ssj , Return this book on or before the Latest Date stamped below. University of Illinois Library /i f J0 — C ICC .%• I •'lay i s i. iS3 WAY 2 2 r- °EC 35 1984 AP9 if ijjgg 4 1984 P ' Llol — H 41 •» :* , : . , 'r . , • *. k'. : 7 ; & •:• t ;/• ft - *t" . * (, D» > : .v - 1 : .. mi 1 ♦' ;, -■ v* *. / ■ ' • ' V:.] ' 11 ' (j ... ' .-;‘V ‘ 1 ' -.1 / • . j i* rt f •! 4" WWW* Free Coinage of Silver THE U-\ ~ m UIN K. J. DONNELL. Reform Club Sound Currency Committee, NZW YORK. v Free Coinage of Silver the Ruin of all Credit./ I have been requested by some friends to write something on the silver question. I confess I do so with reluctance, for this reason : For more than seven vears—from 1881 to 1888— «/ I had, in speech and writings, been warning my countrymen against the dangers of the free silver propaganda begun and carried on with such extraordinary ingenuity, activity, and perseverance, and lavish expenditure. The great success of the silver mines, and the little support I received from those opposed to them, and especially the events of the last few years, convinced me that I had been wasting time, without benefit to either myself or the public. Ignorance of the funda¬ mental principles of economics kept the advocates of sound money on the defensive. I knew that, in politics, a defensive war is always a losing war. In the Spring of 1888 I delivered a lecture before the Re¬ form Club in this city, in which I predicted substantially every¬ thing that has since taken place in connection with the free silver propaganda. What I have to write now will be little more than a restatement, in the light of accomplished facts, of the principles upon which I then founded my predictions. My leading thought was that the free silver propaganda was an attack on credit, which, if successful, must result in general ba nkruptcy . From this we have been saved, at least tempo¬ rarily, by the bold and resolute action of President Cleveland. The great danger of Democratic self-government in questions of finance is that the masses, especially the agriculturists, have 4 no adequate appreciation of the supreme importance of credit. Credit—mutual confidence between men and nations—is the foundation upon which rests modern industry and commerce, in fact, all that is known as civilization. Money is nothing more nor less than the highest form of credit. When credit is shattered, money disappears as it did in the Middle Ages. When a panic results, even fictitious money is hoarded, as it was during the last Congress. I have been surprised to see that the low prices of our lead¬ ing agricultural products have been attributed, even by our professional economists, to overproduction, and nothing else. I cannot speak of wheat with confidence derived from per¬ sonal knowledge, but I can speak of cotton with some claim to authority derived from fifty years’ experience, observation and study. I consider it morally certain that the attitude and con- duct of the last Congress on the silver question cost the cotton planters on the last two crops alone at least $100,000,000. The first Bland silver purchase bill was at once recognized \>y well-informed economists as a menace to credit. It was a storm cloud, small at first, but ever increasing, until the pass¬ age of the Sherman silver purchase bill, when it rapidly spread over the whole heavens/ The silver men were confident that the law would raise the value of silver bullion to a parity with gold at the ratio of 16 to 1. The event was directly opposite. It is reasonably certain that, if the Government had not inter¬ fered, much capital and labor would have been transferred from silver mining to gold mining, and, under the operation of natural laws, gold and silver would have been much nearer to each other in intrinsic value than they are now. At the root of all our economic heresies is the popular belief that values can be not only regulated but created by law. Unfortunately this delusion has been indorsed and propagated by the Supreme Court’s decision that Congres had the constitutional right to declare Governmental promises 5 to pay (greenbacks) a legal tender. This decision was forced upon the court by the short-sighted statesmanship of the time. It was then deemed expedient to declare war measures con¬ stitutional from fear of upsetting conditions which, for the time being, were satisfactory. I doubt if there be in all history a more convincing object lesson of the supreme economic value of credit than was fur¬ nished by our treatment of the national debt incurred in the prosecution of the war, and the results from that treatment. A large part of our bonds w T as sold at an average value of fifty cents on the dollar. Most of them were bought back at an average of one hundred and twenty. This gave us command of nearly the whole surplus capital of Europe, which was the main cause of our wonderful industrial development during twenty years. That free inflow of European capital w T as extremely profitable to us, but was also a danger. Boundless credit is a fool’s paradise. Credit can only be preserved by using it wfisely. When so used it can never cost more than it is worth, and it is the only economic value of which that can be said truly. The late restoration of confidence by the European gold loan is only a more convincing proof of the value of credit, because it is recent. " The lowest price known for middling in the Liverpool mar¬ ket previous to the present season was in 1845, when it aver¬ aged 3 92-100 pence. The lowest was 3J pence; the lowest price in this market was 5| cents. It was at a time of general bankruptcy. Most of our banks had suspended, and bank notes were either worthless or selling at a heavy discount. The lowest price in Liverpool this season was 3 y>ence, and in this market 5 7-16 cents. It would seem from this that in the past fifty years the cost of transportation and exchanges had been reduced more than 1J