest, when expan- 
 sion has reached its farthest limit, and monied institutions are 
 least able to meet unaccustomed calls. In their haste to cancel 
 their obligations and escape bankruptcy, the public is left almost 
 without a currency. A severe stringency, under the pressure of 
 which no business can long live, is the result. Were the common 
 currency gold and silver coin this could not happen, or could 
 not to the same extent. The holder, though confidence should 
 fail in everything else, would not lose his faith in that. It is his 
 own labor and sweat solidified and stamped. Stable, storm-proof 
 as it were, it needs not to be converted, and will be as good to- 
 morrow as to-day. In a time of upheaval the banks are crippled 
 by vain efforts to supply it in exchange for their own (perhaps 
 distrusted) notes, and thus sustain their tottering credit. Before 
 the war, in periods of alarm, the conversion of one paper dollar 
 into specie compelled a contraction of five or ten dollars in notes 
 and discounts. 
 
 In quiet seasons, when confidence and credit are not wanting, 
 the convertible note makes a good enough circulating medium; 
 but it fails when financial excitement has taken hold of the peo- 
 ple. The very qualities which have most recommended it are 
 sources of danger, and weighty reasons for its condemnation. 
 As we have seen it, it is too mercurial; has an excess of mobility, 
 and yields too readily to the forces which determine expansion 
 and contraction. So quietly does it come forth; so little present 
 disturbance in the money-market does it occasion, and so con- 
 venient is it for all parties in interest that it is largely used to 
 foster speculation, and promote schemes which should be nipped 
 in the bud. Were metallic money employed in its stead, the 
 
51 
 
 stringency produced by any new and factitious demand would 
 tend to check the movement, and save the unwary. Theoreti- 
 cally, the over-issue of notes is, in any contingency, prevented 
 or cured by a call for their conversion into coin, but practically 
 this check is not applied in season to prevent disaster. The re- 
 dundant paper, in truth, is rarely presented for redemption till 
 confidence and credit have received a shock, and then the dam- 
 age has been wrought, and its presentation would only aggravate 
 the evil. The remedy for excess — one of the “ heroic ” sort — is 
 reasonably sure if used efficiently and with judgment when the 
 excitement needs curbing, but will extinguish the little vitality 
 left if pushed in the stage of panic and collapse. 
 
 A reasonable and effectual check to expansion by the over-issue 
 of convertible paper is not furnished by any of the known systems 
 of redemption. No doubt voluntary arrangements among the 
 banks themselves designed to secure this may be of signal ser- 
 vice. The old Suffolk system, for instance, did much excellent 
 work. It compelled the banks of New England to redeem their 
 notes at the designated agency with Boston or New York funds. 
 Each bank received the bills of every other, and forwarded them 
 at short intervals to Boston, getting their own in return. The 
 device tended to keep the circulation of each institution within 
 proper limits, and to prevent encroachments on territory natur- 
 ally belonging to others. Thus was given to six states a more 
 uniform and equal currency than had been known elsewhere, on 
 so considerable a scale, in this country. But the redemption 
 which the system secured was a paper redemption. From first 
 to last, not a dollar of coin appeared in any of the large pay- 
 ments which the plan required. The chief end sought, however, 
 was obtained. Practical convertibility, not into specie but into 
 New York or Boston funds, was rigidly enforced. Individual 
 banks of the “ free and easy ” sort were restrained in their issues, 
 and no one could go much faster or further, in this kind of dis- 
 sipation, than the others. But inflation, when all moved together, 
 and in concert with the cities named, was not prevented. If 
 New York sneezed, every bank in New England felt the vibra- 
 bration and sneezed too. Clearly enough, the inadequacy of the 
 system was illustrated and proved by the events which preceded 
 the misfortunes of 1837, 1839, 184V and 1857, when the Suffolk 
 system was in full operation. Except when comparing it with 
 others, the enconiums so liberally bestowed on it by Mr. Carey, 
 Mr. Price and others are not deserved, 
 
52 
 
 The clearing house systems of our larger cities, at the present 
 time, are similiar in plan, objects and operation to the Suffolk 
 scheme. They differ however in one particular. Balances are 
 paid in legal tender money (now treasury notes), or in govern- 
 ment certificates which will command it. 
 
 Nominal convertibility, then, aided, it may be, by systematic 
 redemption in paper, gives no sufficient or reasonable protec- 
 tion against the evils of undue expansion. The latter may go on, 
 not indefinitely, but to a disastrous length in spite of the safe- 
 guards which theory has pronounced ample. Practically, the 
 convertible note system provides no check which is active at the 
 important period when events are most easily shaped or controlled. 
 When prices have advanced largely, and speculation is rampant; 
 when importations have been stimulated by extravagance and a 
 rising market; when the precious metals, repelled by cheaper 
 money, have taken passage to other lands, and a foreign debt 
 been contracted which promises will no longer pay; then for the 
 first time, the “ convertible privilege,” intended as a check, is 
 thought of as a means of relief — a refuge from the storm. Just 
 when the banks are most expanded, and consequently nearly 
 helpless, depositors and bill-holders call for specie, first to supply 
 the foreign demand, then because suspension or something worse 
 is apprehended. A sharp contraction is required, loans are re- 
 fused, confidence is destroyed, and panic like a hideous spectre 
 stalks abroad. With the destruction of credit, the convertible note 
 proves a broken reed having for the moment little to support 
 it. To supply an indispensable want however, it will continue 
 in circulation, proving when attainable satisfactory as a medium 
 of exchange, but quite uncertain as a measure of value. 
 
 In a time of financial anarchy, it is important that the money 
 of a people should have a solid value, and be as far removed as 
 possible from the hazzards of a tottering credit system. Where 
 coin is used as the common currency, there is one thing at least, 
 and that more active and influential than any other as a regula- 
 tor and conservator, in which confidence cannot be shaken. Its 
 presence is capable of doing much to calm apprehension — to con- 
 vince the scared multitude that not all is rottenness and illusion, 
 notwithstanding appearances. 
 
 In order to arrest a speculative excitement, the sure forerun- 
 ner of panic and bankruptcy, the phrensy should be treated in 
 its first stage, before it has gained momentum enough to make 
 
53 
 
 interference futile or dangerous. At that stage, when prices are 
 beginning to stiffen, and all kinds of business are becoming mor- 
 bidly active and speculative, it is comparatively easy to break 
 up the fever, and restore trade to its normal proportions. This 
 is most conveniently done through the intervention of money — 
 a kind of money, acting automatically, which will resist steadily 
 but firmly the enhanced and enhancing prices which are firing 
 the popular mind. Of that kind is specie. It has a fixed rela- 
 tion to other things the disturbance of which is the evidence of 
 disorder and impending reverses. A gold dollar will naturally 
 exchange for as much labor as itself contains whether the latter 
 be put into hardware, crockery or other goods. When it will 
 command less of all commodities whose cost has not been in- 
 creased, in other words when prices have generally risen, some- 
 thing is the matter, and health and safety can never return till 
 the normal relation is restored. As already suggested, the con- 
 vertible note offers little resistance to this upward movement — 
 the true, proximate and sufficient cause of every financial tem- 
 pest. But specie has, in time of need, the necessary degree of 
 rigidity. It will yield readily enough to the wants of legitimate 
 business, but not suddenly and largely to meet an artificial or 
 fictitious pressure. It cannot be extemporized; cannot be ground 
 out to order by a paper mill. Labor and capital are required for 
 its production or purchase, and it may be necessary to bring it 
 from a long distance. While the adventurer is impatiently wait- 
 ing for it, pinched as he is by a stringent money-market caused 
 by the unaccustomed demand, his courage is liable to fail him, a 
 wholesome consciousness that he has been deluded taking its 
 place. Nothing so effectually chills the ardor of a rampant spec- 
 ulator as a limited supply of money. It injures his credit, forces 
 him to sell before he intended, causes a general shrinkage of 
 values, and thus dissipates his cherished hopes of sudden wealth. 
 Men of this class are always opposed to contraction, and in favor 
 of that kind of money which permits immediate and indefinite 
 expansion. 
 
54 
 
 V. 
 
 State Banks-Now the time to get ready for 
 Resumption. 
 
 In my remarks on convertible notes, I have had in view those 
 used in this country previous to the late war, having special re- 
 ference to the better of that class which were issued by the banks 
 of New England. Practically, there was no limitation in the 
 amount except that which a self-imposed system of redemption 
 enforced. The law requiring payment on demand in specie had 
 little effect except as a desperate and impossible remedy in ex- 
 treme cases. When once the provision enjoining a small legal 
 tender reserve “ in coin or bullion ” had been complied with, it 
 inspired no terror, and imposed no restraints. In Connecticut, 
 this reserve, “ not less than one-tenth of the circulation,” was to 
 be “ kept in the vaults of the bank,” the penalty for using it for 
 any object whatever being one hundred dollars per week. Nat- 
 urally enough, it was considered as so much idle capital, un- 
 available for any solvent purpose, and making needful a more 
 profitable use of the resources which were left. The banks, as 
 they do now, depended for individual safety on the goodness of 
 their bills receivable, and favorable balances in their dealings 
 with each other. Those which, when the daily or weekly settle- 
 ment was made, were creditors, had reason to think themselves 
 sound and safe, while habitual debtors gave evidence of weak- 
 ness. Nor am I prepared to deny that the method which placed 
 an institution on the creditor side in the way of business was 
 good banking; but the system permitted great evils and invited 
 abuses, as already explained. A single very large and strong 
 bank, inexorable in its demands and impelled by its fears, could, 
 without endangering its own solvency, cripple half a dozen 
 others which had impaired their resources by extraordinary ef- 
 forts for the relief of their customers and the public. This exer- 
 cise of power by one over another, in the last panic, was, among 
 themselves, measurably prevented by the associated banks in 
 New York city — prevented by expedients which enabled the 
 weaker, at some cost, to use thtir unquestioned assets, for the 
 moment unavailable* in the settlement of balances, 
 
55 
 
 But when 1 think of the deplorable evils growing out of our 
 inconvertible and depreciated currency, and its possibilities for 
 mischief; its volume and consequently its value depending on a 
 majority vote of a fickle, inconsiderate and party-shacked Con- 
 gress, lam, for the moment, disposed to look complacently on the 
 old state bank system with its multiplied abuses — the convert- 
 ible notes it authorized, and the flood of small bills, (“ wild cat,” 
 “ red dog ” and the like,) often at a heavy discount in the cen- 
 tral markets. Nor would I speak with too much severity of the 
 scanty stores of specie, the exhilirating expansions, spasmodic 
 contractions, and periodic disruptions, the succession of events 
 reminding one of fever and ague with endless repetition. Of 
 this system it may be said that, whatever its short comings, it 
 kept in sight, if not within reach, the constitutional standard of 
 value, and showed by signals intelligible to the observing when 
 we had departed from it. It did not wipe out contracts, alter 
 the terms of a bargain, strip individuals of their natural rights, 
 make rags legal tender, confiscate property, or sanction injustice 
 and oppression. The injury it could inflict, though not incon- 
 siderable, was limited and measurable. Periodically and infalli- 
 bly, about once in a decade, usually after a financial convulsion, 
 it brought us back, through much tribulation and the greatest 
 sacrifices, to the standard we had left. No doubt its instability 
 tended to weaken, but it did not obliterate the moral sense. It 
 did not rear up and sustain classes of public plunderers, official 
 thieves, swindlers, and criminals of every grade to be compared 
 in adroitness, depravity and audacity with those of our green- 
 back era. I imagine that the better generation which lived 
 twenty years ago would not have endured patiently for more 
 than fourteen years a currency depreciated from sixty-five to five 
 per cent., and never at rest. A needed reform in money matters, 
 in consequence of worse morals, seems now far more difficult 
 than it would have been then. 
 
 I am aware that the convertible note has the confidence of 
 many practical bankers, and distinguished writers on monetary 
 science. To a notable extent, it is their ideal of a perfect cur- 
 rency, having as a medium of exchange unequalled advantages, 
 as a measure of value, reasonable certainty. In their view, the 
 evils of our present system — depreciation, inflexibleness and un- 
 certainty — are all due to inconvertibility, and would be corrected 
 by a redemption in coin. The more pressing of the evils com- 
 
56 
 
 plained of would, no doubt, be removed by the measure proposed, 
 but that alone would not complete the work necessary to be done. 
 
