i!W.iMi: ,^ -' MDCCCLXVII. r3T Entered, according to Act of Congress, in the year of our Lord 1867, BY JOHN ALEXANDER FERRIS, In the Clerk's Office of the District Court for the District of California. ^ I ^] 5^^ Printed by Towne & Bacon, No. 536 Clay Street, SAN FRANCISCO, CALIFORNIA, ERRATA. Page 43, nineteen lines from the bottom, instead of" convertible," read incon- vertible. Page g6, six lines from the top, instead of " o," read of Page 113, seventeen lines from the top, instead of "seven, page five," read viii, par. 5. Page 248, nineteen lines from the bottom, instead of "avery," read every. Page 257, nineteen lines from the top, instead of "most," read more. Page 257, twenty-one lines from the top, instead of " more," read most. Page 294, fifteen lines from the top, instead of "passed," read pressed. Page xiiiffi, fifth and sixth lines from the top, transpose the words "former" and "latter." To THE Friends of our Constitutional Currency — Gold and Silver Coin; To THE Advocates of Justice and Right, Wherever they may be found, In the United States ; To all who Recognize the Importance of Moral Principlf. In National Legislation and Jurisprudence,. And all who desire the Permanent Prosperity Of the American Republic in General, And of the Pacific States Especially, These Papers are Inscribed, With subservient regard, BY THE AUTHOR. CONTENTS. PAGES Preface xi-xiv NUMBER I. The Effect upon Gold — as Money — by Inflating ALL THE CirRRENClES OF THE WoRLD EQUALLY. Money should possess intrinsic vahie to excliange for value ; secured on stocks or property, not an accu- rate measure of value ; should exist in a country proportionately to the requirements of the same ; rapidity of circulation does not compensate for in- adequate supply ; money adapted to the purposes of its design — currency no repletive substitute. Currency often'circulates at the par of gold when far below gold value ; effect of sudden inflation, in equal proportions, in all countries ; irrepressible conflict between gold and paper 15-23 NUMBER II. Amount of Currency Needed in the United States. The currency of the nation should be governed by Con- gress, for national defense. Issues of State Banks should be suppressed. Currency should never be any form* of credit. Congress should not allow banks to circulate currency of less value than coin ; American mines ample to supply all healthful de- mands of the nation for money ; possibility of making our entire currency equal to gold coin ; currency and population of the country in i860 ; yield of the Pacific mines in eighteen years ; amount of currency required in i860 24-35 CONTENTS. NUMBER III. PAGES. Does California Need the National Banks ? Gold the staple of the State — no currency should be tolerated which cheapens gold, or lessens the de- mand for it as Money. Yield of California Mines, $50,000,000 yearly — Population not over 400,000. Laudations of a uniform Paper Currency. No uni- form currency can exist unless the equivalent of gold coin. The Currency of California desired by all honest men in the old States. Losses which would result from introducing the National Bank Currency — the system would work interminable • mischief 35~38 NUMBER IV. The Legal Tender Act Examined. Justice, one of the Fundamental Principles of the Con- stitution. The Legal Tender Act of Congress makes the word dollar a meaningless term — de- stroys it as a standard. The half of a quantity can- not be equal to the whole of it. The States have the same right to charter Corporations to coin money as to charter them to issue Bills of Credit. When Currency falls below the par of gold, it is issued in dead loss to the country at large. Con- gress has no power to enact a new system for rais- ing funds, when the Constitution provides a definite system for the same object. The Mint Laws of Congress are in full force. The Act would estab- lish a tender far inferior to gold coin in value. A Double Standard, varying in value, an impossi- bility. Congress has power to borrow and tax A\ithout any limitation, except public necessity. Has no right to use means not delegated, to accom- plish a purpose, where express powers are delegat- ed to effect such purpose. A hypothetical case in illustration of the Act (pp. 49-51). Congress fixes the value of coin by prescribing its weight and fine- ness. California being admitted into the Union with a hard-money Constitution, Congress is estop- ped from forcing on her any other currenty. Opin- ion of Daniel Webster on Legal Tender. The de- preciation of the Legal Tenders proceeded pari ■ passu with their issue. The Act had no power to keep them at the par of gold. The tendency of the Act is to create a moneyed oligarchy which will govern the nation, and if it is to remain a perma- nent enactment, to ruin our Form of Government . . 38-74 CONTENTS. NUMBER V. The Constitutionality of the Specific Contract Act Defended. The Law gives to Courts the power to enforce pay- ments of Contracts in the identical currency which the parties specify. Some of its provisions enu- merated. The gold and silver coin of the mints the only legal tender. What is legal tender by the Constitution cannot be made illegal by Congress. The Act is a State Law, furnishing the legal mode for collecting the only legal tender money known to the Constitution ; of course is most thoroughly con- stitutional, and above the power of Congress 74-82 NUMBER VI. The Right of the Federal Government to Con- trol THE Currency. The Constitution gives Congress the power to coin money and regulate the value thereof. This power was given to insure a pure currency. States pro- hibited from coining, also from issuing Bills of ' Credit. All issues of money under the control of the Federal Government. Congress cannot regu- late the value of coin without regulating the currency also. The regulating the value of coin is with Con- gress, which has power to make all laws necessary and proper for the execution of the trusts reposed by the Supreme Law. Currency does affect the value of coin, therefore Congress is bound to rule currency. Federal or State Stocks are no proper basis for the issue of currency. Gold should never be cheapened by paper currency. Congress is bound to provide for the general welfare of the country — nothing of more importance to this wel- fare than sound currency.' Currency should be coin, or represent it. Unlimited liability of stock- holders no proper basis for the issue of currency. The specie basis, dollar for dollar, the only proper regulation of currency 82-96 NUMBER VIL Resumption of Specie Payments. Specie payments cannot be resumed, while Congress al- lows a legal tender of inferior value. Congress, the Courts, and the People must recognize and main- tain the difference in value between Treasury notes CONTENTS. and gold coin. The volume of currency must be reduced — Value of Legal Tenders results from being convertible into Bonds. Every dollar of paper currency should represent a metallic dollar in the Treasury. No part of the business of Congress to provide currency for speculation or gambling. Specific Contract Law of California should be enacted by Congress, for the benefit of the Union. Gold must be monetized by withdrawing currency fi'om circulation. National bonds are not a proper basis for the issue of currency. The profits from circulation should be suppressed by Congress. Losses on the sale of Government bonds abroad by reason of a depreciated currency. Reform of the currency possible and practical. The reform needed in the National Bank system is to change the basis from Government Bonds to gold coin (p. 127). How to resume specie payTnents i^^. 124-129). ^68,000,000 may be applied yearly, in gold coin, to change the basis of the National Bank Circulation fi'om bonds to gold. Banks must keep gold and currency accounts while the system is in transit. The values of each currency must be recognized. Specie in the banks a national shame, not amount- ing, in some, to half per cent, of their immediate liabilities. National Banks clamoring for more circulation, and that their issues be made a legal tender. Currency cannot be pure unless entirely so. Every inflation lessens its value. Government should pay off the debt to the banks first, and hold the gold for security of Bank issues instead of Bonds. The rise in our National Securities abroad would pay for a prompt return to specie payments. 96-142 NUMBER VIIL The Tariff of the United States — its Effect upon THE Value of Gold for Uses Abroad. Equal Taxation is what the Supreme Law contemplated — the Tariff acts unequally — oppresses some States and aids others — the present Tariff extremely oner- ous on California — Estimated yield from 50 to 75 per cent, on goods imported. It takes one-third from the value of gold for uses abroad (p. 143). Is equal to a fine of one-third the value for the purchase and importation of foreign goods. More onerous on California than other States, because gold is always marketable in the marts of the world, while other articles are not. Helps New England immensely, and crushes California equally (p. 145). Prices of CONTENTS. Foreign Goods (pp. 144-145). What California has paid and is paying for the Union (p. 147). Losses enough to build four railroads from the State to the Missouri 142-149 NUMBER IX. The Effect of Demonetizing Gold upon its Domes- tic Value. The Acts of Congress have a blighting effect upon the value of coin. The Tariff bolsters \ rotten Cur- rency in direct proportion to the amount imposed. Domestic goods are advanced directly by the tariff on foreign goods. How the Losses on Currency are balanced (pp. 154-155). The reduction of the value of Gold in the domestic markets is an intoler- able grievance (p. 158). "The Balance of Trade," by C. H. Carroll, Esq. (p. 159). The permanent interest of the Union and the Pacific States identical — upon the matter of Currency. Every State entitled to all the immunities of the Constitution. Secretary McCuUoch bears witness that goods were higher with gold at 47 premium than when it stood at 185. This immense loss to California comes from De- monetizing Gold. The Legal Tender Act and the National Bank Act may now be discussed from a peace stand-point. The organizing of Government or State Stocks into Currency, makes an annual national loss equal to the entire product of our gold and silver mines (pp. 168-169) 150-170 NUMBER X. Bank Circulation. The Principle of Circulation explained. Circulation is twofold — outside, or bills paid out ; and inside, jsr deposit account. Coin will not remain in the coun- try beyond the demands for Money. Banks should not be allowed to receive Profits upon Circulation. The People must blame themselves for the Sins of the Banks, for they exist by sufferance. Supply would follow demand for Banks, even if their issues were limited to specie basis, dollar for dollar. Sav- ings' Banks recommended. When Currency has displaced Coin, the good and bad circulates together at the nominal par of Gold. The gain from Circu- lation is similar to that from transporting passengers in a dangerous vessel — it is made at the imminent risk of the public (p. 175). Interest may be justly paid for Real Capital — not for Credit. Banks CONTENTS. should not be the Custodians of the Specie upon which their circulation is issued — the specie should be deposited in the Federal Treasury I70-I79 NUMBER XI. Government Circulation. Congress cannot legally issue any permanent form of Circulation which lessens the value of Coin. Its only right to rule currency, comes from the necessity of keeping it at far of coin. The Gains from Cir- culation are insignificant, compared with the dam- ages of an inconvertible currency. The Legal Tenders should be funded and annihilated. The Honor of the Country at stake. Government should never disgrace itself by so flagrant an act as the issue of an inconvertible currency 179-182 NUMBER XII. The Sales of Gold by the Secretary of the Treasury. Sales of Gold from February to May, 1866. Profits, in currency, on sales. Different views as to the policy of sales. Importing business done largely on foreign account. Sales made for Currency and at currency prices. Importance of keeping gold at its proper relative value to currency. Whatever it rules under this is dead loss to the country. To bring the value of all currency up to coin is desirable, but to drag the value of coin down to currency is national loss without reducing prices generally. Gold should never be sold to force down its own value. The best use to make of gold for the good of the country. By the sales of gold. Congress rec- ognizes the difference in value between gold and Treasury notes. A real difference of value being admitted by the Legislature, citizens should have equal rights with the Government to deal in such values, and these dealings should be protected by law, not prohibited or made contraband 182-188 NUMBER XIIL Who Owns the Gold Taken from the Govern- ment Lands ? Unjust censures of the miners — their excessive toil and losses of health and constitution. The farm-laborer will endure his work three or four times as long as CONTENTS. the miner. The yield of the mines belongs to the miner as justly as the farmer owns the crops which he sows. The Fisheries have Bounties — their claims less national than those of the miner. The mines must be worked — the Credit of the Government de- pends largely upon them — Government should rather foster the mining interest with bounties than hamper it with taxes or excises. The mining inter- est should be faithfully represented in Congress. . . 188-191 NUMBER XIV. The Independent Treasury. Removal of Deposits from the United States Bank. The pet Banks made the Fiscal Agents of the Gov- ernment. Mania for Speculation from redundant currency. Specie Circular by President Jackson. The Bank of England refuses to Discount for Ameri- can Bankers. Suspension of Specie Payments by all the Banks. Honorable Silas Wright on the Suspension. The New England System of Banking. The New York Safety Fund system. The last United States Bank and the Charter by the State of Pennsylvania. The General Banking Law of New York. Argument of the Hon. Silas Wright for an Independent Treasury. Argument of Hon. Thomas H. Benton, for the same. Benefits of the Independent Treasury should extend to the people. Government cannot receive the full advantages of the Bill, unless Congress suppresses the issue of all currency not equivalent to coin. Gold at paper prices (p. 204). Opinion of Daniel Webster on the Equality of Currencies. The only way to make currency equal to coin, is to limit the issues to the coin deposited for its redemption 192-207 NUMBER XV. The Duty of California in Relation to the Legal Tender Act. The Maintenance of State Credit an indispensable Duty. A Prompt Payment of Interest upon the Debt ne- cessary. The debt should be kept from increasing. The State Policy should be to keep up the value of gold. Reducing the Value of Gold, a direct thrust at the vital interest of the State. Such reduction would increase the State debt, without increasing the means to discharge it. An Illustration by Dr. Smith. His position proves that a paper circula- tion could be of no use to this State. If the Treas- Xna CONTENTS. PAGES. ury notes are lawful money by Act of Congress, the coin of the Mints is legal tender on all debts, by the Constitution. Opinions of eminent Senators on legal tender. It is not necessary to cut off Califor- nia from the use of the coin of the mints for cur- rency. If legal tender be forced upon the State per- manently, the public debt will be greatly increased. Resolutions of the California Legislature. The Gordian Knot of the currency question finally settled, for the State, by the enactment of the Spe- cific Contract Law 207-221 NUMBER XVL Paper Currency — Testimony of Statesmen, Fi- nanciers, Economists, Philosophers, and ■ Philanthropists upon the subject of Paper Money. Any element which makes price without value, is sub- versive of sound economy. It is the very essence of paper money to make such price. Prices without value create bankruptcies. The policy of such mon- ey would be suicidal to California. An Illustra- tion of its Operation (p. 227). The difference in Prices of Commodities, under a gold or paper cur- rency, is an index of the amount of baiikruptcies which a country assumes by an inflated currency. Paper Money to California would be as noxious as tares and darnels among the wheat of her faijners. 221-228 NUMBER XVn. Bank Deposits and Inscriptions of Credit in Banks. The quality of Bank Deposits — those resultant from notes discounted not Deposits Proper. Undrawn Loans should not be reported as Deposits. De- posits rule prices as much as Bills in Circulation. The Deposit Account, through the discounting power, may Monetize all kinds of Property. Such Inflations are constantly being balanced by Bank- ruptcies in the body politic. Deposits should be equal to coin in value. The System of California Banks. To change it to that of the Eastern States, would involve a loss to us of jf20,ooo,ooo an- nually 229-234 CONTENTS. xma PAGES. NUMBER XVIII. Paper Money Tried ey the Doctrine of Ethics. Quotations from the Scriptures, proving the Abomina- tion of all kinds of False Measures. Every one has a Right to his own Property. Defrauding by False Measures of Value equally heinous as by False Measures of Quantity or Capacity. The former is a Crime by our laws, the latter is upheld by Legisla- tion. Gold and Silver are almost universally cited in the Bible to illustrate Values. The Cost and Difficulty of obtaining these Metals. They were given to Mankind for the purpose of Correct Stand- ards. False Money makes all Business partake of the hazards of Gambling. The Perversion of Cur- rency an effect of Avarice. The Laws of God are Irreversible, and a part of these Laws are the Laws of Nature and Science. False Standards of Value condemned by Political Economy, the Federal Con- stitution, and Divine Law. The Spoliation of False Money. Double Standards, varying largely in Value, and yet held as equivalents in law, must work interminable mischief. We cannot atone for Unjust Laws by stamping on our coin " In God we Trust." The Proof of such Trust would be more satisfactory in doing a^ay with all Unrighteousness in Meas- ures 235-260 s> . NUMBER XIX. Enlargement of the Powers, Uses, and Benefits OF the Independent Treasury. Relevant Opinions of Eminent Writers. The Regulation ■ of Currency should reach the Deposit Accounts of Banks. The Faifures of 1857. Our Foreign Debt in 1850 and i860. This Indebtedness to be ascribed largely to our Currency. The Author's Bill, of i860, for Reforming the Currency and Deposit Ac- counts. Recapitulation of the Measures proposed in the Bill (p. 285). The Power of Congress to Regulate the Value of Money is Nullified, through tne emission of Bills of Credit by the Banks. The Rights of Persons considered. Opinions of Mr. Webster and Adam Smith upon the Duty of Gov- ernment to restrain Private Rights. The National iBanks, being the Creatures of Congress, may be Moulded and Governed by any needed amendment of the Law. The Advantages of Treasury Exchange for Domestic Uses. Government Banking, on a Gold Basis solely. Whatever form of Paper Issues are to Circulate as Currency, Government should iva CONTENTS. PAGES. Suppress every species of it which is not secured, dollar for dollar, by Coin in the Treasury. The United States have the means to Saturate the Cur- rency with Gold and Silver. The Silver Coin of the Mints a better Basis for Currency than anything else except Gold. The immense Saving to the Country, if a similar Bill could have been the Law of the Land when California came under our Na- tional Flag 261-293 NUMBER XX. The Pacific Railroad. Subsidies to the Work by the Government. The great necessity of its Speedy Construction. Maybe Fin- ished by January, 1872. Its great Addition to the Wealth of the Country. It has cost four bil- lions OF DOLLARS to bind the Union, North and South — would it be unreasonable to expend $200,000,000 to Bind it East and West ? What California has Paid and is Paying for the Govern- ment. Expenses of the Pacific Coast are National — not Chargeable to California. The Railroad is needed, as a Measure of National Defense, as much as our Navy or Army. Causes which retard the Progress of California not to be attributed to a Gold Currency. These are : first, her Isolated Position and Distance from the large Populations of the World ; secondly, the Want of Correct Knowledge of her Resources; thirdly, the Want of a Certain Market for her Agricultural Products, and reasonable Freight Charges, when shipped to other countries. But the Great, Overshadowing Drawback to her Prosperity is, that she has lost a large fraction of the value of her staple — Gold. The Tariff has vir- tually confiscated a large per centage for uses abroad, and, in connection with the Currency, made Prices without Value upon Domestic Manufactures. The Immense Losses of CaUfornia since 1848, amounting to $693,000,000 (see pages 299-300). These Losses have resulted from the Neglect of Congress to do its duty in the matter of Currency. As a small return for this Unequal Taxation which has been imposed, it is proposed that Government shall aid the Pacific Railroad $100,000,000, and the roads in California $100,000,000. The excellence of the Scheme is that it will be a National Defense ; that it will be an act of justice to California ; a last- ing bond of interest and union to the nation ; and will increase the direct value of the country many fold the amount of the subsidies 294- -Joi CONTENTS OF THE APPENDIX. (A.) PAGK9. A Scheme for a Land Bank in England. The Project Explained by the Historian Macaulay. The Wonders which would follow its Organization in England. The " blessed effects" that were to be produced by issuing enormous quantities of notes on landed security. If a person held real estate worth ^2,000, he ought to have his estate and ;£^2,ooo in paper money. The absurdity of the Scheme set forth. The Principle of issuing Bills on Land compared with issuing upon Government Bonds. Neither of these Schemes are any proper basis for the issue of Currency 302-305 The Possibility of a Metallic Currency 306-307 (B.) American Banking. The Difficulty of Teaching the People that " Paper Money" is no Element in the Nation's Prosperity. The multiplication of Bank Notes adds not a dollar to the Wealth of the Country. The issuing of " Paper Money " should take its place alongside of Astrology and Divination. The system totally use- less and radically absurd 307-308 Returns of the National Banks. Immediate Liabilities over $900,000,000. Specie on hand, $8,170,835. Who could wish to see such a system of Banking adopted in the Pacific States 309 (C.) Extracts from Elliot's Debates in the Federal Convention upon the Subject of Emitting Bills of Credit by the United States 310-312 XVia CONTENTS OF THE APPENDIX. PA '_I4,285, 714 28' ' Jj Loss by the general inflation $i6o,qoo,ooo 00. ^ The direct loss on the issue is thus shown I mTTT ml ]\\\ f ' ^0^ amount of the over-issue. The indirect loss is, that the general prices of commodities would advance about six- teen two-thirds per cent., and every one must buy and sell at these advanced rates, thereby introducing and per- petuating prices at sixteen two-thirds per cent, above gold values, to be paid by the people until this over-issue should be withdrawn from circulation ; ajl time-debts, contracted to be canceled at a future day, would be made payable with the risk that the relative values of currency and gold might be greatly different at the maturity of such contract. The indirect loss it is very difficult to es- timate. My own imprsssion is, that the circulation issued in any country beyond the business requisitions of such country, or beyond the normal specie volume, (and by the specie volume is meant the amount which would circulate in such country in specie, if all bills of credit were pro- hibited) sinks its face value in every ninety days which it circulates. In other words, the community at large carry this circulation as a dead weight, and the loss to them is the whole amount of such circulation every ninety days. The losses are created through the prices which RESULTING FROM INFLATION. 47 such circulation makes, beyond the specie values, in general commodities. If the masses could see the untold e\'ils which such circulation brings upon them, they would blow it higher than the moon. Can any sane man, then, maintain that it was wise, ex- pedient, necessary, fit, proper, right or judicious, to issue a form of currency tliat was dead loss to the government and people jointly, and which loss was carried for a few years in a joint capacity, but which finally must fall upon the people entirely, to he paid with immense losses in in- terest account, expenses of collection, and in the dollar worth its metallic equivalent ? But if such over-issue be made a legal tender, how will this qualify it ? If it be made a tender by law, the credi- tor class of the communit}' must lose in precisely the same proportion . as the debtor class would gain. Th^ making treasury notes a legal tender some would justify on the ground that it was the on/y way which Congress had to raise funds for the war. Such is not the true state of the case. Congress had power to excise the State bank cir- culation enough to coerce its total withdrawal from use. Then it could have issued, to the amount of the State bank circulation, the treasury notes, and they would have stood at the par of gold, without any coercive legislation to make them legal tenders. Whenever they fell below the par of gold, they would be issued in dead loss to the nation. It was neither expedient, good policy, wisdom, justice, or fair dealing, to issue them when they fell below gold. The losses of such issue would fall on those who held the former issues and on the Government, in the shape of advanced prices, which it must pay for all commodities and materials needed for the war. In estimating the actual losses of such issues, it is not unreasonable to say that they have more than doubled the expenses of the war. We cannot roll back the wheels of time, and amend what has been done amiss ; but when we assume for granted that the manner in which our finances have been managed was the very best, or the only way they might have been managed successfully, we assume much more than is necessary to admit. If we have gone through the war with the paper dollar worth from 48 CONGRESS MAY TAX WITHOUT LIMIT. thirty-five to ninety-five cents on the dollar — on the aver- age perhaps as low as sixty cents — how much easier could we have achieved the same end if we had kept the cur- rency dollar worth one hundred cents all the time ? Obviously, the raising of funds by issuing circulation, or treasury notes, without suppressing the State bank cir- culation, was the most expensive manner of getting money which could have been adopted. But it is not alone the government loss which we have to consider in view of this experiment. The loss to individuals has been im- mense. The damages of doubling the prices of com- modities, in a country like ours, can scarcely be computed. Every man feels it : every one loses by it sooner or later. Congress had no power to enact a new system of rais- ing money, where the Constitution had already provided one. It is claimed that Congress might make a paper legal tender on account of a " war necessity," to provide the means of carrying on the war. The Constitution gives to Congress the right to " borrow money on the credit of the United States." It also gives to Congress the power to lay and collect taxes, duties, imposts, and excises ; to pay the debts, and provide for the common defense of the United States." (See Section eight of the Constitution.) Let it be observed, there is no limit to the amount which Congress may borrow, nor to the rate of interest it may pay, nor to the amount of taxes it may impose upon the people ; only they must be uniform throughout the United States. The most latitudinarian constructionists of the Constitution admit " that there can he no implied power conferred on Congress by that instru- ment, where an express power is given by it for the same object. Congress has the express power to raise money by borrowing, and by imposing taxes, duties, imposts, excises, etc., to any amount the country may need "to pay debts, and provide for the common defense arid general welfare of the United States." Article ten of the amend- ments reads thus : " The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." Certainly the Constitution does not give to Congress the right to make paper money legal tender ; and it positively prohibits the States from issuing bills of INCREASE OF THE PUBLIC DEBT. 49 credit. And, since it gi\'es to Congress positive power to levy taxes, make loans, pay interest, impose excises with- out limit, for national defense, these powers may be exer- cised lawfully ; but implied powers cannot be presumed, for the very reason that others are given. A power can- not be implied to effect a given purpose, where an express power of a different nature has been conferred, by the instrument itself, to effect the same purpose. If upon a fair construction of the Legal Tender Acts, tried by the Constitution of the United States, it shall be apparent that their just and proper execution will treble or quadruple the national debt, then we have not only the right to conclude that these Acts were not necessary and proper ; not needful, essential, or adapted to the pro- posed end ; but that they were not judicious, expedient, wise, or requisite. Because they were adopted, and because the wealth of the nation, added to an immense national debt, has enabled us to pass through the trial, does not prove this to be the only way, or that taxation, loans, and excises would not have answered the same purpose with much smaller debt than now oppresses the people. But Treasury notes are not legal tender, because Con- gress has no power delegated to make "such a tender, and because the Constitution provides other ways for raising money — to wit, by borrowing, taxing, imposts, excises, etc. This brings us to another view of the subject. The Legal Tender Act has been sought to be justified on the ground that it is a forced loan from the citizen to the Government, which the "necessities of war" com- pelled Congress to impose. The necessities of war, I presume, would be accounted as national ; in other words, the wants of the nation compelled Congress to enact the Legal Tender Bill. Let us make a case for illustration. Suppose that on the nth of July, 1861, two worthy citizens completed a bargain and sale of a farm of land, valued at $10,000 in gold coin. This farm was sold by Mr. White to Mr. Brown, at $10,000, payable in three years with interest, and the deed was duly executed to Mr. Brown of the farm, and a mortgage upon the estate, in turn, was executed to Mr. AVhite, to secure the payment of the pur- F so THE LEGAL TENDER ACT chase money. Let it be fully understood that, at the thne the bargain and sale was made, the parties intended and agreed that the price of the farm was to be $10,000, and that each of these dollars, at the time of making the bargain, was worth one hundred cents. At the maturity of the undertaking, when the mortgage note of Mr. Brown fell due, nth of July, 1864, Mr. Brown counts down to Mr. White 1 10,000 of United States Treasury notes, commonly called greenbacks or legal tenders, worth thirty-five cents on the dollar, in gold coin. Mr. White objects to receive them, because the dollars for which he contracted were worth one hundred cents each. Mr. Brown very coolly replies : This is legal tender on all debts — it is all you can claim — it is all I shall pay. Mr. White gets $3,500 value for $10,000 value he has given, making a clear loss of $6,500 to one of the parties, and an equal gain to the other. Mr. Brown avers that it was no part of his undertaking to guarantee the currency ; that it is the province of the Legislature to determine what shall be a dollar, or its legal equivalent ; and that it is merely a fortunate turn of the times which has enabled him to make this gain ; that it is all a fair, bo7ia Jide, legal, and just transaction. By the compulsory and coercive action of the Legal Tender Act, Mr. White has lost nearly two-thirds of the claim which he held against Mr. Brown, for the sale of his farm. It is a pos- itive, direct loss to him. And is the Government aided by any such loss ? If it is, I cannot see it. But, if it is aided, then of course it should pay for such aid. The advocates of the tender say it is a forced loan. Well, if so, is it not to be paid ? If it is a forced loan, and never intended to be paid, it is very like the loans which the highwayman forces from the traveler when he demands his purse or his life. Mr. White must make this loss to sustain the credit of the national legal tender. This is the only good which the most zealous advocate of the tender can claim, for its spoliations of private property. If it be put on the ground of a loan to the Government, should not the Government pay for this loan ? Nor is the case met at all by answering that Mr. White may make his loss good by victimizing some other citizen. Mr. White may not be a debtor — he may not owe a dollar — ILLUSTRATED BY EXAMPLE. 