UNIVERSITY OF ILLINOIS LIBRARY Class 33ft. S Book Volume My 08-1 5M THE ROAD TO SAFETY A LETTER TO GENERAL GRANT ' ON THE CURRENCY. u Fling but a Stone ? the Giant Dies!” B O S T O N : WRIGHT & POTTER, PRINTERS, 79 MILK STREET, (COR. OF FEDERAL.) 1869. *5 3 V=> ' S h v* o >» rfi (fi 0 «$ In Somerville, Mass,, February 1, 1869. To General Ulysses S. Grant, Washington , X). C. As President elect of the United States, it will soon become your prerogative and duty, as the executive head of the nation, to recommend to the legislative branch of the government the enactment of such laws as seem to be required by the present condition of public affairs. The Congress now in session is paralyzed by the magnitude and importance of matters presented for its determination, and in a critical condition of the exchanges, revenue and industry of the country, composedly talks of “ masterly inactivity,” — an idea born of treason, — in expectation that the ship of state will drift into a less troubled sea. An absence of stout determination on the part of this body is likely to devolve upon you the necessity of presenting for the consideration of another Congress the urgent wants of the nation. As one of more than thirty millions, whose interests, pursuits and influence are less potent in shaping legislation than are the persistent, concerted and intelligent efforts of a smaller class of the population, — embracing merchants, bankers, tradesmen and speculators, as well as public plunderers, — I think it not improper to offer some suggestions on the most important topic now before the people's representatives, — that of the measures necessary to restore the currency of the country to an equality with the money of the world. No philosophical disquisition on the power of money, the rela- tion of capital to labor, or of money to capital, can promote the payment of debts ; nor will it strengthen your well-known prac- tical appreciation of existing evils, or aid in providing a remedy therefor. It cannot, however, bo impertinent, in considering the manner whereby the present Condition of affairs may be improved, o fwU 880 4 to refer to the causes which have produced the difficulties under which we are laboring. Within the last eight years, the nation has consumed, in an expensive war, — inevitable, and worth to this and to subsequent generations, whatever it may have cost, — more that 17,000,000,000 of the results of labor, — the past and future earnings of its people. A portion of this enormous sum, — that 'represented by waste and destruction in one section of the country, — has been yielded up, a penalty for crime ; a portion has been satisfied by the people from their more recent earnings ; and there remains for the industry of the population to provide for hereafter, not less than 12,500,000,000. The agent of the nation, its government, has become sponsor for future payments, and $400,000,000 of the amount it promises to pay on demand. This alone of its promises it fails to perform, and thus impairs its credit not only with its own people, but in every foreign land. Until this, its foremost pledge, shall be redeemed, a further use of the credit of the nation must prove imprudent, expensive and unwise ; for when the ability and determination to pay this portion of the debt is manifested, as it can only be manifested, by the act of payment, loans sufficient to consolidate the entire indebtedness may be obtained on terms so favorable as to relieve the people of one-lialf the burden. To bring about such a result will certainly justify every necessary present sacrifice. Payment of these unredeemed obligations, upon which hinge the credit, the character and the welfare of the population, may be made in the manner indicated hereafter, per- mitting a joint influence of contraction and commercial growth to operate in the means to secure a permanent specie currency. A dread of contraction has heretofore stood in the way of adopting a clear, resolute and unchangeable method of payment, without which confidence can nowhere exist, and under such a dread the country may flounder about until the industry and economic habits of its people have suffered a loss greater than the aggregate of the present national debt. A judicious contraction of the currency cannot lessen the pur- chasing power of what remains in circulation, but a disturbance to some extent of all values must take place whenever or however D a return to gold and silver payments is brought about. The sooner this disturbance is ended, the better for the whole people. Assuming that the present circulating medium reaches the nominal sum of $700,000,000, of the value of 74 cents each, how much more useful in commerce can this be than $500,000,000 worth 100 cents each ? Should a far-reaching policy be inaugurated, looking to the ultimate and certain payment of legal tenders in gold, and under which $100,000,000 shall have been redeemed, will not those out- standing be likely to rise to the value of 87 cents ? And before another $100,000,000 shall have thus been paid, will not the balance be appreciated to par? Various circumstances will co-operate to this end, and the inconvenience to commercial operations will arise from efforts of the banks to fortify themselves with lawful money, which the best interests of the country and all its people demand. If legislation be wise, the banks can be made stronger as well as more useful by restraining their business to legitimate and proper channels, enabling them to furnish a currency medium more than sufficient for all the demands of honest commercial and industrial pursuits. While a manly, straightforward, creditable and statesmanlike policy suggests a commencement of the payment of legal tender notes by the government at once, which can be done by hypothe- cating, — not selling, — four per cent, bonds in Europe, there is a more comfortable method, — too slow, perhaps, for the highest integrity to sanction, — one that is safe, certain, simple and effica- cious, conclusively meeting all the objections of the most timid, and which will, for its absolute and complete success, require only steadfastness and unchangeableness on the part of Congress. This method may require for a few years a small amount of gold be- yond the current receipts ; but if, for a purpose so important, the nation is unwilling or unable to curtail its annual expenses, its bankruptcy ought to be proclaimed, so that its creditors may un- derstand their real position. A longer use of irredeemable paper money is bankruptcy, and taints every outstanding obligation of the nation and all other public American securities. When