 Having reached specie payment, what shall be done with the 
 greenbacks ? Shall they be withdrawn from circulation, or will 
 the issue be continued in the form of treasury notes payable on 
 demand in coin? To say nothing of constitutional right, com- 
 paratively few, I think, will contemplate with satisfaction any 
 permament legislation authorizing the government to supply the 
 paper money of the country. Till our rulers can discharge better 
 the functions necessary to the existence of the republic, it will 
 not be wise to impose on them more difficult and important duties 
 not essential to the public welfare, and which may better be 
 trusted to private hands. The paltry sum to be saved in interest 
 would be no sufficient consideration. Instead of multiplying the 
 responsibilties and extending the powers of the general govern- 
 ment, the remaining time of the present century should be oc- 
 cupied in restricting and more clearly defining both. War and 
 currency dissipation have introduced abuses and encouraged 
 practices which cannot be corrected in less than a quarter of a 
 century of hard well-directed work. But if we must have green- 
 backs for money, let them, by all means, be irredeemable and 
 legal tender, the volume to be fixed irrevocably by constitutional 
 amendment. Thus a cheap, “ non-exportable currency for the 
 people,” would be supplied — one which, if limited in its amount, 
 could be maintained at the specie level. If no more, say, than 
 three hundred million were allowed, and this were the only paper 
 money permitted, there would be a large demand for coin to 
 make up the deficiency. Thus we should have a circulating 
 medium, part paper and part metal, having as much stability in 
 value and flexibility in volume as if it were all specie. It would 
 be self-regulating— fitted by the slowly yielding qualities of its 
 metallic element to conform to the ever-changing condition of 
 the country and of business. The power of self-adjustment would 
 of course depend wholly on the last named element — an element 
 which should be proportianally large enough to permit without 
 disorder all needful contractions. Under a system of this kind, 
 the currency in use would not be curtailed by the exportation of 
 a few millions in gold except to the extent of the shipment. It 
 would be placed beyond the reach of unwise legislation, and 
 could not be manipulated by wily politicians. It might not sat- 
 isfy the dreamers and schemers in financial science, or the specu- 
 
57 
 
 lators in business, or the many who would be richer if money 
 were of less value; but it would encourage industry and thrift, 
 promote justice and honesty, and improve the morals of all 
 classes. 
 
 In case specie payment should be resumed, and legal tenders 
 finally retired, the question will be asked: Shall our present na- 
 tional banking system be perpetuated ? Resting on a coin basis, 
 it would be far preferable to the old state system, and better 
 probably than any other having a chance for adoption, or which 
 would now be tolerated. It should be free, the circulation 
 abundantly secured, the redemption agency continued, an am- 
 pler reserve than now enforced, and small bills — those, say, un- 
 der fifty dollars — suppressed. The last important provision 
 would bring the precious metals into general use, and perma- 
 nently increase our stock for exportation and other purposes. 
 As the convertible note is least able to furnish assistance when as- 
 sistance is most needed; and as the distress caused by the attempt 
 to redeem it, in a time of peril, largely outweighs the relief 
 which the specie thus obtained affords; it is obvious that when 
 gold is wanted to meet a foreign or domestic demand, help should 
 not be looked for in that quarter. It is true that inconvenient 
 contraction is produced, when much coin is withdrawn directly 
 from the circulation, but the contraction is equal only to the 
 metal removed; while if the same amount be taken from the 
 banks by means of convertible notes, a much larger and more 
 embarrassing contraction follows. This comes of an earnest en- 
 deavor on the part of the institutions named to protect their van- 
 ishing and always scanty reserves, and thus maintain their sol- 
 vency. To do this they must refuse discounts, retain all their 
 own notes paid in, and in every way diminish promptly their lia- 
 bilities. 
 
 With the reforms suggested, we should have a better currency 
 than we ever had before — one certainly which could be endured 
 till the close of the century. Convertible notes might still work 
 mischief in times of speculative excitement by yielding too read- 
 ily to factitious demands, but their power would be limited by 
 difficulty of attainment. When the banks are required to pledge 
 United States bonds to secure ultimate redemption, and are suffi- 
 ciently taxed for their issues, they will be employed somewhat 
 sparingly. Panics too might be expected, though these would 
 not be as severe or destructive under a conservative system of 
 banking, and rigid supervision. 
 
 8 
 
58 
 
 It should be observed that bank notes secured by pledges 
 of undoubted stocks are much inferior in flexibility to those 
 which may be issued without legal and practical conditions or 
 restrictions — are inferior because the system provides a check to 
 the emission of circulating notes without capital. Under such 
 a system a few aspiring individuals cannot establish a bank, emit 
 bills for circulation, and inflate the currency without a surer 
 foundation than pretension without the means of payment. Con- 
 sequently, in times of wild excitement when the demand for more 
 money is pressing, money cannot be supplied with sufficient 
 promptness or freedom to satisfy the restless crowd of speculators. 
 Certain fast-going institutions, already much extended, may wish 
 to do it, but they cannot “put up” the securities, while those 
 which have the ability to do so are usually suspicious and con- 
 servative, slow to act and fearful of getting hurt. This prac- 
 tical conservatism, voluntary or constrained, hinders and delays 
 expansion, though it may at length give way to outward pres- 
 sure. Whatever the final result, it will, for a short period at 
 least, prove a barrier to advancing prices, a discouragement to 
 speculation, and do what it can to quench the rising phrensy. If 
 a financial catastrophe be not averted, its violence will be tem- 
 pered. 
 
 There is another reason why the secured currency-note is bet- 
 ter than the unsecured. In a panic, confidence in its soundness, 
 considered as the evidence of property or value, is not easily 
 shaken, as proved by experience in the fall of 1873. Nor will 
 the ignorant and incredulous — those having no special use for 
 specie — be so impatient for its conversion. Could they be con- 
 vinced that the bill-holders would not be losers though the banks 
 should all fail, their hot haste, ending in a disasterous “run,” 
 would give place to reason and common sense. 
 
 The present is the most favorable time for a return to specie pay- 
 ment since the period which immediately followed the war. The 
 amount of domestic indebtedness is much reduced, and the class 
 to be injured by any possible contraction of the currency is 
 smaller than it has been for many years, or than it will be after 
 business revives. Prices have fallen heavily, so that many things 
 are as low as in 1860. The evils that were anticipated as the 
 effect of resumption are already upon us, and whatever suffer- 
 ing has been endured is a contribution to its cost, which, if 
 properly improved, need not be again exacted. If there were 
 
59 
 
 reasons for opposing the movement in former years, they have 
 little force now. Millions of greenbacks and national bank notes, 
 at present useless for want of employment, might be cancelled 
 without any disturbance of the money-market. Not as much 
 curreney would be required for the restored trade of the country 
 as was in use at the time prices were higher. When its vol- 
 ume had been somewhat reduced, followed promptly by appre- 
 ciation, every paper dollar removed would be replaced by a gold 
 dollar, the whole having the same value and efficiency as before. 
 “ The tools of trade,” so called, would not be taken from the 
 people, but a substitution in part made, those of better quality 
 taking the place of the discarded variety. Labor, even at the 
 present rates, would be more liberally rewarded than before the 
 panic; that is, the wages received would buy more bread, meat, 
 clothing, shelter and luxuries than previous to the tornado of 
 1873. Business, when it returned, would be natural and healthy, 
 and comparatively steady and durable. The numerous race of 
 middle men which sprang into existence with the greenback, 
 placing themselves between the producers and consumers and 
 tolling both classes, would, to a large extent, find their occupa- 
 tion gone, and perhaps be compelled themselves to become pro- 
 ducers. 
 
 It is often contended, sometimes by well meaning persons, that 
 specie resumption may be best secured, and greenbacks be made 
 equal to gold by measures which will “ promote the industries 
 of the country,” and restore business to its former activity; but 
 industry and business have no tendency to increase the value of 
 the accepted dollar more than they have to augment the length 
 of the accepted yard-stick. Both serve to measure, the products 
 of labor, and are not less or more perfect because those products 
 are sold with difficulty, and labor is unemployed. Ten years 
 ago, when trade was brisk, greenbacks were far more depreciated 
 than they have been at any time during the last three years of 
 stagnation. The difficulty with our paper money is this: it is 
 short in measure, is at the mercy of the politicians, and has no 
 certain value. With it we cheat one another, and by its influ- 
 ence have become, to a notable extent, a nation of gamblers. 
 The evil will not cure itself; nor shall we “ grow up ” to specie 
 payment. Legislation is required, at least enough of it to re- 
 move the great barrier to resumption — -the legal tender law. 
 
 Should business revive before anything decisive has been done 
 
60 
 
 to forward resumption, the arguments now urged against it would 
 be greatly strengthened. The class of objectors would obtain 
 earnest converts among those unwilling to contend with new 
 causes of disturbance — causes which might put to hazzard the 
 opening prospect for better times. A currency-reform, begun at a 
 period when business men were successfully struggling to repair 
 their shattered fortunes, and drawing after it consequences which 
 could not be forseen, would be suspected and resisted. Those 
 who lead might admit its importance, but would probably desire 
 to put off action to “ a more convenient season.” Should the 
 present opportunity pass unimproved, it is most likely that anoth- 
 er decade would go by, and another financial crisis have culmi- 
 nated before the public mind could be again turned toward re- 
 sumption. If there be now those who would procrastinate when 
 the reasons for immediate action are, viewed by the intelligence 
 alone, overwhelming, the do-nothings and obstructors will be 
 numerous when seeming prosperity, attended by rising prices 
 and greenback-depreciation, again returns. 
 
 The best good of a long suffering people requires that a fixed 
 policy on the money-question should be forthwith adopted and 
 accepted; and as nearly all agree that paper and specie ought to 
 be equal in value, immediate steps should be taken which, in due 
 time, will make them so. If it be admitted that the volume of 
 the currency determines its value, we have at all times the means 
 to secure equality, and no excuse for delay. N othing more surely 
 hinders industry, and discourages enterprize than uncertainty. 
 No evil is so much feared as that which is hidden, or seen dimly 
 through the mist of doubt. The worst policy, if it be stable, is 
 scarcely mor6 injurious than a vascillating one. The business 
 man is always watching the western sky, and will not make goods, 
 nor will merchants buy them, when the financial prospect is un- 
 settled. Against fire and flood, and the perils to health, life and 
 limb he can insure; but the risks from a devious, faithless cur- 
 rency he must bear himself. Even in this adventurous age, 
 when the insurance-man surprises us by his ingenious and multi- 
 tudinous plans for our security, no one has yet had the courage 
 to set up a “ guaranty and indemnity company ” for the protec- 
 tion of those exposed to the explosive action of depreciated pa- 
 per-money. Under any system into which credit enters, all but 
 adventurers and gamblers must have a trusty measure of value, 
 and a future of reasonable certainty. Having these, they can 
 
61 
 
 adapt themselves and their business, with some success, to almost 
 any conditions, and the changes which time may introduce. 
 
 To diminish the volume and increase the value of greenbacks, 
 and thus prepare the way for resumption, Congress, without long- 
 er delay, should restore to the bill-holder the only privilege 
 vouchsafed him in the original tender law, and which was wrong- 
 fully taken from him so soon as it became worth anything — the 
 privilege, I mean, of conversion into a gold-bearing bond. One 
 paying interest at the rate of four and a-quarter per cent, and run- 
 running twenty-five years, with gold as now at one hundred and 
 seven, would do excellent service. It would appreciate the cur- 
 rency slightly, acting most efficiently when money was abundant 
 and cheap, and stopping work when money became scarce and 
 dear. Moderately and safely, it would absorb the surplus notes 
 for which there is now no legitimate use, preventing perhaps an 
 inflation when trade revives, and the demand becomes more ac- 
 tive. In this manner would be made the necessary preparation 
 for resumption at the appointed time, January first, 1879. 
 
 VI. 
 
 The Interconvertible Bond as a Regulator of 
 Volume and Measure of Value. 
 