5 1 and if he does, he may be too honorable to pay his debts in dollars worth but thirty-five cents each, when he has received equivalents of dollars worth one hundred cents each. But if the Government is not aided by this- loss of Mr. White, then is the Legal Tender Act not only useless, it is an action of the National Legislature of most wanton cruelty and tyranny, in thus intervening to impair the validity of private contracts. And nothing can be needed more in point to illustrate that the Act is not adapted to the objects and purposes for which it was made. If the Act is constitutional, and a just and proper exercise of the powers delegated to Congress, then the Government has taken from Mr. White $6,500 to sustain and support the credit of the legal tender notes ; and although this money did not go directly into the National Treasury, yet as it was necessary that Mr. White must lose that amount of his debt to sustain the credit of the legal tenders, it follows as a necessary consequence that the Government is justly holden and bound to compensate this loss, upon the ground that the Constitution declares " private property shall not be taken for public use without just compensa- tion." The parallel to this hypothetical case has occurred in millions of instances in the United States in the past five years. Through the force of the Legal Tender Acts, probably billions of dollars have been taken from one class of citizens for the gain of another class — direct losses to the creditor interest, and direct gains to the debtor interest. Another feature of the failure I would state, that the Treasury notes were only worth thirty-five cents on the dollar to Mr. White ; he could only get that for them in gold, or in property at gold prices. How, then, does this loss of Mr. White sustain the credit or power of the legal tenders ? The object of the bill is absurd, and its practical workings demonstrate its fatuity. Admitting, for argument's sake, that the paper is legal tender : who must bear the loss on this legal tender ? I say unhesitatingly, the nation. It is a corollary inevit- able that the loss upon the legal tender shall be borne by the nation, and not by individuals, if the Legal Tender Act, making paper tender, shall ultimately be decided by the Sttpreme Court of the United States to be a real and bona 52 THE LEGAL TENDER ACT fide good tmder in payment of debts. Such a decision would quadruple the national debt. Upon what grounds would t-he nation be liable for this loss? First, upon the grounds of justice. The creditor's money is taken from him by the powtr of law ; and the preamble to the Constitution asserts that the same was ordained and established, among other reasons, to " establish justice." If the Constitution of the United States was made to establish justice, what right has Con- gress to pass laws to subyert it 1 If it is a national necessity to subvert the Constitution, which makes nothing but gold and silver a legal tender in payment of debts, it is a bounden duty of the Government to make good to its citizens all it takes from them in this manner by forced loans, as some choose to call the legal tender. Whether these loans be forced or not, they should be paid, if the national exigencies require such sacrifices from its citizens. But the suggestion of calling the legal tender a loan is totally absurd, so far as its losses fall upon the people, for Government never intends to pay them. Still I maintain that it must pay them to be con- sistent and honorable to its citizens, provided that the Supreme Court of the United States shall ultimati-ly rule that the Treasury notes are in reality a valid legal tender on all contracts between citizens. The issue of the notes is defended on the ground that it was a war necessity, or a national necessity. The making of the notes legal tender on all contracts between citizens is defended on the ground that, with- out their being a legal tender, they would not pos- sess the functions of money : therefore, it was a na- tional necessity to make them a legal tender on private debts as well as government debts. If it were a na- tional necessity to make them a legal tender on private con- tracts, as an inevitable corollary it is a national liability to pay to private citizens all the damages for despoiling them of their property. I argue this from the express words of the Constitution. Article five of the Amendments to the Constitution provides that " private properU' shall not be taken for public use without just compensation." If trea- sury notes are issued and made legal tender from a na- tional necessity, they despoil the creditor for the benefit SUBVERTS JUSTICE. S3 of the debtor, discharging the debtor from his legal obli- gations by such tender, and the creditor loses one-third, one-half, two-thirds, or whatever discount the paper may rule at in the markets of the country, at the time the debt happens to be paid. This is taking the creditor's pro- perty to sustain the currency of the legal tender for the iDenefit of tlie government, and comes fully up to the case specified in the Constitution ; that is, that private prop- erty is taken for public use by the action of the bill making treasury notes legal tender ; and hence the in- jured parties have a right to just compensation for such loss, by the very words of the Constitution. The same article provides that property shall not be taken without due process of law. The legal tender act does take property without process of law ; therefore, the same is unconstitutional. Furthermore, the Constitution provides that no bill of attainder, or ex post facto- law, shall be passed by Congress. Again : Section eight of the Constitution provides that taxes, duties, imposts, and excises shall be uniform throughout the United States. What uni- formity of the public burdens is attained by a law which takes from the creditor one-half or two-thirds of his debt for the benefit of the debtor directly, and for the benefit of the Government very indirectly ? Surely this imposes a most grievous tax on the creditor portion of the people, for a very indirect benefit to the Govern- ment, without equality, uniformity, right, or equity. One of the cardinal objects in forming the Federal Constitu- tion, as expressed in the preamble of the same, was to establish justice. The Legal Tender Act above referred to totally subverts justice, and thus perverts the very object of making the Constitution. It also impinges the duty of the Government in this regard, that Government is as much bound to defend the citizen's property as his life ; and no one should be so lost to a perception of right as to suppose it is for the general welfare that the creditor should be compelled by law to give the debtor a large fraction of his debt for the support of the Government, without any restitution by that Government. The legal tender act, making treasury notes a tender, takes the pro- perty of die creditor citizen and gives it to the debtor 54 THE LAWS OF THE MINT citizen, in exactly the amount which the prices of the trea- sury notes rule in the market under the prices of gold coin. This is a forced loan ! It is a forced loan, indeed, with a vengeance ! A loan upon which the Government never expects to refund the losses to the person from whom it is distrained. Borrowing and lending are terms which imply volition — free action — free moral agency. Spoliation and appropriation are acts of injustice which should never be legitimated by any government. The Constitution of the United States is in full force and virtue in regard to the provision which makes nothing but gold and silver a legal tender in payment of debts. The laws establishing the United States mints and their coinage are in full force and virtue. These laws prescribe the amount of fine gold in the eagle, the half-eagle, and the quarter-eagle, and the gold dollar. By these laws these coins are the legal tender of the United States. The mint laws are in perfect harmony with the Constitution. They have never worked injustice, oppression, or robbery to the citizen. No one has ever found fault with them for any of these reasons. Now, if the mint laws are in perfect harmony with the Constitution of the United States, and the law making Treasury notes legal tender is diametrically opposed to the gold tender prescribed by the Constitution, then- are the mint laws constitutional and sanctioned by the supreme law of the land, and the law making Treasury notes a legal tender is unconstitutional ; and, as has been most fully demonstrated by its operation in practice, most unwisely conceived, and all of its tendencies are towards disorgan- ization of society, destruction of business, and universal demoralization. We cannot have two kinds of legal ten- der dollars varying from forty to sixty per cent, in value from each other. Either the gold dollar must go the wall or the paper dollar. The operations of the people of the United States are of such immense magnitude, that they cannot afford to be wrong on this subject. The dollar should have a definite and specific meaning attached to it in law and in business operations, as the half-bushel or the pound weight. AVith- out such definite meaning, the word dollar becomes en- tirely useless as a measure of value, or as a national ARE JUST AND UPRIGHT. 55 Standard. If this definite meaning is to be detached from it — if it is not to mean the legal gold coin of the country, the sooner we commence to reckon in pounds sterling, in francs, in roubles, in ounces and decimals of an ounce, the better will it be for the welfare and happiness of the body politic. It is complete lunacy to cling to the system of promising dollars, and swearing that these promises, to be redeemed twenty or forty years hence, are equal to the real substance in hand. No legislation can ever make them equivalents ; no decisions of courts can permanently impose such fatuity upon the intelligence of the American people. The first thing needed, if the American people are determined to demonetize gold, is to amend the Con- stitution making gold coin a legal tender in the payment of debts. Then they can make their currency of oyster shells, cowries, soap, tobacco, nails, Indian wampum, eggs, or whatever the wisdom of these paper champions may choose to institute. But, whatever the currency is, let us have the real article itself ; not the promise of it, payable some scores of years hence, or never ; or, at any rate, long after the generation now living have finished their earthly career. Either the laws of the United States making the gold coin of the mints legal tender are unconstitutional, or the laws making Treasury notes a legal tender are uncon- stitutional. These laws are entirely conflicting, and cannot be made consistent with each other. And, although it is not the province of the Courts to make law, but to interpret it, it is their bounden duty to pronounce a law unconstitutional when they believe it such, as all judges are sworn to support and defend the organic law. At a session of one of the Courts in Indiana, the legal tender of treasury notes being under review and trial, the presiding justice argued with singular force against the constitutionality of the tender ; he was thor- oughly convinced of the illegality of it, yet he gave judgment in direct conflict with his own opinion and argument, on the ground that it was a law of Congress, and a question for the ultimate decision of the Supreme Court of the United States. If our Courts should usually evade their obvious duty in this manner, how could the people get from them justice or the proper ruling of law ? 56 CHANCELLOR KENT Very few men have time or money to spend in getting the opinion of the Supreme Court of the United States upon a question of law. Upon this point, Chancellor Kent says : " It has accordingly become a settled prin- ciple that it is the right and duty of the judiciary to declare null and void every act of the Legislature in conflict with any provision of the Constitution." [Kent's Commentaries, vol. i. p. 650.] It results from these premises: That the legal tender act conflicts with the Constitution, in that it subverts justice by robbing the creditor-citizen for' the benefit of the debtor-citizen ; the Constitution having been made to establish justice, as its preamble sets forth. That it conflicts with the Constitution in impairing the obligation of contracts ; since it causes the creditor to take a kind of money, which is not an equivalent, from the debtor. That it conflicts with the Constitution in that it is an unequal system of taxation, which requires the creditor to surrender to the debtor a considerable amount of his claim, for the general credit of the Treasury notes, without any return from the Government ; whereas the Constitu- tion says, that " private property shall not be taken for public use, without just compensation," and that all taxation shall be uniform throughout the United States. That it is ex post facto in its terms, and retrospective in its action on contracts. That if it shall be sustained by the Supreme Court of the United States, as a necessary corollary to it, the Federal Government must be bounden for all the damages to individuals which result from it, since private property cannot be taken for public use without just compensation, by the letter of the Constitution. Congress can exercise no powers except such as are delegated ; and, more especially, Congress cannot exer- cise powers which are not delegated, to achieve any purpose where distinct and explicit powers of anotlier nature are delegated to achieve the same purpose. The making of Treasury notes a legal tender is not delegated by the Constitution for any purpose ; but the imposing of taxes, excises, duties, etc., is a power granted to Con- gress, without limitation; also the borrowing of money on ON THE RULING OF COURTS. 57 the credit of the United States is another delegated power to Congress, without limitation. These modes of raising money by Congress, being delegated for the public good, are lawful and right. Therefore, the raising of money by legal tender treasury notes, not being delegated, is wrong, and subversive of the ^^'hole tenor of tlie Constitution upon the subject. " No State can coin money, or make anything but gold and silver a tender in payment of debts." Congress has power " to coin money, and regulate the value thereof, and of foreign coin." The word " thereof" used in this sentence means the identical coin which the Constitution empowers the Congress to make. The only way they can fix the value is to enact the precise amount of fine gold and silver which the coinage of the mints shall contain. Congress can make the counter- feiting of the national coin a felony ; and it can suppress the issue of all paper money, on the ground that paper money unfixes the value of the national coins, vilifies and degrades the issues of the mints, lessens the pur- chasing power and the exchangeable power of gold, by the action of such form of currency in making the prices of all commodities and property. But as the States can- not coin money, they must depend on the coin of the mints ; and as nothing but gold and silver can be made a legal tender by the States, it follows inevitably that it is the duty of Congress to enforce the mints to make such coin as the Constitution prescribes to be a legal tender; which being gold and silver, it follows that the coinage of no other metals can be made a legal tender by Congress. The power of Congress is subordinate to the Constitution, derived immediately from it, and all acts in conflict with it are. if there can be degrees of comparison in illegality, superlatively illegal. Congress has no power to coin brass, zinc, pewter, lead and iron, making these a legal tender, so long as the States cannot make anything but gold and silver a tender. Therefore, the Constitution of the United States must be amended before Congress can coin money of such metals and make them legal tender. The States never delegated to Congress the right to coin any different met- als than such as the Constitution required as legal tender ; S8 KING JAMES' LEGAL TENDER. and these are specified in the Constitution as gold and silver. A different ruling from this would constitute a tyranny equal to King James' base coin. This monarch supposed he could release himself from his financial diffi- culties by the simple process of calling a farthing a shilling. The right of coining, says Macaulay, "was undoubtedly a power of the prerogative ; and, in James' view, the right of coining includecl the right of debasing the coin. Pots, pans, knockers of doors, pieces of ordnance, which had long been past use, were carried to the Mint. In a short time lumps of base metal, nomin- ally worth near a million sterling, intrinsically worth about a sixtieth part of that sum, were in circulation. A royal edict declared these pieces to be legal tender in all cases whatever. A mortgage for a thousand pounds was cleared off by a bag of counters made out of old kettles. The creditors who complained to the Court of Chancery were told by Fitton to take their money, and be gone. But of all classes the tradesmen of Dublin, who were generally Protestants, were the greatest losers. At first, of course, they raised their demands ; but the magistrates of the city took on themselves to meet this heretical machination by putting forth a tariff regulating prices. Any man who belonged^ to the caste now dom- inant might walk into a shop, lay on the counter a bit of brass worth three pence, and carry off goods to the value of half-a-guinea. Legal redress was out of the question. Indeed, the sufferers thought themselves happy if, by the sacrifice of their stock in trade, they could redeem their limbs and their lives. Some persons, who refused the base money, were arrested by troopers and carried before the Provost-Marshal, who cursed them, swore at them, locked them up in dark cells, and by threatening to hang them at their own doors, soon overcame their resistance. Of all the plagues of that time, none made a deeper or more lasting impression on the minds of the Protestants of Dublin than the plague of the brass money." The making of paper money a legal tender is an act of injustice of the same nature as King James', making his base coin a tender. No National legislation, which is in conflict with the principles of justice and morality, can be for the per- CONSTITUTION OF CALIFORNIA. 59 manent interests of any people. If we build our whole national wealth on a column of fraud and injustice, we may expect to see it fall witli a most terrific destruction. Justice can neither be subverted by an individual or a nation without certain and irreversible retribution. The Legal Tender Act is against the Constitution, the supreme law of the land, the laws of trade, the laws of science, and the laws of God. For these reasons, the sooner Congress shall repeal the Acts making such notes a tender, or the Supreme Court shall declare them un- constitutional, and the notes are funded, the sooner the nation will be released from its present system of legal- ized gambling and injustice, specie payments be again resumed, and the nation assume right and honesty to be the proper foundations for permanent happiness and prosperity. There remains for examination one point of great im- portance, which I have never seen brought forward for the consideration of any court, or the judgment of public opinion. In admitting California into the Union of the States, the Constitution was thoroughly examined by the Congress or its competent committees, accepted by this august body, and every article of that Constitution was \'irtually ratified and agreed to by the Federal Legisla- ture, when she became a member of the Confederation. Section thirt)f-four of the Constitution of California reads : " The Legislature shall have no power to pass any act granting any charter for banking purposes ; but associa- tions may be forrhed, under general laws, for the deposit of gold and silver; but no such association shaU make, issue, or put in circulation, any bill, check, ticket, certifi- cate, promissory note, or other paper, or the paper of any bank, to circulate as money." Sect, thirty-five reads thus : " The Legislature of this State shall prohibit by law any person or persons, association, company, or corporation from exercising the privileges of banking, or creating paper to circulate as money." These provisions in the Constitution of California, rejecting every form of paper moiic)', are in perfect harmony with the Constitution of the Ihiited States — the supreme law of the land. Cali- fornia has a perfect right to adhere strictly to the letter of her Constitution, and to maintain her system of hard 6o IMMUNITY TO CALIFORNIA. currency against any acts of Congress upon the subject ; and all such acts are doubly unconstitutional : first, be- cause they are opposed to the Federal Constitution, which prescribes that nothing but gold and silver shall be a tender in payment of debts ; and secondly, because the Constitution of California, in perfect accord with the Constitution of the United States, ordains that paper money shall not circulate in the State, and the statutes of California make any such circulation a felony. This Constitution is ratified by Congress, in every article, in the admission of the State. Congress can not go behind this. Federal legislation conflicting with the Constitu- tion of California, where that Constitution is in harmony with the supreme law, is estopped, is null and void ; and to enforce a paper circulation would be to oppress Cali- fornia with useless tj-ranny and unla'\^'fiil exaction. It is verj' plain, then, that Congress has no power to impose paper money upon California in any form whatever. If Congress has this power, it has the power to vote any other provision against the Constitution of California ; and, for anything I can see, to \-ote her out of the Union again, and make territory of her domain. It is a privi- lege and immunit}- of the citizens of California to use a gold currency. The supreme law of the land, the Con- stitution of the State, and die admission of California into the Union, all unite to guarantee and defend her in this privilege, this immunit}-. Article four Section two, of the Constitution prescribes that " The citizens of each State shall be entitled to all the privileges and immunities of citizens in tlie several States." The privilege and imnumit)'- granted by the Constitution of the United States, by the Constitution of California, and by Congress itself, in admitting the State into the Union with a hard-money Constitution, not being matters which it is possible to rescind or repeal by subsequent acts of Congi-ess, it follows that this State does most fully, rightfully, and constitutionally have and enjoy this priAilege and immunity of using gold for money, and rejecting all forms of paper mone}- ; and the corollary seems irresistible, that all tiie States and citizens of the several States have the same privilege and immunit)' as California ; since w hat is Federal law and RAISING THE DENOMINATION OF COIN. 6 1 constitutional in one State must be constitutional in every other. Any different decisions or rulings from this must involve the absurdity that the gold coin of our mints is not a legal tender in the United States ; and that Congress has the right, without any amendment of the Constitution, to demonetize gold and silver in all the States, and to impose upon them a disorganizing and irredeemable issue of paper money, to terminate in chaos and general bankruptcy. If the Supreme Court of the United States shall rule that the Treasury notes, as they are called, are a legal ten- ■ der, on contracts payable in gold coin, at their face, it will be an impossibility to call them in or fund them. Gold will be virtually and efficiently demonetized by the high- est judicial decision that can be rendered in the Union. The banks will hold the legal tenders in reserve instead of specie ; prices of all commodities will keep on advanc- ing ; the poor and middling classes of our population will be ground to death and dust by this tyrannical, and, now, worse than useless enactment, and the whole country sold in worse than Egyptian bondage, to these new dis- pensers of the money of the nation — the national cur- rency makers. On the contrary, if the national legisla- ture shall immediately repeal the legal tender quality of this form of money ; or if the Supreme Court shall rule that investing paper money with any such quality as legal tender is in conflict with the supreme law of the land, this form of money will immediately go out of circulation and the country return again to cash payments and honest dealings. The learned Doctor Adam Smith, in treating of the fraud in raising the denomination of coin — and his work has been written for nearly a century — has the fol- lowing pertinent remarks : ''The raising of the denomination of the coin has been the most usual expedient by which a real public bank- ruptcy has been disguised under the appearance of a pre- tended payment. If a sixpence, for example, should, either by act of parliament or royal proclamation, be raised to the denomination of a shilling, and twenty six- pences to that of a pound sterling, the person who, under the old denomination, had borrowed twenty shillings, or near four ounces of silver, would, under the new, pay with G 62 EFFECT OF RAISING THE DENOMINATION. twenty sixpences, or with something less than two ounces. A national debt of about one hundred and twenty-eight millions— near the capital of the funded and unfunded debt of Great Britain — might, in this manner, be paid with about sixty-four millions of our present money. It would, indeed, be a pretended payment only, and the creditors of the public would really be defrauded of ten shillings in the pound of what was due to them. The calamity, too, would extend much further than to the creditors of the public, and those of every private person would suffer a proportionable loss ; and this without any advantage, but in most cases with a great additional loss to the cred- . itors of the public. If the creditors of the public, in- deed, were generally much in debt to other people, they might in some measure compensate their loss by paying their creditors in the same coin in which the public had paid them. But in most countries the creditors of the public are, the greater part of them, wealthy people, who stand more in the relation of creditors than in that of debtors, towards the rest of their fellow citizens. A pre- tended payment of this kind, therefore, instead of alleviat- ing, aggravates, in most cases, the loss of the creditors of the public ; and, without any advantage to the public, extends the calamity to a great number of other innocent people. It occasions a general and most pernicious subversion of the fortunes of private people ; enriching, in most cases, the idle and profuse debtor, at the expense of the indus- trious and frugal creditor ; and transporting a great part of the national capital from the hands which were likely to increase and improve it, to those who are likely to dis- sipate and destroy it. When it becomes necessary for a state to declare itself bankrupt, in the same manner as when it becomes necessary for an individual to do so, a fair, open, and avowed bankruptcy is always the measure which is both least dishonorable to the debtor, and least hurtful to the creditor. The honor of a state is surely very poorly provided for, when, in order to cover the dis- grace of a real bankruptcy, it has recourse to a juggling trick of this kind, so easily seen through, and at the same time so extremely pernicious." "An augmentation, or a direct raising of the denomina- tion of the coin, always is, and from its nature must be, THE ADULTERATION OF COIN. 63 an open and avowed operation. By means of it, pieces of a smaller weight and bulk are called by tlie same name, which had before been given to pieces of a greater weight and bulk. The adulteration of the standard, on the con- trary, has generally been a concealed operation. By means of it, pieces are issued from the mint, of the same denomination, and, as nearly as could be contrived, of the same weight, bulk, and appearance, with pieces which had been current before, of much greater value. When king John, of France,* in order to pay his debts, adulterated his coin, all the officers of his mint were sworn to secrecy. Both operations are unjust. But a simple augmentation is an injustice of open violence ; whereas an adulteration is an injustice of treacherous fraud. This latter opera- tion, therefore, as soon as it has been discovered, and it could never be concealed very long, has always excited much greater indignation than the former. The coin, after any considerable augmentation, has very seldom been brought back to its former weight ; but after the greatest adulterations, it has almost always been brought back to its former fineness. It has scarce ever happened that the fury and indignation of the people could other- wise be appeased." (See Smith's Wealth of Nations ; Book V, p. 396.) Now fraudulent, unjust, and tyrannical as is this form of national deception, of raising the denomination of coin, or of increasing its alloy, while the sovereignty still makes it a tender on debts previously contracted, such injustice is even surpassed by making paper promises, which are irredeemable in the exact kind of money which they declare upon their face a legal tender at anything beyond their value in the open markets of the country, in the gold coin of the mints. And for this reason : An adulterated coin will soon be detected by the assayers, and must pass at its value or go to the melting pot for refining. But a promise of the Government to pay coin, which everybody knows is false, can only be kept in cir- culation by acts of legislative tyranny. Our forefathers, in making the Constitution of the United States, never * See Du Cange Glossary, voce Moneta ; the Benedictine Edi- tion. 64 VOTE OF THE CONVENTION intended to invest the Congress with any such power for dominating the people. On the contrary, they most scrupulously and carefully provided that the national coin alone should be the only lawful tender of the States. If any impartial examiner would know the intentions of the framers of the Constitution of the United States, let him examine the Supplement to Elliot's Debates in the Conven- tion upon the Constitution, vol. V, p. 435* The vote against the power of Congress to emit bills of credit was nine to two. Hence the framers of the Constitution, by a decisive vote on the subject, prohibited Congress from emitting bills of credit, and inserted in the organic law that no State should emit bills of credit. In binding the future acts of Congress and State Legislatures in the matter of bills of credit, these men, who had learned by a most disastrous experience the intolerable evils of a vitiated paper currency, intended to prevent its further emission by a positive provision in the organic law. But, whatever good may be passed to the credit of the Legal Tender Act for its action in time of war — and men of long study in the matter of currency will always differ in opinion as to its having been a measure founded in wisdom — in time of peace, all sound, practical economists will condemn it as an act not only unconstitutional, but of most oppressive tyranny. In considering the expediency, the fitness, the adapta- tion of such a measure as making paper a legal tender upon all money contracts — of subverting the principles of justice — of the supreme law — for the temporary aid which such digression from the principles of right might bring to the country in times of great financial distress ; in deciding upon such expediency and the means to effect the end, if we would make a just comparison of the good and evil of the measure, we must duly weigh all the disadvan- tages resulting from the change of values in their transition from a gold basis to an elastic paper basis, to remain on this expanded basis for years, thence till these values again return to the specie standard. The damage to a people producing and distributing the annual amount of more than six billions of dollars in value, by reason of having a currency inflated fifty per * See Appendix C. ON THE ISSUE OF BILLS OF CREDIT. 65 cent, is a matter of immense importance — perhaps $500,000,000 a year. The experiment has abundantly demonstrated that the main object of the making the paper legal tender — to keep it at the par of gold — has been a most marked failure. From the incipient issue of Treasury notes, their depreciation, when measured by gold, has proceeded /arz/aww with such issue. If they are really constitutional tender upon all debts, the Gov- ernment is justly and equitably holden for all losses which the creditor portion of the country has had to sus- tain by reason of such law, which bound them to receive the Treasury notes, promissory dollars, and which prom- ises were only an imposition — the reason for this dis- traint upon the creditor's property, by the action of the Statutes at Large, being to sustain the credit of the legal tender notes. This being a fair and just exposition of the case, the Government assumed this arbitrary inter- ference, to take the wealth of one citizen from another citizen, by allowing him to pay a debt at half its value, and compelling the . other citizen to accept this payment in full for his claim. And this revolting spoliation is done under the sanction of law ; the excuse for it being that it is necessary to do it to support the credit of the legal tender notes. If this be all so, then the Government takes the property of one class of citizens and gives it to another from a national necessity — the necessity of sup- porting the credit of the legal tender notes. Now the support of the credit of the legal tender notes being a national necessity, the nation is bound to impose taxes equally, and not to invade private rights wantonly. To protect the rights of citizens, the supreme law says (Article five, amendments) that " private property shall not be taken for public use without just compensation." And what compensation does the creditor get, who gives up a note and mortgage for gold, on the payment in a currency which is- only worth half or two-thirds the gold ? If the Legal Tender Act is in harmony with the supreme law, then is the Government bound in honesty and justice to pay up the loss on such claim. The losses on such claims between citizens would not be less than one billion of dollars, and this would be justly and properly passed to the debit of the legal tender law. G* 66 OTHER MEANS OF RAISING MONEY. The time when specie payments will be restored is in the indefinite fixture. It may take place sooner or later, but if it be put at four years from the close of the war, (April, 1865) or in April, 1869, the damages to the people will not be less than two billions of dollars, resulting from the Legal Tender Act. But how could the Government have done different ? It could and should have suppressed the State bank issues at all hazards and consequences. This would have allowed the issue of about $160,000,000 of bills at the par of gold. It could have issued $200,000,000 more of bills, and made them receivable for taxes, licenses, excises, postage, and all salaries of government officers. It could have issued, upon the principle of bank circula- tion, by reason of the extravagant demand for currency during the war, perhaps 200,000,000 dollars more, re- deemable in five-year bonds, after the end of the war. For the balance needed, it had unlimited powers of bor- rowing and taxation given in the Constitution. These issues would have kept quite as near the par of gold as the legal tender has done — this, too, without working the incalculable mischiefs and injuries which are justly chargeable to that measure. For these reasons I think the Legal Tender Act was not wise, judicious, adapted to the end proposed ; nor was it the only or best means of raising the national credit. But however statesmen and economists may view the matter in the light of necessity — as a measure that was needed — its use is no longer called for. If the Supreme Court decide that it was an error of Congress — that the legal tender clause of the Treasury note bill was uncon- stitutional — the bills will be funded at the treasury and canceled. This will end the matter finally, and the best way it can be ended, save that Congress itself shall repeal the legal tender quality of all the acts making paper a tender between citizens. On the contrary, if the Supreme Court shall hold to the Constitutionality of the tender, and Congress does not repeal the same, I see no way that we can get rid of the evils which will be conse- quent upon such legislation for the indefinite future. It may be twenty or fifty years before we return to specie payments again. Our gold is bound to go from us, so HOW TO TRY THE ACT. 67 long as our national legislation shall tolerate any form of money, and make it lawful tender, which is of less value tlian gold ; and the test of this value will be — not the ruling of courts — not the Statutes at Large — but equivalents tried and adjusted by the commerce of nations, the laws of trade, and the ruling of the world. If Congress and the Supreme Court heed these princi- ples, our monetary affairs will soon be getting better. On the contrary, if they oppose them, they resist equity and the right, and the longer the opposition continues the more difficult will be the return to truth, honesty, justice, and prosperity. In deciding upon the fitness and propriety of the Legal Tender Act to achieve the purposes for which it was intended by Congress, we must look at its operation not only during the civil war, but until it shall be repealed by Congress, or pronounced unconstitutional by the Supreme Court. It must be admitted, that all the good it has done is measured by the difference in the price of greenbacks as they have ruled through the war at their gold prices, and what they would have ruled at, measured by gold, if the State Bank circulation had been stricken out of existence, and if the balance of the greenback issue, in excess of the State circulation, had been secured by making them receivable for taxes, excises, debts due to and from the Government of all kinds, except duties and interest upon tlie national debt. My own opinion is, that they would have held their relative position to gold nearly the same as they have done, with that act in full force. . If this be so, or any where near correct, the entire action of the measure has done incomparably more mischief than all the good that can be passed to its credit. But the din of arms has, long since, ceased, and the enormous act still disgraces our Statutes at Large. Furthermore, it has been the entering wedge — '■'■the first step which costs" — the example of a great and potent nation, using it's utmost legislative power, and probably far exceeding its constitutional right, to fasten upon the people an irre- deemable currency by arbitrary enactments. Already does the tocsin sound the alarm, and the National Banks are crying for more circulation, more power, more privileges. 