the power of the government of the United States extends over the whole earth, and not till then, can a symbolic currency without intrinsic value be made to meet the wants of trade ; but where, 6 as here, a small fraction of the commerce of the world is car- ried on, the emblems of labor and of wealth must be bone and sinew, gold and silver. To overcome our present difficulties, I propose that method which an honest and right-minded business man would adopt, should he find his ability to meet his pecuniary obligations tem- porarily deranged. Such a man would divide his liabilities into convenient and manageable instalments, and fix upon the earliest future dates, consistent with safety, for their extinguishment. Provision for such a payment of the failed paper of the nation can be brought about by authorizing the issue of bonds payable in instalments in gold, without interest , in two, three, four, five, six, seven years, or longer, limiting the amount to become due in any one year to thirty, forty or fifty millions of dollars, and receiving in exchange therefor legal tender notes, which should be cancelled and destroyed. One section of an act will cover all necessary legislation on the currency until after resumption of specie payments is complete , and this, in combination with an Act legalizing contracts in coin, and a declaration that our debt is to be paid in specie, will improve the credit of the nation where it is most needed, — in every bank parlor of the old world, — thus paving the way to future financial health. The date of the bonds first becoming due may be so arranged that their present marketable value will be less than that of greenbacks, and not being wanted, they would remain in the treasury. This method can be so graduated by any merchant’s clerk that resumption may be brought about speedily, or may be deferred five, ten or twenty years. If, as an example, 810,000,000 of bonds per annum, without interest, should be authorized, the first to be paid in five years, it would be a long period before greenbacks would become as valuable as gold ; but if instalments of 850,000,000 were adopted, the first payment to be made in two years, it is probable that paper money and gold would be on an equality within five years. This plan would enable the average opinion of Congress to concentrate upon some date and amount, as a groundwork for the people in all future business operations. As gradually these bonds appreciate, and as time rolls on they must appreciate, exchanges will commence. Left to the volun- tary action of the people, they will be taken only when they are esteemed of greater value than legal tender notes, and as this 7 time must come, sooner or later, the process of conversion will move on without obstruction. The effect will be obvious. At first worth but 70 cents, they become in time worth 75, 80, 90, and at the time of payment 100 cents in gold. Meantime a sec- ond and a third instalment of these bonds are being purchased, and an appreciation of the whole mass of legal tenders and bank notes has commenced. This appreciation would undoubtedly nearly correspond with the depreciation of the volume of paper money, so that from this cause alone \ no contraction of the pur- chasing power of the currency would take place. A better dollar would buy more goods, just as it does now, and will always. There is more likely to be a slight inflation, consequent upon the increased value of greenbacks, brought about by such a rigid determination of the nation to pay its debts. While this process is going on, the people will more frequently than hitherto exercise their right to the redemption of bills issued by the national banks, absorbing legal tenders to an extent which will compel the banks to provide themselves with coin, the only lawful money within their reach ; and it is probable that resump- tion would commence long before $200,000,000 of the bonds issued to facilitate this purpose had matured, and being without interest, all further demand for them would cease. Our contracts hitherto have been to pay in dollars recognized as the money of the world. A policy resulting in the payment of one instalment of $50,000,000 of the principal of the legal tender debt would be a most complete financial success, should it raise the price of our bonds (now selling in London at 76,) to 91, equal here to 100 cents in gold, by establishing our credit abroad, thus leading to a speedy equalization in value here of paper money and gold. Through this period, the directors of more than sixteen hun- dred banks, intelligent and sagacious business men, would take measures to insure the ability of their several institutions to re- spond to the demands for redemption made upon them, and such as failed to provide for this would necessarily be closed by author- ity of law. At whatever cost, the banks must thus prepare, and this will be no hardship, when the great profits of their business for the last few yesfrs, and upon the sale of coin formerly held by them, is taken into view. 8 Hereafter the people should enjoy a more equitable proportion of the value of the circulating notes issued to the banks, by in- creasing the tax thereon ; and the right to engage in the business of national banking should be extended to localities now destitute of proper facilities of this kind. A striking feature in legislation is the care taken to protect the banks from inconvenience or loss of interest. This is all unneces- sary and wrong, and indicates how far these institutions have already vitiated the public mind. Congress enacted laws under which more than sixteen hundred banking [associations, with an average capital of a quarter of a million of dollars, have been organized. Besides paying dividends amounting to ten per cent, per annum, — a much larger rate than the industry of the country could ever afford, — these associations have in four years accumu- lated a surplus of a hundred millions of dollars. Let, then, such institutions provide for themselves within the limits of the most stringent laws. They are managed by more than sixteen hun- dred boards of directors, comprising the most able business minds in the country, who, when compelled by some action of Congress directed to restoring the credit of the government, will astonish the members of the national legislature by the skilful manage- ment of their own affairs. Their future profits, ground out of the industry of the people, may and should be greatly reduced, and after having sold their coin at an advance averaging nearly a hundred per cent., they cannot ask to be relieved from restoring it to their vaults at a much