 There are many schemes for resuming specie payment, most 
 of them advocated by persons in quest of easy, frequently impos- 
 sible, methods — methods which will cause no reduction in the 
 volume of circulating notes. To some extent these originate in 
 selfish motives or class prejudices, but in many instances men 
 think the objects not inconsistent. No doubt there are honest 
 persons who regard the differing values of specie and paper as 
 owing to faulty or wayward movements of the former, and that 
 the disparity may be corrected by some legislative device which, 
 without disturbing any important existing interest, will drag 
 down gold to the greenback level. They forget that this metal 
 has for the time a natural and fixed relation to other products, 
 and even to paper money, which cannot be changed by schemes 
 or devices of any kind. 
 
62 
 
 A plan proposed several years ago, and now urged pertina- 
 ciously by Congressman Kelley, supported by B. F. Butler, Peter 
 Cooper, J. Watson Webb, Senator Booth, the venerable and dis- 
 tinguished Henry C. Carey, and others, has some new features, 
 and deserves respectful consideration. Mr. Kelley is its best 
 known and most earnest advocate. Its professed aim is, not so 
 much to secure resumption, as to give flexibility and stability to 
 legal tenders, and eu hance their value. The inflationists gener- 
 ally throughout the country seem to have embraced the plan, 
 perhaps because of a belief that, in some unknown way, it would 
 make money plentiful and cheap. To speak briefly, it proposes 
 that the government, having everywhere substituted greenbacks 
 for national bank notes, should issue inter-convertible bonds, so 
 called, bearing 3.65 per cent per annum interest (equal to one 
 cent a day on one hundred dollars), “ payable on demand [with 
 accrued interest] in greenbacks.” These are to be issued for 
 sums of not less than fifty dollars each, and offered, to the ex- 
 tent of the demand, in exchange for legal tenders. That is, both 
 bonds and treasury notes may be issued without limit, each in 
 exchange only for the other. The former, Mr. Kelley thinks, 
 would be largely sought as a safe temporary investment by banks, 
 banking companies, savings institutions, and the people generally. 
 This part of the scheme would act most efficiently when money 
 was abundant and cheap. In times like the present, when busi- 
 ness is sluggish and the demands for loans slack, the bonds 
 would, to a limited extent, find a ready market. Those having 
 idle funds on deposit or in hand, waiting the maturity of contracts, 
 or a better opportunity to make purchases, would take them for 
 the interest to be gained, incurring no risk. Executors, admin- 
 istrators, trustees and guardians would be similarly inclined. 
 The banks, having the proposed authority to do so, would gladly 
 exchange for them a large proportion of the greenbacks, amount- 
 ing to tens of millions, which they are now required to hold as 
 reserves. More or less, they would do the same with the surplus 
 funds they are accustomed to loan on call. Other institutions 
 having large immediate liabilities, like savings banks and insu- 
 rance and trust companies, would find them an eligible security, 
 far more trusty in squally times than ordinary loans, and suffi- 
 ciently profitable to attract this class of lenders. Had the sys- 
 tem been in operation during the last year, when money has aver- 
 aged, say, three per cent “ on call,” it is probable that as much 
 
as one hundred million legal tenders would have gone into con- 
 vertibles, depleting the currency to a notable extent, and costing 
 the treasury, in interest, $ 3 , 650 , 000 , a sum many think it could 
 well afford to pay to somebody in consideration of its having had 
 the use of, say, $ 400 , 000,000 thirteen years for nothing. Un- 
 doubtedly, the scheme would, for the moment, be a great boon 
 to our banking and other moneyed institutions, enabling them to 
 dispense with an important part of their unproductive funds, and 
 thus relieved, to make better exhibits at the end of the year than 
 they otherwise could. In very dull seasons, a “paternal gov- 
 ernment ” would take the surplus funds of the people, pay for the 
 keeping, and return them promptly whenever the money could 
 be more profitably used. Thus the current rate of interest, on a 
 certain class of loans, would be buoyed up in periods of depres- 
 sion so that lenders, at least, would be able to eke out a living; 
 for it is evident that the rate could never fall below 3.65 p. c. 
 “on call” when the government stood ready to pay that. 
 
 It is not probable that Mr. Kelley’s bond would prove satisfac- 
 tory to the multitude of small investors who are accustomed to 
 place their earnings in the savings banks, though that gentleman 
 thinks otherwise. In this part of the country, these banks, with 
 some exceptions, are managed with prudence, paying with rea- 
 sonable certainty five or six per cent, per annum, which rate de- 
 positors would not willingly exchange for a much lower one. 
 But there is a serious objection of another kind to the bond in 
 question. To answer its purpose, it must have every facility for 
 instant conversion, and would doubtless be made payable to 
 bearer. With this provision, it would be almost as dangerous 
 to hold as money, particularly when in the hands of the working 
 people who have few conveniences for safe-keeping, and to whose 
 special wants it is expected to minister. Since the phrensy for 
 money and money’s worth has become epidemic, made so largely 
 by a depreciating currency, a race of burglars, robbers, thieves 
 and pick-pockets, unsurpassed in boldness and skill, has grown 
 up, making securities of this kind a precarious kind of property, 
 to be avoided most of all by those who now use the savings 
 banks. 
 
 Undoubtedly, convertible bonds would absorb legal tenders 
 when the latter were in excess, and worth no more to loan than 
 3.65 per annum. But this absorption would be checked or sus- 
 pended when business revived, and the calls for money were 
 
64 
 
 more urgent. If trade became active, the rate of interest would 
 advance, more currency would be needed, and bonds for conver- 
 sion be taken to the treasury. At this stage, should stringency 
 occur, indicating a short supply of circulating notes, the move- 
 ment would be accelerated till a large proportion of those temp- 
 orarily in retirement were restored to circulation. The greater 
 volume of greenbacks, called forth at a critical moment, would 
 tend to relieve the pressure, sustain prices, gladden the hearts of 
 debtors and business men, and might under favorable circum- 
 stances, like the flexible, specie-paying notes, prevent serious re- 
 verses. 
 
 In the way indicated, the interconvertible bond system, worked 
 by self-interest, would, it is claimed, favor expansion when trade 
 and the public good required it. Within a limited range, it 
 would have the kind of elasticity for which coin is distinguished. 
 Bank managers and others would, to a certain extent, convert 
 their 3.65’s whenever they could use the money more profitably; 
 but it is obvious that the severest pressure could not call forth 
 all the notes which had previously been retired. Any reserves 
 laid by in compliance with the statute would be kept (if kept at 
 all) in interest-earning bonds. Administrators, trustees, savings 
 institutions, etc., expecting soon to want legal tenders, would 
 hold on to them tenaciously, especially when their supply was 
 getting short, and the times were suspicious. Like a sponge, the 
 friendly bonds, having power to absorb and capacity of storage, 
 would yield up on pressure a definite amount of watered curren- 
 cy, but could not be squeezed quite dry. So far as anything re- 
 mained, so far as conversion was prevented or delayed by con- 
 siderations of any sort, the circulation would, as a net result, be 
 contracted — contracted as compared with its volume before the 
 system was introduced. Without reference to the result in this 
 particular, when the compressed sponge had done its utmost, and 
 no more legal tenders could be had, the scheme would break 
 down hopelessly. Any further expansion to meet the wants of 
 a more active industry, or a new emergency of any kind, would 
 be impossible. Of a sudden, perhaps, however urgent the occa- 
 sion, the currency would become unyielding, inflexible, iron- 
 bound, as it were, having in the highest degree all the defects 
 it pretends to cure, and differing wholly, in this regard, from 
 metallic money the supply of which is not cut off* by the inade- 
 quate provision of any local system, but, coming as it does from 
 
65 
 
 all the world, is practically inexhaustible. But it may be said 
 that the supposed result would be prevented by the relief afford- 
 ed in the early and middle stages of the pressure, before the 
 barrier to expansion (immobility) had been reached. The claim 
 might be a plausible one were business always done on a healthy 
 basis, and were the last notes from the treasury — the last squeeze 
 of the sponge — sufficient to satisfy the existing and every possi- 
 ble demand. But, memorably, the fact is otherwise. Uniform 
 health in the financial world cannot be presumed. There are 
 frequent periods of wild speculation when goods and u estate are 
 bought and sold many times on their way from producers to 
 consumers, attended by rising prices, enhanced profits, a greatly 
 enlarged volume of business, and a correspondingly more active 
 demand for circulating notes. When the excitement is highest 
 and values most inflated; when trade is morbidly and dangerous- 
 ly active though in appearance largely remunerative, and every 
 available dollar has been brought into service; then it is that 
 the crisis is at hand. While business is still moving on at a 
 break-neck pace, the fixed obstacle of an inflexible currency is 
 encountered, and something or somebody breaks. 
 
 We want a currency which will, as far as possible, repress 
 these speculative and dangerous movements in the beginning — 
 one which, yielding freely to the legitimate wants of business, 
 will apply the brake, steadily but firmly, when speed is becoming 
 too great for safety. The object is not to stop movement ab- 
 ruptly, and thus precipitate a crisis, but to check it, to crush out 
 speculation, and restore trade to its normal state. The convert- 
 ible bond, while bearing so low an interest as 3 . 65 , would give 
 up the coveted legal tenders in the early stages of the excite- 
 ment, kindling the fire, and then of a sudden refusing relief, 
 possibly at a time when a further temporary supply might miti- 
 gate the pressure, break the fall from higher to lower prices, 
 and perhaps save from shipwreck. Banks and bankers it is true 
 might, at the last moment, convert the bonds they had held back 
 as a reserve, but in doing so they would exhaust their resources 
 wholly, without giving more succor than could have been afford- 
 ed under the old system when they chose to release their coin 
 reserves. Like the convertible bank note, and the other credit 
 intruments used to facilitate exchange and disturb values, the 
 Kelley bond, if I mistake not, would prove injuriously flexible 
 in the early period of a financial fever, and destructively rigid at 
 
 9 
 
66 
 
 a later date; supplying fuel liberally when the supply should be 
 restricted, and denying aid when denial might be fatal. As a 
 regulator and remedial agent or agency when business and trade 
 are distempered, it must prove a poor substitute for a specie cur- 
 rency. 
 
 No doubt the interconvertible bond, considered as an order on 
 the treasury for greenbacks held as a special deposit for their 
 redemption, would, in ordinary times, control or hinder the 
 slighter and not very important fluctuations in the currency, 
 promoting healthful contractions and expansions in answer to the 
 calls of legitimate business; but at such times the old fashioned 
 bank note payable in coin always proved sufficient. Nor is 
 the fact that it must be powerless to prevent or curb the great 
 financial phrensies which periodically sweep every highly civil- 
 ized country, or to turn aside the final catastrophe and prolong- 
 ed collapse which are but effects of the previous madness, a suffi- 
 cient objection to its use. But to proclaim it a panacea, a 
 sovereign remedy for every currency evil, is preposterous. 
 
 The truth is a public “ craze ” of the kind referred to, may ori- 
 ginate and get under dangerous headway with only a limited 
 dependence on the money market, as before intimated. All the 
 paper remedies yet devised have fed the fire, intensified the ex- 
 citement, refused “ aid and comfort ” at the critical period, and 
 made more calamitous the downfall; and it is not reasonable to 
 suppose that the convertible bond will set aside all that history 
 has taught at so much cost. Not improperly, the claim may be 
 made that, as a preventive of panics, it has no important advan- 
 tage over the old time convertible bank note, confessedly imper- 
 fect as it is, and that it has some defects peculiar to itself as will 
 appear in the sequel. As a regulator and standard of value for 
 considerable periods and in tempestuous times, it will be shown 
 to deserve no confidence. 
 