68 THE ACT TENDS TO ENRICH THOUSANDS Not satisfied that their notes are allowed to be circulated as money, and receivable for taxes, excises, public lands, and all other dues to the United States, except for duties on imports ; and also for all salaries and other debts and demands owing by the United States to individuals, corporations and associations, within the United States, except interest on the public debt, and are also receivable in redemption of the national currency — not satisfied with these immense privileges, they are already asking that they be made a legal tender on all contracts between citizens. These banks would never have thought of such extravagant demands from Congress had not the Legal Tender Act paved the way for such apathy on the part of the people. Money is power, and this power attaches even to false money, so long as it is in good credit. The war was waged to put down the rebellion and save the Government. One of the bulwarks of our republican institutions has been the moderate equality of wealth and general listribution among its citizens. That while we had but lew exceed- ingly wealthy men, we had scarcely any paupers. The Legal Tender Act has done more than anything else to break down this support of the Government, and to crush the laborer and the inedium class of citizens between the upper and nether millstones. Its tendency is directly to create a money oligarchy, making the rich richer and the poor more and more abject. If we have put down the war by the Legal Tender Act, and the Legal Tender Act has instituted a system to grind the poor and medium classes in the dust ; to build up an oligarchy of wealth upon the taxation and toil of the medium classes of society, it needs no great stretch of reasoning powers to see that this oligarchy is destined to rule the nation absolutely. That part of the national debt which for- eigners do not purchase at half or two-thirds of its face, will pass into the hands of the aristocracy of wealth, to be a source of power and profit to them, and to build up their claims to such form of government as shall best subserve their purposes. With every succeeding year the profits and wealth of this class increases, and with that increase the medium classes are rendered more obsequious, and more pliant to the will of their superiors. BY IMPOVERISHING MILLIONS. 69 The system of taxation grinds heavily, but it is only yet in its incipiency. I know that some think the national debt will soon be paid off; but its rapid reduction does not seem possible, except by most blighting taxation. The public debt in August, 1865, was. .$2,757,253,275 65 1866, . . 2,633,099,276 38 Reduction, $124,153,999 27 But to reduce the debt $124,000,000, as above, there has been collected $556,000,000, as appears by the official report of United States receipts and expenditures for the fiscal year ending June 30th, 1866, as follows : RECEIPTS. 1865. 1866. From customs $184,928,26060 $179,046,63064 From public lands 99^,553 31 665,031 03 From direct tax 1,200,573 03 1,974,754 12 From internal revenue 209,464,215 25 309,226,812 81 From miscellaneous . . 32,978,28447 65,125,96646 Total $329,567,886 66 $556,039,195 06 EXPENDITURES. Civil, foreign and mis- cellaneous $44,765,558 12 $41,049,965 96 Pensioners and Indians 14,258,57538 16,253,30044 "War 1,031,323,360 79 284,449,701 82 Navy 122,567,776 12 43,519,632 21 Interest 77,397,71200 133,074,73727 Total $1,290,312,98241 $518,347,337 70 "The internal revenue increased $99,762,597. The miscellaneous includes the premium on gold sold ; or in other words, the buying up by the Treasury of its own paper at a discount. The result is a surplus of ^537,691,857-" Surely it does not seem to be an easy reduction of the debt, if the people must be taxed $556,000,000 to pay off $124,000,000. We shall continue to roll the wealth of the country into 70 THE ACT GIVES OUR WEALTH TO FOREIGNERS. the hands of the few, so long as we have two kinds of dollars, held by Congress and the Courts to be equal, but in truth and in equity, differing in value from one-third to one-half We shall continue to pass our national debt into the hands of foreigners, and of our wealthy citizens, at fearful sacrifice, so long as we cling to this falsehood of making t\vo currencies legally equal, which vary in fact from thirty to fiftj- per cent. The Legal Tender Act is a carcinomatous cancer upon the body politic which is eating its way towards the vitals, and will, if not amputated, destroy the government. It never was adapted to the purposes for which it was enacted, even in time of war ; but in time of peace, its tendency is to pass the whole wealth of the country into the hands of a few, and to make the great majority their vassals. It is as anti-republican in principle and practice as can possibly be conceived. To return to our figure : there are but two surgeons in the United States com- petent to perform the operation of its amputation. These are Congress and the Supreme Court. Will either of these incumbents use their power for good, and save the country ? The Constitution of the United States was made " to ESTABLISH justice." (See Preamble.) The Legal Tender Acts of Congress do positively and unequivocally subvert JUSTICE. Therefore, they are diametrically opposed to the design, spirit and letter of that instrument. Further- more, justice is an attribute of Deit\- ; hence, these acts are opposed, not only to the supreme law of the land, but they are opposed to the will of the Creator ; and no nation can hope for permanent prosperity whose laws and whose courts are framed and administered in known violation of the Divine Law."* (See Appendix C.) A cogent argument against the justice of a law is a * Deuteronomy .x\i, 19, 20. Thou shalt not rest judgment ; * * * That which is altogether just shalt thou follow, that thou mayest live, and inherit the land which the Lord thy God giveth thee. Isaiah Iv, i, 2. Thus saith the Lord : Keep ye judgment, and do justice : Blessed is the man that doeth this, and the son of man that layeth hold on it. GIVES STATES THE RIGHT TO TENDER PAPER. 7 1 powerful argument against the constitutionality of such law ; if the argument for such law is founded on any con- strained interpretation of the Constitution, rather than a positive grant. This results from the fact that the Con- stitution was made to establish justice, not to evade it, or subvert it. Whatever is expressed in the Constitution is, beyond doubt, the prerogative of Congress to exercise; but whatever is merely implied, must certainly be subject to express grants and conditions. The right to make a legal tender of paper is implied, say its advocates, as a war necessity. This implication must certainly be sub- ject to the written law of the instrument itself. The written law guards everything with scrupulous exactness in Amendment ten. It takes from the States the power to impair the validity of contracts, and the said Amend- ment takes from Congress itself any such power. It de- clares that private property shall not be taken for public use without just compensation. It ordains that no State shall make anything but gold and silver a tender in pay- ment of debts ; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts. It also provides that Congress shall have power to lay and col- lect taxes, duties, imports and excises ; and provides that these shall be uniform throughout the United States. The Legal Tender Law, to be justified on the ground of necessity and not of a grant, nullifies the following ex- press conditions of the Constitution : First. It is a direct subversion of Article ten of the Amendments. Secondly. It takes private property for public use with- out just compensation, by compelling the creditor to ac- cept a depreciated form of currency of the debtor. Thirdly. It subverts the Constitution, in that it allows States to make a legal tender of Treasury notes — that in- strument declaring that no State shall make anything\)\xX gold and silver a tender. Fourthly. It xs post facto in its scope and compass, in that it makes the legal tender receivable upon all dues between citizens. Fifthly. It institutes unequal taxation, the creditor class suffering, and the debtor class gaining thereby. Sixthly. It subverts one of the cardinal objects of the 72 DELEGATED AND IMPLIED POWERS. Constitution — the principle of justice. Now, let any honest judiciary in the United States weigh these six pos- itive provisions of the Supreme Law in the balance, and place against them the naked presumption or implication of a right to pass a law directly conflicting with them, and how would a court sworn to support this instrument rule? The framers of the Constitution were men of sound common sense, and in the preamble of the Instrument they set forth that the Constitution was made to establish JUSTICE. If a law is manifestly and enormously unjust, Congress must show by the Constitution an express, pos- itive, clear grant in that instrument to pass it. The powers of Congress are delegated, marked, and defined. A¥hoever thought of questioning the right of Congress to use and exercise its delegated powers ? One of these powers is, to " establish uniform laws on the subject of bankruptcies throughout the United State's." Another is to declare war, grant letters of marque and reprisal, etc., etc. If the discharge of bankrupts be a delegated power, to be governed by the act of Congress, it is a very dif- ferent matter from the discharge of solvent men from their debts. It may be, and probably is, the moral duty of every man to discharge his debtor, upon giving him up all he possesses. If this be sound morality, and I firmly believe it, then it is not in conflict with strict justice; for the high behests of justice must ever comport with moral principle. It is, therefore, not only delegated to Con- gress, but it is an imperative duty to release the debtor portion of the community who are honest, unfortunate, insolvent, and who surrender their propert)'. In the case of declaring war : this, too, is a delegated power which Congress has by the Constitution. Now, to infer that, because Congress has these powers delegated, and because these delegated powers do in their exercise relieve the debtor from his obligation, or impair the va- lidity of contracts, therefore Congress may use powers that are not delegated, to release a solvent debtor from his obligation, or from a large fraction of it, is such a pre- posterous subversion of the Amendment ten of the Con- stitution, as, if generally carried out, would defeat the whole purpose of the Constitution and the Union of the A BRIEF SUMMARY. 73 States. There is not a subject matter provided for in the supreme law that Congress might not subvert witli as much propriety and right as the spoHation made upon private property by enacting the legal tender laws. The question of Constitutional power is answered by the instrument itself. "The powers not delegated to the United States by the Constitution, nor prohibited to it by the States, are reserved to the States respectively, or to the people." The power to make Treasury notes legal tender has never been delegated — the inference is irresistible — it does not exist in the Congress. If the Legal Tender Act of Congress, making Treasury notes a legal tender upon all debts between citizens, sub- verts justice instead of establishing it ; if it inflates the currency so as to make general prices above their gold values ; if it banishes the gold coin from the country, and leaves in its place the promises of the Government to deliver coin, which promises are notoriously false ; if it has augmented the national debt by a very large frac- tion of its total amount ; if it has been demonstrated by experiment that it was and is a total failure to keep the price of the notes at the par of gold ; if it has injured the monetary credit of the United States at home and abroad ; if it has been a fruitful source of occasioning and facilitating the sale of our bonds to foreigners at two- thirds or less of their face value, or what they are the promises of the Government to pay ; if it has been the cause of most exacting taxation on the part of the Government, which must continue to grind the people indefinitely for the future ; — then surely it is not a measure which is judi- cious, equitable, adapted to the purposes for which it was enacted, or which will promote the real interest of the people of the United States. But in addition to all these disabilities and pernicious consequences of the act, if it works individual wrong and losses larger to the people even than to the Government ; if it has laid the foundation for a moneyed oligarchy which can rule the people ; if it is a device which will essentially con- tribute to make the rich more wealthy, and the poor and middling classes more dependent and more abject ; if it is a measure which is promotive of the rapid passage of the wealth of the country from the hands of the many H 74 THE ARGUMENT CONCLUDED. into the power and control of the few ; if these are the scope and the tendency of the legal tender, then it is in fact the most dangerous bill which has been enacted by any Congress.* In reckoning the advantages and injuries of the measure, we must commence at its first fruits, and con- tinue our researches through all its history till it is repealed by Congress or pronounced imconstitutional by the Supreme Court. To me it seems that where thousands may be passed to the credit of the measure millions should be carried to its debit. The expediency of the measure has been the ground upon which many of the courts have ruled its constitutionality. But nothing can be expedient in a national point of view, any more than an individual, which essentially conflicts with justice, equity, right, and science. No legislation can successfully oppose such principles ; no tribunal can bind men to disregard them. A successful demolition of these would destroy any government upon earth. (See Appendix D.) * Let it never be forgotten that large accumulations of wealth \Tii^^'^^XiA?>^ are inimical to the very existence of a republic. Even the general and reckless squandering of our resources, for which we are justly reproached, may work less permanent mischief than would the same amount of wealth accumulated and permanently distributed among a small class of the community. — Bankers^ lifa^a-iim. No V. THE CONSTITUTIONALITY OF THE SPECIFIC CONTRACT ACT DEFENDED. The Specific Contract Law of California is one to enable the Judiciary of the State to compel contractors to fulfill their specified engagements. Its opponents do not found their resistance to its conservatism and justice in any of its provisions, except that it shields with the sanction of the law contracts made payable in United States gold coin. They are not opposed to the Specific Contract Law, be- cause it makes it impossible to discharge a contract for one thousand bushels of wheat legally, by the delivery of one thousand bushels of rye, or one thousand bushels of oats. They do not contend for the defense of such an injustice. The essence of their opposition to the law is that, after the party has received one thousand dollars in gold coin or its equivalent in other property, and executes a note to pay for this value in United States gold coin at a future day, such note, contract, or obliga- tion ought of right to be canceled and discharged in full by the payment of one thousand dollars _ in legal tender notes, as they are called. The Specific Contract Law does not prevent any debtor from making his election in what sort of currency he will pay, at the time the debt is contracted for the loan of money, for the purchase of property, for the de- livery of goods, wares, and merchandise ; but after he has made his election in what form of currency he will pay the debt ; after he has borrowed gold arid promised to pay in gold ; after he has bought goods and commodities on time and promised to pay in gold ; the law will not allow the creditor, under these circumstances, to pay in any other currency than the identical one specified in the contract. 76 EXTRACTS FROM THE LAW. For the convenience of such as have not the Specific Contract Law at hand, I will cite some of its provisions : " In an action on a contract or obligation in writing, for the direct payment of money, made payable in a specified kind of money or currency, judgment for the plaintiff, whether the same be by default or after verdict, may follow the contract or obligation, and be made pay- able in the kind of money or currency specified therein. " If it (the writ of execution) be issued on a judgment made payable in a specified kind of money or currency, as provided in this act, it shall also require the sheriff to satisfy the same in the kind of money or currency in which said judgment is made payable, and the sheriff shall refuse payment in any other kind of money or cur- rency ; and in case of levy and sale of the property of the judgment debtor, he shall refuse payment from any pur- chaser at such sale in any other kind of money or cur- rency than that specified in the execution. The sheriff collecting money or currency in the manner required by this act, shall pay to the plaintiff or party entitled to re- cover the same, the same kind of money or currency received by him ; and in case of neglect or refusal to do so, he shall be liable on his official bond to the judgment creditor in three times the amount of the money so col- lected." [See Statutes of California, April 27th, 1863, p. 687.] I presume no one will contend that the Specific Con- tract Law is in conflict with the Constitution of the United States. The Constitution, the supreme law of the land, determines that " no State shall make anything but gold and silver coin a tender in payment of debts." Now the States must make something a tender in payment of debts ; and, as the Constitution will not allow them to make anything but gold and silver coin such tender, it follows that they are obliged to make the gold coin of the mints such tender. Does the Specific Con- tract Law conflict with this ? Not in the least. It is, on the contrary, in perfect union and accord with it. The law compels the Courts to give judgment for such form of currency as the contracting parties have agreed upon ; that execution shall issue for such form of currency, and that the sheriff shall sell property or collect the execution IT BINDS PARTIES TO THEIR PROMISES. 77 in such form of currency. It is plain, then, that the law is not unconstitutional in coercing gold payments. While gold coin remains a legal tender by the supreme law, it is obvious that every citizen has the right to receive it and pay it, to contract for it and insist upon its payment. Any State or Federal legislation conflicting with this is not only unconstitutional, but tyrannous and obnoxious in the extreme. The Constitution of the United States also provides that " no State shall pass any law impairing the obliga- tion of contracts." If a contract between parties be for gold, the debtor must pay in gold. If the contract between parties be for wheat, the identical kind of grain must be delivered ; and if the parties contract for green- backs, then it is right that greenbacks should discharge the obligation. Contracting parties have the right them- selves to agree upon what form of currency shall dis- charge a debt, contract, or obligation. But for this power which individuals have to stipulate and specify in posi- tive terms what shall be payment in full of a contract or undertaking, it is not so manifest that a note written for a given amount of dollars, payable in currency, could be discharged lawfully in any other payment than gold coin, so long as the Constitution positively makes nothing but gold and silver coin a tender for debts. But since the Constitution of the United States will not allow any State law to impair the obligation of contracts, it follows that any currency which the parties themselves agree upon is a constitutional act, which may be properly and legally en- forced by State law. To bind men legally to perform exactly what they promise in good faith, is the object and purpose of the Specific Contract Act. If there be any unconstitutional principle involved in the Specific Contract Law, it is not in allowing the Courts to give judgments payable in gold coin, where the en- gagements of the parties call for that form of money in payment, but in allowing the Courts to give judgments payable in any other money than gold coin, even where the specification of the parties calls for currency, green- backs, or United States Treasury notes, which Congress have enacted to be legal tender. But since parties may legally contract for any form of currency, instituted and H* 78 THE COINAGE LAW OF 1837 made under an act of Congress, which has not been pro- nounced unconstitutional by the Supreme Court of the United States, it follows that, until gold and silver be pronounced by tlie Supreme Court of the United States unlawful currency, it is not unconstitutional for State Courts to enforce ail contracts, expressly made payable in such currency, in the constitutional tender — gold and silver. And until the Supreme Court of the United States, or the Act of Congress by legislation, shall make the Treasury notes — commonly called greenbacks — un- lawful currency, it will not be unlawful for the State Courts, under such a law as the Specific Contract Law of California, to coerce die payment of judgments in die currency allowed by Congress and agreed upon by the contracting parties themselves. The Constitution of die United States says : " No State shall make anything but gold and silver coin a tender in pa)Tnent of debts." As the States are positi^'ely pro- hibited from coining money by the Constitution, they have no resources for constitutional currency except the Gov- ernment mints. The Treasury notes are cjilled lawful money ; but they certainly are not constitutional tender, and it is fatuous so to regard diem. To carry out the ordinances of the Constitution, the mint laws have been enacted by Congress. Section ten of the Act of 1837 reads thus : " And be it further enacted: That of the gold coins, the weight of the eagle shall be 258 grains; that of die half- eagle shall be 129 grains; and that of the quarter-eagle 645^ grains. And that for all sums whatever, the eagle shall be a legal tender for payment for ten dollars ; the half-eagle for five dollars ; and die quarter-eagle for two and a-half dollars." (See United States Statutes at Large, vol. 5, page 138.) This is the enactment of Congress, now in full force and virtue ; and the acts making the Treasury notes law- ful money, do not repeal any of the mint laws making the gold coin of the mints legal tender on all sums whatever. Hence, the Specific Contract Law of California, enforc- ing payments in gold coin where the parties contract for such form of currency, is sanctioned by the Constitution of the United States, by all the mint laws which apply to CORROBORATES THE ACT. 79 gold coin, by the Constitution of California, by the laws of right and equity, and by every principle which should influence the actions of the Government and the morals of just men. Hence, the Specific Contract Law is in agreement with the Constitution of the United States, inasmuch as it coerces the payment of the gold coins of the mint, which are legal tender by the Constitution, upon all contracts made payable in such coin. It is in harmony with the laws of the mint, which make- the gold coins of the nation a lawful tender on all debts ; which laws are now in full force and virtue. It is in agreement with the Constitution of California, which positively forbids the making, issuing, or putting in circulation any bill, check, ticket, certificate, promissory note, or other paper to circulate as money, or creating paper to circulate as money. It is in agreement with the most obviously implied conditions on the part of Congress towards the State of California, when the same was admitted into the Union with a hard money Constitution, and when the State Con- stitution was accepted by Congress, thereby ratifying and binding the Federal Government as well as the State itself, to all the provisions of that Constitution. It is in agreement with the conditions that California should ever have and hold the right to adhere to the Constitutional currency, which is only gold and silver. It is in agreement with the Constitution of the United States, inasmuch as no State may impair the validity of contracts. And where parties themselves agree and stip- ulate upon the specific form of currency that shall fulfill a contract, the State has no right to make a law to im- pair the validity of such contracts. The law is also in agreement with the Constitution of the United States, in- asmuch as all of its provisions are founded on the prin- ciples of justice and equity to all men ; and one of the cardinal reasons for making the Constitution of the United States, as declared in the preamble to that instru- ment, was to establish justice. California should never repeal the Specific Contract Law, but every State in the Union should enact it. This would monetize gold again in the old States, make a domestic market for our staple. 8o GOLD COIN IS CURRENCY and would expedite and aid in the resumption of specie payments by the Goverpment and the banks more than any other legislation which the State Legislature could enact. To ostracize gold as currency, the provision which makes it legal tender in the Supreme Law must first be amended. But even if we have two kinds of legal tender dollars — the metallic dollar, worth one hundred cents, and the " promise dollar," worth half or two-thirds as much ; •should the citizen be proscribed by law, from electing to contract for, and make his obligations payable in the metallic dollar ? It would be a matter of grievance of no ordinary nature if California should find herself opposed by the Federal Government, upon a constitutional principle of such plain and unequivocal right, as the use of metallic currency ; or, if the Supreme Court should rule that the statute authorizing the use and collection of this form of the national currency — gold and silver coin — the only constitutional currency known, is unconstitutional legisla- tion. If both currencies are made by the Federal Govern- ment, the gold dollar worth thirty to fifty per cent, more than the paper dollar, shall this inequality of value be held as just equivalent, in our business relations, by the inflexible enactments of the Statutes at Large ? To say it shall be so, reflects upon the honesty and wisdom of our people and Government. It seems to be impossible that the Supreme Court of the United States should ever rule that a State law, coerc- ing the payment of contracts in United States gold coin, is unconstitutional, while that Constitution, which is the Supreme law, ordains that " no State shall make anything but gold and silver coin a tender in payment of debts." The Specific Contract Law is an Act to enforce practi- cally one of the cardinal provisions of the Supreme Law. The United States present to the civilized world, in the nineteenth century, the anomaly of a Government making two kinds of currency — the one a metallic cur- rency — a currency of gold and silver — the other, the Government promises to pay or deliver this metallic currency, which are not trvie in fact — the promises being fundable in a public stock, payable twenty or forty years BY THE SUPREME LAW. 8l from date — Congress legislating that the promises shall be received where the coin is due, as its just and full equivalent, dollar for dollar. I cannot believe the Su- preme Court of the United States will ever rule, that laws for the collection of coin of the United States mints, passed by any State Legislature, are to be held as unconstitutional. [See notes " ^," " B " and " C," follow- ing ; also see Appendix E.] Note " A." Important Principle Recognized in a Legal Tender Case. — S. P. Johnson, presiding Judge at Erie, Pennsylva- nia, lately rendered a decision in reference to legal tender notes, in which he says : " The plaintiff had deposited $620 of gold with defendants, and taken a certificate of deposit, payable in gold, dated May ist, 1862, and claimed the market value in gold at the same time suit was brought. By arrangement of the parties, the premium on gold was fixed at 50 per centum. The defendants claimed the right to pay the certificate of deposit in legal tender Treasury notes, under act of Congress of 25th of February, 1862, and tendered plaintiff notes for the par value of the certificate of deposit. Judge Johnson held that a debt not payable in money, but expressly payable by a return of the deposit in kind, is not a debt within the act of Congress aforesaid, and therefore the plaintiff was entitled to recover the market value in gold. The Court also held that the certificate of deposit containing the express promise to pay gold was a waiver of a right or privilege of paying in lega! tender notes; that although debts are payable in legal tender notes, the right or privilege to pay with such notes may be waived as well as the right to exemption, stay of execution, trial by jury, and many other statutory and constitutional rights which have long been held liable to be waived by the acts or agreements of parties interested." " B." The Principle of the California Specific Con- tract Law. — In the Court of Common Pleas at Baltimore, recently, a case was decided which involved the validity of a special stipulation to pay in gold. A piece of land was rented so long ago as 1 79 1, with the stipulation that the annual rent should be paid in golden guineas. Upon legal tender notes being offered in liquidation they were refused, and the Judge of the Court above named sustained the refusal, and maintained the right of the lessor to demand gold. He held that so long as the laws of Congress recognize two kinds of currency as legal tender, the Court should recognize the validity of a contract for payment in either one alone. If paper currency was to be placed on a level with gold and silver when the laws of trade make a fundamental distinction between them, a legal fraud would be accomplished. Contracts which specify that payment is to be made in gold are still binding. This was the reasonmg of the California Legislature, which only furnished the legal machinery to enforce such contracts. 82 A DECISION IN THE CIRCUIT COURT. [From the Philadelphia Ledger, Oct. 27tli.] " C." Interesting Decision. — During the current week a very important case was decided in the United States Circuit Court at New York. The point in the case was the use of the word cask in the ship's charter, the plaintiffs in the suit claiming that the phrase used meant coin. The Judge, in his charge to the jury, presented the true points which should control the verdict of the jury in all cases of this kind. He said the question was not what says the Legal Tender Act, but what was the intent of the parties to the contract ? Did they intend that the freight should be paid in legal tender notes, or in gold and silver coin ? Law must sustain and enforce contracts; not furnish the means of evading them. This is the only proper rule in regard to the interpretation of contracts, and it does not speak well for our Judiciary, that they have not, from the first, laid down the rule precisely as the Judge has so correctly done in this case. Every contract must be interpreted in accordance with the general current meaning of the words used at the time the contract is made. Any alteration in the meaning of words which may have taken place since the making of the con- tract, whether by universal consent or in consequence of legislation, should have no effect on the fulfilment of the contract. Measures and currencies may change in the meantime, but every contract must be carried out in accordance with the measures and currencies in use at the time of making the contract, because equity forbids that a law shall be retroactive in its effects. Had this been held as the rule of law from the time of the passage of the Legal Tender Act, it would have been better for the currency, and for public morals. There is nothing truer than that laws should be made and regarded as for enforcing contracts in good faith, and not treated as a means for their evasion. No. VI. THE RIGHT OF THE FEDERAL GOVERNMENT TO CONTROL THE CURRENCY. The American system of Federal and State Govern- ments is complex, and unless it be executed in the man- ner designed by its makers, will necessarily be coming into frequent conflicts in its administration. The dan- gers of consolidation and disunion are to be carefully avoided. If we are to have a Constitutional Govern- ment, we must make up our minds to respect and abide by that instrument. So far, then, as an individual holds firmly to the doc- trines of the Constitution, he is both a Constitutionalist and a States' rights man — the Constitution being the supreme law of the land, and by consequence as much the law of every State as though it were engrossed in each State Constitution. Witness the preamble to that instrument, which is in these words : "We the People of the United States, in order to form a more perfect Union, establish justice, etc., etc., do ordain and establish this Constitution for the United States of America." Hence the Constitution for the United States of America was formed by the repre- sentatives of THE People of the United States acting in concert, and not acting as separate States. The ratifica- tion of the Constitution subsequently by the States, through the action of their respective conventions, did not take from that instrument its binding force as the Constitution of the people, instituted in their joint and sovereign capacity. This Constitution provides the way for its own amend- ment, and under this power the following amendment has become a part of that instrument. Article ten : " The powers not delegated to the United States by the Con- 84 THE STATES CANNOT COIN MONEY. stitution, nor prohibited by it to the States, are reserved to the States separately, or to the people." Article one, section eight, prescribes the powers of Congress. Among these the power is delegated " to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures." It would seem that the makers of that instrument intended that it should be very precise upon this point. An objection is made by the States' rights men to the regulation of the currency under this authority, to coin money and regulate its value, that "the Constitution has not the word currency in it, and that the power to regulate the value of coin, domestic and foreign, does not include or imply the power to regulate currency; that currency may be cash or credit, or a compound of each, mingled in any given proportions ; and that it is no part of the duty of Congress to rule the credits of the country." The delegation of the exclusive power to Con- gress to coin money and rule its value, and the value of foreign coin, by the Constitution, was made to insure to the people a pure currency, and one of sterling value in itself For this reason the States are prohibited in the same instrument from coining money. No matter how pure the States might make coin, the right to make it does not belong to them. It is a vested right in the Federal Government, solely and exclusively. It is equally clear that Congress has the sole right to fix the value of coin. Now the only power that the Government has to fix the value of coin is to keep it pure, according to the legal standard ; to prevent its being counterfeited, which the Constitution expressly provides for ; and to make all the issues of money under the authority of the Government. Gold and silver coin must take its place in the marts of the Union, and its relative value to other wealth must be measured by supply and demand. But all issues of coin by States or individuals are most clearly illegal and prohibited. And further, every spurious or false issue of anything to circulate as money is illegal, robs gold of its value, and conflicts with the spirit and letter of the Constitution. Now, would it be held by sensible men, that banks had the right to coin brass or copper planch6ts, and circulate STATES SHOULD NOT MAKE CURRENCY. , 85 them as money among the people, even though they pro- fessed to keep on hand gold and silver for their redemp- tion ? Such issue would certainly be counterfeit coin, and expressly against the provision that nothing "but gold and silver shall be made a tender in payment of debts." But suppose the banks should not only issue such bogus coin, but issue it in quantities five or ten times as much as they kept genuine coin to redeem ; is it not manifest that such issues would be a theft from the value of the genuine coin, provided such bogus coin cir- culated as money and discharged the functions of money ? Would it change its nature by calling it currency ? Should the powerful protection which the Constitution was in- tended to guarantee to the people, upon so cardinal a point as the money of the country, be frustrated by the substitution of a name for false money by calling it cur- rency, and the power to regulate the value of coin be thereby destroyed ? This applies to any form of false money, or substitute for money, which is not issued b}' authority of Congress, be the same of copper, brass, leather, or paper. The common mode of counterfeiting and uttering false currency now, is with paper — it is done by banks, and done by the aegis of State legis- lation. The former practice was for each bank to get a special charter under which to do business, and this charter allowed such bank to emit bills of credit to cir- culate among the body politic as money, claiming the attributes of money, and discharging the functions of money. The makers of this circulating medium screen themselves from liability on the ground that it is cur- rency, not money ; that, being currency, it is only credit, and it is not competent for Congress to regulate private credits ; that the dealings between individuals are sub- ject to their own control, and Congress cannot recognize them. Undoubtedly such construction is true as relates to all forms of barter and exchange of property between individuals ; but money, which is always currency, and currency which should always be money, or at least repre- sent money, is a manifest exception to the rule. The regulation of currency belongs to Congress, from the fact that it cannot regulate the value of coin unless it also regulates the currency ; and as to the regulation of I 86 THE CONTROL OF THE CURRENCY. coin, no one disputes its authority. Congress, then, having the power to regulate the value of coin, has this further power : " To make all laws which shall be neces- sary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the Government of the United States, or in any de- partment or officer thereof" (See Article one, section eight, paragraph eighteen of the Constitution.) It fol- lows, then, that Congress can legally govern the currency absolutely and beyond all doubt Even if the Constitution did not prohibit the issue of bills of credit by the States, (which necessarily prohibits the States from chartering banks to make such issue) this last recited paragraph from the Constitution would give to Congress the absolute authority of regulating the currency. All that is necessary to show in the premises is, that currency does affect the value of coin ; that it does banish coin from circulation ; and, this demon- strated, it is as much the bounden duty of Congress to govern it as it is to punish the utterance of bogus coin. And most wisely is this power vested in Congress, for it is necessary that it should be lodged in the same Legislature as governs the minting operations of the nation. All the protection which the bullionists claim for silver and gold, from Congress, is that its coinage shall be according to the standard fineness, and that the value of such coin shall not be impinged by the utter- ance of any form of currency which does not represent coin in the hands of safe custodians, and dollar for dollar for such issue. If the exchangeable value of gold, in comparison to other wealth, be reduced by the bountiful yield of the mines, the owner of gold has no reason to find fault at such depreciation. Such bounty is the gift of Providence, or the rewards of toilsome industry. The same reduction of price follows an excessive crop of wheat. Again, if gold is depressed by commerce, or the nominal laws of trade, this loss is at the risk of the holder of gold. But inflating the currency with paper issues, (no matter how such issues are secured, unless it be in coin) is the very essence and substance of the principle which the makers of the Constitution sought to empower Congress to SECURITY FOR CURRENCY. 