cents per pound. The startling fact is that the whole of this saving has gone to the benefit of consumers and no part of it to the profit of producers. I cannot doubt but that this was mainly owing to the disor¬ ganization of credit in this country. The free-silver agitation \lias kept our people in a panicky condition for several _years. During tile last two to four years we were on the perilous edge of bankruptcy. Previously people had treated the silver propaganda as a passing folly unworthy of serious attention. I feel sincere affection for my countrymen of all classes, and I wish to speak of them as I feel, but I must confess that many sensible patriotic people concluded that, if the last Con¬ gress fairly represented the popular sentiment of the South and West, our fellow-citizens of the South and West have been demented. During nearly the whole of the last Congress we were drifting toward general bankruptcy, yet Congress refused to give the Administration the means of preserving the national credit. Nothing like this has ever been seen in this country or in the modern world. The only cloud that now darkens the horizon of the future is the dreaded meeting of the next Congress, which is reported to be even more demented on the silver question than was the A. last. If there should be no change for the better our last con¬ dition would be worse than the first. The danger is greatly increased by the apparent fact that there is but one man’s life, like that of President Cleveland’s, between us and a silver basis. _ _ A majority, or at least a large minority, of our politicians have committed themselves unequivocally to free coinage. They consequently considered their political fortunes involved in its success or failure. Will they have the manliness to ac¬ knowledge their error? Doubtless many will. The mass o f the Southern people w a nt more money, ev en if it be fict itious money . If nothing else would satisfy them, I would advocate the unconditional repeal of the tax on State bank issues and, simultaneously, the redemption and destruction of all the legal-tender obligations of the Government. If the State 9 US ( banks are permitted to issue paper that does not command public confidence, people need not accept it. It is to be hoped that the memory of ante-war times, and especially the catas¬ trophe of 1837, will prevent them from repeating the folly of those times. It is still probable that they will be willing to submit to some sort of governmental supervision such as will inspire general confidence. There is in the world a vast mass of jfioaf.i n g na pi fa i T increas¬ ing continually, and more and more rapidly as industry and science advance. This floating capital is bound to no country in particular. It is constantly seeking everywhere for either the most profitable or safest investments. It will desert any country or community that fails to protect it. The country or community that woul d av ail itself of the benefits of the use of this floating capital must elevate its credit to t he high est stan - dard. The first condition of such credit is sound money, the 1 right definition of which is money that commands universal confidence; not money that has the confidence of a single community or nation alone, but of all nations. There is but one standard of value that meets this requirement, viz., gold. The leading industrial nations have been forced to recognize this truth. The floating capital of the world is all based on gold values. It will be loaned on that basis or not at all. A few may specu¬ late on the chances of a fluctuating currency, but always with a large margin of profit to protect them from possible loss. I use the term basis of gold values because thousands of millions of transactions in commerce and finance are consummated without the use of the metal. The unquestioned recognition of the gold standard is generally sufficient with a very small percentage of the metal. The reason why money can be borrowed on time in New York at 3 per cent, per annum, and in remote agricultural dis¬ tricts can hardly be borrowed at all, is obvious. In the former 8 the security is satisfactory, and the obligation of the borrowe to return the same kind of money he borrows is not questioned by anybody; ' the latter the mania for a depreciated cur3 rency undermines confidence and destroys credit. What would be the effect of the silver standard on the basi ^>f 16 to 1? It would not advance the gold value of silver, on \if it should, it would be only temporarily, consequently our ($540,000,000 of silver, every dollar of which now discharges the functions of gold, would then be reduced to $270,000,000 actually. This of itself would cause a terrible contraction, the i/ • world would be still conducted on the basis of gold values, and the crushing effect of the contraction and loss of credit would fall on the masses of industrious people. The fearful injustice,! not to say robbery, to the wage earners, the widows and orphans dependent on life insurance for their future protection from! want, the depositors in savings banks, in trust companies, ami banks of deposit, has been amply discussed by others; it needa only to be named here. The government and people thal would be guilty of such robbery would neither have noa deserve credit. I cannot believe—it is not possible—that thJ American people could ever be consciously guilty of such a crime. Nor can anv man who would advise it ever retain tlieiJ nfidence. In the early days of Gen. Jackson’s political career, he de nounced, with all the vehement energy of his character, th stay laws they proposed for the relief of debtors. Ills life was threatened in vain, and never afterward did the American people either condemn his course or doubt his integrity. (For price list of Sound Currency literature address Reform Clul Office, 5*4 William st.. New York City.) 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