 In the preceding remarks, I have assumed that the legal ten- 
 ders received in exchange for bonds would be kept in the treas- 
 ury till called for by the holders of the latter, as they clearly 
 should be. Were they thus retained, the bonds would not differ 
 in their uses from the certificates of deposit which the govern- 
 ment now issues to the banks for clearing house purposes, though 
 more desirable to hold because of the interest they would bear. 
 But Mr. Kelley’s plan, as I understand it, does not permit this 
 “ locking up of greenbacks.” “The whole amount received,” 
 
67 
 
 he contends, should be employed to redeem at par six and five 
 per cent bonds, the treasury thereby saving a large amount of 
 interest, or the difference between the rates named and 3.65 p. c. 
 per annum. Were this course taken, and the notes again put in 
 circulation, there would be none of the proposed contraction at 
 the outset; the assumed redundancy of the currency would not 
 be diminished, nor its uniformity in purchasing power in any 
 way promoted. Thus the scheme would be divested of one of 
 its most important features — one essential to its subsequent suc- 
 cessful working. Another result pregnant with disaster might 
 be expected. Were the bond-holders’ money expended in the 
 way prescribed, there would of course be no redemption-fund 
 left, and the government, when called on for payment, be com- 
 pelled to issue more greenbacks, or confess bankruptcy. The 
 former alternative would be taken, and the way opened to inde- 
 finite expansion. Nor would the proposed amendment of the 
 original bill requiring twenty-five per cent of the notes received 
 to be retained in the treasury (out of which the bonds presented 
 might be paid) afford sufficient protection against the evil. A 
 speculative, or even an active legitimate demand might soon ex- 
 haust this scanty reserve, driving the government to the printing 
 press for supplies. On every recurrence of stringency, prompt- 
 ing to persistent conversion, new emissions would be necessary, 
 never to be called in and cancelled. When a season of sharp 
 pressure was over, the currency would be found more redundant 
 than at the beginning, with no additional provision for reducing 
 the volume. The bonds with the accrued interest would, as com- 
 pared with any fixed standard, have less and less value in pro- 
 portion as the medium in which they were payable was depreci- 
 ated. Instead of buoying up a sinking currency, they would be 
 the means of dragging it down to a lower level. While this 
 was going on, the gold bonds to be bought with diluted paper 
 would rise in the ratio of its dilution, making necessary a greater 
 nominal outlay in each successive purchase. 
 
 There can be no doubt that the interconvertible bonds would 
 produce expansion in another way. Were they issued of as low 
 a denomination as fifty dollars, in accordance with the plan, they 
 would — certainly to a notable extent — circulate as money like 
 the present and former convertible bank-notes, passing, when 
 much interest had accrued, at their face plus the earnings, and 
 thus adding to the currency. The interest could be so easily 
 
68 
 
 computed on a 3.65 bond that little embarrassment would come 
 from that. The banks, regarding them as equal to accepted 
 sight drafts on the U. S. treasury, would willingly take them, 
 and whatever they received their customers would not refuse. 
 But if no bonds were allowed of a lower denomination than one 
 thousand dollars, this objection would be partially obviated. 
 They would then be used only in the larger transactions, for the 
 same purposes say as the one thousand dollar notes now in cir- 
 culation. The restriction, however, would place them quite be- 
 yond the reach of the “ working people ” and small investors who, 
 it is claimed, would seek them largely. Only those obliged to 
 keep on hand considerable amounts in cash funds would have 
 use for them. To this class, undoubtedly, they would be con- 
 venient and profitable, as already suggested. Considered as 
 orders on the treasury for greenbacks, no creditor would decline 
 to take them. Nor could holders have any motive, till notes 
 were wanted for smaller payments, to forego the interest, and 
 present them for redemption. 
 
 In the above remarks, I have supposed Mr. Kelley’s peculiar 
 scheme in operation. But if the notes received into the treasury 
 were not paid out till convertible bonds were presented for re- 
 demption, there could be no expansion, however small the bonds. 
 On the contrary, the contraction would be considerable, as already 
 explained. 
 
 Provided the volume of the currency were not increased, I 
 agree with those who claim that the 3.65 bond, as to any effect 
 it might have on the value of the greenback, would not be great- 
 ly improved by making the interest payable in gold. Whether 
 so payable or not, the bond itself would not be worth par in 
 currency to ordina^ investors — those having no immediate lia- 
 bilities, and caring little for the convertible privilege. Persons 
 wishing a permanent, equally safe investment would prefer the 
 plain government bond, or a good mortgage note, because of its 
 yielding larger interest. Of two convertible bonds, one paying 
 interest in gold the other in paper, the first would be most attrac- 
 tive to the class having use for it on account of its earning most. 
 It would be a better “ absorbent ” than the other of circulating 
 notes, and hold on to them more tenaciously when the demand 
 for money increased; but neither would be sufficiently profitable 
 to tempt the people generally. As the government credit now 
 stands, a very long 3.65 currency bond would be worth, in gold, 
 
69 
 
 about seventy-six per cent., a gold paying bond about eighty- 
 two. At these prices, no one would exchange notes equal now 
 to ninety-three per cent., in gold, for either description of bond, 
 losing in the transaction seventeen per cent, in one case, and 
 eleven in the other. Of course a security of the kind named 
 would have no tendency to appreciate legal tenders. The value 
 of the latter would, as now, be governed exclusively by limitation 
 or volume. Instead of being lifted, as claimed, they would lift 
 to their own level so many of the bonds as were wanted by banks, 
 bankers, etc., for special purposes. In order to shift the control- 
 ling power to the other side, and make a passive thing an active 
 influence and agency, it would be necessary to strengthen the 
 3.65s by adding to the interest rate. A four and a quarter per 
 cent, interconvertible gold paying bond, worth for investment 
 say ninety-six per cent, in specie would have the requisite qual- 
 ities, and at once take a commanding position. By reason of its 
 greater buoyancy it would regulate and rule legal tenders, carry- 
 ing them up from ninety-three to ninety-six. Freely and largely, 
 in the present condition of the money market, they would imbibe 
 circulating notes, and afterward when the times changed, yield 
 them up reluctantly and sparingly, the contraction in the begin- 
 ning exceeding the expansion at the close, so that, when the 
 movement had ended, the volume would be diminished, and the 
 value proportionally increased. The average amount of notes 
 lying in the treasury and withdrawn from circulation would be 
 considerably greater than it could be under the influence of the 
 cheaper bond. The two classes of convertibles would give equal 
 elasticity, but the high priced security would, as the final or net 
 result, favor contraction to the extent say of three per cent., while 
 the other, in a propable contingency (already referred to), would 
 lead to expansion. 
 
 Should Mr. Kelley’s scheme in any way permit the increase of 
 circulating notes, it would be of prime importance that his 3.65 
 convertibles should be gold-paying bonds. Thus fortified, they 
 would be worth, for ordinary uses, eighty-two per cent; and 
 however recklessly legal tenders were issued, they could not fall 
 below those figures — below the market value of the security for 
 which they might at will be exchanged. Any additional issues 
 would promptly go into bonds, the movement defeating every 
 attempt at further inflation. 
 
 The claim that the 3.65 bond would lower the common rate of 
 
'TO 
 
 interest, and furnish the government with funds with which to 
 pay off, (“ five hundred million in six months,” says Mr Kelley,) 
 in a few years, the six and five p. c. gold bonds, leaving in their 
 stead an equal amount of convertibles, and saving fabulous sums 
 of interest, is of course extravagant, and based on a misunder- 
 standing of the laws which govern interest. What is called in- 
 terest grows out of the fact that certain persons have more and 
 others less capital than they wish to employ in production in 
 their own business. The lenders furnish the supply, the borrow- 
 ers the demand, and the relation of one to the other, made known 
 by competition, determines the rate. The latter is not lowered 
 generally because a few, on certain conditions, or for an equiva- 
 lent other than money, choose to make loans at 3.65 p. c., or be- 
 low the general market rate. Such loans, prompted by the 
 peculiar liabilities and circumstances of the lender, could exert 
 no wider influence than they do now when made in large amounts 
 at three per cent, on call, in Wall street. Profit, often confound- 
 ed with interest, provides the fund out of which the latter is paid, 
 but is not otherwise directly connected with it. Of necessity, it 
 must be more than sufficient to pay for the use of capital bor- 
 rowed, but with this limitation in one direction, it may be higher 
 or lower, from time to time, without immediately disturbing 
 the relation of lender to borrower. High profits, however, by 
 offering new inducements to one class to employ in their own 
 business their surplus capital, and to the other to enlarge their 
 capital by loans, both seeking to share the enhanced gains, would 
 erelong augment the rate of interest by diminishing the supply 
 of loanable capital. This loanable capital, varying from year to 
 year, commanding high rates in times of speculative activity, 
 and low rates in periods of depression and discouragement, can- 
 not be evoked by new bonds bearing a low and insufficient inter- 
 est, nor by juggling legislation of any kind; but Congress can, 
 by enacting wise laws, repealing foolish and wicked ones, and 
 abandoning the “ paternal system ” of government, do much to 
 give stability to business, uniformity to the loan market, and 
 perennial prosperity to the people. 
 
 There is a very serious objection to the convertible bond, as 
 the regulator of the currency, growing out of the instability of 
 the public credit. Suppose Congress should authorize a four and 
 a quarter per cent gold bond of the kind suggested. In process 
 of time, it might become worth, in the general market, par in 
 
n 
 
 coin. Greenbacks, through conversion, would be carried 4 up to 
 the same level. While appreciation was going on, there would 
 be contraction, a fall of prices and a money pressure, relieved at 
 intervals, but not cured by reconversion — a contraction of the 
 same kind and degree as that caused by cancellation, or by any 
 movement toward resumption. The volume of the currency 
 would adjust itself to its newly acquired value (value of its units). 
 The bond, by its coercive power, would regulate and govern both. 
 When paper had become equal to specie, the two would circulate 
 side by side neither having a preference except in the way of 
 convenience. Could the bond be persuaded to remain at par, 
 the system would work well undoubtedly, but suasion could not 
 secure that result. A day or a week might bring a change, and 
 the equality spoken of be destroyed. Should the bond rise say to 
 one hundred and two, greenbacks would be worth more for con- 
 version than circulation. Consequently they should disappear, 
 leaving the void to be supplied by the cheaper medium, specie. 
 While the change was in progress and not completed, there would 
 be a short supply of money, and a tendency to lower prices. If 
 then, owing to a change in the financial out look, the bond should 
 fall below par, say to ninety-eight, coin would be withdrawn as 
 too valuable for money, and paper alone constitute the circulating 
 medium. Temporary confusion in the money market, the re-ap- 
 pearance of retired greenbacks, and the milder symptoms of in- 
 flation would ensue. These fluctuations or pendulum-like move- 
 ments of the convertible bond, the proposed measure of value, 
 passing from one side to the other of the world’s standard, obe- 
 dient to a hundred unforseeen influences, and compelling frequent 
 changes in the medium with which payments are made, would 
 be an intolerable evil — an evil not to be avoided, even partially, 
 except by the use of a bond at a lower rate of interest — a bond 
 which, consigning the greenback to perpetual degradation, would 
 never rise to par. The 3.65s would, I think, have the requisite 
 poorness. In value for investment purposes, they would not 
 soon work up to a point in dangerous proximity to the gold level. 
 Inside their natural limits, like the four and a quarter per cents, 
 they would move up and down, having a range, not of four per 
 cent merely, but, it may be, of twenty or thirty according to the 
 times. 
 
 The public credit is, in truth, too precarious and indefinite for 
 adoption as a measure of value, even for short periods. It is and 
 
72 . 
 
 must be of slow growth; is exposed to a hundred disturbing in- 
 fluences, and has not half the stability of the best private credit. 
 Fair and full of promise to-day, cloud and storm may envelop 
 it to-morrow. A great foreign war would knock it down ten or 
 fifteen per cent, and the loss of an important battle half as much 
 more. Aggressive movements on our part or the part of other 
 nations, domestic strife, threatened repudiation, a large radical 
 element in Congress or among the people, as well as financial 
 embarrassment and a restricted money market, would similarly 
 affect it. At an early period during the late “ Rebellion,” Unit- 
 ed States six per cent ten years gold bonds were sold at eighty- 
 three in coin. Soon after the upheaval of 1837 and 1839 , when 
 the national debt had been paid, the government tried in vain to 
 borrow money in the markets of Europe on a six per cent bond. 
 In the comparatively insignificant war of 1812 , the treasurer, at 
 one time, was obliged “to issue in stocks $ 4 , 266,000 to obtain 
 $ 2 , 500 , 000 ” (Hildreth), and the contest was brought to a close 
 partly on account of the seeming impossibility of raising funds 
 to carry it on. Only a few months ago, when immediate war 
 was threatened between Russia and Turkey, the securities of the 
 former, which had previously stood well in the London market, 
 fell in one day seven per cent, in two days twelve per cent, and 
 in a week nearly twenty per cent. 
 