87 avert, by the clear and stringent provisions in that instrument. This opens another view of currency, which few seem to understand, or if they understand it they do not consider it of sufficient importance to enlarge upon the theme. What possible difference can it make whether the issue of currency is secured on gold, on mortgages of real estate, on State stocks, on Government bonds, or any other good security ? To the security of paper issues on gold, dollar for dollar, as a buUionist, I do not object. It is right, expedient and very convenient. To the security of currency on bond and mortgages there are weight)' objections. And, first : It opens the door for any man who possesses real estate, houses, stores, farms, etc., to receive the rents, issues and profits of such estate j and by pledging it for security, to receive stamped paper to issue as currency. Thus he receives revenue from his estate as such, and interest from all the currency he can circulate. This, if it was a correct principle, would enable him to " eat his cake, and have it also." Pre- cisely the same result is attained by pledging stocks and issuing Currency upon them. The owner of the stocks receives pay for his coupons for interest, and also the interest on the " bills of credit," which he circulates as currency. And, secondly : If bonds and mortgages on real estate are a good security for the utterance of currency, we may convert all of our real estate into currency by such alchemy ; and after we have done it, what ha^e we gained by it ? What would currency be worth under such in- flation ? And yet, if this principle be sound, why should one man be allowed to issue currency on the pledge of real estate, and his neighbor, who carr offer equally good mortgages, be excluded from such profits ? Why should there be any limit to the issue of currency to any one who can give what is called good property security for the redemption of the currency which he issues ? Why may not all of our State stocks and Government stocks be made the basis of bank issues, and the amount of issues be limited only by the power of circulation ? The power of circulation is almost boundless, provided all the banks 88 MONEY A UNIVERSAL AGENT. expand their issues in a proportionate amount to their capitals. While they are under suspension of specie payments they may play this game ad libitum ; and they seem to think nothing of the suspension of payments, for they claim that their bills are equally good whether they pay specie or not. To a great extent this is true, for they are never, even when panting under their greatest plethora of gold, able to redeem in coin more than one dollar in six of their immediate liabilities. Hence the value of their promises depends upon the property of their debtors which they can sacrifice in an emergency, and not upon the specie which they retain in reserve. It is a useful reflection to contemplate how this system of organizing Government and State stocks, bonds and mortgages, into currency, affects the vital interests of the people. Money is a universal agent. The man who possesses it in necessary amount, can convert it into any other form of wealth. This universal agency makes it the grand medium which is constantly being sought for. All property is seeking to be exchanged for it, at least as often as once in thirty years, and nearly all the property of the country is in the market every five years, while one-half of the whole wealth of the count]-y may be said to be constantly seeking to be converted into cash. The settlement of estates, and the embarking in trade, commerce, industrial pursuits, manufactures and the varied modes of gain which each succeeding generation has to institute, necessarily requires a large amount of capital, and this capital is sought in the form of currency. To obtain this capital, the erroneous principle of organ- izing Government and State stocks into currency has been adopted. It is erroneous, in that it does not add a single dollar of real capital to the country ; but, on the contrary, is constantly increasing the demand for cur- rency by banishing real money from us, and creating false prices for every species of property. Men cannot get real money so fast as they desire to amass wealth, and their covetousness leads them to make a currency from property security, and endow it with all the attributes of money, or, at least, try to do this, and contend most manfully that they have done it to all intents and pur- GOLD SHOULD NOT BE CHEAPENED BY PAPER. 89 poses. Still to do it in fact has been an impossibility, and must remain such. It is totally impossible to make paper equal to gold by securing it on property or on stocks ; and, therefore, paper should never be transformed into currency, unless its security be on gold. Its action on the public weal is after this manner. The currency being reputed strong by the pledge of stocks and mort- gages, and easily manufactured by the banks, the bills promising on their face to pay real dollars on demand, they acquire a credit and circulation among business men, and are received as cash and equivalents of value in the exchanging of property. Every dollar of such currency which circulates drives one dollar of gold from circulation, and bank paper and credits become the measures of value, and gold is but merchandise. Gold should never be made an article of merchandise among any people, by reason of its having been cheapened in price from the use of paper currency. The whole ne- cessities of the people for currency should be fully satu- rated with gold, before the owners of gold are compelled to seek a market for it as merchandise. In other words, gold should never be depreciated but by its own super- abundance — ^by its excess over and above the wants of the people for currency. That no such superabundance of the article exists in the United States is patent from the fact that our specie, in 1861, is only one hundred and eighty millions of dollars all told, while our currency is more than six hundred million of dollars. This shows a deficit of gold in the currency of fully four hundred and twenty millions of dollars. The only argument that has any shadow of plausibility in favor of a paper currency built upon credits, stocks, bonds, and mortgages (that is, making money out of anything but gold and silver) is based upon the supposition, that it is impossible to get gold and silver enough in the currency to do the business of the country ; and hence that all our industrial pursuits must languish if we resort to a purely gold currency. No such impossibility exists, if the people will have a gold currency. The whole currency of the United States, in 1 86 1, was only six hundred and twenty millions of dollars. California has yielded two hundred million of dollars over and above this last sum — say, eight hundred and I* go CONGRESS MAY EXCISE BANK ISSUES. twenty millions — since the Treaty of Guadaloupe Hidalgo was signed. The whole banking capital of the United States is less than five hundred millions of dollars. Why may it not be all gold ? Every second the clock has ticked for the last twelve years, California has sent out of the Golden Gate more than two dollars of gold, on the aver- age. Australia has yielded nearly an equal amount ; and if we had no gold fields at all, our commerce ought to yield us an ample supply of coin. Whence, then, the impossibility of having a currency of gold in the United States, equal to six hundred millions of dollars .-' I make the following estimate of the yield of the gold and silver mines of the United States for the next ten years : The mines of California, {(40,000,000, ten years, $400,000,000 Other mines in the United States.west of the Rocky Mountains, JS35, 000,000, ten years, . . 350,000,000 Now in the United States (i86l) 180,000,000 jf930,ooo,ooo If the above estimate is correct, we may have a cur- rency of more than nine hundred millions of dollars, in the next ten years, in coin ; provided we institute proper national legislation to demonetize paper money. There is another way that is plainly constitutional, and competent for Congress to regulate the currency of the country. Section eight. Article one of the Constitution provides that "The Congress shall have power to lay and collect taxes, duties, imposts, and excises, to pay the debts, and provide for the common defense and general welfare of the United States." Here, then. Congress has power to excise anything it may choose to, bank notes and the issues of banks, as well as any other kind of property, not excepted. Why may not this excise be made so high as to drive all bank notes out of circulation, except such as are willing to be regulated by Congress, and will pledge such security with the Federal Government for their re- demption, as they may require ? The latter clause of the section gives the power to Congress in this, that it shall " provide for the common defense and general welfare of the United States." Is there a more essential point of general welfare to the Union than a sound currency ? UNLIMITED LFABILITY. 9 1 The same arguments which Mr. Webster has used to prove that Congress has the right to regulate the currency, by reason of its having the right to " regulate commerce with foreign nations, and among the several States," will apply to the same power, vested in the same Congress, to provide for the general welfare of the United States. Hence, Congress has the power to regulate commerce, and by consequence, the currency which governs commerce ; and also to regulate the currency as an indispensable means of discharging its duties and functions upon the subject of money, which is due to the Union at large by its vested right " to provide for the common defense and general welfare of the United Slates." To say that Congress has the constitutional right to fix the value of coin, which of course must mean its ex- changeable value for property, and still that it has no right to suppress the issue of paper which does not represent coin, is absolutely to nullify its right over both coin and currency. Currency, as it now exists in the United States, is constantly unfixing and changing the value of coin ; and such must inevitably be the case while currency repre- sents anything else than coin. From this it results that currency should always be coin, or represent it. It should not represent property of any kind, save the precious metals ; for if it does, it opens the way to virtually monetize such property as the currency represents. It should not represent debts. State stocks, or any other form of debentures or securities, whether of the Federal or State Governments ; for this opens the way to monetize such securities, and thus unfixes the value of coin ; partially demonetizes gold, and makes it an article of merchandise, and most materially depreciates its value. Unlimited liability of stockholders has been exalted by some as a ne plus ultra for governing issues ; and that banks whose solvency is thus guarded may be left to their own discretion in all their business. The truth is, no system of issue is correct, just, wise, discreet, economical, or of any permanent practical use to a country, but the one which strictly limits such issues to the gold coin de- posited for their redemption. Every system which tries to evade this, is a struggle to perform impossibilities ; and although it may support itself for a long time, and make 92 IMPOSSIBILITIES IN CURRENCY profits to the shareholders, these profits are extorted from the people in high prices of commodities, in plunging them needlessly and ruinously in debt, in sapping the vital interests of every form of industry, to build up and con- tinue such mode of subtle exaction. Impossibilities should never be allowed to disgrace a national currency. Suppose a brilliant of immense value existed in the star Aldebaran : would the promise of the Bank of Eng- land to deliver this jewel be good .' Would the joint pro- mise of the Banks of England and France to make the delivery, ensure it ? If the endorsement of the Dukes of Bridgewater, Bedford, the Rothschilds, Barings, Hopes, and all Threadneedle and Lombard Streets were added, would these command the jewel ? It might command the wealth of these corporations and individuals, but the jewel would be just as far from the earth after the promise as before. To govern the currency belongs to Congress ; and it should not allow any impossibility to be engrafted into the system. The more stringent the bond to perform an impossibility, the more intolerably does the condition grind upon the Commonwealth. It is the duty of Congress to suppress all issues of banks not based upon an equal amount cf coin ; and issues so secured can never oppress the makers of the same, or the people. The clause in the Constitution which declares that " nothing but gold and silver shall be a tender in pay- ment of debts" gives to the Government virtual control of the deposit account of banks, and is broad enough for Congress to legislate to compel banks to possess money before they can discount bills, or manufacture currency ; and that they shall not discount bills, or utter currency, except they possess the gold to cover such credits and such issue of currency. If banks were compelled to pay gold on their discounts, the power of discount banking would be limited to the cash on hand. All intelligent examiners pronounce the deposits of banks currency as much as their circulation. Mr. McDuffie, in his " Report of the Committee of Ways and Means, April, 1830, says : "The power to coin money and fix the value thereof is expressly and exclu- sively vested in Congress. This grant was evidently in- SHOULD NOT BE ATTEMPTED. 93 tended to invest Congress with the power of regulating the circulating medium. Coin was regarded, at the period of framing the Constitution, as synonymous with currency, as it was then generally believed that bank notes would only be maintained in circulation by being the true representative of the precious metals." In proportion as we monetize property and credits, we demonetize gold, and make it but an article of merchandise. Here is the first starting point from truth, from right, from justice : to wit, that bank notes promise dollars and pre- tend to guarantee the payment of dollars in coin, and base that promise upon the security of stocks. These stock pledges give them a credit ; and this credit, confer- red upon them by the public, with the fact that real wealth exchanges hands through the potency of this credit, keeps them in circulation, and they thus displace real money, exercise its functions, and leave the whole money credits of the country resting on a shadow instead of a reality. The banks issue their promises to pay dollars, and exact in exchange for these the promises of their dealers and customers to pay dollars. The names must be con- sidered solvent for three or four times the amount of the paper discounted, and thus they have their talons in the vitals of the people. When times come stringent they shield themselves behind this bulwark of the people, and say, you may crush us by your calls for specie, but before we die we must pass over your dead bodies. Then comes the stern fiat of the banker : " No expectation of forbearance or indulgence should be encouraged. Favor and benevolence are not the attributes of good banking. Strict justice and the rigid performance of contracts are its proper foundation." Undoubtedly this rule is correct where banks deal solely in gold — in real cash — when they give dollars to their dealers, as a currency, to pay dollars. But after making currency of stocks, mortgages, and all forms and varieties of credit, the rigid exacting of dollars in payment for such currency is but the essence of tyranny ; and the wonder is that our people do not see the injustice and resolve to abate the abomination. Is it not manifest that every one who goes in debt, or purchases property, does so under the belief that the 94 A SOUND CURRENCY currency is sound, not inflated ? A rotten currency does not come into our calculations, and indeed it ought not to, for it is the duty of the Government to guarantee that the currency is sound, and convertible at any time, and under all circumstances. But, says one, if the normal amount of our currency, with a population of thirty millions, be six hundred mill- ions of dollars, may we not keep two-thirds of that cur- rency in credit, and one-third gold, and make prices rule the same under the mixed currency as they would under a gold currency, thereby saving interest upon four hun- dred millions of dollars by the substitute of credit ? Per- haps the answer to this query may be more satisfactory to many minds if they extend the case a little farther, and say : ^Vhy not make the whole currency of credit, but let that credit be secured on property or stocks ? If by sub- stituting credit for two-thirds of the necessary amount of currency which the nation requires for its prosperit}-, we can save interest upon that sum, why not make it all of credit, and save interest on the whole ?* The difference between possessing a currency of gold or one of credit to a nation, is precisely analagous to the difference between erecting a valuable edifice upon an unstable and in- sufficient foundation, and building that edifice upon a rock. Money being the measure of all values, except moral worth, and also the equivalent of all forms of wealth, it is the needfiil agent for which all properties are seeking to be converted. Hence it underlies ever}-thing, and be- comes the foundation of all business operations, of all credits of a monetary nature, and is the measure of the permanent prosperity of a countr}', as well as of its im- mediate power. Wherever it remains, civilization, en- lightenment, power, opulence, advancement, prosperity, and happiness are diffused among the masses of the popu- lation. It builds up business upon a firm basis, and * The profundity of this logic is well illustrated by a facetious anecdote of a farmer, who was boasting to his hired man, a Hiber- nian, that he had bought a valuable stove, which would save one- half his wood. The Irishman replied, " Troth, why don't you get another one, and save all the wood." INSURES PROSPERITY. 95 gives to the patient toil of industry a just and sure re- ward. Unlike its competitor in the circle of currency — paper money and credit — it gives stability to prices, banishes the uncertain, gambling, fitful, and bankrupt operations which necessarily result from using a false currency, and is not less salutary to the people in a moral point of view than in its universally beneficent influence upon every branch of honest industry. Such, then, is the difference to a people between a currency of intrinsic value and one of credit. Under the former, the normal action of gold makes prices on a real basis according to supply and demand ; under the latter, the prices of all property are in chaos and confusion, and debtors are not only liable to failures, but failures are the necessary con- sequences of such currency. Is it well, then, that our medium of exchange should be two-thirds credit, so long as we are competent to make it all gold with proper national legislation ? No currency inferior to the best one attainable is true economy. \This article was written in 1 86 1, when the State banks dominated.'] NO. VII. RESUMPTION OF SPECIE PAYMENTS. The organic law of the land has made golfl coin the legal tender in payment of all debts. The law of Congress, in violation and in direct subversion of this law, purports to have made United States notes, or Treasury notes, commonly called greenbacks, a legal tender in payment of all debts. The practical effect o this legislation has been to make money of paper and to demonetize the coin of the Government mints. It is obvious that human nature is not so constituted as to pay debts with dollars worth one hundred cents each, when a law of Congress is in full force and virtue which allows such debts to be paid in the promises of the Government, and while these promises are to be had at seventy-five cents on the dollar, or less, in any sums which are needed. So long, then, as these promises to pay dollars are maintained by the Government and by the Courts to be legal tender, so long, it is obvious, the country will not return to specie payments. The Legal Tender Acts relating to paper money must be either repealed by Congress, pronounced unconstitu- tional by the Supreme Court, or the issues of the paper must be retired by funding the bills, and canceling them, before the country can return to specie payments upon any sufficiently sound basis to continue such payments. The first step toward a return to a specie foundation, is for Congress and all the Courts to recognize the differ- ence in value between these paper promises and the gold coin of the mints. This difference would adjust itself almost with mathematical exactness, if it were not interfered with by tyrannous legislation. But for the mints of the country to make one kind of dollars worth one hundred cents, and the Congress to print another THE CURRENCY MUST BE REDUCED. 97 kind of " promise dollars " worth, say seventy-five cents each, and the Courts and Congress insist that the promise dollars are as good and lawful equivalents as the gold dollars of the mints, is making an interminable labyrinth of fraud, injustice, extortion and disorganization, which can never be readjusted upon any proper basis until we go back to first principles, and let citizens settle their business matters on the grounds of equitable values, without the coercion of law, or acts of Congress to shield one class of the community in robbing the other. The Legal Tender Acts passed by Congress in 1862, and since that date, have only instituted legalized frauds of the debtor upon the creditor. The excuse for this unparalleled and outrageous invasion of the constitu- tional rights of our citizens is upon the principle that such infringement of private rights was required for the public good ; that these Legal Tender Acts have been a necessity imposed by the existence of the war. But the war ceased in April 1865, and the Legal Tender Acts are still held to be in full force and virtue. How much longer the people will be willing to submit to the extor- tion of paper money, in time of peace, is a matter that no one can predict with accuracy. Certain it is, however, that we can never return to specie payments with such a mass of currency in the shape of greenbacks and national bank issues. As I stated before, the first step towards a return to specie payments is for the Government, the Administration, the Congress of the United States, the Courts of the Note. — The difficulty of returning from a wrong position, after such step is once thoroughly inaugurated, is well illustrated by comparing the hopes of honest men to retrace such measures. The following is from the Washington correspondent of the New York Post: " Mr. Lincoln was rejoicing with his friends last even- ing over the altered aspect of our conflict with the rebels. A distinguished financier present remarked that ' if these successes had occurred three months ago the Legal Tender Bill would have been unnecessary.' It is safe to add that one week ago the bill would have been voted down in the House, with the present aspect of our affairs. The firiends of the legal tender claim that it is only needed for three months, till the taxation bills are in operation. Even Mr. Chase made this statement in the committee room." 98 RESUMPTION OF SPECIE PAYMENTS. country, from the Supreme Court of the United States and the -Supreme Courts of the respective States, down to the Courts of the Justices of the Peace of the town- ships — all to recognize the difference in value between the paper legal tender — " promise dollar " — and the real legal tender — gold dollar. That such difference in value does really exist, I need not, after the experience of the past four years, attempt to prove. The truth of the demonstration has burnt itself into the pockets, if not into the very living, of the people. To this end the laws of the United States, and the laws of the States, must respect and enforce contracts made between citizens upon a gold basis. The Specific Contract Law of Cali- fornia, allowing a judgment to be entered for gold coin of the United States, where the contracting parties have stipulated for such form of payment, should be passed by every State Legislature. This would make gold coin money again, and make a healthful and proper demand for it. As it now stands, gold, with the organic law declaring that " no State shall coin money ; emit bills of credit ; make anything but gold and silver coin a tender in payment of debts," with such plain constitutional doctrine, gold coin has become almost a contraband artiile. California adheres to the organic law of the Union and of the State, and compels her Courts by State law to give judgment for gold, where the parties contract for gold ; and this law alone is what has con- tinued to California the blessings of a sound and uniform gold currency. If the State of New York should enact the Specific Contract Law of California, it would not be one year after the passage of such act, before we should see one-half of all contracts and bargains would be made payable in gold coin of the mints, or its equivalent. In two years nearly the whole business of the country would be done on a gold basis, and gold would again rule tlie- prices of commodities. This would monetize gold again — make it what our forefathers designed it should be — the money of the country. Is it supposable that the National Banks will redeem in gold so long as greenbacks are legal tender ? Most assuredly they will not. They will not redeem their THE VOLUME OF CURRENCY. 99 issues in tlie gold dollar when they can redeem in greenbacks, worth only seventy-five per cent, of the gold coin. The consequence is that the greenback dollar makes the prices of all commodities less; and what keeps up the price of the greenback ? The current rate of our national debt in the markets of the country, and in foreign markets. The greenback being convertible into bonds of the Government, is directly dependent upon the value of the bonds for its own value. This, I con- tend, shows the absurdity of the Legal Tender Act. The value of the greenback is not derived from the fact that it is a legal tender ; but from the fact that it is con- vertible into a Government bond. So far as these bonds are sold in London, Paris, Hamburg, and other foreign cities, so far they are a fund equal to gold to draw upon, for the time being ; whatever future liabilities and sacrifices they may entail upon the country notwith- standing. The Legal Tender Acts never kept the greenbacks up to the value of gold, or anything approximating to it. Hence it has been almost an entire failure, for the intent of it was to keep the paper dollar up to the value of gold. The Government five-twenties sell for gold abroad. Would they not sell at as high a rate abroad if our cur- rency were gold ? No sane mind can doubt it. The only use then of the Legal Tender Act is to keep the country in all the trouble and perplexity into which that act has so needlessly engulfed the people. Without keeping the Government paper any where near the value of gold, and thus failing in the very cardinal point of its institution, the act remains in force, in time of peace even, demoralizing our people and rearing a moneyed oligarchy, which can become wealthy by dealing in dollars only worth two-thirds or three- quarters of the real mint dollars ; but whose wealth is most surely drawn from the losses of the people, and at immense sacrifices. Such is the system of finance and currency which our Government has fastened upon us in time of war, and which in time of peace they do not seem inclined to reform. The issuing of greenbacks in 3uch quantities has made a demand for currency directly in proportion to the voFume of the issue. 100 RESUMPTION OF SPECIE PAYMENTS. With the relative value of currency to commodities at double its present ruling, the country could advance in all its material interests just as well with half the present volume, as to allow it to remain at its present inflation, imposing upon all kinds of business the chances and sudden reverses of the gambler. The currency must not be contracted, says the specu- lator, because it will ruin everybody. To this I reply, that the bankruptcy which the currency has created must fall upon some one in every instance, and continuing this bankruptcy in circulation, as real cash, is but a manifold multiplication of the evil. Let the bankruptcy come at once, then, and let us be done with it. I suppose that it is now a fixed fact that the system of the national banks, as they are called, is to have a trial. Their issues are now far in excess of the amount of paper money which inflicted the country previous to the war ; this, too, with but a mere pittance of their issues being apportioned to the Southern States. We are not so deeply in debt as Great Britain, and our annual excises and taxes need not be greater than theirs ; for, as yet, we have not to provide for all the pomp and equipage of a monarchical govern- ment. The circulation of the United Kingdom, including the Bank of England, the private and Joint-Stock Banks of England, Scotland, and Ireland — that is, the whole paper circulation of the United Kingdom, in April, 1864, was only ;^3S, 578,850 ; or, in our currency, less than $173,000,000. The coin and bullion held by these banks was, then, ;^i8,369,6io ; or. in our currency, a little over $89,000,000. Thus, the circulation of the United King- dom, in 1864, was $84,000,000 above their constant specie reserve. The revenue of the United Kingdom for the year 1863, was ;^7o,433,62o 5s. ; the expenditure for the same year was ;£'67, 810,987 us. lod. sterling. The revenue for 1864 was ;^7o,373,944 sterling; equal to $342,439,611.50, our currency. It is not necessary to compare this with the revenue of our own country during the four years of war between the North and South. The revenue through the war was derived mainly from the issuing of bonds and Treasury notes of various descrip- tions. Our revenue, surely, need not be larger than that THE PAPER CIRCULATION OF GREAT BRITAIN. 