lower rate. If, in consequence of a scarcity of legal tender notes, any bank is found unable to redeem its circulation in lawful money, let it go to the wall. Ten appli- cants for the lost privileges will immediately appear from sections of the country unprovided with proper facilities. It is the busi- ness of the banks to strengthen their own position, and it is the duty of Congress to protect the people from loss by the circula- tion of paper money, which, when inconvertible, has proved the most ingenious device ever contrived to rob the poor man of his just share in the product of labor. Intimately connected with the question of currency are other subjects, — the national debt, revenue system, tariff, public lands, internal improvements, — all, as they may be wisely or thriftlessly managed, affecting the industry of the country, upon which de- pends success in developing a “ government of the people for the 9 people ; ” but the brief limits assigned to this communication admit of but a few suggestions on these topics. The high rates of interest paid by the nation, compel nearly all classes of its population to consent to rates far beyond the ability of any people through a long series of years to sustain by their labor. It is a duty, therefore, of the government to make any temporary sacrifice, if by doing this the credit of the nation can be so established as to enable it to contract loans in competition with the most favored countries. With a government which no earthly power can shake, — having crushed a rebellion which must have annihilated any other system, — destined to live long after the monarchies of Europe have dis- appeared, their debts and their debtors alike crumbled to atoms, it is mortifying to find our obligations demanding a rate of inter- est nearly three times that of Great Britain. In the money mar- kets of Europe more confidence is awarded to the securities of effete Turkey and half-civilized Brazil. This discredit will con- tinue so long as Congress confines itself to resolutions and speeches touching the payment of the debts of the nation. To give confi- dence to the world some deed must be done, some payment of principal must be made in coin, under authority of unchanging and unchangeable laws. To develop the resources of the nation, encourage its industry, — the source of wealth, — economize its revenues, reduce its ex- penses, and consolidate its debts at a low rate of interest, demand the daily and hourly attention of ail public officers. We must be taught to earn money, husband it, invest it, and made to realize that the safest investment is in the payment of debts. That representative of the people who shall successfully discharge his duty in this direction will earn for himself the gratitude of mil- lions of his fellow citizens, and the just approval of the good and wise in other lands. If, however, the will and the genius are wanting, the country can work out with much suffering its own salvation, in defiance of legislative ignorance and neglect. With resources unequalled, the nation which has sacrificed hundreds of thousands of its able-bodied citizens, and thousands of millions of its wealth, to prevent a disintegration of its terri- tory, is being disgraced and impoverished by tardiness in the adop- tion of measures necessary to establish its credit, notwithstanding 2 10 the requisite measures are sure to prove alike honest and econo- mical. A sinking fund of but-thirteen cents per annum for each of the present population, compounded at six per cent., will pay the principal of the public debt in little more than fifty years. Waste, fraud, or extravagance, to the same small extent, will double the debt in the same number of years. Is not this a suf- ficient motive for economy ? If excessive taxation does not retard emigration, the ordinary in- crease of population will gradually reduce the per capita expenses of the government, amounting now to eight dollars per annum, so that in little more than twenty years this burden will be but half as great. Wise legislation, and an honest execution of the laws, can save, meantime, for the larger portion of the inhabitants of the land, the price of some necessity or comfort. A very large and the most valuable portion of the public domain, — pledged as it is for the payment of our debts, — has been frittered away, but what remains might, if placed under the absolute control of trustees selected for this especial purpose, be made in time to pay the principal of the national debt. Legislation on this matter seems heretofore to have been controlled by money rather than reason. This also has been the case on questions relating to the tariff, which have been deter- mined by fancies and guesses, and vague opinions of interested parties, so that no scientific basis for legislation has been sought for or deemed necessary. Notwithstanding the audacious criminality of an attempt to dismember the government, the time for the gallows has passed, and an unqualified forgiveness of errors will do much to restore to the South the ability to aid in our redemption from financial difficulties. When peace shall be fully appreciated in that section of the country, its industry will certainly furnish the sheet anchor of our safety, as California once saved from utter bankruptcy the people of the Eastern States. These are matters of too great importance to the industrial classes to be neglected. If not properly cared for, the will of the people must, at no distant period, manifest itself, at any cost to themselves, to the banks, or any other special interests. The operations of thieves and plunderers in the moneyed metropolis 11 of the nation has taught the simple lesson that an average of only five dollars of legal tender notes suddenly locked up in the pockets of forty millions of people will destroy all industry, and render insolvent every bank in the country. In selecting a head for that department which should give sys- tem, regularity and economy to the revenue and finances of the nation, cast your vision over the whole horizon, and haply there may be found, beyond a towering legion of political charlatans, some captain of artillery, the counterpart of that Secretary of the Treasury who co-operated so skilfully in the organization of our present form of government, and of whom— although appointed by Washington when little more than thirty years of age — it has been said, “ Ho smote the rock of the national resources, and abundant streams of revenue gushed forth ; he touched the dead corpse of public credit, and it sprang upon its feet.” Very respectfully, Your obedient servant, JAMES M. SHUTE.