 A currency whose value depends on any bond liable to these 
 wide and perhaps sudden fluctuations, needing at frequent inter- 
 vals the interference of Congress to adjust the supply to the de- 
 mand, and the standard of value to changing circumstances and 
 conditions, would not promote justice, or in any way be an im- 
 provement on that which has so long afflicted us. 
 
 In one thing I agree with the school of Mr. Kelley. No doubt 
 greenbacks ought (if anywhere) to be legal tender at the custom 
 houses. Had they been so from the first, over-issue and depre- 
 ciation to the extent at one time of sixty-five per cent, would not 
 have been permitted. The protectionists in Congress, rejoicing 
 in undisputed power and the new tariff, must have interfered to 
 prevent it. Nor would they have allowed that eminently wise 
 provision making greenbacks convertible into twenty year six 
 per cent, gold bonds to be repealed. Had they felt that every 
 new emission in effect diminished the duty on imported goods, 
 and made themselves and their friends at home equal sufferers 
 with others from the evils of depreciation, the mischief to be 
 
73 
 
 wrought by inflation could not have been ignored. Nothing 
 more surely leads men to think of consequences, and to help others 
 when helping themselves, than self-interest. It is true, the effects 
 of more currency might have been counteracted by successive 
 additions to the tariff; but such additions must have been too 
 obviously for the benefit of a single much favored class — a class 
 never better able to make sacrifices — to be popular. Besides, 
 the downward course of paper was so rapid that legislation, how- 
 ever agile, could scarcely have kept up with it. When protec- 
 tionists saw that their new advantages and present opportunity 
 were slipping away with fearful haste, and that repressive meas- 
 ures of a decisive kind must be taken, they would have stood up, 
 an invincible band, against greenback degradation, and the causes 
 leading to it and perpetuating it. 
 
 Should treasury notes now be made receiveable for customs, 
 home producers of a certain class would seem to lose in protec- 
 tion the difference between notes and coin, but the compensations 
 should not be overlooked. The opening of a new field for their 
 employment — the additional work required of them — could not 
 but enhance their value. How much the advance would be no 
 one can safely predict, though it ought to be at least appreciable, 
 and sufficient to cheer the friends of a better currency. As a 
 consequence of the movement, some millions of notes having 
 been diverted into new channels, there would be in ordinary 
 times, but not now, a degree of stringency, the symptoms having 
 the same characters as those produced by the general locking up 
 or cancellation of greenbacks. Resumption, approached in this 
 way, would be no easier or more attractive than if begun by call- 
 ing in and blotting out superfluous paper. In whatever way the 
 end be sought, the same obstacles, greatly magnified by the timid 
 and the knavish, must be surmounted. 
 
 VII. 
 
 Some Commercial Reasons assigned for delay- 
 ing Resumption. 
 
 Many are the reasons assigned for delaying resumption. One 
 of these, our foreign indebtedness, is often repeated by busi- 
 
 10 
 
74 
 
 ness-men, and is very generally thought to be formidable. To 
 the people of Europe we owe a very large sum. For the last 
 few years, and particularly since irredeemable paper began its 
 reign, the amount has been increasing at a fearful rate. Our 
 bonds and obligations, national, state, municipal and corporate, 
 must now be equal to more than two thousand million, in many 
 cases bearing a high rate of interest. This immense amount has 
 been received in iron, woolens, cottons, silks, teas, coffees, etc. 
 A large proportion of the whole represents the losses by war, 
 speculation and unremunerative investments. So much of the 
 debt as shall not be wiped out by repudiation or bankruptcy, 
 must be paid, interest and principle, by the shipment of cotton, 
 tobacco, flour, petroleum, pork, cheese, gold, silver, etc., the pro- 
 ducts of our industry and economy, for all of which, to the ex- 
 tent of the debt, no return can be made. It is indeed a grievous 
 burden, but the compensations and offsets should be considered. 
 When the proceeds of foreign loans have become a part of the 
 capital of the country which is actively employed in the work of 
 production, the benefits have doubtless been found to exceed the 
 sacrifices — the benefits, I mean, of borrowing in the foreign in- 
 stead of the home market. The remittances received in exchange 
 for the large proportion of the bonds of the United States trans- 
 ferred to foreign holders after the war contributed, in an impor- 
 tant degree, to replace the much needed capital destroyed in the 
 contest, and to mitigate the evils growing out of the enormous 
 waste. Had it not been for the blighting influence of a depreci- 
 ating currency, it is fair to conclude that the capital thus obtained 
 would have earned more than its cost in bonds. It is not pleas- 
 ant to be in debt, and share with others your earnings; in itself 
 considered, only fools call it “ a blessing;” and none but those 
 who can employ productively more than they own can be justi- 
 fied in becoming debtors. But to the individual, it matters little 
 where his borrowed capital comes from — whether his creditor is 
 a fellow-citizen or foreigner. It is as easy to pay £1,000 and the 
 interest on it in London as to pay $4,860 and interest in New 
 York, and easier if in the former place the interest be lower. It 
 is true, a portion of the gain will go abroad if an Englishman or 
 German be the lender, but the net profit will remain as a clean 
 addition to the wealth of the country — an addition created by 
 foreign capital, and which could not have existed without its 
 agency. Were the needed loan obtained in our own markets, 
 
capital would be taken which was wanted in some other business 
 while no addition was made to the aggregate production of the 
 country. Besides the net profit, new capital, whatever its sources, 
 increases the demand for laborers, puts into their hands the tools 
 of industry, introduces labor-saving machinery, augments the 
 rate of wages, and meliorates the condition of the people. Were 
 it not for outside help in the form of loans, our resources as a 
 manufacturing, mechanical, agricultural and commercial popula- 
 tion would be far more limited than they now are. When I say 
 this, I do not forget the reckless, self-destroying way in which 
 we often contract debts. It is a national infirmity. 
 
 So long as the interest of money and the profits of business are 
 much lower in Europe than in this country, capital will flow 
 hitherward making a foreign debt inevitable, unless, indeed, our 
 friends abroad choose, on second thought, to give us what they 
 now lend. I imagine the amount will not soon be largely re- 
 duced, and that those who would postpone specie redemption till 
 this is paid consent to put it off indefinitely. As a class, debtors 
 may be injured by measures which appreciate greenbacks and 
 restore specie payment, but those who owe pounds sterling in 
 England cannot suffer. Whatever may be our standard of value, 
 and however frequently we may change it to promote swindling 
 among ourselves, that by which the obligations to outside parties 
 are measured is fixed by laws which, fortunately for them, we 
 cannot set aside. 
 
 It is a great mistake to suppose that a foreign debt, or any 
 part of it, must of necessity be paid in gold. Gold is the meas- 
 ure, but need not be the medium. No stringency, no disturbance 
 in the money centers of England and Germany signalized the 
 borrowing in those markets of two thousand million and its 
 transfer, and none in the United States should attend the pay* 
 ment, in a business way, of the like amount. As the supply of 
 precious metal there was not made inadequate by lending 
 and remitting, so no inadequacy here should await similar remit- 
 tances in the way of payment. Unless our great staples are too 
 dear, they — probably they alone— will be taken as the most 
 profitable means of satisfying every claim. If they cannot be 
 taken advantageously to Europe, they may be, perhaps, to the 
 West Indies or South America, and bills drawn against them 
 sold in London or Hamburg. If goods, as measured by gold, 
 be too high for exportation, the fact will be indicated by an ad- 
 
76 
 
 Vance in sterling or other exchange. When this advance has 
 reached the shipping point, coin or bullion will be taken as the 
 cheapest remittance; but this movement will soon be checked 
 by the changes always wrought by the transfer. The removal 
 of a few millions from one country to another causes comparative' 
 stringency, cheaper production and lower prices in the former, 
 and expansion, increased cost of production, and higher prices in 
 the latter. As a consequence of this favorable alteration in both 
 the factors concerned, the commodities which in the treasure- 
 exporting country were before too dear for the foreign market 
 may be shipped with a profit. The same causes which stimulate 
 this movement of merchandise discourage importations till the 
 adverse “balance of trade” is adjusted, and the whole debt, in- 
 terest and principal, due and becoming due, is discharged or pro- 
 vided for. This frequent shifting of specie (bullion), leaving 
 the places where it is degraded by excess, and going where the 
 supply is scanty and the value enhanced, so adjusts prices to cir- 
 cumstances and special needs that every people, not crushed by 
 government interference, is able to furnish for commerce precise- 
 ly the articles which natural or acquired advantages — soil, capi- 
 tal, skill, &c., — best qualify it to produce cheaply. This move- 
 ment, the effect of course and not the cause of the advantages 
 referred to, is entirely conservative and beneficent, making for- 
 eign trade both possible and profitable, and causing its revival 
 when fetters and unjust burdens have been imposed. 
 
 By the agency of the precious metals, the industrial interests of 
 widely separated communities are placed and preserved in har- 
 monious relation, while disturbing and hostile influences of every 
 kind are neutralized or counteracted. When Congress for the 
 benefit of one class and the injury of another imposes unreasona- 
 ble duties on imports with the intention of preventing the com- 
 petition of foreign with domestic producers, the international 
 money, bullion, does all that is possible to preserve trade and 
 repair damages. For a season gold is imported in place of 
 heavily taxed goods, but so far as it becomes a part of our cur- 
 rency, it is wholly unproductive, adding not the smallest fraction 
 to our capital or wealth. Considered from a national point of 
 view, the cotton, rice, flour pork, etc., given in exchange for it, 
 are, in an important sense, presented as a gratuity to our rivals 
 abroad. A carefully prepared inventory of all the property in 
 each country, estimating everything by quantity and productive 
 
11 
 
 power, would show this result. In the true sense, specie Or 
 money is not capital, as before stated, and has no productive 
 power. The nation losing it in the way of business, loses nothing; 
 the nation gaining it gains nothing; but trade is sustained, and 
 both parties are profited, in the manner explained. 
 
 Any considerable flow of gold to our shores, of course, con- 
 tracts the currency in other markets, and expands it in our own, 
 giving “ outside barbarians ” unaccustomed advantages in the 
 cost of production. With us, prices rise gradually till the ex- 
 cluded and now cheapened commodities can be floated over the 
 duty into our ports again to compete with our products. In the 
 interval, however, the protected classes, having got control of 
 the much enlarged home-market, are able to obtain better prices 
 for their goods, and before wages advance, as they ultimately 
 must, to make large gains. To the extent that they are benefit- 
 ed, those who provide exportable articles are damaged. They 
 are damaged because diluted and depreciated money at home in- 
 creases their expenses, while the enhanced value of gold abroad 
 (equivalent to a lower level of prices) compels them to sell at a 
 sacrifice. The producers of cotton, etc., in the Southern States, 
 who always complained that a high tariff which put money in 
 the pockets of northern manufacturers did great injustice to them, 
 were right in principle and in fact, as erelong all will admit. 
 