10 1 of Great Britain, now that the war is ended ; and even if it be so large as three quarters of that of the United Kingdom, a considerable sum of that can be laid aside as a fund to redeem the national debt. If Great Britain, with a paper currency of $173,000,000, can and does col- lect an annual revenue of $342,000,000, and move all of her industries and commerce, her manufactures and agriculture, her mines and railroads, her stock operations, and her general fiscal concerns involving moneyed capital, — I say, if she can, and does perform all this upon so small a paper circulation of bills of credit as $ 1 73,000,000, and even this comparatively insignificant circulation, covered by a constant specie reserve of more than half the last-mentioned sum, held by the issuing banks, if these premises apd statistics be all historical truths ; what amount of paper currency does the United States need to collect her revenues, and to move her industries ? The population of the United Kingdom and the United States is almost equal. The debt of Great Britain is about $1,000,000,000 larger than that of the United States. Great Britain, with a national debt larger than our own, and a revenue beyond any needed for our country, ac- tually makes all her collections and disbursements with a paper currency of only $84,000,000 in excess of the con- stant specie reserve of her banking institutions. Great Britain might just as well have her entire paper circulation secured, pound for pound, on gold in the banks, as to make this small amount rest upon credit and circulation of money. What other nations have done, in permanent utility, towards founding their paper circulation upon a basis of gold, the United States are competent to do. Commerce alone ought to give our country all the gold which it needs for currency ; and in the counting of such needs I reckon these requirements upon a gold basis, whether they be five hundred millions or double that amount. But if it required $1,000,000,000 to move the industries of the people of the United States, even this sum, with com- merce and the mines of the country, might be easily amassed, under a proper organization and administration of our fiscal affairs ; so that every paper dollar in circula- *J 102 RESUMPTION OF SPECIE PAYMENTS. tion should represent a gold dollar on deposit in the Treasury of the United States. To effect this salutary change — this national reform in our currency — this moral reform in the ethics of our finances, we must give up at once and for ever the profits of circulating false money. The people, the Government, the nation, the States, the banks, must all be willing to make money on honest principles. The profits resulting to banks from making money out of circulating "prom- ises " to pay dollars, which they do not possess, should be dealt with by Congress with most marked severity. Whenever the moral sense of the people shall put the circulation of paper promises by the banks upon the same ground as the utterance of counterfeit money, unless such circulation i§ based, delkr for dollar, upon specie, then we may hope for a thorough reform in the money of the country, which is the measure of the value of every man's property. It is useless, however, to find fault with existing insti- tutions, unless we have something better to offer. Our people are wedded to paper money, and they think it im- possible to do business without it. An experience of six- teen years in California convinces me that the principle of circulation of paper money is a financial heresy fraught with most fatal consequences to the prosperity of the country at large. We have banks of discount and depo- sit here — institutions which discharge all the proper func- tions of banking and exchanges, discounting notes, draw- ing drafts, giving certificates of deposit, and rendering every facility to business operations which it is right and legitimate to perform ; this, too, without corrupting them- selves or the public by vitiating the currency with bills of credit. The Bank of California has a paid-up capital of five millions of dollars in gold coin. This, with the other banks in San Francisco, will make the banking capital equal to ten millions of dollars. Is there another city in the United States, old or yov^ng, with a population of 120,000, that can boast of a bank possessing a capital paid up in gold coin, of five million dollars ? It is also a matter of certainty that bank capital will increase, so long as there is a healthful demand for its use. But CALIFORNIA ADHERES TO CASH PAYMENTS. I03 there is a wide difference between a healthful and specu- lative demand. The former is bounded by legitimate wants ; the latter is like " the horse leech, which cries — Give, give." The one is content with reasonable gains ; the other could scarcely be satisfied with the wealth of the universe. While money possesses power it will be desired by all ; but the healthful demand for it is only that which can re- turn a just and reasonable reward for its forbearance. The highwayman who replenishes his purse by despoiling the traveler ; the gambler who stakes his all upon the turn of a card ; the speculator, who soon becomes reck- less by his repeated adventures ; have each a strong de- sire to possess money, to amass wealth. The business of all such is illicit, and it is no part of the duty of Gov- ernment to furnish the means for them to continue their operations. And yet probably not less than half the call for currency in the country arises from such demands. The return which such call for money makes comes from unjust and fraudulent means. Government, instead of fostering and supporting it, should frown it down. California has passed through the war adhering to her gold currency ; making, what the Constitution of the United States prescribes that all the States shall do, " nothing but gold and silver a tender in payment of debts ;" and living up to the requirements of her own Constitution, which forever interdicts the issuing of paper money in the State, to which Constitution Congress has affixed its seal of approbation by admitting California into the Union of States, with a fundamental law forever repu- diating paper money in any and all forms. The present regime of batiks in California is nearer perfection than any that ever existed in the United States, and comes nearer the ideas of the makers of our Federal Constitution than the best devised modes of Congress or the wisdom of State legislation has ever yet emanated. Its cardinal merit is that it allows of no issue of bills of credit. Cali- fornians believe that they have the right to do their busi- ness upon the currency which the Constitution makes the legal tender of all the States, and which was specially guaranteed as a right to them by Congress when the State was admitted into the Union, with a Constitution 104 RESUMPTION OF SPECIE PAYMENTS. coercing the use of hard money, and interdicting the use of paper money under the severest penalties. Congress has just as good right to expel CaUfornia from the Union as to compel her to use or adopt any form of paper money. This is a digression from the direct argument before me ; still it is relevant to the case in this regard, that whatever one State can do, others may do with equal facility, if protected by proper legislation. California recognizes the real nature of money, and maintains that no form of credit, however sound, however secured, should be allowed to enter into the money of the Union. But in the matter of currency California has the right to use the coins of the national mints as her money, and her own Constitution and the laws of the State make it a felony to circulate paper as money. It would be strange indeed, if California jurisprudence should be found in conflict with that of the Federal Government upon so plain a principle of law as the carrying into practical effect one of the organic elements of the Federal Union, which ordains that "no State shall coin money, emit bills of credit, make anything but gold and silver coin a tender in payment of debts." To coerce the observance of the Supreme law, the State of California has been compelled to pass a law making it obligatory upon the Courts to give judgments payable in United States gold coin ; and for sheriffs and constables to collect such judgments in coin where the contracting parties have covenanted and specified for such form of payments. Precisely such a law as this is needed to be passed by Congress, allowing citizens of the United States to specify and make contracts payable in gold coin ; and compelling all Courts, both State and Federal, to respect these contracts, and to give judgments payable in such gold coin ; and compelling marshals, sheriffs, and constables to collect the executions issued on such judg- ments in gold coin. Such legislation would be most salutary to the people, for the reason that it would begin the process of monetizing gold coin once more. In direct proportion as gold is made money again by Con- gress, so far will a demand for it be induced by the wants of trade and the industries of the people. VINDICTIVE LEGISLATION AGAINST GOLD. 105 No doubt it would be better for Congress to repeal the Legal Tender Act at once, and let the legal tenders be funded. This would demonstrate the injury whigh the legislation has wrought, and the bankruptcies would come at once and be ended. If, however, we cannot at once and forever banish from our national statutes so inconsistent, so unjust, so mischievous, so disorgan- izing, so unconstitutional an act as is each of those making paper promises a legal tender for debts, then let Congress enact the Specific Contract Law of California for the benefit of the Union at large, and allow gold to be no longer a contraband article, which, however strongly citizens may bind themselves to pay it, is most effectually proscribed by the ruling of the Courts, inasmuch as they cannot give judgment, and distinguish between the value of the various kinds of money in use, without Federal or State laws allowing such discrimination. The first step towards a healthful return to specie pay- ments is to monetize gold again ; once more make it money through the length and breadth of the land ; encourage citizens to make contracts payable in gold coin. This will make a domestic market for gold, and in a fair field fight, where odious and oppressive legislation are not instituted to banish this honest currency from the keeping and es- teem of the people, where it is left free to make the prices of property and wealth in the country ; it will either drive paper from circulation, or at least, compel such paper to come up to its own standard of value. But the legislation of Congress upon gold has been al- most vindictive. It has been treated as though it were the most thorough foe to all sound and virtuous govern- ment. A greater fallacy than this could not well seize upon the minds of a sane people. Our whole industries and wealth depend upon the principle of fixity and uni- formity of value in our measures of value. In proportion as we possess a sound currency, we have stability in our opulence ; and in proportion as our currency is unsound, so far have the other nations with whom we are in com- merce and communication a lever power to grind us to powder. In this connection I would remark that, be- yond doubt, the old State bank systems of issuing bills of credit to circulate as money were, one and all of them. Io6 RESUMPTION OF SPECIE PAYMENTS. not only unconstitutional, but, as conducted, decidedly hostile to American industries. Soon after the Southern revolt burst upon the country, the Secretary of the Trea- sury was forced to the humiliating necessity of supplicat- ing these unconstitutional and, of course, illegitimate creations of the State legislatures, for the requisite funds to prosecute the war. But what could they do for the Government? Only exchange credits with it. They had no real money to lend. Their entire means were only about five-sixths credit and one-sixth cash. Was it not disgraceful that a nation with such immense resources should be supplicating favors of such impotent State corporations? And yet these institutions, weak as they had been demonstrated to be by the experience of the times, suspending cash pa)mients every decade, or oftener ; failing outright in numerous instances, and in their failures carr}dng with them multitudes of the business men of the nation, whose circumstances would have been completely sound and solvent, but for the bankruptcy in the cur- rency which the issues of these illegitimate institutions had induced; these institutions Congress had suffered to exist, while it had ample powers to control and re- form the currency, and bring it upon a strictly specie basis. That the whole currency of the country, in i860, was less than $620,000,000, is a statistical fact. That the gold mines of the country have yielded over one billion of dollars, since 1849, is equally true. If the system of State banks had been a proper one, (and every one can see that a score or two of State legis- latures, more or less, could never agree upon any system good, bad, or indifferent) if the old system had been a proper one, we should have had five hundred millions of dollars in gold coin in the country when the revolt first broke out. This would have enabled the Government to carry the war through on a gold basis, thereby lessen- ing the expenses of the war and the national debt at least one-half. For, with five hundred million dollars in gold coin, the whole of the expenses of the war could have been managed so as to keep the prices of com- modities upon the gold basis. The power of issuing bonds would have remained the same as now : and this THE LOSSES FROM FALSE CURRENCY. I07 power the Government could have availed itself of to any extent. It follows, that one-half of the war debt is di- rectly chargeable to the impotent system of State banks, which was in full operation in i860. Thus, the people of the United States must pay a tribute of one billion and a-half of dollars, or half of the national debt, for their experience and practice in State banking, in addition to all the other evils which it has brought upon them, by driving the gold from the country, and substituting promises for the reality — the shadow for the substance. The losses which these illegitimate issues induced, in time of peace, were abundantly sufficient to sweep them from existence with an honest and enlightened people ; but the fearful increase of national debt, and the extreme difficulty in raising funds in any way, to prosecute the war, should for ever banish them from any recognized legal existence, by the Federal Government. Still, it was necessary to have banks of some kind; the grand error was in allowing them to issue bills of credit, in contravention of the direct provisions of the organic law. When Congress passed the Independent Treasury Bill, separating the funds of the nation from the pet banks, taking immediate charge of the nation's trea- sure in the National Treasury, and ordaining that its re- ceipts and disbursements should thereafter be made in the coin of the National Mint, it enacted one of the most wise, conservative and salutary laws that has ever ap- peared on the Statutes at Large. But while the law of the Independent Treasury worked well for the Govern- ment, the people had a right to participate in its salutary provisions. The Independent Treasury Act should be more ex- tended in its operations, so as to secure a gold currency to the people as well as to the Government. I purpose to devote an article to this subject hereafter. The National Currency Act, as it is called, purports to secure the issues of the banks upon the bonds of the Gov- ernment. The great advantage of having the currency under the governance of one legislature instead of many, is that it may be governed in wisdom and justice, and not in caprice, favoritism, tyranny, and folly. I am not disposed to underrate the advantages of having the cur- Io8 RESUMPTION OF SPECIE PAYMENTS. rency of the country under the government of Congress instead of the State' Legislatures. The aggregate capital stock of the State banks in i860 was, according to the national statistics, $421,880,095. I believe that the old system of the State banks was so im- perfect that it gave to foreigners an advantage of at least twelve per cent, upon all the goods we imported, so that every decade the nation lost a sum equal to its whole banking capital, which it 'might have saved under a proper system and regulation of its currency and mone- tary interests. The advantage, therefore, of transferring the governance of the currency from the State Legisla- tures to the National Congress will depend entirely upon the question whether Congress will govern this control- ling interest of national prosperity upon the principles of science, justice, equity, right, and sound policy. Will Congress recognize and act upon the great moral prin- ciple that it is as necessary for a government to do right to ensure permanent prosperity, as for an individual ? With these premises, I proceed in the discussion of the subject. Are national bonds a proper and just basis upon which to issue a national currency? I maintain that they are not such a basis, and that in addition to all the evils and injustice which they work to the United States in their domestic relations by making false prices to pro- perty — prices not corresponding with values — and thus allowing one class of citizens to be preyed upon by another class — they absolutely sink to the nation the nominal face of such securities, in their commerce and trade with other nations, at least as often as once in ten years. Or to state it in simpler form, the losses entailed by such a system of banking upon the nation are equal to $50,000,000 a year in gold. This immense sum is abso- lute loss annually to the country, and absolute gain in gold value to the countries with which we have a com- merce. Large as is this amount, however, it is only the foreign loss, or loss which goes out of the country. The domestic losses are ten times that amount ; but these all fall in the country, and although they work ruin and dis- organization in society, there are not wanting men who CURRENCY MAKES PRICES ON A WRONG BASIS. I09 justify such extortions on the ground that what is one man's loss is another's gain. The issues of paper money, by swelling the volume of the currency beyond its normal standard, or what it would stand at if such paper were not issued, make the prices of all forms of wealth in the country correspondingly above their normal value, when measured by gold coin. It is this excess of price in our country, above the prices of other countries which use a currency less inflated, that stimulates imports to such an extent. These imports cannot be paid for in local money — paper money — but they rnust be settled by exports, or money of the world — gold and silver. Since our exports are far less than our imports, our gold must go to pay these balances, and it is drawn from us at prices greatly enhanced upon the imports by the action of a currency based upon credit, with very little regard to the coin of the country. Every one who carefully studies the relation of values to each other will see that where the shadow is deemed equal to the substance in any country, or where the promise to pay a dollar, which does not exist, is counted as good as the actual coin in hand, such fallacy in reasoning and in practice must ever keep the people which believe it and act upon it most danger- ously depleted of their real wealth in coin. It makes wealth in merchandise disproportionately higher than wealth in gold. This is one of the great objections to making national bonds the basis of currency instead of gold. The currency put forth upon such a basis may be a source of great profit to the banks, but it is a source of continual bankruptcy, extortion, injustice, and poverty to the country which will tolerate such imposition and exac- tion upon its vital resources. No nation should ever tolerate a currency which needs redemption in times of panic, in times of short crops, in years of scarcity, in years of immense losses by fires, marine risks, or from other causes. When any of these calamities fall upon the land, the monetary interest of the country should be so founded and fortified that it would remain firm and unshaken as the mountains of granite, upholding the people by its potency, not driving them mad by its weak- ness. Fire, floods, and pestilence should never affect the currency of a country. But, as our schemes of finance K no RESUMPTION OF SPECIE PAYMENTS. and currency exist, any great national calamity is sure to induce a monetary panic. And why is this ? Why should the controlling interest, which is at the foundation of all our wealth, and which ought to be so potent for good in all times of national trial, invariably be the first one to tremble and seek aid from the people when overwhelming calamities fall upon the land ? Because it is instituted upon a false basis. The currency maker issues promises to pay dollars which do not exist. These prom- ises circulate as though they were based on coin. The issuers — ^the banks — hold the promises of their cus- tomers, who are the people ; and whenever panic comes these promises must be redeemed. This grinds the people between the upper and nether millstone. Now if the currency were of gold, or paper based on gold dollar for dollar, there would be no need of redemption by the people. Such a thing as a monetary panic would never be known. That a currency based on Government bonds instead of gold does drive the gold from the country, is sufficient reason for an intelligent and honest people to banish it, and eschew it as a moral pestilence. It is held that com- merce will give to every nation sufficient coin to do its own business. But if commerce alone will do that, what right have the people of the United States, with mines yielding seventy-five millions of dollars of the precious metals annually, and only requiring six hundred millions of dollars to move all their industries, to dilute their cur- rency with paper issues ? What excuse is there for such a country to tolerate any form of deception or falsehood in the money which it issues ? The people of the United States must be content to stand before the judgment of the civilized world, either as profoundly stupid and ignorant in the matter of cur- rency, or as grossly dishonest and lache in the plainest principles of justice. In this position they must remain, so long as they allow any kind of currency to circulate among them not equal in value to gold coin, and while the laws of Congress make such form of currency a legal tender. But the country is in this very difficult dilemma, the paper champions contending that all the paper issues are PAPER CURRENCY AGGRESSIVE. Ill needed, because these issues have advanced the prices of . property to correspond widi the excessive volume of their issue. And so are we to go on for ever, with two dollars of gold legal tender worth three dollars of paper legal tender, (the Government itself recognizing and acting upon this difference of value, by selling gold legal tender at 130, and putting it into the treasury) and the laws of Congress and the ruling of the Courts stultifying and conflicting entirely with the unbending laws of value, and ruling against honesty, right, justice, and reason, that two-thirds of a dollar shall be equal to a whole dollar? When the American Constitution was trodden under foot by Congress, in making a legal tender of the Govern- ment issues of paper, the only excuse for the enormity was, that it was a "war necessity." Even its votaries re- quired this excuse to quiet the stings of conscience which upbraided them for the passage of the Act, after they had sworn to support and defend the supreme law. But at this day we are beginning to hear loud calls for Congress to make the issues of the National Banks a legal tender on private contracts. It is the first step in wickedness which costs : let that be made, and the next is more easy. The first step was taken when Congress made the issues of Treasury notes legal tender. Will it, now that the war is past, and there is not the excuse of the mad excitement of arms to trample on private rights, repeal the legal tender quality of paper money, and return to the specie basis .' The legal tender of the paper issues of Government, between citizens, should be repealed immediately. Gov- ernment coercion, to fix their value equal to gold in time of peace, however much individuals may differ a:bout such a stretch of power in times of war, is the very essence of tyranny. Besides, they cannot be funded until they are shorn of this legal tender quality. Men possessing money would prefer it in that shape rather than in bonds pay- able ten or twenty years after they are dead. The Gov- ernment cannot come to specie payments till the Legal Tender Acts, making paper as good as gold, are repealed. Before specie payments can be resumed on a firm basis, :he Government issues or the National Bank issues must oe withdrawn from circulation. As a matter of right, no 112 THE RIGHT TO REGULATE COIN GIVES doubt, the profits of circulation would belong to the Gov- ernment rather than the banks. But we ought to look at the matter for all futurity. I am decidedly opposed to the Government, now that it has after ninety years gotten the control of the currency into its own hands, taking any course, or looking to any expedient, which shall not be a thorough and complete system making every paper dollar that circulates as money based upon a gold dollar in actual possession. To give to Congress the function to issue a paper legal tender, irredeemable, and beyond the power of the people to coerce the same, would be the destruction of the Government. So powerful, may I say, so just a Government as the United States, should never set so base an example as the issue of an irredeem- able paper currency. The people seem determined that the National banks shall have a fair trial ; and, as yet. Congress has them in leading strings, if the lobby-house is not too powerful for the Senate and the House of Representatives. Congress has power to alter or repeal the National Bank Act. This power, I trust, it will ever retain. If Congress does its duty in the premises, and coerces these banks to a system of redemption in gold coin, it will be infinitely better for the country, than to issue paper legal tender of its own, which is irredeemable, for the petty gain upon the circu- lation of such paper, with the unbounded injury which must result to the body politic from such issues of Gov- ernment. What amendments are needed in the National Bank Act to make it a boon to the people of the Union ? The fundamental principle — the basis of the Act — is wrong in theory, and subversive of right and equity in practice. No greater financial heresy was ever devised than to make debt, whether individual. State, or Federal, the basis for the issue of currency. If a paper currency is a national necessity, it should be governed by the National Legisla- ture ; and it should be governed with as much absolutism and the same scrupulous exactness which is enforced by the laws of the mint, in regard to the coinage and alloy of the national coins. The impress of the United States mint upon the national coin is a guarantee to the public that such coin THE RIGHT TO RULE CURRENCY. II3 is of the proper weight and fineness ; and under this guarantee the coins of the mint are a legal tender, as prescribed in the mint laws of the Statutes at Large. If these coins were alloyed with base metal in excess of the requirements of the statute, they would be almost destroyed as money. The laws are ample for their protection and purity, and for the punishment of coun- terfeiting these coins. It was contended by the great statesman of Massachu- setts, the late Daniel Webster, that Congress derived its right to regulate the currency through its right to regulate commerce. [See works of Daniel Webster, vol. four, pp. 338-363.] With all deference to the argument of this learned statesman, to me it appears that Congress derives its right to govern the currency of the country in a much more direct manner than incidentally, because it has the right to regulate commerce. In Section seven, page five, the Constitution delegates to Congress the power '' to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures." Let it be observed, the regulating the value of coin, and the meas- ures of value, was placed in immediate juxtaposition in the Constitution with the fixing the standard of weights and measures, thereby demonstrating that it was as positively the duty of Congress to regulate the value of coin — the standard of values — as it was to fix the standard of weights and measures, which were to measure mer- chandise. I maintain that the words in the Constitution, " to coin money, regulate the value thereof, and of foreign coin," does give to Congress the right to fix the value of coin; and since it gives the right to fix the value of coin, so far as this, to say what weight of the precious metals and what weight of alloy the coins of the country shall contain, and also gives the right " to make all laws which shall be necessary and proper for carrying into execution the foregoing powers, etc., etc.," (Par. i8 Con stitution) with the powers to punish the counterfeiting oi the national coin, etc., etc., it follows that Congress has the power to regulate the currency of the country solely, thoroughly and entirely, upon the basis of gold and silver values. If a national paper currency be a national K* 114 BILLS OF CREDIT DEFINED necessity, Congress derives no power to issue such currency to banks or individuals, unless such currency shall be not only by reputation at the par of gold but equal to it by actual deposit of the gold in the national treasury, to cover such issue of paper dollar for dollar. The bills would then be not bills of credit, which are properly and most positively forbidden by the Constitu- tion to be issued by the States, and which were equally positively intended to be forbidden to the Federal Gov- ernment by the framers of the Constitution, (for proof of this position I would refer to Elliot's Debates, Madison Papers, vol. 5, p. 435, the vote of the Convention stood nine against, to two in favor of the issue of bills of credit by the Federal Government) and further, the Federal Government being one of delegated powers, and strictly confined to such matters as are so delegated, by the very terms of the Constitution, it follows that it has no right to issue bills of credit to circulate as money, any more than the several States have such right. But if a bank deposits gold with the Treasury, and wishes to receive paper of an equal amount, such paper cannot work mischief, being radically and essentially different from the old bills of credit which are described in the Constitution, the meaning of which it is very important to establish, and fortunately it has been done by the Supreme Court of the United States. Upon this point we will quote the authority of Chief Justice Marshall, as reported in Marshall's Constitutional Opinions, page 397, etc., in the case of Craig et al. vs. The State of Missouri : " What is a bill of credit ? What did the Constitution mean to forbid ? In its enlarged, and perhaps its literal sense, the term 'bill of credit' may comprehend any instrument by which a State engages to pay money at a future day ; thus including a certificate given for money borrowed. But' the language of the Constitution itself, and the mischief to be prevented, which we know from the history of our country, equally limit the interpretation of the terms. The word ' emit ' is never employed in describing those contracts by which a State binds itself to pay money at a future day, for services actually received, or for money borrowed for present use ; nor BY CHIEF JUSTICE MARSHALL. I IS are instruments executed for such purposes, in common language, denominated 'bills of credit' To 'emit bills of credit ' conveys to the mind the idea of issuing paper intended to circulate through the community, for its ordinary purposes as money, which paper is redeemable at a future day. This is the sense in which the terms have been always understood. At a very early period of our colonial history, the attempt to supply the want of the precious metals by a paper medium was made to a considerable extent ; and the bills emitted for this purpose have been frequently denominated ' bills of credit.' During the war of our revolution we were driven to this expedient; and necessity compelled us to use it to a most fearful extent. The term has acquired an appropriate meaning, and ' bills of credit ' signify a paper medium, intended to circulate between individuals, and between Government and individuals, for the or- dinary purposes of society. Such a medium has been always liable to considerable fluctuation. Its value is continually changing ; and these changes, often great and sudden, expose individuals to immense loss, are the sources of ruinous speculations, and destroy all confi- dence between man and man. To cut up this mischief by the roots, a mischief which was felt through the United States, and which deeply affected the interest and prosperity of all, the people declared in their Constitution, that no State should emit bills of credit. If the prohibition means any thing, if the words are not empty sounds, it must comprehend the emission of any paper medium, by a State Government, for the purpose of common circulation." Here the learned Chief Justice Marshall includes and makes a paper medium, for the purpose of common circulation, the very kind of " bills of credit " which the Constitution intended to prohibit. Hence, no State can lawfully issue these. And hence, no State can lawfully charter banks to issue "bills of credit." For the same learned authority decides in the case of the Providence Bank vs. Billings & Pittman, on page 406 : " That can not be done circuitously which may not be done di- rectly." Therefore, if States cannot issue bills of credit, they cannot charter banks, companies or associations to issue such " bills of credit" Il6 BILLS WHICH REPRESENT COIN A bill issued and intended to be circulated as cur- rency, if such bill were fully covered by a deposit of gold coin in the treasury of the United States, could not properly be called a bill of credit. Hence, such bill would be free from the charge that it was issued in con- flict with the Constitution. If such form of money be absolutely necessary in the Union, it follows that it is absolutely necessary that it be kept at the par of gold; and it can never be at the value of gold, strictly speaking, unless it represent gold in the hands of some trustworthy custodian. Another view of the case, and one of immense import- ance, is that credit money — paper money not represent- ing coin — -promises of banks to pay coin which they do not possess, materially diminishes the value of gold. Congress has full power to regulate the value of coin, and of course it has full power to stop the circulation as money of everything which conflicts with the value of gold coin. The value of gold coin is its exchangeable power for other forms of wealth. If gold coin would purchase twice as much of other forms of wealth if the circulation of bills were prohibited by law, then it is most obviously the duty of Congress to suppress the circula- tion of paper money, or make it on the par with gold coin. While we have two kinds of dollars — the one the gold dollar, worth one hundred cents, the other the promise of the Government or the banks, reputed worth sixty-six cents — all kinds of business will be but varied forms of gambling. Nevertheless, such are the evils upon us, and how can we rid ourselves of these agencies which are devouring our substance ? Without the power in Congress to make laws to suppress and punish the counterfeiting of the national coins, it would have no power to fix the value of coin, no power to keep the national coin at its normal or natural relative value to other forms of wealth ; because if a large fraction of the coin in circulation were counterfeit, or alloyed with base metals beyond the requirements of the mint laws, it will be readily seen what effect such frauds would have upon the coin of full weight and standard purity. So long as such base metals are circulated in place of good coin, the genuine coin must be greatly re- ARE NOT BILLS OF CREDIT. I17 duced in value. In like manner, for Congress to fix the value of the coin of the mints, it is as absolutely neces- sary that it possess the control of the currency of the country, whether it be paper or anything else, as it is to possess the power and authority to suppress all counter- feiting of the coin. The issue of promises to pay dollars which do not exist, where these promises circulate in place of real dol- lars, has the same effect upon the value of gold coin as the counterfeiting of the coin. From these premises we infer that the issue of currency should be governed and regulated by Congress with the same absolute authority as the coining of gold. Any addition to the currency, whether it be base coin, paper money, or anything else, does, if it circulates, directly act upon the value of gold as money. Since Congress has the right conferred by the Consti- tution to coin money and regulate the value thereof, and to make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and in furtherance of this duty it does establish United States mints, prescribing fixed and absolute rules for the gov- ernance of the same, enacting laws to suppress and punish the counterfeiting of the national coin ; and since, to regulate the value of the national coin it is indispen- sably necessary to regulate or suppress every form of currency which acts upon the value of coin ; and since the issue of all forms of currency which circulate as money does directly affect the value of gold coin — it fol- lows that Congress not only has the right to regulate the issues of currency, (provided that any right exists in Con- gress under the Constitution to issue such currency, and of which I am more than doubtful) but it is the bounden duty of that body to do this, and to prohibit, under penalties as severe as those of counterfeiting the national coin, any and all emissions of paper to circulate as money which are not at all times instantly and immediately convertible into gold coin at the face of such issues. This is the only regulation of the value of money that Congress is charged with by the Constitution. Such regulation of the paper issues is just as necessary as sup- pressing counterfeits. Given, then, the premise, that a Il8 RESUMPTION OF SPECIE PAYMENTS. paper currency is a national necessity, it is as much the bounden duty of Congress to regulate such currency, and coerce its par with that of gold, or suppress its circula- tion altogether, as it is to punish and suppress the coun- terfeiting of the national coins. It cannot protect the value of gold coins in any other manner, and it is bound to fix and protect the value of gold coin, so far as this, at least, that paper shall not be allowed to circulate' as money which conflicts with or lessens the value of gold coin. According to the definition of the term " bills of credit" as used in the Constitution, by Chief Justice Marshall, they are radically different from a bill which cir- culates with the gold for its redemption always in a safe and trusty depository. Congress may then, if paper money be a national necessity, allow its issue to an equal amount with the gold which banks may deposit in the national- treasury for its redemption. Such issue of paper might be called, instead of bills of credit, gold bills— bills representing gold coin on deposit in the treasury of the United States, which can be used for no other purpose but the redemption of these bills. Such bills would not interfere with the value of gold, because, while they were circulating, the gold coin for their re- demption would be locked up in the treasury of the United States, and when the gold was drawn out and put in circulation, the bills would be locked up in the treasury. This would involve the necessity of making the treasury, or a branch of it in New York, a sort of clearing house for all the banks of the country. This part of my subject is sufficient matter for a separate chapter, and I will not go into it at present. An objection is often raised to the issue of gold bills like this. Is it supposable that banks will open an office of discount and deposit, pay a president, cashier, and tellers, to do business upon a purely gold basis ? In reply I would state, that I believe supply would follow healthful proper business demand, in banks and their capital, as in all other sound business matters. There are various ways for banks to make money, but this hackneyed, American mode, I might call it, of making money from circulation of notes, should at once and for ever be stopped by the action of Congress. It would be infinitely better GOLD VS. INTEREST. II9 for the public to allow banks to raise their rates of dis- count, than to allow them to dilute the currency with pa- per issues. A high rate of interest does not so thoroughly disorganize and demoralize a people as a false and rot- ten currency. It would be a thousand times better for the interests of the country to allow banks to raise their rates of discount to twelve per cent, upon loans, and in- sist that these discount should be made in gold or its equivalent, than to allow them to debase the currency by paper issues which are not covered by deposits of gold, dollar for dollar. If the currency were gold coin, or its undoubted equi- valent, it would be worth double what it now is." One dollar would move the industries and wants of the people as much as two dollars under our present re^me. There- fore, borrowers could as well afford to pay twelve per cent, for such a currency as they now can afford to pay six per cent, for the present diluted article. But rest assured that competition would bring down the rates of interest, on first-class securities, as certainly as it does in merchandising. California has adhered to her gold cur- rency, and the rates of interest have fallen from five per cent, a month to one — and many loans have been made at ten per cent, a year. It is this nefarious tampering with the value of gold, by issuing paper as a substitute for money, that drives our gold abroad, and fastens upon us the burdens of high rates of interest. But for this, our country would as surely retain gold enough for currency as it would retain wheat enough for bread. Californians came to the country poor, and have had to struggle to amass their capital. But they have so many of them achieved it, that they now begin to compete for the strongest notes in the market. This competition is a direct inducement to offer low rates of interest for capital, upon undoubted securities. It would act the same at the East, if they would adhere strictly to the gold principle. With proper national legislation, in a few years, with the mines of gold and silver which we possess, the mone- tary interests of the country would become so strong that no nation on earth could compete with us. In pro- portion as this wealth increased, banks would be com- pelled to lessen their rates of interest, from competition, if for no other reason. 120 RESUMPTION OF SPECIE PAYMENTS. But our national banks are not, as at present organized, at all adapted to save the wealth of the country, or to inure to its permanent prosperity. On the contrary, their organization is such as will sack us of our gold without any just equivalent. The Government pays the banks a bonus of $18,000,000 yearly in gold, being the interest coupons on the bonds deposited for security for the re- demption of the bills which they are allowed to issue. This sum is paid to work the mpst subtle and mischievous iniquity in the country which could possibly be devised. So long as this system is allowed to exists so long will foreigners get the whole product of the gold and silver mines'of our country for nothing. This position may be hard to demonstrate, but it is of such importance that it claims our closest attention. That money goes from one country to another, to purchase articles of utility or luxury which cannot be produced in the country which purchases, or which cannot be produced at so cheap a rate as such articles can be imported, is apparent. While commodities of equally good quality can be pro- duced at home, at the same prices as it costs to import such goods from abroad, the real money of the country — gold coin — will not be sent away to purchase such goods. It is the difference in real price — ^money price — which stimulates imports; and it is the essential nature of paper money to produce this difference in price. The issue of paper money beyond the normal amount of cur- cency required in a country, does not immediately expel the gold from the country, but it inflates the prices of all commodities, and this inflation brings foreign goods into competition with our own manufactures. The foreign goods are sold for such currency as the country deals in, the prices being made by such currency, but the remit- tances are all made in gold, or its equivalent. The use of paper money then seems to be this, to inflate prices so that foreigners shall get the whole of our gold product for nothing. Absolutely for nothing ! If Qie wealth of the country is so great that we can give to other nations, outright, the whole annual product of our gold and silver mines, without bankrupting ourselves by such unprece- dented liberality, still the question is open to all inquir- ing and patriotic minds. Is it wisdom or justice to allow COMPARATIVE PRICES OF NATIONAL STOCKS. 121 this fearful drain upon our vital resources, when we are entirely competent to stop it ? The profits of this nefarious system enures to foreigners in the first place, and to the national banks in the second place, directly and most thoroughly by the losses of the people. If Congress had studied to prepare a system of cur- rency which should sack us of our gold, giving us in place of it inflated prices on goods without corresponding values, it could not have done it more efficiently than by instituting banks to issue currency upon the security of national bonds. Nor is this the only way by which it in- flicts upon us national robbery. Foreigners are purchas- ing largely of our national debt, and the price of the bonds is graduated by the value of our currency at home. The financial article of the Atta California of 7th August has the following sensible remarks : " The United States in a time of profound peace ought to be able to borrow, if borrow it must, on better terms than one per cent, per month. California can do that. The idea that United States bonds should stand among the lowest on European exchange markets, and that a class of papers and trumpeters should deem it evidence of " loy- alty" to shout over it, is somewhat humiliating to Ameri- cans that were wont to see United States stocks at twenty-two premium at home and abroad. It certainly makes the blood boil to take up the last London Stock Circular and compare quotations as follows : Higher Equiva- than U. S. Interest. Price. lents. Stocks. United States bonds 6 65 65 Virginia State 5 52 55 Brazilian 5 71 55 16 Egyptian 7 80 77 3 Peruvian 4J 67 50 17 New Granada 2 39 22 17 Portuguese 3 42 33 9 Russian 5 80 55 25 Sardinian 5 63 55 8 Spanish 3 30 33 Turkish 6 78 65 12 Dutch 4 85 44 41 French 3 62 33 29 British Consols 3 86 33 53 Thus, Brazil stock is 16 per cent, higher than United L 122 RESUMPTION OF SPECIE PAYMENTS. States; Peruvian, although at war, 17 per cent. Even Sardinia gets better terms. The Turk sells his 6 per cent stock at 78 ; while Mr. McCulloch boasts that he sells his at 66, and a shout goes up when they are sold at all. Certainly, this is not a pleasant picture to contem- plate — the more so when we remember how heavy the reckoning is to be. Thus, the six per cent, stock is due in five to ten years hence, in gold. For one bond sold we get $700, and are to pay as follows : Principal in ten years jSi,ooo Ten years' interest at $60 per annum 600 Total to be sent out of the country in gold $1,600 Amount received in goods 700 Interest and bonus in gold, gi per annum $960 "That is a pretty round rate for the United States to pay, when Russia borrows at 6, Holland at 4^^, the Turks at 7^, etc., etc. The money so borrowed by the United States comes to us in the shape of goods which are consumed, and the Treasury policy of selling gold is to give a premium on the operation. The nation is thus eating out its own vitals on credit." To reform the currency is to lay the ax at the root of the mischief Is such reform possible in relation to the existing National banks ? The power is with Congress, if it will use it, for the weal of the nation, and for the de- liverance of the people from this odious tyranny. It can be done by bringing matters to a deadlock at once, and balancing all off in bankruptcy ; or it can be done gradually, by leaving this bankruptcy upon the people's shoulders, to be met by them or not, as they shall feel able to struggle under the load. Congress has the power and authority to coerce the National banks into specie payments, and it cannot be too soon in commencing to put forth this power. The National banks purport to be a new system ; but, in fact, are an extended experiment of the New York Banking Law on a grand scale. The system of issuing currency on state stocks was the old New York General Banking Law. This was a most signal failure in 1857 — a time of profound peace, most unexampled heavy crops, THE IMPOTENCE OF THE STATE BANKS. 1 23 and after the receipt of about $450,000,000 in gold from California. In August, 1857, the rates for money in New York and Boston were four per cent, a year ; in October they were four per cent, a month. It was computed that the monetary failures in the currency of that year made one billion of dollars of failures in the gen- eral credits of the country, all of which might have come out sound and right if the currency had been well founded. However iinancial minds may regard the failures of 1857, after such a deluge of gold as California had poured into the coffers of the eastern banks, all will agree that the test of the Southern revolt proved them utterly impotent. The United States was supplicating favors of uncon- stitutional corporations, which could by possibility only exchange credit with them — the whole being one vast pile of credit upon credit, which, but for the continued yield of California's mines, must have ended in one vast maelstrom of ruin and bankruptcy, both national and individual. And does the United States want to try over again such a demonstrated system of impotence and poverty ? The issues of the National banks are founded on Govern- ment bonds, instead of State ; and does this difference radically change their nature ? If an emergency to the Government should arise as trying as the one out of which we have but just survived, would the National banks be in any more potent position to aid the Govern- ment than the State banks were in 186 1? The impo- tence of the State banks is a lesson to the people, that in addition to all the charges which were brought against them by the bullionists and hard money men of the nation, they had so thoroughly monopolized the circu- lation as to expel the gold from the country, and through the nefarious and poverty-stricken policy which they had instituted, the Government had been compelled to issue greenbacks — the State banks still keeping the volume of their issues up to the utmost point of circulation — and the joint issues of the banks and Government so in- flating prices as to make the cost of the war double what it would have been under a gold currency, so that the tribute which the people must pay by reason of having 124 HOW TO RESUME SPECIE PAYMENTS. and allowing such an impotent system as the old State banks is equal to $1,500,000,000. A lesson of experience, taught at such high rates of tuition, one might suppose would be amply sufficient, satis superque, to satisfy the most incredulous of the bane- ful national effects of such a currency. And yet, as in- stituted, the National banks would be equally powerless to aid the Federal Government, in times of great distress, as the State banks were in 1861. The reform necessary in the National banks is, to monetize gold, to make gold coin — which is the consti- tutional currency — the real money of the nation. Unless they are willing to do this, to act heart and hand with the Government in achieving so important an object, the sooner their doors are closed the better for the country at large. Nor should it be deemed satisfactory to resume specie payments upon a similar principle of the old State banks, keeping barely specie enough to turn the corners. The principle of allowing banks to make money upon circu- lation should be at once and efficiently put down by Congress. Anything short of this is dodging the real question. With the yield of our gold and silver mines, nothing short of the coin, or paper issued upon the coin dollar for dollar, should ever satisfy the people. AVe can have it if we will. I will now attempt to show how it can be done. The power being in Congress to amend the Act creat- ing the National banks, let that power be exercised in the following manner. First, The coupons of interest, attached to the bonds which are pledged to the Govern- ment for the security of the redemption of the bills, will amount upon $300,000,000, the sum allowed to be issued of currency by the national Banks, to $18,000,000 an- nually. These coupons are largely of the Five-Twenty Bonds, and are payable in gold coin. Here, then, is a basis of $18,000,000 a-year to operate upon to lift the banks out of the slough of despondency into which this credit money system has plunged them. This eighteen millions of dollars yearly should be used by the Govern- ment, and the Treasury department should have the autho- rity to carry out the necessary arrangements to perfect the HOW TO RESUME SPECIE PAYMENTS. 125 scheme, in the following manner. The gold should not be paid by the Treasury upon these coupons, but should be retained in the Treasury for the uses and purposes as follows. Allowing that the coupons are due for one year in gold coin to the banks which have pledged them, and the Treasury has the coin to pay the coupons, instead of paying the coin I would have a new emission of gold bills, to the amount of the coupons due, and let these gold bills be secured by the gold in the Treasury, which is collected and ready for their payment. Then for one year's cou- pons — $18,000,000 — the United States would be ready to issue to the banks $18,000,000 of a currency of gold bills. But as fast as the Treasury issued these new gold bills it should be obligatory upon the banks to return an equal amount of the old circulation, previously issued, which was secured upon the national bonds, and as fast as the old circulation was called in by this process it should be canceled, and the bonds pledged for its re- demption should be returned to the bank which hypothe- cated them as security. In this manner $18,000,000 a year would be withdrawn from circulation of the old issue, which was secured by the Government bonds, and $18,000,000 of new circulation of gold bills, secured upon gold coin in the Treasury of the United States, dollar for dollar, would be substituted for such issue. This the examiner will readily perceive would be getting out of the difficulty at the rate of $18,000,000 a year. But this is by no means the rate at which we can or ought to be satisfied. Secondly: assuming that the banks have issued the full quota of currency allowed by the law — $300,000,000 — their annual profits will be, moderately stated, at $30,000,000. This sum should be used by im- perative legislation of Congress to help on with the good work of coercive return to specie payments. This profit account, which I have above assumed to be $30,000,000 in currency, would equal about two-thirds the amount in gold, or $20,000,000. I would make it obligatory by law that the banks should not make their dividends of profits annually, but convert these profits into gold coin for the following uses. The gold coin resulting from the con- version of their annual profit account into the same, should be paid into the Treasury of the United States, L* 126 HOW TO RESUME SPECIE PAYMENTS. and thereupon the United States treasurer should issue gold bills to the bank or banks making such deposits, so fast only, however, as the said bank or banks should re- turn their old circulation, which should be canceled, and the bonds pledged for their redemption should be re- turned to the bank or banks making such gold deposits. In this way the further sum of about $20,000,000 yearly would be withdrawn from the circulation of the old issue, which was secured upon bonds, and a new issue of $20,000,000, secured upon gold coin in the Treasury of the United States, dollar for dollar. This, the examiner will see, would help, with the former conversion of the coupons, at the rate of $38,000,000 yearly. After these bonds were returned to the banks, they could sell them for currency, and make their dividends out of the same. This, however, is not all the means and force which I would apply to the resumption of specie payments. Its importance is such to the nation, that no temporizing policy should be adopted in regard to it. Thirdly : a large amount of the debt of the nation is funded ; and the Government can pay it off at pleasure after five years from date, as fast as its means will allow. After paying the interest upon the Government bonds, yearly, in gold, I would have the whole excess of the receipts of gold from the customs applied to the payment of the hands held by the Treasury as security for the redemption of the issues of currency by the banks. This might reach sixty mil- lions a year ; but, to be within bounds, I will assume that it is only half that sum, or ^30,000,000 a-year. The first part of the national debt paid off, I would have applied upon those bonds deposited with the Treasury as security for the bank circulation. Every three months I would have the department give notice to the banks, that the Treasury was ready to redeem so many millions of dollars of those bonds in gold coin ; and after such notice was sent to the banks, the interest coupons should cease to draw, and should be virtually canceled. But the gold- coin I would have retained in the department. In place of it, however, I would have the department issue to the banks gold notes of an equal amount, dollar for dollar, to the coin reserved in the Treasury ; only so fast, however, as each bank should call in and return to the Treasuiy HOW TO RESUME SPECIE PAYMENTS. I27 for cancelation its old issues which were secured by the bonds ; which bills should be canceled by the depart- ment, and thereafter the new issues of gold bills should be secured by an actual amount of gold in the Treasury, dollar for dollar. Here, then, I have given an easy way of returning to specie payments, at the rate of $68,000,000 a year ; this, too, without oppressing the banks or the people in the least. By the application of the debt of the Government in the interest coupons, the profits of the banks? and the surplus income of the custom-house in gold, beyond the demands for interest on the national debt, specie pay- ments may be restored on a sound basis. To simplify the subject and give a synopsis of it at once, I will recapitulate the means and sources for specie payments. Interest upon JiS300,ooo,ooo national bonds, pledged by the banks, yearly coupons, . . jS 18,000,000 Yearly profits of the banks in currency, $30,000,000, to be converted by them into gold and pledged for gold bills 20,000,000 Redemption of bonds by the Government, from gold received from customs' duties, yearly 30,000,000 $68,000,000 Here, then, we have resources, which, if faithfully ap- plied, will enable the banks to resume specie payments at the rate of $68,000,000 a year ; or, in four years and a-half every dollar of their issues of bills of credit maybe withdrawn, and in place of them may be issued bills of substance — gold bills — secured by a deposit of gold in the National Treasury, dollar for dollar. The scheme neither oppresses the Government, the banks, or the people. It, however, cuts off all profits from the circula- tion of bank notes, further than such circulation is based on gold. It rids the Government of the obnoxious posi- tion into which it has placed itself, by creating monopolies to circulate paper money, (which has ever been the bane of the country) and actually paying these monopolies an immense bonus for the mischief which they most tho- roughly achieve, by expelling the real money from the 128 HOW TO RESUME SPECIE PAYMENTS. country, and making all the business industries depend upon a basis of gambling. It rids the Government of the charge of issuing " bills of credit," for it makes the issues all gold bills. While the scheme is in transition from a system of credit to a system of gold basis, it will necessitate the keeping of double accounts by the banks ; one a currency account, the other a gold account. Some of the banks' customers will keep their accounts in gold, others in cur- rency. • Each dealer might elect in which kind of money he would account with the banks. But in either case the law of the land should protect both the banks and their cus- tomers, that no unfairness could be exercised on either side. Hence the Congress of the United States should immediately enact the Specific Contract Law of Califor- nia, for the benefit of every citizen of the Union, making it imperative upon every contractor to pay in such kind of money as he specifies. The scheme, when established, will make it necessary for the banks to redeem at a branch or branches of the Treasury in New York, Boston, and other commercial cities of the Union. That the scheme will lessen the amount of bills in circulation, and increase the actual circulation of gold coin, is too plain to need illustration. The expenses should be borne largely by the Govern- ment, for all losses of bills by fire, floods, by shipwrecks, by hoards of persons deceased which will never come to light, these will all be direct gain to the Government. Hence I have shown that it is not only possible to re- turn to specie payments, but comparatively easy ; and to return so that the circulation shall not only be reputed as equal to gold coin, but actually be equal to it, by the de- posit of gold in the Treasury to cover the issue. The United States guarantee the circulation of the National banks. This is reason enough for exacting the deposit of coin for the redemption of such circulation. There- fore the legislation needed to coerce the reform should be instituted at once, and put it in process of a gradual per- fecting of the national currency; and this reform may proceed, without oppressing the banks or the people, at the rate of the yearly product of the gold and silver mines of the country. And so long as the work of reform HOW TO RESUME SPECIE PAYMENTS. 1 29 is deferred, so long will the product of these mines go to foreign countries in pure loss to the United States. It may be thought by some that to lock up hundreds of millions of dollars of gold coin in the Treasury would be so much actual loss of capital to the nation, and that such a hoarding of gold would be wholly useless. This objection is entirely without foundation. The gold, when not in circulation, would be represented in circula- tion by the gold bills. Nothing would be lost to the nation. As well might one say that the granite founda- tions upon which the treasury buildings are erected, or upon which the Capitol stands, might as well be of wood, or some some cheaper material, which would sustain these edifices for a few years and then crumble to dust, because such material was cheaper than a lasting foundation, as to say that the currency need not be so valuable as gold, because a cheaper form of circulation may be instituted. The whole fabric of our credit system rests upon the currency. It is this that lies under and supports the whole. If the currency be gold, or rests on gold, dollar for dollar, the foundation will not rot or settle, and the superstructure will not fail by reason of the foundation. But if the foundation of the whole system be liable to de- cay, and is utterly impotent to sustain the weight of the edifice which we are building thereon, when such founda- tion fails it spreads ruin throughout all the works which rest upon it. A sound currency will not remedy an un- sound credit; but a vicious and diluted currency will destroy general credits in a tenfold proportion to the amount in circulation, making the bankruptcies under a system of false currency ten times more than they would be if it were sound. And this for the reason that every dollar of currency which circulates as money sustains ten dollars of the general credits of the country, and every dollar of the currency which fails drags down with it ten dollars of the general credits. In this view of the matter, is it possible to make the currency too sound for the vital interests of the body politic ? If it were necessary to make the sacrifice, every citizen who carries a gold watch should be willing to substitute a silver one ; nay more, every one should be willing to take the gold out of his mouth and send it to the mint, to 130 THE BANKS OF CALIFORNIA achieve so salutary a national reform as a perfect gold currency. These sacrifices, however, are by no means called for. We have gold enough for our currency if we have the wit to save it for so wise purpose. Seven years' saving, with what we now possess, would make ours the model currency of the world. Shall we make it such, or continue to give away our gold, and content ourselves with the shadow ? But another objection is, that we should have no banks upon a strictly gold basis ; that the expenses of their management would not justify such institutions. I deny the premise entirely, and in confirmation of my position I point to the existing fact that San Francisco, with a population of only 120,000, and with all her banks established and doing a sound business, has lately raised the capital stock of the Bank of California to $5,000,000, and that these institutions are all doing a prosperous business, upon a strictly gold basis, without any issues of currency whatever. Experiment is the touchstone by which to try theories. To say that busi- ness would not be done if it had to be done with real money instead of a fiction, is the same sort of argument as to urge that people would not travel on our magnifi- cent steamers if they could travel at a cheaper rate on such vessels as would very likely explode and kill them. The United States are now old enough, and their mines are rich enough, to set an example of the best currency on earth. The people of the United States, having used a paper currency so long, are not aware of the advantages which a gold currency would give them". The paper money champions have ruled for more than half a century ; let the bullionists now try it for a few decades ; they cannot make matters worse. For a gold-producing country to economize the use of gold as currency by substituting promises to pay the coin which are not based upon its possession, is a saving of exactly the same nature as though a man should trust his life and money on board some extra hazardous and unseaworthy vessel, or some steamboat whose boiler is ready to collapse at any moment a little extra pressure is needed to be put upon it, rather than select the most thoroughly built ARE BASED ENTIRELY ON GOLD COIN. I3I and substantial vessel upon which to risk his life and property. This policy is also a voluntary surrender to other nations of our real money, with which a beneficent Pro- vidence has so bountifully favored us, and substituting the promise for the reality — the shadow for the sub- stance. , We need only $620,000,000 in gold to move all of our industries and distribute our products. Probably we have on hand $12 0,000,000, which reduces the amount needed to $500,000,000. This can be amassed, with proper national legislation, in six or seven years ; and after this national saving, we need retain the yield of our mines only as fast as our population increases ; the balance may be exported to pay for imports. But until the volume of currency be en- tirely filled with gold and silver coin, our gold should not be exported. Its remaining in the country, however, should not result from any coercive legislation, like im- posing an export duty, but from its imperative necessity as coin for domestic uses — thus making it really more valuable at home for currency, than to send abroad for merchandise. As fast as we demonetize paper money, our gold is bound by the laws of trade and commerce to remain with us, and to fill the place of the paper. The currency of the United States should not be of such worthless material, as that, to purify it, we must con- tract its volume, and thus bring ruin upon our industrial pursuits. This, however, is the practical effect of con- tracting or calling in the currency, when banks are mov- ing on under pretended specie payments. The remedy which strikes at the heart of the disease — the medicine which will give immediate relief to the body politic — is to save every dollar of the yield of our gold and silver mines, and with this sink one dollar of our " bills of credit " leaning on the national bonds. The remedy is easy, and if persisted in, the result will be a return to complete solvency in currency. If we sustained the whole business of the country in i860, upon a currency of $620,000,000, it is entirely possible, with the yield of our mines, and without a dollar return from commerce, to have our monetary basis strictly founded upon gold. 