 Take another view of the foreign debt question. The par of 
 exchange on London is say $4.86; that is, $4.86 in United States 
 coin contain as much fine gold as an English sovereign, and will 
 buy in New York a bill on London for one pound sterling— will, 
 I mean when exchange is at par, coinage free, and no account 
 taken of the cost of shipping gold. Now this par, depending on 
 the equivalence of equal quantities of metal in different pi aces • 
 is in the nature of things fixed. Except temporarily, whatever 
 the amount of foreign indebtedness, exchange can never rise 
 above or fall below the point named, except to the extent of the 
 cost of shipping it, including of course insurance, the loss of in- 
 terest, etc. Always $4.86 in New York will be the natural equiv- 
 alent of twenty shillings in London. This equality is not dis- 
 turbed except when a floating debt, probably unforseen, must 
 be paid, or international prices need readjusting. When once 
 disturbed from any cause, exchange, so soon as the disquieting 
 influence is removed, and the necessary transfers of gold effected, 
 retqrns to par, there to remain until again unsettled by the course 
 
of trade, or the state of the markets. An alien debt, once coti* 
 tracted, requiring the payment of one hundred million annually, 
 in divided sums, at fixed periods, could have no certain effect. 
 Exchange might fluctuate slightly, moving up and down to cor- 
 rect the mistakes of merchants, and protect trade when momen- 
 tarily embarrassed; but no gold would be shipped merely be- 
 cause a debt existed. If for a transient and special purpose the 
 metal were taken, it would be returned when the emergency was 
 passed, and a profit could thereby be made. In foreign trade, 
 it performs the same office, and is exported for the same reason 
 as any commodity worth more abroad than at home. From the 
 latter however, it differs in one important particular. Tempora- 
 rily or permanently, in the countries participating in the move- 
 ment, it readjusts prices generally for the benefit of commerce, 
 and the good of the people. Only debts already due, or soon 
 becoming due, causing an unusual demand for remittances, can 
 raise exchange, stimulate the greed of exporters, and draw treas- 
 ure from its resting places. In spite of the large amount of in- 
 terest which we pay to Europe, equal to several scores of millions 
 yearly, and notwithstanding we are the largest producers of the 
 precious metals for export in the world, the balance of trade, 
 and the price of foreign exchange often cause these metals to 
 flow hitherward, as they are doing now, and as they have often 
 done before, for short periods, in the last twenty-five years. 
 Prime sterling sight bills are worth $4.84, and to-day, November 
 4th, 1876, says a telegraphic dispatch, $860,000 have been drawn 
 from the Bank of England, and shipped for New York. The 
 merchants concerned in this movement are not deterred, in their 
 pursuit of gain, by the fact that we owe to Europe a large fund- 
 ed debt— a debt for which the proper allowance has been made 
 in every new distribution of the gold supply by which prices are 
 regulated. The necessary payments are provided for by mer- 
 chants seeking a profit, perhaps without knowing their own 
 agency in the matter. 
 
 With us, the present inward flow of gold shows that, for the 
 moment, the relative specie prices of exportable goods are too 
 low in this country and too high in England, and that an equali- 
 zation is demanded in the interest of commerce. When this end 
 has been attained, a counter current may be expected—the old 
 outward current which, for a quarter of a century with occasional 
 short interruptions, has been setting towards the East, carrying 
 
79 
 
 away the surplus product of our mines, but leaving all which our 
 own business-interests require. If we omit this surplus product, 
 and make the proper allowances for those years in which we have 
 paid interest or increased the principal by more borrowing, a 
 careful comparison will doubtless show that, since we have owed 
 so much abroad, no more precious metal has been exported than 
 imported. 
 
 Whenever a large foreign debt exists in a permanent form, 
 and borrowing is at an end, the exports must steadily exceed the 
 imports. On no other condition can either interest or principal 
 be paid. What is called the “ balance of trade” — a balance to 
 be paid in gold at the end, say, of the financial year — is no more 
 likely to be against than in favor of the debtor country; nor can 
 the accruing interest, becoming due at regular periods, have any 
 effect after trade has once been adjusted to the existing relations 
 of the parties. All are provided for by the foresight and sagacity 
 of merchants and business men, and such distribution of the in- 
 ternational currency as will make profitable the requisite excess 
 of exports over imports, is secured. Abroad as well as at home, 
 large sums may be paid, if becoming due in frequent small in- 
 stallments, without financial disorder. An adverse balance, 
 happening under these circumstances, would be promptly dis- 
 covered, perhaps anticipated, by those whose interests were liable 
 to suffer, when a sufficient corrective could be applied. If I mis- 
 take not, the apprehension of losing precious metal to our injury, 
 on account of unfavorable balances — balances caused by foreign 
 indebtedness, and the remittances required for interest — has no 
 substantial basis, and should not interfere with resumption. Our 
 mines will supply all we need for every purpose, and more than 
 our good demands. 
 
 According to the old and once famous mercantile theory, the 
 benefits derived from foreign commerce are wholly due to the 
 gold and silver which may be wrung out of it. These metals, 
 it was contended, are the only true riches, and the exchauge of 
 commodities with other nations is profitable or otherwise in pro- 
 portion as these are gained or lost. Consequently, true state- 
 manship consisted in the adoption and enforcement of measures 
 which will increase exports and diminish imports, thus securing 
 a favorable balance of trade, and the influx of the coveted metals. 
 A war of the custom houses, bitter and prolonged, grew out of 
 these views. Strangely enough, the theory, in a mitigated form, 
 
80 
 
 still maintains its hold of certain minds, particularly of the com- 
 mercial class. There are those among us, men of general intelli- 
 gence, who contend that resumption should be deferred not only 
 till our foreign debts are paid, but till a favorable state of the 
 exchanges causes gold to flow, steadily and continuously, into 
 the country. Of course a flow of this kind is impossible, not to 
 say undesirable. No more difficult would it be to heap up indefi- 
 nitely the waters of the Atlantic on our eastern border, draining 
 the bays and harbors on the other side. As often as the natural 
 level is disturbed, the counter-currents or under-tow will restore 
 the equilibrium. Treasure never moves, on a considerable scale, 
 from one place to another except to secure a juster distribution, 
 or to equalize the supply. By an economic law as persistent as 
 the desire for gain, the movement must cease when the end has 
 been attained. Except as local and temporary causes interfere, 
 the outward and inward flow must be equal. Legislation may 
 momentarily change the current, but it cannot abrogate the law. 
 Nor would the perpetual influx of the precious metals, without 
 reference to the legitimate demand for them, prove of the small- 
 est advantage. On the contrary, it would destroy the usefulness 
 of the established measures of value, and introduce evils of the 
 same kind as those caused by paper inflation. 
 
 It must be said, however, that in ordinary or healthy times 
 when gold is coming into a country, and money is being cheap- 
 ened, business is active and trade prosperous — prosperous, or 
 seemingly so, because prices move upward, debts are easily paid, 
 confidence is reenforced, and a speculative spirit generated. The 
 prospect of getting rich speedily stimulates enterprise, encour- 
 ages the industrious classes, and increases production. The general 
 thrift, temporary and often delusive, which results from a favor- 
 able balance of trade, or follows increased duties on importations, 
 is largely due to a sudden accession of precious metal, and the 
 consequent depreciation of the currency. Prosperity beginning 
 in this way, and sustained only by cheap money, is usually tran- 
 sient, lasting only while the tide is rising; but sometimes it runs 
 into more durable and unhealthy excitement, ending perhaps in 
 commercial disaster. 
 
 A people having unusual facilities for production — a rich soil, 
 abundant capital, cheap power, superior machinery and tools, 
 and skillful artisans — are able to supply goods, particularly of 
 the manufactured kind, in large quantity and at small cost. 
 
81 
 
 They have all the elements of substantial wealth, while labor is 
 invested with extraordinary efficiency. The products of industry 
 are greatly increased, and a large surplus furnished for exchange. 
 With these advantages, a rich country will underbid its rivals in 
 the markets of the world, and for a season sell more than can be 
 paid for in commodities. When this happens a favorable balance 
 of trade is secured, and treasure begins to flow from debtor to 
 creditor to satisfy the claim. As specie accumulates the curren- 
 cy is expanded, prices rise, the nominal, but not the real cost 
 (cost in labor) of production is enhanced. This rise compels in- 
 dividuals, competing with one another, to sell to their customers 
 abroad at advanced rates — rates which will defray the increased 
 nominal cost. When this point is reached, and not before, the 
 richer country obtains the full benefit of its peculiar advantages, 
 though the individuals engaged in the trade get only the usual 
 profits. The commodities parted with represent and contain in 
 the aggregate less labor — fewer days’ work — than those received 
 in exchange. A yard of Cotton cloth, the product of the power 
 loom, and costing one hour’s work can be sold, say, for a pound 
 of sugar or rice costing two or three hours’ work. In this man- 
 ner England (and to some extent New England) gains the just 
 reward of her industrial and inventive preeminence. Her amaz- 
 ing fecundity in the manufacturing line, due largely to cheap 
 coal and iron, has enabled her, to a notable extent, to supply the 
 world, and secure great wealth. She has drawn to herself a lib- 
 eral share of the precious metals, and maintains at home a high 
 range of prices in order that she may gather without loss the 
 fruits of industrial superiority. Her gain is not secured at the 
 expense of others, as popularly supposed, but is the fitting rec- 
 ompense of genius, energy and improved methods. Those who 
 trade with her promote their own interest, getting more goods — ■ 
 more of the comforts and conveniences of life — than they could 
 otherwise obtain. If they give two or three days’ work for one, 
 they pay the honest difference only between skilled and unskilled, 
 efficient and inefficient labor — between labor yielding a large pro- 
 duct and labor yielding a small one. Under a free trade system 
 both sides are benefited, or the interchange would not be made. 
 In no case does the fact that labor is unremunerative in one 
 country as compared with another prevent a mutually gainful 
 trade. Nor can the claim be sustained that low wages, nominal 
 or real, necessarily give to a people important manufacturing and 
 
 II 
 
82 
 
 commercial advantages — advantages which those paying higher 
 wages can wisely attempt to destroy by oppressive tariff laws. 
 Money-wages are, in truth, high or low in different countries 
 (made so by a just apportionment of the gold and silver of the 
 world) that trade may be successfully prosecuted, and each com- 
 munity make the most of its peculiar facilities for production. 
 Legislation which shuts out foreign goods without stopping the 
 exports has in fact a direct tendency to lower the price of labor 
 abroad, and otherwise increase the supposed embarrassment 
 which protective legislation is intended to remove. 
 
 In this discussion, I have often referred to the fact that gold 
 and silver are products of this country. An enormous amount — 
 nearly ninety million in value annually — are taken from our 
 mines, all of which, except the small proportion which is em- 
 ployed in the arts, and coined for the uses of the treasury and 
 certain western specie-paying states, goes to swell our exports. 
 Of course it goes as bullion or merchandise. It is a part of our 
 surplus production for which there is no need or adequate demand 
 at home. Under present circumstances, or till we resume pay- 
 ment in coin, or in some other way multiply its uses, it is impos- 
 sible it should remain. In parting with it, we cancel obligations 
 and lose nothing; or in exchange for it obtain capital which, if 
 employed productively, will support laborers and yield a profit. 
 Did it become a part of the circulating medium, even though we 
 were now on a coin basis, it would not add to the comforts 
 and conveniences of the people. So far, indeed, as it took this 
 direction, it might, for reasons often repeated, be better sunk in 
 mid-ocean. Except to the extent of certain additions required 
 by increased population and trade — required to preserve uniform- 
 ity in the standard of value — the world has gained nothing by 
 all the precious metal poured into the circulation in the last 
 twenth-eight years. Trinkets and certain ornaments and utensils 
 of very limited utility have thereby been made cheaper, and con- 
 sequently more accessible; but this can scarcely be said of any 
 article of prime or even secondary importance. Nor, as a result, 
 have men become wiser and better. On the contrary, a specu- 
 lating spirit has been engendered, greed, dishonesty and extrava- 
 gance encouraged, and industry diverted to unprofitable enter- 
 prises. The manifold evils more directly traceable to paper 
 money inflation have no doubt been intensified by the rich min- 
 eral discoveries in California and Nevada. In a certain sense, 
 
83 
 
 however, this country has been largely profited by its gold and 
 silver mines. An important and productive industry has been 
 added to those before in existence, but the benefits conferred are 
 by no means as great as those coming from the increased abun- 
 dance of the more useful metals. It is more desirable to have 
 cheap coal, iron, copper, spelter, lead, etc., than cheap gold and 
 silver. 
 
 VIII. 
 
 Commercial Crises viewed as Epidemics. 
 
 There are certain familiar diseases which appear periodically 
 and spread rapidly, involving large populations and running a 
 definite career, which, on account of their general prevalence, are 
 called epidemics. Among them may be named influenza, mea- 
 sles, hooping cough, cholera, the meningitis spinalis of horses, 
 etc. Some of them, if not all, are contagious. The mind, like 
 the body, is vexed by epidemic influences; has its periodic dis- 
 turbances and critical seasons. It does not long or often move 
 on in a straight line, with even step, but pursues a devious, inter- 
 mittent and spasmodic course. Periods of activity and rest, 
 of excitement and indifference, confidence and doubt, hope and 
 fear, in perpetual alternation, have always marked its history, 
 and forever must till human nature changes. There is a constant 
 ebbing and flowing with occasional spring tides and neap tides 
 to relieve the monotony. The feelings, sentiments and passions 
 are most conspicuously and profoundly affected, now blazing up 
 fiercely, then dying away exhausted, like a burning hay-stack 
 when the wind is fitful. All the faculties, however, including 
 those which make man a rational being, and should control con- 
 duct, are involved. The judgment is warped, the vision distort- 1 
 ed, reality exaggerated, and fancy mistaken for fact. Under 
 these circumstances, men become the prey of impostors and en- 
 thusiasts. 
 