'To effect this salutary change we must recognize gold as 132 RESUMPTION OF SPECIE PAYMENTS. money, and make a home market for it to the extent of our domestic wants of currency. A pure currency may be well compared to a virtuous woman. If a woman harbor the thought that she may step aside from a course of purity, and secretly practise for a while the ways of the wanton, and again return to the paths of innocence and virtue, she is at once on the highway to ruin. Every step in vice makes reform more hopeless. Facilis descensus Averni : Sed revocare gradum superasque evadere ad auras. Hoc opus, hie labor est. — Virgil. " Avernus' gates are open night and day, Smooth the descent, and easy is the way : But to return to Heaven's pure light again, This is a work of labor and of pain." Precisely so it is with the practice of vitiating the cur- rency. It commenced with small beginnings. First, the idea that one hundred dollars of specie might be made one hundred and one by issuing that amount of currency ; then it was raised to one hundred and ten ; then to one hundred and fifty ; then to two hundred ; and the pre- posterous principle has been extended and extending, till the banks scarcely hold a small portion of their immediate liabilities in specie. On the loth of October last, the banks of Boston owed for deposits and circulation ^68,588,709, and held of specie only $250,638, or less than forty cents specie on one hundred dollars of imme- diate liabilities. The New York City banks, holding large deposits be- longing to the country banks, which ought to be immensely strong in specie, owed on the 13th October, 1866 : For deposits ^225,858,897 For circulation 30,176,908 $256,035,805 They held in specie 5,576,062 or less than two and a-quarter cents on the dollar upon their immediate liabilities. The National banks of Chicago have had their specie SPECIE HELD BY NATIONAL BANKS. I33 reserve as low as one-fourth of one per cent, to their im- mediate liabilities. Twenty-five cents in specie for one hundred dollars of liabilities ! If this is not totally ignoring a specie basis, it must be admitted that it comes so near an entire repu- diation of coin as not to be very wide from it in practice. After the principle of allowing issues of bills of credit beyond the amount of specie on hand, dollar for dollar, is once admitted, recognized, and legalized, there is no predicting where so nefarious a scheme will terminate. The calls of the currency makers are incessant; their de- mands are aggressive and bold ; their arguments are plausible to those minds which have not compassed the subject ; and in their greed of gain, they make no hesi- tancy in sacrificing the permanent welfare of the country to their unbounded avarice. Already do they insist that the National Currency Act should be amended, allowing a further issue of $100,000,000 of promises to pay, which are not to be covered by specie. Already do they pro- test against assorting the notes, clearing houses and every form of redemption. And, what is most outrageously insolent and presumptive, they are clamoring that their diluted issues should be made legal tender between citi- zens as well as for taxes and excises. The only way to stop all this contempt of right, justice, and equity, (which these currencymakers impose upon the majesty of the people, by insisting that their issues shall pass as good coin, making the prices of all forms of wealth in the land) is to limit the issues of currency to the amount of gold coin which banks deposit in the Treasury to redeem such issues. For, as a woman cannot be virtuous unless she is entirely so, in like manner a currency cannot be pure unless it is kept up to the legal standard of such purity. It is not a function of Congress to create currency of any kind, further than the coinage of the mints. The right to regulate the currency is incidental to the right of " coining money and fixing the value thereof." It is im- possible to keep up the purchasing and exchangeable value of gold coin and let the power of issuing bills of credit run riot. Therefore Congress has power either to suppress in toto all forms of circulation of bills of credit in the United States, or to make this circulation conform M 134 BANKS SHOULD NOT BE THE CUSTODIANS to such rules as will render it impossible to interfere with the normal value of gold coin. My own opinion is, that the power of Congress is reached when it suppresses every form of issue of bills of credit. I use the term bills of credit here in the same sense in which it was understood by the Convention which made the Constitution. But, without contending for strict construction, which is so scouted in these days of latitudinarian interpretation, it must be apparent that, in times of peace at least, justice is a principle which can- not be trampled upon by any legislative body without a fearful retribution. If paper money, therefore, be a national necessity, it is the bounden duty of Congress to see to it, that this form of money shall be equal to gold coin at all times and under all circumstances — panics and commercial crises not excepted. This can only be done by limiting the amount of issues of paper to the specie on deposit to redeem such paper. Nor will it do to trust the banks to hold this specie and give them the power of issuing bills also. The specie must be locked up with some safe custodian while the bills circulate, and the bills must also be locked up with the same care while the specie circulates. Again : it is no function of Congress to furnish cur- rency for speculators, stock gamblers, usurers, faro and monte dealers, and all the thousand forms of parasites which prey upon the gains of honest industry. Strike out these classes, which are of very small use to the production of real wealth among any people, and it would not be difficult to find capital enough from the yield of our gold and silver mines to move all the indus- tries of the country. Paper money is extolled by its advocates for its legerity and portability. A person, say they, may cany hundreds of thousands of dollars in his pocket, and no one suspect that he has more than enough to balance his daily bills. Grant all this ; still would it not be vastly better that these bills should be based on gold coin, dollar for dollar, than that they lien on Government Stocks payable twenty or forty years ahead ? If they lien on gold, they do not lessen the value of gold ; if they lien on stocks, they do most materiall)' lessen the purchasing power of gold. OF THE SPECIE FOR THEIR ISSUES. I35 And they do make it utterly impossible for Congress to coin gold '■'■ and fix the value of it." Therefore they do render it impossible for Congress to discharge one of its imperative functions to the people, which is to fix the value of gold coin — at least to fix it so far as that bills which they issue shall represent gold and nothing else. In short, the bills which Congress issue, or authorize to be issued, either by the Federal Government directly or to banking corporations to circulate as currency, should not be bills of credit, but bills of substance — bills resting on gold, not on debt, national, state, or private. All of these unspeakable advantages are waiting for our acceptance and appropriation. The National banks will be a boon to the people if they make them such by purging them from the unjust principle of issuing pro- mises to pay dollars which they do not possess. As a bludgeon in the hands of the Government to break down the old systems of the State banks (which were always so impotent to help in time of need, and yet so potent as to drive all the gold from our country to foreigners, the loss of which gold was a damage to the country of a bil- lion and a half during the war of 186 1-5), the National banks have served a good purpose. The government of the currency is now under the legislation of Congress ; and this advantage is worth $500,000,000 to the country, provided Congress will coerce, by imperative legislation, the system of the National banks on to the principle of the gold and silver basis — dollar for dollar. But if Congress will not do this ; if the sworn delegates of the American people will hold their sessions in the city of Washington, and by their legislative action throw aside all their scruples of moral principle, all their oaths of office, to support and defend that Constitution, one of the car- dinal objects of making which was " to establish justice," and which does most positively prohibit the States from issuing " bills of credit," or of making anything but gold and silver coin a tender in payment of debts ; if, regard- less of these sacred injunctions of the Constitution and the oaths of office to support and defend it, the Congress shall so far prove recreant to its trusts and duties as to allow and encourage by legislative acts the issue of bills of credit by the National banks, thereby driving our gold 136 RESUMPTION OF SPECIE PAYMENTS. to Other countries and radically changing the substantial basis of our monetary system, as established by the wisdom of our forefathers, then we have nothing to hope of good from them. One rotten system will have been broken down to give place to another which, if possible, exceeds it in impotence to do good and in power to work mischief The National banks will be a boon to the country if Congress brings them and holds them to a strict specie basis. As at present organized and conducted, they are worse to the prosperity of the country than the old State banks, which held to specie payments, in name at least. If they are not compelled to specie payments they will work nothing but ruin in the republic. It is so easy to do this — to do it and have it rest upon a basis so different to what our currency has exer rested heretofore, as I have proven above, that I will not de- spair of favorable action by Congress in the premises. The National banks will be useful to the countiy in direct proportion as they approximate to a specie basis ; they will be disorganizing, mischief making, spreading the evils of Pandora's box through the country, in direct pro- portion as they reject the specie basis and substitute for it a basis of debt. Whenever Congress shall take from the government circulation — commonly called greenbacks — the legal tender qualification, or the Supreme Court of the United States shall decide that this circulation is not a tender between citizens, then will the first step have been taken toward the Government resuming cash payments. Then the greenbacks can be funded ; but while they remain money, and legal tender too, it will be nearly impossible to fund them. This act is indispensable, and must be a condition precedent to the resumption of specie pay- ments by the Government, unless we remain in a state of bankruptcy through the present generation. The Gov- ernment must resume before the banks will think of the measure. But it is in the power of the Government to coerce the banks into resumption gradually, if it has the nerve to do it. All the coupons of interest upon the bonds held by the Government for the security of the circulation of the HOW GOVERNMENT CAN AID THE BANKS. I37 banks, should be retained by the Government in gold ; the old circulation should be withdrawn from time to time, and new circulation issued to the amount of these coupons, the new circulation would then be based on gold. All the profits of the banks should be converted into gold, this gold deposited in the Treasury of the United States, and an equal amount of the old circulation called in and canceled, and new circulation based on gold coin be issued to the banks. The bonds could be returned to the bank in an amount equal to the amount of this lastnamed new circulation. Lastly; the Govern- ment should, from time to time, appropriate every dollar of its surplus revenue from customs, after reserving enough to pay the interest upon that portion of the debt which is payable in gold coin, to taking up and canceling the bonds which have been deposited to secure the cir- culation of the National banks. This should continue until the entire capital of the banks becomes gold coin in the Treasury of the United States, and their entire circu- lation of bills will then be gold bills — bills of substance — not bills of credit, which are forbidden by the organic law of the Federal Government. Some may object to making the first payments of the national debt to the National banks : but, beyond doubt, the Go\'ernment has the right to pay off first that portion of the debt where the advantages of such payment shall inure most signally to the benefit of the people. War, debt, the legislation of Congress, and the necessity of the times, if you will, have brought on the suspension of cash payments. This suspension has raised prices, so that the people are ground, as it were, beneath the upper and nether millstone. The Five-Twenties of the Government will soon be due. The Government can, if it chooses, pay them at any time after five years from their date. When the Government shall pay them, such payment will, of course, stop interest. The interest and happiness of the people are certainly relevant matters for national le- gislation. Besides, this changing of the basis of the Na- tional Banks from Government debt to gold coin, will bring these institutions into harmony with the supreme law of the land. And, if we are to have any constitutional Gov- ernment hereafter, it is meet that Congress should make M* 138 HOW GOVERNMENT CAN AID THE PEOPLE. its laws to conform, at least so far as is possible, to the organic law. The National banks when brought on to this basis, having all their circulation secured, dollar for dol- lar in gold coin, will be very different institutions from the old State banks. In case of war, or any great na- tional calamity, they would have the sinews to stand by the Government in time of need. They would have some- thing more than credit to lend. It will not be possible for the Federal Government to render the people a greater boon, than to pay off that portion of the public debt held by the Treasury depart- ment for security of the circulation of bills of the National banks, and hold the gold as security in lieu of the bonds. In this way the interest will stop running on the bonds, while the banks will be coerced into specie payments. The advantages will be felt both by the Government and the people. It will require an assorting and clearing house to be attached to the Treasury department in the cities of New York, Boston, and, in time, in other commercial cities of the Union. All the banks should be required to redeem their notes in gold as fast as they were returned to the Treasury. This would make a domestic require- ment for gold coin, exactly equal to the amount of gold bills in circulation. The bills, however, would not be sent to the Treasury for redemption only as gold was re- quired for shipments abroad. The mines of the country will yield $75,000,000 a year, and, through the customs, the Federal Government will receive the whole of this amount, and probably $50,000,000 more of the gold in the hands of the people. This will leave a large excess of gold in the Treasury, after paying the coin interest on the public debt, to be applied to paying off the bonds, and making the basis of the circulation coin. The preceding measures only reach the reform and purity of the bills in circulation. Some may say it is not radical enough — that it ought to reform the deposit account in banks as well as their circulation. There is no doubt but the liability of banks, in proportion to their constant specie reserve, should be rigidly enforced by legislative enactments. But it is not well to attempt too much at once. The reform of the " circulation with- out " is sufficient to begin upon. The preceding chapter RESPONSIBILITY OF THE TREASURY. I39 is in the right direction of reform so far as it goes. Be- sides, when the outside circulation is made entirely pure, the deposits will be made corresponsively more sound. This will be proper matter for another chapter. So far as reform of the currency in circulation goes, the banks ought not to object to it, while there remains to them the power to work such efficient mischief through the deposit ac- count, or their internal circulation. There remains one point of great importance for con- sideration, which is this : Is it safe to trust the Federal Treasury with such an immense amount of gold coin ? Immense trusts must devolve upon every generation. Man is mortal ; and however much of wealth he may amass in life, it must all descend to future generations. Our lives, liberties, and properties, we trust in the hands of states- men, jurists, legislators, and generals. These are quite as important trusts as our monetary interests. In de- ciding this question we may inquire — Are the moral qualities of our people on a par with those of other na- tions ? If they are, the trust may be made. No doubt the Federal Government would be as legally responsible for anv embezzlement of funds left in the Treasury for the redemption of bank bills, as it would for embez- zlement of gold left at the mints for coinage. The bank of England has often on hand ;^2o,ooo,ooo in coin and bullion, besides all its bills of exchequer, bank-notes, rest, government deposits, and private deposits. The bank of France had on hand recently ^26,000,000 ster- ling in specie, besides all its other trusts. I believe neither of these institutions have suffered any severe losses by embezzlements. It is safe to say that the trusts in the Treasury of the United States, if they held the gold to cover the entire circulation allowed the national banks, would not be equal to the trusts in the bank of England or the bank of France. The deposits of gold to secure the circulation of the bills would of necessity be divided among the sub-treasurers of various commercial cities, probably not less than four or five in number. The New York branch would be the largest — that being the com- mercial and fiscal centre of the Union. The Federal Treasury holds in gold frequently for customs' duties collected, seventy-five to eighty millions of dollars ; and 140 THE REFORM OF THE CURRENCY WILL MAKE there has never been any large direct robbery of the Treasury. The trusts which a deposit of gold would re- quire, to cover the circulation of the banks, in the Trea- sury, would not exceed the trusts of the bank of England or the bank of France, or of the actual trusts which have already been committed to the Treasury. The treasure could be under the keeping of a dozen officers, each holding separate keys, which could not be reached by any one of them without possessing all of the keys, and which would require the combination of all these officials in crime, to commit an embezzlement. The general banking law of New York was a demon- strated failure in 1857. The Government should not desire to renew upon a grand scale the old New York system, nationalizing it, and preparing it for a gigantic swindle on the vitality of the people. Every dollar of gold which goes from the mines of California to the old States, should be the means of retiring from circulation one credit dollar, which is now based upon the national debt. To effect this salutary reform, our legislators in Congress should amend the National Currency Bill. With the coupons of interest attached to the national bonds which are held in the Treasury to secure the circu- lation of the banks, and which the Government must pay semi-annually to these institutions, with the profits of the banks converted to gold, and the excess of gold which the customs will put into the Treasury ; from these three sources the Treasury may, in less than five years, have gold enough to secure the entire circulation of the Na- tional banks, dollar for dollar. Neither tire people, nor the banks, nor the Government, need be at all oppressed or burdened, to effect all this salutary reform quite speedily. This reform will immediately make a domestic market for about $68,000,000 of the yield of our gold mines ; and it is as certain as the laws of gravitation, if we allow the " promised dollar " to circulate, and continue to usurp the uses and functions of the gold dollar, that the whole an- nual yield of our mines in the precious metals will go from us to other countries in dead loss. We shall get it in goods advanced in prices enough to cover it. We shall get it balanced in extra prices, not in real values. We A HOME MARKET FOR GOLD COIN. 141 shall get for it only price without corresponding values. The present organization of the National banks is upon a system which gives to other nations, virtually, the whole product of our gold and silver mines. What would be the effect upon the credit of the United States abroad to have three hundred millions of gold coin in the Treasury ? Certainly it could not be other than most salutary. With such an amount of gold coin on hand, would British Consols, paying only three per cent, interest, stand at eighty-nine, while American Five- Twenties paying six per cent, interest, stood at sixty-eight ? Such a disparity in value would be impossible. The rise in our National stocks abroad, if we must part with them to balance our imports, would pay for the change of our monetary basis from credit to gold, four times over ; besides all the domestic advantages of an honest and just currency. When, however, we do return to specie payments, we want it based upon an entirely different principle from any that has heretofore existed in the United States. If the National bank system is to be no better than the Suffolk bank system of New England, and the general banking law of New York, as these existed before the war, keeping only from five to twenty per cent, of their immediate liabilities in coin, it will prove a vast delegation of power to corporations to work untold mischiefs in the body politic. I mention these two systems because they have been considered the best that have ever been de- vised, to circulate currency without keeping means to re- deem it — shirking all the losses of such business upon the people, keeping them out of their sight, and making them suppose that banks were the very soul of justice and beneficence to the nation. Congress should wield the whole power of the Government against any and every form of currency which banishes the gold from the country. This cannot be done in any way but to make the banks insure their issues, dollar for dollar, by deposit of gold coin. The National banks should be made na- tional in fact as well as in name. This can only be done by bringing them into accord with the organic law. They are in conflict with this law so long as they issue bills of credit ; the Government acts in conflict with this law so 142 RESUMPTION OF SPECIE PAYMENTS. long as it prepares bills of credit for these institutions to circulate as money. Neither the action of the Govern- ment in the premises, nor that of the banks, can be in harmony with this law, until they change the form of this circulation from bills of credit to bills of substance, and make the issue of bills no larger than the actual deposit of gold in the Treasury for its redemption. Under these restrictions, the issue of bills will be adjusted as accurately to the wants of the people, as the houses in a large city are constructed to meet the demands for such dwellings. Banking business should be as open as farming, mer- chandising, or manufacturing; hut the issuing of currency is an attribute of the sovereignty, and should b e guard ed as closely as the coining of gold and silvej,*^^ Q Er7>s V/iv No. VIII. rA-^. UPON THE VALUE OF GOLD FOR USES THE TARIFF OF THE UNITED STATES— I ABl298,37S Premiums 2,490,891 Remittances and other cash items 103,676,649 Due from national banks 107,597,858 Due from other banks and bankers 12,136,549 United States bonds deposited to secure circulation 331,703,200 Other U. S. bonds and securities 94,954,150 Bills of other banks 17,437,699 Specie 8,170,835 Other lawful money 205,770,641 Other stocks, bontis, and mortgages 1 5,887,490 Aggregate $1,525,493,960 LIABILITIES. Capital stock paid in $415,278,969 Surplus fund 53>359>277 National bank notes in circulation 280, 129,558 State bank notes in circulation 9,819,719 Individual deposits 563,510,570 United States deposits 30,420,819 Deposits of U. S. disbursing officers 2,979,955 Due to national banks 1 10,531,957 Due to other banks and bankers 26,879,804 Profits 32,583,328 Aggregate $1,525,493,960 If we analyze this return, we have results as follows : Owed by the banks— Circulation $289,949,277 " " Balance due banks I7>677,354 " " Deposits S93.931.389 Total due on demand $901,558,020 310 APPENDIX. In the event of a return to specie payments, this must be paid in specie, and the banks have only $8,170,835. But they hold — Paper money $305,000,000 United States bonds 436,657,350 Loans and discounts 601,238,808 §1,342,896,158 Now, in view of these official returns of the condition of the National banks, and the fact that a return to specie payments may, even with all the calls for currency, drive them into hopeless bankruptcy, what friend of California could wish to see the same system of currency adopted upon the Pacific Coast, while we are exporting the best currency on earth in scores of millions annually ? (See PP- 35-38.) (C.) EXTRACT FROM ELLIOT'S DEBATES IN THE FED- ERAL CONVENTION, UPON THE SUBJECT OF EMITTING BILLS OF CREDIT BY THE UNITED STATES. " Mr. GouvERNEUR Morris moved to strike out ' and emit bills on the credit of the United States.' If the United States had credit, such bills would be unnecessary ; if they had not, unjust and useless. " Mr. Butler seconds the motion. " Mr. Madison. AVill it not be sufficient to prohibit the making of them a tender i This will remove the temp- tation to emit them with unjust views ; and promissory notes, in that shape, may in some emergencies be best. " Mr. Gouverneur Morris. Striking out the words will leave room still for notes of a responsible minister, which will do all the good without the mischief The moneyed interest will oppose the plan of government, if paper emissions be not prohibited. " Mr. GoRHAM was for striking out without inserting EXTRACTS FROM ELLIOTS DEBATES. 3II any prohibition. If the words stand, they may suggest and lead to the measure. " Mr. Mason had doubts on the subject. Congress, he thought, would not have the power, unless it were ex- pressed. Though he had a moral hatred to paper money, yet, as he could not foresee all emergencies, he was un- willing to tie the hands of the Legislature. He observed that the late war could not have been carried on, had such a prohibition existed. " Mr. Gorham. The power, as far as it will be neces- sary or safe, is involved in that of borrowing. " Mr. Mercer was a friend to paper money, though, in the present state and temperof America, he should neither propose nor approve of such a measure. He was, conse- quently, opposed to a prohibition of it altogether. It will stamp suspicion on the Government to deny it discretion on this point. It was impolitic, also, to excite the oppo- sition of all those who were friends to paper money. The people of property would be sure to be on the side of the plan, and it was impolitic to purchase their further at- tachment with the loss of the opposite class of citizens. Mr. Ellsworth thought this was a favorable moment to shut and bar the door against paper money. The mis- chiefs of the various experiments which had been made were now fresh in the public mind, and had excited the disgust of all the respectable part of America. By with- holding the power from the new government, more friends of influence would be gained to it than by almost any- thing else. Paper money can in no case be necessary. Give the Government credit, and other resources will offer. The power may do harm, never good. "Mr. Randolph, notwithstanding his antipathy to paper money, could not agree to strike out the words, as he could not foresee all the occasions that might arise. " Mr. Wilson. It will have a most salutary influence on the credit of the United States, to remove the possi- bility of paper money. This expedient can never succeed whilst its mischiefs are remembered ; and, as long as it can be resorted to, it will be a bar to other resources. " Mr. Butler remarked, that paper was a legal tender in no country in Europe. He was urgent for disarming the Government of such a power. 312 APPENDIX. "Mr. Mason was still averse to tying the hands of the Legislature altogether. If there was no example in Eu- rope, as just remarked, it might be observed, on the other side, that there was none in which the Government was restrained on this head. " Mr. Read thought the words, if not struck out, would be as alarming as the mark of the beast in Revelation. " Mr. Langdon had rather reject the whole plan than retain the three words, ' and emit bills.' "On the motion for striking out — New Hampshire, Massachusetts, Connecticut, Pennsylvania, Delaware, Virginia,* North Carolina, South Carolina, Georgia, ay, nine; New Jersey, Maryland, no, two." (See Vol. V, Supplement, pp. 434-43S-) Here we have the authority of James Madison, one of the members of the Convention for framing the Constitu- tion, giving the vote of the Convention, upon the subject of allowing Congress to issue bills of credit ; and the same was stricken out by a vote of nine to two. (See pages 64-70.) (D.) LEGAL TENDER NOTES. — HAS CONGRESS THE POWER TO MAKE NOTES A LEGAL TENDER ? OPINION OF JUDGE SHARSWOOD, OF PENNSYLVANIA. If any point may be considered as well settled, it is that the Constitution of the United States is a special grant or delegation of limited powers to the Federal Government. " It has been truly said," observes C. J. * This vote in the affirmative by Virginia was occasioned by the acquiescence of Mr. Madison, who became satisfied that striking out the words would not disable the Government from the use of public notes, as far as they could be safe and proper ; and would only cut off the pretext for s. paper currency, and particularly for making the bills a tender, either for public or private debts. LEGAL TENDER NOTES. 313 Marshall, in the United States z/j. Fisher (2 Cranch, 212) " that under a Constitution conferring specific powers, the power contended for must be granted or it can- not be exercised. " The same thing has been affirmed by Mr. Justice Story, in Martin vs. Hunter's Lessee (i Wheat. 326). "The Government of the United States can claim no powers which are not granted to it by the Constitution, and the powers actually granted must be such as are expressly given, or given by necessary implication." And not to multiply citations — on so clear a principle — again by C. J. Mar- shall, in McGullough vs. the State of Maryland (4 Wheat. 405) : "This Government is acknowledged by all to be one of enumerated powers. The principle that it can exercise only the powers granted to it would seem too apparent to have required to be enforced by all those arguments which its enlightened friends, while it was de- pending before the people, found it necessary to urge. That principle is now universally admitted." It follows that to sustain the constitutionality of an act of Congress — to determine that it is a law — an authority for it must be affirmatively shown. That authority must exist in the Constitution in express words, or the act must appear to be necessary and proper for carrying into execution some power or powers vested in Congress, in the Government of the United States, or in some de- partment or officer thereof By this rule we are now to decide whether that clause of the act of Congress, approved February 25, 1862, en- titled "An act to authorize the issue of United States notes, and for the redemption or funding thereof, and for funding the floating debt of the United States," which provides that the notes issued in pursuance of that act " shall be lawful money, and a legal tender in payment of all debts, public or private" — is or is not a law of the land. The counsel of the defendant — recognizing that on him rested the burden of maintaining the affirmative of this issue — claimed that the provision referred to was an exercise of authority vested in Congress under one or other of the following clauses of the enumeration' in Section 8 of Article i : BB 314 LEGAL TENDER NOTES. Paragraph 2. To borrow money on the credit of the United States. Paragraph 3. To regulate commerce with foreign na- tions, and among the several States, and with the Indian tribes. Paragraph 5. To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures. Paragraph 18. To make all laws which shall be neces- sary and proper for carrying into execution the foregoing powers, and all other powers vested by the Constitution in the Government of the United States, or in any de- partment or officer thereof I propose to examine these clauses, with such other parts of the Constitution as have been supposed in the course of the argument to illustrate them. I feel some degree of confidence, not only from the well-known ability, learning, and research of the counsel for the defend- ant, but from my own investigations, that if the act of Congress in question cannot be sustained on either of these clauses, it cannot be sustained at all. I will begin with the last paragraph of the enumera- tion, because its proper construction has an important bearing on the others. Par. 18 : "To make all laws which shall be necessary and proper for carrying into execution the foregoing powers." I will not here revert to political and controverted grounds, nor to the arguments by which in the Federalist, No. 44, and elsewhere, the objections of the enemies of the Constitution to the sweeping words of this clause were met and answered by " its enlightened friends." I mean to take exclusively as my guide the principles judicially settled by the Supreme Court of the United States in the leading case of McCullough vs. the State of Maryland (4 Wheat. 316). The rule established in that case is well expressed by the reporter in the syllabus. If the end be legitimate, and within the scope of the Constitution, all the means which are appropriate, which are plainly adapted to that endj and which are not prohibited, may constitutionally be employed to carry it into effect. Let us recur, however, to the very words of the opinion as delivered by C. J. Marshall. " We think the sound construction of the Constitution must allow to LEGAL TENDER NOTES. 3IS the National Legislature that discretion, with respect to the means by which the powers it confers are to be car- ried into execution, which will enable that body to per- form the high duties assigned to it in the manner most beneficial to the people. Let the end be legitimate, let it be within the scope of the Constitution, and all means which are appropriate, which are plainly adapted to that end, and which are not prohibited, but consist with the letter and spirit of the Constitution, are constitu- tional." (P. 421.) This is certainly a very large charter to the discretion of Congress, yet as a rule for judicial cases, I am willing to accept it. It is apparent, however, from the very terms in which the principle is enunciated, that this dis- cretion is not without limits. It is not Congress which is to be the final judge as to whether a measure is necessary and proper for carrying into effect any of the delegated powers. Were it so, the enumeration would have been a vain and delusive mock- ery, and the fundamental principle that the Federal Gov- ernment is one merely of limited authority, an un- meaning formula of words. The limits plainly set in this language are these : i. The end must be legitimate, and within the scope of the Constitution. 2. The means must be appropriate and adapted to the end. 3. The means must not themselves be prohibited, but consist with the letter and spirit of the Constitution. There is, however, another limitation upon the discre- tion of Congress in the choice of necessary and proper means. It is clearly stated in McCullough vs. the State of Maryland, and indeed the principle of it may be con- sidered to have ruled that case. I quote again the very words of the opinion : " The power of creating a corporation, though apper- taining to sovereignt)', is not, like the powers of making war or levying taxes, or of regulating commerce, a great substantive and independent power, w/iic/t cannot be im- plied as incidental to other powers, or used as a means of executing them." (4 Wheat. 411.) I understand the Supreme Court in this language to lay down the simple and reasonable — I might perhaps 3l6 LEGAL TENDER NOTES. say the self-evident — proposition, that no one enumerated power can be incidental to another enumerated power. Three cases are stated as examples of substantive powers, but clearly only as examples. We have no right to say that any one of the express powers is more substantive and independent than another. Their very expression authoritatively stamps their character. If, therefore, a power is delegated, but in terms which import a limita- tion or qualification, it cannot be exercised as incidental to some other power, disregarding the limitation or qual- ification annexed to the express grant. Indeed, such limitation or qualification may be considered as a pro- hibition against the exercise of that power in any other way, and therefore within the limit which the Supreme Court places upon the discretion of Congress in the enunciation of the general principle, viz : that Congress cannot employ a measure, however necessary and proper it may be, for carrying into effect some express power, if that measure has been prohibited. I pass now to the consideration of those grants from which, by the aid of the last paragraph of the enumera- tion, it is contended that Congress have authority to issue what this act calls " United States notes," and to make them a legal tender in payment of all debts, public and private. I. "To regulate commerce with foreign nations, and among the several States, and with the Indian tribes." Art I, sect. 8, par. 3. It must be admitted that standards of value and of weights and measures, are means very appropriate and adapted to the regulation of commerce. But then we have in this enumeration a clause which expressly grants and defines the authority to create such standards. If it directs of what they shall consist. Congress cannot make another kind as incidental to the regulation of com- merce. With equal plausibility might it be pretended that, for the regulation of commerce. Congress could lay duties, imposts, and excises, and pass bankrupt laws. Such measures might be very appropriate and adapted to that end. Yet surely it will not be maintained that assuming these powers as incidental. Congress could disregard the LEGAL TENDER NOTES. 