 From the fact that the periodic excitements referred to have 
 their origin and seat chiefly in man’s social and moral natures, 
 they have been called moral epidemics, or epidemic delusions. 
 
B4 
 
 They attack different classes, but with most frequency the cred- 
 ulous, the imaginative, the fervid, those having active nervous 
 systems and the fanatical temperament. Once introduced, they 
 spread by contagion; that is, one catches the prevailing disorder 
 from another till the community is made wild by the reigning 
 epidemic. Sympathy, example and the imitative faculty — the 
 almost irresistable tendency to feel, think and act as others do- 
 open a channel by which the malady passes easily from one mind, 
 one organism, to another. Moral like other epidemics run a defi- 
 nite, self-limited course, terminate in a prescribed way, travel 
 most frequently in groups and in serial order, and return at in- 
 tervals more or less regular. Unlike the subjects of measles, 
 hooping cough, etc., those once afflicted are susceptible to second 
 and third attacks, and do in fact sicken as often as exposed. By 
 constitution and temperament, they are naturally predisposed to 
 this class of disorders, often receiving them in a friendly spirit 
 as if pleasurable excitement were expected. They are of differ- 
 ent kinds, political, religious, reformatory, financial, etc., accord- 
 ing to the emotions awakened, and the kind of hallucination pre- 
 vailing. The noblest and best as well as the meanest and worst 
 qualities of the human character are at different times displayed. 
 They end in wars, revolutions, persecutions and carnivals of 
 crime; sometimes in deeds of heroism, reformation and the over- 
 throw of abuses. They will take any proposed direction, if ex- 
 cited passion but lead the way. 
 
 Among the most remarkable of the epidemics about which I 
 now write may be named those which swept southern and west- 
 ern Europe in the time of the crusades, precipitating on Palestine 
 the maddened Christian hosts in successive military expeditions 
 organized to expel the infidel Turks from the Holy city. The 
 persecutions and massacres which have marked the domination 
 of particular religious sects at different times have had a similar 
 origin and character. In every age, whenever a reformation of 
 a radical character and on a considerable scale was to be secured, 
 religious zeal rekindled, or a new faith or sect introduced, the 
 instrumentalities known to be active in originating and spreading 
 epidemics have been invoked. By similar means were brought 
 forth and diffused the witchcraft delusions of Europe and America, 
 the popular phrensy which preceded and attended the French 
 Revolution of the last century, and the Mesmeric lunacy which 
 broke out in Paris in 1773, and in this country forty years ago. 
 
85 
 
 In some epidemics, the morbid element (which may be detected 
 in all) is particularly conspicuous. This was the fact in one 
 which appeared among a persecuted religious sect in the south 
 of France. The worshipers, known as the “Trembleurs de Ce 
 venues,” were seized with trembling and convulsive movements 
 which proved contagious. A disorder of a similar nature, with 
 modified symptoms, the effect of “ sensational preaching ” and sym- 
 pathy or contagion, broke out in Scotland in 1742, in Kentucky 
 in the first years of the present century, and in other places at 
 different times. An examination of the records of crime, etc., 
 will show that homicide, suicide,* incendiarism, poisoning and 
 other offences are also epidemic and contagious. The furor of a 
 presidential election is, with us, a regularly recurring epidemic, 
 sometimes of a malignant type. 
 
 Had the events which followed the last presidential election — 
 those connected with the “returning boards” and the electoral 
 commission — happened at another time, when the public mind 
 was predisposed to and prepared for an epidemic madness, wait- 
 ing impatiently perhaps for an “exciting cause” or occasion, we 
 should doubtless have had a quarrel for the succession, and possi- 
 bly a civil war. Our recent memorable experiences in the war- 
 line, and the general business-depression and discouragement 
 perhaps saved us. Crushed as we now are by our own folly, no 
 wide-spread excitement will take hold of the people which does 
 not harmonize with the general gloom. A panic in a crowded 
 church or theatre would take well; possibly a religious excite- 
 ment might be started, but in the last case the preachers would 
 succeed least by setting forth the terrors of the law, using liber- 
 ally the sulphurous element. 
 
 In the earlier stages of society, when the people had few wants 
 and but little surplus wealth, before capital, on a considerable 
 scale, was employed to give efficiency to labor,, financial or com- 
 mercial epidemics were unknown. When every man was a com- 
 mon laborer, producing with the fewest and cheapest tools, or 
 
 * The following is taken from a New York newspaper : “It is such an easy matter to 
 get out of the world that it is strange that people make such hard work of it— especially 
 in hot weather. During the past month Paris green has been used in nineteen out, of 
 twenty cases of suicide that have occurred in New York, Brooklyn, and Jersey City. In 
 suicide personal comfort is generally sacrificed to fashion. The Pont Neuf and the Lon- 
 don bridge became popular passage-ways to death soon after they were built. The sus- 
 pension bridge at Cincinnati was barely finished when a man ended his life by jumping 
 from it, and for a long time three out of four suicides in that city were committed in the 
 same way. Paris green will probably have the “run ” here until the East River bridge is 
 completed.” 
 
86 
 
 procuring by single exchange, all he consumed, the imagination 
 was not excited by visions of prospective and indefinite riches. 
 Growing and stored crops for the year, scanty fiocks and herds, 
 a few beasts of burden, and land enough for their subsistence, 
 with the simplest clothing and shelter, were all they sought with 
 expectation, and more than ' they could acquire without the 
 severest toil and privation. But when capital became an impor- 
 tant instrument of production, making possible the utilization of 
 the natural forces, and the introduction of machinery and num- 
 berless labor-saving appliances, multiplying and cheapening the 
 products of industry often a hundred or a thousand fold, and 
 placing within reach the vast resources of commerce, a way was 
 opened and inducements offered for extraordinary accumulations. 
 At the same time, a new class of workers was added to those be- 
 fore in existence; I mean the distributors of wealth, or middle- 
 men, sometimes so called. They are a necessary part of the 
 economic system, more important as society advances, but, from 
 their position and opportunities, somewhat dangerous to business 
 interests, and the welfare of the other classes. When discharg- 
 ing their proper functions as merchants, brokers, bankers, etc., 
 passing over from producers to consumers the proceeds of indus- 
 try, they perform an essential service, adding to substantial value, 
 or saving in needful expenses, the full amount of their charges 
 (toll). But too often they forget their regular duties, and usurp 
 another office. Like others who are largely paid, they are fre- 
 quently smitten with cupidity — a consuming desire to gain wealth 
 without earning it. They attempt monopoly, or buy on specula- 
 tion, and sell, not to consumers, but to speculators like themselves, 
 using credit largely to supply the means. Their peculiar rela- 
 tions to the credit system and moneyed institutions of the country, 
 when taken in connection with their needful, perhaps speculative 
 risks, expose them to unwelcome surprises and dangerous reverses. 
 Among them, financial or commercial epidemics always begin, 
 and under their management run their appointed courses. lo 
 this class, panic, when it comes, is most disastrous, though other 
 parties more blameless suffer severely. 
 
 Incidentally, on several occasions in the course of this paper, 
 I have referred to some of the leading phonomena which attend 
 the financial epidemic. Collectively, they constitute a disorder 
 of a peculiar kind with unique symptoms. Recent occurrencies 
 have made them a too familiar group. Distinctly, as they appear 
 
87 
 
 in the individual, they are of a morbid character, and follow one 
 another in a determinate order, the series recurring at intervals 
 with an approach to regularity. The following have been mem- 
 orable periods in modern financial history: 1816 , 1825 , 1837 , 1847 , 
 1857 , 1866 , 1873 , the periods (in consequence, seemingly, of 
 special local influences causing acceleration or retardation) ex- 
 ceeding slightly or falling a little short of ten years. The aver- 
 age up to 1866 (the last time that the Bank of England was 
 authorized to issue notes in excess of the statute-limit) was just 
 ten years. What is called the crisis which immediately precedes 
 the panic, graphically so called, marks the culmination of the 
 epidemic. It introduces the last, most painful and appalling of 
 a series of changes each of which is dependent on the conditions 
 which have preceded it. The morbid mental state which is the 
 characteristic of panic, contagious as it is in the highest degree, 
 spreads with marvellous rapidity, using the telegraphic wires as 
 the vehicle for the more distant places. In an able paper, in 
 “The Fortnightly Review,” Mr. Horace White notes the fact 
 that the Anglo Saxon and Teutonic races are the most severe 
 sufferers from commercial epidemics. The French are nearly 
 exempt from attack. 
 
 The financial distemper, like the ordinary febrile disease, may 
 properly be said to have three stages, one characterized by de- 
 pression, another by reaction or excitement, and another by col- 
 lapse and debility. That which may be called the first or intro- 
 ductory stage grows out of the shock which the nervous system 
 has received at the winding up of the preceding epidemic. The 
 panic and the external changes immediately connected with it 
 have produced temporary lesions in the nervous centres, modify- 
 ing the mental constitution, and giving exaggerated views of the 
 business world, and one’s position in it. Men of the sanguine 
 temperament, who have seemingly been driving a prosperous 
 trade, building larger every year, and gathering treasure and 
 distinction, find the work of half a life-time tumbling about their 
 ears, their fortunes wrecked an$ their hopes blasted. Of course 
 they are sick, and greatly disheartened. Property which, a short 
 time before, was supposed sufficient to make the owner rich will 
 not sell for enough to discharge the liens or mortgages. Prices 
 have fallen ruinously so that producers have been unable to make 
 and sell goods without severe losses. Fearing the worst, and 
 knowing that insolvency is the penalty for mistake, they hesitate 
 
and delay, while buyers for the same reason first postpone, then 
 stint their purchases. Everything has gone and is still going 
 down except taxes, which politicians contrive to maintain. Un- 
 der these circumstances, labor finds scanty employment at reduced 
 wages. Of all goods seeking a market the sale is painfully slow, 
 and at unremunerative prices. The slack demand, the greatly 
 reduced consumption, and the severe economy practiced in all 
 directions, make the supply, however limited, in excess of the 
 wants of the buying and paying public. Of course industry lan- 
 guishes, business droops, and enterprise is extinct. Further 
 losses are apprehended whatever course is pursued. Occasion- 
 ally, perhaps, the prospect has improved, and men been tempted 
 to spend money, and prepare for a more active trade; but in such 
 cases expectations have been disappointed, and those making 
 ventures cheated by their hopes and impatience. Consequently, 
 all are discouraged, doing best seemingly when doing least. So 
 long as prices are still falling, the whole business population — 
 those engaged in producing for the market, or in distributing the 
 wealth which others create — are practically helpless — helpless till 
 the bottom is reached. They are so because they cannot control 
 the circumstances which determine the downward movement. 
 It is economically impossible for either class to discharge its 
 office, or long maintain financial existence when goods or prop- 
 erty exposed for sale will not bring cost. If cost be not obtained 
 there is not only individual bankruptcy, but a rapid destruction 
 of capital — one of the industrial forces — without which labor 
 has no efficiency, and prQduction is at an end. 
 
 At the present moment, we are in a condition not unlike that 
 described. We have passed through the several stages of one of 
 the severest commercial epidemics on record. Though bruised 
 and bleeding, and not a little crest-fallen, as a people we have so 
 far survived the attack and its consequences. A few have gone 
 into the insane asylums or taken Paris green; many have felt the 
 pangs and the sorrows which come after intoxication— the “hor- 
 rors,” so called, of delirium trerpens — and all are now very far 
 advanced in the stage of exhausted vitality and collapse. Of re- 
 covery there are yet no decisive symptoms. For four successive 
 seasons our financial doctors have promised speedy convalescence, 
 and as often have announced the signs which foretell improve- 
 ment, but results have shown they were arrant pretenders and 
 quacks. No doubt the better time is coming, perhaps is just at 
 
89 
 
 hand. When at last it arrives, the later, more lucky, but per- 
 haps not wiser prophets will be accounted seers. Consumption 
 on a considerable scale, it will be remembered, particularly of 
 those articles which supply the primary wants of the people, is 
 all the time going on, while production, owing to extreme caution, 
 is largely suspended. When, at length, by the unequal action 
 of these opposing forces, a comparatively glutted market is re- 
 lieved, prices will improve, and goods can be made and disposed 
 of at a profit. Then, and not before, those engaged in business, 
 having learned economy and cut down expenses, will be able to 
 go forward with more assurance. Till all classes interested in 
 sustaining prices have come down to the normal level, consented 
 to temporary sacrifices, and made the needful reforms, there can 
 be no advantage in starting or trying to start business. Prema- 
 ture efforts will inevitably fail as they have done repeatedly in 
 the last three years, and as they did still more disastrously in 
 1838, preparatory to the second and final break-down in 1839. 
 Combinations, trades-unions and other desperate expedients may, 
 in certain cases, and for a little time, save individuals from their 
 share of the needful losses; but they cannot avert the unwelcome 
 necessity, much more abrogate a natural law. Had all classes 
 forty months ago submitted to the inevitable, and at once made the 
 sacrifices (in many cases more apparent than real) they have since 
 vainly strived to escape, we might long since have greeted the 
 more prosperous season for which we are waiting. Had business- 
 men, at that time, pursued this course, remembering that price 
 is nominal, not real — that the profits of capital and wages of 
 labor are not determined by the money received but by the com- 
 modities, including food, clothing, shelter, etc., for which that 
 money will exchange, there would have been no subsequent loss- 
 es on the part of producers except such as grew out of the tem- 
 porary stagnation in trade. If every dollar which a man gets 
 to-day will purchase as much as two dollars would procure four 
 years ago, it is difficult to see how his condition is made worse. 
 The ready and sufficient excuse for the different course pursued 
 is found in the fact that the people have been crazed, sick and in 
 affliction, not knowing what their best good required. Their 
 minds have been bewildered, their heads made giddy by the ex- 
 citing delusions of the past. They could not think complacent- 
 ly of coming down in anything; and not till compulsion has 
 braced up the resolution have any needful concessions been made. 
 
 12 
 
90 
 
 It is not strange that many have mistaken the cause of the 
 hard times, and, turning away from an unpalatable remedy, have 
 so long neglected to make the needful sacrifices, looking for re- 
 lief in the mean time to some juggling legislation which will un- 
 settle values. Contrary to an opinion which prevailed extensive- 
 ly three years ago, it is now known that cheapening the currency, 
 in a time of business depression, can have no tendency to restore 
 trade and prosperity. It will not stimulate production, or give 
 work to laborers, because it cannot create a demand for the pro- 
 ducts of industry. There are already in the market more goods 
 than can be sold at a profit, and any considerable addition would 
 knock down prices, and make necessary still greater sacrifices. 
 There is more than enough money at the present time for the 
 transaction of all the business which offers — more than enough 
 to run all the iron-mills, factories, steam-vessels, freight trains 
 and merchant-houses which can be run without loss. If more 
 were issued, it could not be profitably employed, and could not 
 be loaned to solvent men — to men who would promptly return 
 it, with interest, when wanted. President Grant and Secretary 
 Richardson, three years ago, without the authority of law, tried 
 to restore health by the issue of twenty-six million of greenbacks, 
 but failed signally and disgracefully, as those better informed 
 anticipated. The first legal tenders which were put in cir- 
 culation in 1862 acted as a spur to business because the condi- 
 tion of the country was wholly different. Then the government 
 was the chief support of trade. It had taken a big contract. It 
 borrowed capital on an enormous scale, employed half a million 
 laborers to do its bloody work, became the great purchaser, con- 
 sumer and wrecker of the products of industry, and furnished 
 the active demand now so conspicuously wanting. Under the 
 circumstances named business in general could not long be stag- 
 nant. 
 
 The phenomena which mark the decline of one nearly spent 
 commercial epidemic are much the same as those which signalize 
 the approach of another. Notably, they attend our present con- 
 dition. We are now passing through a transition stage, filling 
 up with lamentations the weary interval between the outgoing 
 and incoming tides. No movement is yet apparent, but clearly 
 the nervous depression, discouragement, lack of confidence (not 
 so much in men as in prices), and flagging energy in all direc- 
 tions so characteristic of the times, must erelong, in virtue of a 
 
91 
 
 well known physiological law, give place to reaction. When 
 sufficient vitality remains, all the morbid states of the system 
 distinguished by the symptoms named are followed by a counter 
 or reactive movement designed to repair the damage which the 
 nervous centres have received. In regular febrile diseases, this 
 reaction is attended by unnatural and conspicuous activity in the 
 blood-vessels; but if the disorder be seated in the organs control- 
 ling the moral nature, the sanguine excitement may not be im- 
 portant. However this may be, relief should be expected when- 
 ever falling prices have gone far enough to guarantee reaction 
 without relapse. When the returning flow of vital energy, an- 
 swering to outward change, has reinforced and repaired the 
 injured nervous tissues, then shall we be lifted from the u slough 
 of despond.” Then will come hope, courage, enterprise and busi- 
 ness prosperity, putting an end to the torpor and general par- 
 alysis to-day so apparent. It is quite possible, indeed, highly 
 probable, that declining values, owing to distrust of the future, 
 may proceed further than necessity requires before restoring 
 production and trade to their accustomed activity; but should 
 this happen, recovery, when once a beginning is made, will be 
 more rapid than otherwise, and less liable to interruptions. 
 
 Always when the stage of nervous depression has been pro- 
 longed and severe, reaction, like the returning tidal wave, tends 
 to pass beyond the normal limit. When this tendency becomes 
 reality, the second and most remarkable stage of the epidemic is 
 begun. The symptoms again become morbid, morbid from ex- 
 citement; and in accordance with a well understood law, are 
 measurably more active in proportion to the severity of the 
 preceding stage. The invariable external condition which signal- 
 izes the progress of reaction from the moderate to the vehe- 
 ment will be found in the steadily advancing prices — a sure and 
 exhilarating upward movement in place of the disheartening 
 downward tending of an earlier period. This persistent rise of 
 money values makes the holders and purchasers of property and 
 middle men for the time prosperous, and all classes happy. Men 
 forget their misery, become resolute and go to work with a will. 
 Production is largely increased, sales are quickly made, consump- 
 tion is proportionally active, profits are again remunerative and 
 wages satisfactory. Mills lately “ running on half time ” are 
 fully employed, the hum of industry is heard every where, while 
 the marts of commerce are thronged with trading people. The 
 
92 
 
 hopeful prospect begets confident expectation and restlessness 
 leading to new enterprises. 
 
 Rising prices then, are the outward and immediate cause of 
 reviving business, while reaction which, by an organic law, fol- 
 lows and removes nervous depression, is the inward, more funda- 
 mental cause. These augmented prices are of course equivalent 
 to a depreciation of the currency, but those who supply the 
 money market are compensated by the enhanced rate of interest 
 resulting from the new demand for loans. Did the advancing 
 movement cease when the natural level had been reached, no 
 harm, but unmixed good would ensue; but unfortunately there 
 is usually no halt at that point unless for a brief period. In a 
 particular fever, the malady is not at an end when the chills, 
 nausea, neuralgic pains and other symptoms of depression give 
 place to returning heat and the modified relief of the second stage. 
 The hope, sometimes favored by appearances, that reaction 
 will not do more than restore healthy excitement is deceptive. 
 So in a financial epidemic; the movement which inspires courage 
 and carries up prices to the normal standard, does not stop there, 
 but goes on to produce new chauges — seductive but dangerous 
 disturbances. The mischief wrought dates from the period when 
 speculation begins — when men buy not for distribution, or in the 
 way of business, but to hold temporarily for an advance, bidding 
 against one another in the market, and running up money values. 
 When the speculative element, in considerable proportion, enters 
 into business, all the evils which belong to a commercial epide- 
 mic are let loose, and a financial crises becomes inevitable. The 
 symptoms are distinctly, sometimes intensely morbid, and the 
 disease ouce established, must run its course. The end is ex- 
 plosion, disruption, panic. 
 
 It will not be necessary to repeat at length what I have writ- 
 ten in other places concerning the phenomena and conclusion of 
 the second stage of the financial malady, the special circum- 
 stances which increase or mitigate its violence, the effect of 
 paper money in facilitating its progress, or of an inflexible in- 
 convertible currency in making more destructive the final catas- 
 trophe. Of antidotes and peremptory remedies there are none. 
 Of means to alleviate, however, we are not destitute. These are 
 more effectual than in influenza, measles or small pox, but are 
 not always successful. Of course no curative agent will abrupt 
 ly, while its essential conditions remain, cut short the distemper 
 
93 
 
 in any of its stages. Specifics are not known, though mack 
 remedies abound. 
 
 In the way of palliative treatment, the first stage — that of ex 
 haustion and depression— demands mild stimulants, exhilarants, 
 nervines, tonics, and the usual means to sustain the courage, 
 keep alive hope, and incline the sufferers to make promptly the 
 required sacrifices. In the second stage — that of reaction — re- 
 frigerants, sedatives and depletion are called for. The indications 
 (in medical phrase) are to moderate the cerebral excitement, 
 control the speculating proclivity, and restrict or curb prices. 
 These may all be met, and the proposed ends attained (if attain- 
 able) by the same remedies. Manifestly, the heated brain needs 
 cooling applications; the too active cerebral functions sedative 
 and repressive treatment; but usually, the aid of the physician, 
 armed with the implements of torture — blisters, setons and the 
 lancet — is not asked. Most likely his advice, if given, would be 
 spurned. Were a prescription desired, some financial charlatan, 
 some noted Dr. Leech, broker, loan-agent and speculator, would 
 naturally be consulted. Relief then must be sought from 
 another quarter. Effects (symptoms) must be modified l»y 
 means which control causes and conditions; measures taken to 
 govern trade, and through trade to suppress the exuberance of 
 traders. Not easily can all buy and sell on an enlarged scale — 
 cannot without embarrassment speculate successfully, or extend 
 their credit, or by competition run up prices extravagantly — with- 
 out an increased supply of money, or in a stringent condition 
 of the money market. Money is, in an important sense, the 
 blood of the economic system, the circulating medium which 
 gives li t<> commerce and exchange. Whoever controls the cur- 
 rency has an instrument equal in efficiency to the lancet in the 
 hands of the physician. Largely in either case, the manipulator 
 holds the issues of life and death. Primarily, the government 
 provide the currency, or determines what it shall be. In this 
 regard, by the use of its rightful authority, it can exercise a vast 
 influence over the commercial health of the people — an influence 
 which -a ill be salutary or otherwise according to the measure of 
 its wi i • ' ' a or folly. When the Constitution, for the good of all, 
 gave to * ogress the sole right “to coin money and regulate the 
 value thei-t of,” it made adequate provision for a measure of value 
 and medium of exchange, the best the world has yet seen, one 
 better fitted than any other to act as a preventive of financial 
 
94 
 
 M 
 
 sickness, and as a palliative and remedial agent when disease is 
 already present — one which cannot be increased suddenly and 
 indefinitely at the call of schemers and inflationists — one qualified 
 to resist at every step wild speculation aud unhealthy prices, and 
 to embarrass those inclined to use their personal credit for ille- 
 gitimate purposes — purposes hostile to our industrial, commercial 
 and monetary systems. Though not capable of suppressing wholly 
 the visionary in human nature, or of controlling the tendency to 
 epidemic excitements, metallic money always exerts a sanitive 
 influence. It checks the break-neck speed of those who would 
 overturn themselves and the world in their haste to gain un- 
 earned riches; while paper money of whatever pattern has the 
 effect of an immoderate stimulus and inebriant, giving “ aid and 
 comfort ” to the perspiring throng of moon-struck adventurers, 
 and urging on to a disastrous end the morbid actions. Not only 
 is a specie circulation competent to moderate the fever and de- 
 lirium of a commercial epidemic, but it is able, by another quality, 
 to mitigate the frightful and distressing symptoms which mark 
 the crisis or culmination of the disease. It is comparatively in- 
 flexible in one contingency, and flexible in another, both at the 
 right time and in due degree, as heretofore explained. 
 
 I ■ • .