317 rule of uniformity, which limits and qualifies the express delegation of them. This qualification is, in fact, a pro- hibition of any duties, imports, or excises, which shall not be uniform throughout the United States — of any laws on the subject of bankruptcies which shall not, in like manner, be uniform throughout the United States. (Art. I, sect. 8, par. 4.) These cases present a perfect illustration of the soundness of the limit to the discretion of Congress, prescribed by the Supreme Court, that a substantive power shall not be exercised as incidental. I do not, however, consider them as any more perfect than the very case before us. If the power to create a standard of value and medium of exchange is expressly delegated, but confined by its terms, as we will presently see, that is to coins — foreign or domestic — it is a prohi- bition .of any other kind of money. Congress cannot, under the pretext of regulating commerce, infringe the prohibition thus laid on them. 2. " To borrow money on the credit of the United States." (Art. i, sect. 8, par. 2.) It has been argued that under this clause Congress may issue these " United States notes," because they are only acknowledgments of debt in a negotiable form, and in order to give them greater credit, make them a legal tender. That there may be constitutionally issued to the public creditor certificates of the amount due, transferable by assignment — or bonds or notes payable to bearer, which can pass from hand to hand by mere delivery — I do not deny. These are all securities, and Congress is vested expressly with power " to provide for the punish- ment of counterfeiting the securities and current coin of the United States." (Art. i, sect. 8, par. 6.) This lan- guage is accurate. Securities i?a: z'« /irr»22«z are something different from money. This view is strengthened when we find the coin described in the same paragraph as current coin. These United States notes are not securities for money which may be issued under the authority to borrow, but they are " bills of credit" — things distinct and different from securities. That there is such a distinction may be clearly shown by the judgments of the highest tribunal, which gives the law on these subjects to all other courts. BB* 3l8 LEGAL TENDER NOTES. According to that tribunal, bills of credit are not certifi- cates of loan — not Treasury bonds or notes — not acknowl- edgments of indebtedness, all of which are mere secu- rities — but bills invested with the functions of money — just such bills as the United States notes issued in pur- suance of the act of Congress in question. In Craig vs. the State of Missouri, (4 Peters, 431) C. J. Marshall, in delivering the opinion of the Court, says : " In its en- larged and perhaps literal sense the term 'bill of credit ' may comprehend any instrument by which a State en- gages to pay money at a future day : thus including a certificate given for money borrowed. But the language of the Constitution itself, and the mischief to be pre- vented, which we know from the history of our country, equally limit the interpretation of the term. The word ' emit' is never employed in describing those contracts by which a State binds itself to pay money at a future day for services actually received or for money borrowed for present use ; nor are instruments executed for such pur- poses in common language denominated ' bills of credit' To ' emit bills of credit' conveys to the mind the idea of issuing paper intended to circulate through the commu- nity for its ordinary purposes as money, which paper is re- deemable at a future day. This is the sense in which the terms have always been understood." The definition here given was subsequently reconsidered, and sustained in Briscoe vs. the Bank of Kentucky (2 Peters, 257). According to this clear and authoritative exposition, what distinguishes bills of credit from such securities as are issued to the public creditor is, that the former are, and the latter are not, intended to circulate as money. These United States notes, then, are not acknowledg- ments of debt, nor " securities of the United States," but " bills of credit" — in other words, " money." In- deed, this act of Congress of February 25, 1862, intends to leave no doubt on that point, for it expressly declares that they shall be " lawful money." In conformity, then, to the principle, as settled by the Supreme Court in McCullough vs. the State of Maryland, we must turn to the money clause to ascertain whether Congress had au- thority to make them " lawful money." That body can- not, as incidental to the power to borrow, create any LEGAL TENDER NOTES. 319 kind of money which will not stand the test of the ex- press power, which is granted on that subject. If any doubt remains as to whether the right to emit bills of credit — to make paper money — can be exercised as incidental to the borrowing power, it ought, as it ap- pears to me, to be entirely dissipated by the proceedings of the Federal Convention when this clause was before them. I freely submit that the opinions expressed in that body are not conclusive upon the interpretation of the Constitution. That instrument is to be construed like all others — by its four corners. But surely as C. J. Marshall relied " on the history of our country" in limit- ing the meaning of the words " bills of credit," we may resort for light to the opinions and votes of the men who framed the Constitution in deciding whether in the words " to borrow money" was intended to be included " to emit bills of credit," for that is the precise question we have here to consider. By the ninth of the old articles of confederation, sec- tion 5, it was declared that " the United States in Con- gress assembled shall have authority to borrow money or emit bills on the credit of the United States. " In the plan of the Constitution, as reported to the Convention by the Committee of Detail, of which Mr. Rutledge was chairman, this clause was copied : " to borrow money and emit bills on the credit of the United States." On the 17th of August, 1787, in convention, Mr. Gouverneur Morris, of Pennsylvania, moved to strike out the words " and emit bills." There was a debate on this motion, which is reported by Mr. Madison. It was argued by some — and Mr. Madison himself among the number- that the words had better remain, with a provision pro- hibiting them from being made a legal tender. Mr. James Wilson, of Pennsylvania, afterwards one of the Justices of the Supreme Court of the United States, ap- pointed by President Washington, contended that it would have a most salutary influence on the credit of the United States " to remove \h^ possibility of paper money." Other members who spoke, concurred with him in this view. The motion was carried, and the words stricken out by a vote of nine States to two. Mr. Madison has added in a foot-note, that the vote by Virginia in the 320 LEGAL TENDER NOTES. affirmative was occasioned by his acquiescence, because he became satisfied that striking out the words would not disable the Government from the use of public notes, so far as they could be safe and proper, and would only cut o^ the pretext of a paper currency, and particularly for making the bills a tender either for public or private debts. (S Elliot's Debates, 434, 435.) I do not know how these proceedings may strike other minds, but they have convinced me that the Federal Convention understood by " bills of credit," not securities — certificates of loan or indebtedness — Treasury notes — or Exchequer bills — but just what Chief Justice Marshall afterwards defined them to be, " paper money," and meant to deny to Congress the power to make such money. Luther Martin, in his address to the Maryland Legis- lature in justification of his course in retiring from the Federal Convention, has also given a brief sketch of this interesting debate, which corresponds in the main with that of Mr. Madison. He declares in the most emphatic manner that " a majority of the Convention, being willing to risk any political evil rather than admit the idea of a paper emission in any possible case, refused to trust this authority to the Government." (Secret Proceedings of the Federal Convention, p. 57.) He afterwards informs the Legislature, as indicative of the temper of the body, fi"om which he had withdrawn, that as the Constitution " was reported by the Committee of Detail, the States were only prohibited from emitting them (bills of credit) without the consent of Congress ; but the Convention were so smitten with the paper money dread that they insisted that the prohibition should be absolute." " It was my opinion, sir," he proceeds to say, " that the States ought not to be totally deprived of the right to emit bills of credit ; and that as we had not given an authority to the general Government for that purpose, it was the more necessary to retain it in the States." The members of the Federal Convention truly repre- sented the views and feelings of the people of the States by whom they had been chosen. No one acquainted with the history of the Revolution can be surprised at the extreme jealousy entertained of investing either the Federal or State Governments, or even both, by LEGAL TENDER NOTES. 321 joint action, with any discretion on this subject. It is plain that the men who framed the Constitu- tion — the men who ratified it in the State Conven- tions — the great mass of their constituents — meant nothing less than to exclude forever in any possible case — (Mr. Martin) — the possibility of paper money (Mr. Wil- son). The public faith again and again solemnly pledged for the redemption of the Continental bills of credit had been shamefully violated. The tender laws of the States, enacted at the urgent solicitation of Congress for the purpose of sustaining their credit, had utterly failed. The amount of private wrong thereby inflicted on individuals and families was incalculable. Congress in a circular address in 1779 — after promising solemnly that the amount of the bills should on no account exceed $200,000,000 — indignantly repelled the idea that there could be any violation of the public faith, or that there did not exist ample funds to redeem them. The emission, how- ever, very soon after swelled to $3 79,000,000, and having ceased to circulate, quietly died in the hands of its pos- sessors. (3Story on theConst, 223-224.) No financiering was found so easy, so attractive, and at the same time so delusive and destructive, as that of resorting to paper money. " Who," said a member of the Revolutionary Congress in debate, " will consent to load his constit- uents with taxes, when we can send to our printer and get a wagon-load of money, and pay for the whole with a quire of paper?" (Breck's History of Continental Money, p. 13.) Well said Mr. Read, of Delaware, in the Federal Convention, that such a power would stamp the Constitution with " the mark of the beast in Revela- tions ;" and Mr. Langdon, of New Hampshire, only ex- pressed the feelings of the entire country when he de- clared that he would rather reject the whole plan than retain the three words " and emit bills." It requires but a slight knowledge of the times to conclude that if these three words had been retained, or had it been imagined that, though stricken out, as by comparing the new with the old system everybody could see that they were, they still lurked in the instrument as incidental to some other power, the Federal Constitution would never have been ratified by nine States. In the discussions and publica- 322 LEGAL TENDER NOTES. tions which followed on the promulgation of the plan, before proceeding to vote on it in the State Conventions, as well as in the debates of those bodies so far as they have been preserved and handed down to us, though every hole and corner of the instrument was ransacked to find objections, I am not aware that it was ever sug- gested that it might possibly contain so odious and un- popular a power. The voice of the instrument itself ap- peared sufficiently marked and unmistakable. 3. I now come to consider the remaining clause, which has been relied on as the source of authority to pass the act in question. " To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures." (Art. i, sect. 8, par. 5.) It is evident, not merely from the words, but from their juxta- position with the clause for fixing a standard of weights and measures, that the Constitution intends that the money of the United States shall be not merely a me- dium of exchange, but a standard of value. Uniformity and stability were the ends in view, and for this reason those powers were vested exclusively in the Federal Gov- ernment. Here, and here alone, and not as a mere inci- dent to something else, are we to look for whatever au- thority Congress possesses over the subject of money. These words seem to me to sanction only coins or metal- lic money. In the Federalist, No. 42, this is taken for granted : " All that need be remarked on the power to coin money, regulate the value thereof, and of foreign coin, is that by providing for this last case the Constitution has supplied a material omission in the articles of con- federation. The authority of the existing Congress is restrained to the regulation of coin struck by their own authority, or that of the respective States. It must be seen at once that the proposed uniformity in the value of the current coin might be destroyed by subjecting that of foreign coin to the different regulations of the different States." Judge Story thought so, for he says : "The power to coin money is one of the ordinary prerogatives of sovereignty, and is almost universally exercised, in order to preserve a proper circulation of good coin of a known value in the home market." (3 Story on the Const., 17.) But the Supreme Court of the United LEGAL TENDER NOTES. 323 States have not left this to inference, but have distinctly declared the same opinion in the United States vs. Mari- gold, (9 Howard, 560) in which an act of Congress, pun- ishing the offense of importing spurious coin, was held to be constitutional, on the ground that the provisions of the act appertained, to use the very words of the opinion, " to the execution of an important trust invested by the Constitution, and to the obligation to fulfill that trust on the part of the Government, namely : the trust and the duty of creating and maintaining a uniform and pure me- tallic standard of value throughout the Union. The power of coining money and of regulating its value was delegated to Congress by the Constitution for the very purpose, as assigned by the framers of that instrument, of creating and preserving the uniformity and purity of such a standard of value." The word coin is one of well-settled meaning. The primary sense of the noun, according to Dr. Webster, is " the die used for stamping money ;" and the undisputed signification of the verb, according to most, if not all, the lexicographers, is "to stamp metal, and convert it into coin." Ill Wharton's Law Lexicon (ad verbum) it is said : " Strictly speaking, coin differs from money as the species differs from the genus. Money is any matter, whether metal, paper, beads, shells, etc., which has cur- rency as a medium in commerce. Coin is a particular species, always made of metal, and struck according to a certain process called coining." It was urged at the bar — I do not know whether seriously or not — that printing is stamping, and these notes might therefore literally be said to be coined. No such use of the word in any au- thor has been shown. AVe may say figuratively to coin a story, meaning to invent one, but never to coin the book in which it is printed. The story is a fiction — the coinage of the brain — the book a reality. Surely, however, no one will contend, in earnest, that if a sufficient number of clerks had been employed, and these flotes had all been written with the hand, they would have been unconstitu- tional, but that printing them makes them valid. To state the case thus, is to reduce the argument to an absurdity. It may seem like laboring unnecessarily to substantiate 324 LEGAL TENDER NOTES. a very plain proposition, but I will hazard some further illustrations. The notes in "question draw a plain distinction on their face between themselves and coins. They promise to pay dollars. What is a dollar ? To a similar question — what is a pound ? — Sir Robert Peel answered : " A pound is a definite quantity of gold, with a mark upon it to de- termine its weight and fineness." Many pages have been written to controvert this definition, and to prove that a pound is a mere abstraction — something like a mathematical point, without length, breadth, or thickness. But common sense, I think, vindicates Sir Robert Peel. A standard measure must be some actual length or ca- pacity — a standard weight, some actual weight. How else can other weights and measures be compared with it ? This is the object of a standard. So a standard of value must be some actual value. I would say, drawing the definition from the statute book — I know not where else to look- for it — a dollar is a silver coin, weighing four hundred and twelve and one-half grains, or a gold coin, weighing twenty-five and four-fifths grains, of nine- tenths pure to one-tenth alloy of each metal. These notes, then, promise to pay coins. To say that they are themselves coins is to make the promise and perform- ance identical. As they do not state on their face when they are to be paid, in law, if issued by an individual or a corporation, they would be payable on demand. Whitlock vs. Un- derwood (3 B. and C. 187). Story on Notes, par. 29. Payable in what .'' In themselves, if they are coins or dollars. They are promises to pay on demand, pay- able in promises to pay on demand. A promise to pay may represent coin, and circulate as such. It is properly designated as currency, and is one of many modes by which the use of an expensive standard may be spared by the substitution, as a medium of exchange, of public or private credit. It is safe and convenient, as well as economical, as long as it truly represents the standard by being immediately convertible into coin. But in its very nature it is not coin. Its value, or power of purchasing other commodities, depends as well upon the confidence of the community in the ability and inten- LEGAL TENDER NOTES. 325 tion of the issuers to redeem it as upon the amount issued. Coin, on the other hand, possesses present, actual, intrinsic value. If you obliterate from the pound weight the public mark, which attests its conformity to the standard, it still weighs the same as before. So you may erase the image from the coin, yet its value remains. Blot out, however, the Superscription from these pieces of paper, and nothing remains — they are worthless. The stamp on the coin is really nothing but a certificate of the weight and fineness of that piece of metal. Government guarantees nothing but this — makes no contract to de- liver corn, wool, or leather in exchange for it. The power of regulating its value can only extend to declar- ing that in law a certain number of one coin shall be deemed the equivalent of another of a different denomi- nation, in contracts and other transactions. In the market, unequal values cannot be made equal by law. Congress has no power to enact how many bushels of wheat an eagle shall exchange for ; and if it had, and should make the experiment, the act, like all attempts by Government to change the laws of value, which are natural laws, would be futile. The legislation of Congress upon this subject recog- nizes the difference between these United States notes and coin, and that they are not of equal value. The act before us (Feb. 25, 1862) requires duties on imports and the interest of the public debt to be paid in coin, and provides that the notes " shall be received the same as coin at their par value, in payment for any loans that may hereafter be sold or negotiated by the Secretary of the Treasury." So by the act of March 17, 1862, the Secretary of the Treasury is authorized to purchase coin with them at such rates and upon such terms as he may deem most advantageous to the public interest. And the act of March 3, 1863, prohibits the loan of currency or money on the security of gold or silver coins, exceed- ing in amount the/ar value of the, coin pledged or depos- ited as security. By the first of these acts coin is treated as the standard ; by the last, paper. The one speaks of the par value of the notes, the other, the par value of the coins. If the word coin has any more general or figurative CC 326 LEGAL TENDKR NOTES. sense in the phrase to coin money than that I have as- signed to it, it must be held to have the same in other parts of the article. In foreign coin will be included foreign paper money, and Congress may regulate its value, and make it a legal tender. They may thus treat notes of the Bank of England and France, Austrian and Russian Government money — ^but not State bank notes. Congress has no power of regulating the value of any money except foreign coins and money coined by its own authority. If to coin money mean to stamp paper, then the clause which forbids the States "to emit bills of credit " was unnecessary ; the prohibition " to coin money" included it. The terms of that very prohibition show that in the minds of the makers of the Constitution ' to coin money" and " to emit bills of credit" were two entirely distinct and different things. In short, in what- ever point of view it is regarded, it seems to me that the position that this clause authorizes or permits any other but metallic money is untenable. The restrictions on the States illustrate and confirm Ihe opinion which I have expressed upon the proper construction of the paragraph before us. " No State shall coin money, emit bills of credit, make anything but gold and silver coin a tender in payment of debts, or pass any law impairing the obligation of contracts." (Art. i, sect. lo.) The whole power over contracts resided in the States before the ratification of the Federal Constitu- tion. This section admits it and leaves it there, subject only to two restrictions — both having the same end in view — the inviolability of contracts. Inasmuch as the States cannot coin, and the Federal Government alone can, and inasmuch as the States cannot make anything but gold and silver a tender in payment of debts, it fol- lows that gold or silver coins, foreign or domestic, as regulated by Congress, constitute the only lawful money. This was evidently Mr. Webster's opinion in that able speech on the Specie Circular, which was cited at the bar, and in which he declared " that gold and silver, at rates fixed by Congress,, constitute the legal standard of value in this country ; and that neither Congress nor any State has authority to establish any other standard, or to displace this." And still more ernphatically : " Most uh- LEGAL TENDER NOTES. 327 questionably there is, and there can be no legal tender in this country, under the authority of this Government, or any other, but gold and silver. This is a constitutional principle, perfectly plain, and of the very highest importance. The States are expressly prohibited from making any- thing but gold and silver a tender in payment of debts ; and although no such express prohibition is applied to Congress, yet as Congress has no power granted to it but to coin money and regulate the value thereof, it clearly has no power to substitute paper or anything else for coin as a tender. The constitutional tender is the thing to be preserved, and it ought to be preserved sacredly, under all circumstances.^' (4 Webster's Works, 271, 280.) I must confess that upon a question of this magnitude — amid the conflict of opinion by which I am surrounded — my mind has rested with confidence and satisfaction upon this clear and decided conclusion of a great intel- lect. Mr. Webster's fame rests mainly on his eminence as a constitutional lawyer. The Constitution had been the study of his life — the subject of most of his profes- sional and political efforts. He belonged to no school of strict construction, but on all occasions was found earnestly contending for the broadest charter to the Fed- eral Government. The opinions he expressed in his seat in the Senate of the United States, under the sanc- tion of his official oath, are entitled to be received as de- liberate and well considered. With Mr. Webster, I regard these provisions of the Constitution, upon the subjects of contracts and tenders, as " of the very highest importance," and " to be pre- served sacredly under all circumstances." They rest upon sanctions which ought to be considered as of the most inviolable solemnity, at all times and in all emerg- encies. The true strength of a government — the best foundation on which can rest the confidence and affection of its people — is the security which it guarantees to property. This depends, in this country, upon those con- stitutional provisions which absolutely protect, under the M%\s, of the Courts of Justice, alike the daily earnings of the poor, and the accumulated savings of the rich man, not only from fraud and violence, but from the Govern- ment itself, except in the form of open and equal taxa- tion. 328 LEGAL TENDER NOTES. . It has been strongly urged upon us that Congress has the power of debasing the coin, either in weight or fine- ness, without changing the denomination or legal value; What, it has been asked, is the difference between that and issuing paper money, even though that paper should be, at the time, depreciated below the value of coin ? I answer that because Congress may possibly accomplish a certain end by constitutional means, it does not follow that the same object can be attained by means which are not constitutional. Though, by the process of debasing the metallic standard. Congress may perhaps reduce all debts, public and private, fifty per cent., it does not follow that they can enact directly that the man who owes one hundred dollars to another shall be quit upon the tender of fifty-> We apply no such principle to other cases. Because under a power a man may dispose of an estate by will, we do not hold that he can do the same in any other way than that directed or prescribed. But considering it merely as an argument of the inten- tion of the framers of the Constitution, it appears to me equally inconclusive. There are very important differ- ences between debasing the coin and issuing paper money, though their practical results may in some respects be similar. It may well have been intended to leave to Congress discretion as to the one, but to deny to either branch of the Government — State or Federal — any discretion as to the other. I. The debasing of the coin as a financial measure, for the purpose of discharging the public debt, would be an open, gross, and palpable breach of faith, scarcely possible in the present age of the world. Changes, how- ever, for the mere purpose of regulating the value of the currency, may be occasionally necessary. " Arbitrary Governments," says Albert Gallatin, " have, at various times, in order to defraud their creditors, debased the coin, whilst they preserved its denomination, and thus subverted the standard of value, by which the payment of public and private debts and the performance of con- tracts ought to have been regulated. This flagrant mode of violating public faith has been long proscribed by pub- lic opinion. Governments have, in modern times, sub- stituted for the same purpose issues of paper money, LEGAL TENDER NOTES. ■ 329 gradually increasing in amount, and decreasing in value. It was to guard against these evils that the provisions in the Constitution on that subject were introduced." (Con- siderations on the Currency, p. 72.) It is true that the coin has been debased in our own times and country, but never with a view to defraud either public or private creditors. When the coinage of the United States was first regulated, 1792, a double standard, both of gold and silver, was adopted, and the proportion of these two metals fixed at one to fifteen, which was then about their true relation in the market. But though the relation between gold and silver is cer- tainly more steady than that between any two other com- modities, at least within short periods of time, yet it is not immutable. Accordingly, about the year 182 1, a change was observed to have occurred. An ounce of gold, instead of being worth only fifteen ounces of silver, was really exchangeable for about sixteen ounces. Of course, no one would pay a debt with sixteen ounces of silver, when he could do so with fifteen. The conse- quence was that the gold coins disappeared entirely from circulation, in obedience to the invariable law that the metal legally undervalued is always expelled. Silver be- came practically the only standard. The act of June 25, 1834, commonly called the Gold Bill, undertook to re- store the true relation. To do this, either the gold coin must be debased or the silver enhanced. The latter course would have been fraught with more injustice and mischief than the former ; though the true policy may have been to let things alone, or to have established as the only legal what had practically become the actual standard. Yet many pure and eminent statesmen were then, and still are, wedded to a different policy. Subsequently, ^by the act of January 18, 1837, the weight and standard of the coin of both metals were slightly changed, with no design but to maintain, if possible, a currency of both gold and silver. Silver, however, being now undervalued, was banished from circulation, as gold had been before. By the act of February 21, 1853, a much more considerable reduction was made in the weight of silver coins less than the dollar, but evidently only for the purpose of supplying a subsidiary currency cc* ^^O LEGAL TENDER NOTES for small payments : for by the same act it was provided that the silver coins issued in conformity thereto should be legal tenders in payment of debts for all sums not ex- ceeding five dollars. I have no doubt that all this tam- pering with the coin was unwise and unjust Whatever may be the advantages of a double standard, they are too dearly purchased by the frequently recurring necessity for these changes.. But I do not see that there was, in any of these instances, a criminal breach of public faith, or an intention to interfere with private contracts. In 1834 the public debt had been then recently liquidated in full, and at the period of none of these measures was anything to be gained by the Government from them, but rather the reverse. 2. There is another important difference between the two measures of debasing the coin, and of issuing paper money. When an act is passed debasing the coin, all the mischief is done. On the day following the prices of all markets adjust themselves to the new standard. Commodities, real or personal, lands or chattels, are of exactly the same exchangeable value as before, the only difference being that their value is expressed in different figures. An ounce of gold will still buy the same num- ber of bushels of wheat, whether it is coined into twenty pieces called dollars, or forty pieces. True, debtors are richer at the expense of their creditors. But that gross injustice also is finished. Every man, creditor or debtor, capitalist or laborer, knows exactly where he stands. Not so with paper money. As to all existing contracts, the same and even worse injustice is done, if the paper depreciates, than when the coin is debased. All equality is at an end. To-day a man pays at one discount, to- morrow he receives at another. TAere is, in truth, no standard of value whatever. The paper money varies like the mercury in the barometer, acted on by the super- incumbent column of air, swayed to and fro by the tides of the atmosphere — now high, now low — now rarefied, now condensed. Thus, as confidence rises or falls, but more certainly as issues are increased or contracted, the value of every man's property, and the real price of his labor, what he can procure for it of the necessaries and comforts of life, fluctuates from day to day. This was UNCONSTITUTIONAL. 3 J I just what the men of the Revolution, who met in the Fed- eral Convention, who assembled in the State Conven- tions and ratified the Constitution, had not merely heard with their ears, but seen with their own eyes, touched and handled with their own hands, and felt in their own pockets. They had not the advantage of reading the same history repeated in a more rapid and aggravated form, in the paper money of revolutionary France. But they needed it not. They had quite enough, in their own experience, to make them determine to deal an effectual death-blow at paper money. On the whole, then, I am of opinion that the provision of the act of Congress of February 25, 1862, declaring the notes issued in pursuance of that act to be lawful money and a legal tender, is unconstitutional. If the preceding logical, perspicuous and constitutional argument is not enough to convince the most skeptical of the illegality of the Legal Tender Acts, recently passed by Congress ; and if such examiners would seek for fur- ther proof, they may find, in the Merchants' Magazine, Vol. L, No. I, pp. 64-76, the opinion and argument of Judge Denio, of New York, which is completely exhaust- ive of the subject, and is a document which should be studied by every one who has any remaining doubts upon the question. His arguments are completely unanswer- able. (D.) LEGAL TENDERS UNCONSTITUTIONAL. " In a case relative to ground rent, lately decided by Judge Alexander, of the Court of Maryland, the validity of the Act of Congress making greenbacks a legal tender in payment of debts, was involved. The Judge has filed the opinion that Congress has no power to declare these notes legal tenders. The decisions in a number of cases assimilating in principle to the one before the Court, are referred to as sustaining the view presented by him. In those cases it was conceded that there was no author- 332 APPENDIX. ity vested in Congress for the purpose above stated, though it was deemed a matter of policy that the enact- ment should be sustained. The complainant took an appeal from the ruling of the Court, and all the points thus controverted will have to be determined by the Court of Appeals of Maryland, whose decision on them will be looked for with anxiety. In case the decision is sustained by the Court of Appeals, the question will be taken to the United States Supreme Court, for final arbitrament." (D.) LEGAL TENDERS DECLARED UNCONSTITUTIONAL IN KENTUCKY. The Court of Appeals of the State of Kentucky has rendered a decision, declaring the Legal Tender Act of Congress to be unconstitutional. Judge Robinson gave the opinion of the Court, declaring as follows : "Whenever a jurist inquires whether a statute is con- sistent with the State constitution, he looks into that con- stitution, not for a grant, but only for some limitation of the power inherent in the people's legislative organ so far as not forbidden by their organic law. " But, as Congress derives its power from grants by the people of pre-existing State sovereignties, an enlightened inquirer into the constitutionality of any of its acts looks only to a delegation of power by the Federal Constitution ; for that Constitution expressly declares that all power not delegated by it is reserved to the States, or to the people. In this class of cases, therefore, he who asserts the power holds the affirmative ; and, unless he maintains it, the controverted act should not be enforced as law by the judiciary. On the contrary, the party affirming that a legislative act of a State is prohibited by the State Con- stitution, must prove it ; and unless the proof be clear, the contested act must be admitted to be law. The dis- tinctive difference between the two classes of cases is, that in the former, the power must be shown to have been delegated ; but, in the latter, it must appear to have been prohibited. A JUDICIAL. DECISION. 333 ''And in this case, therefore, the power to pass the Tender Act must satisfactorily appear to have been delegated before the judiciary should recognize and en- force it." (D.) ILLUSTRATION OF LEGAL TENDER. "As favorable a view as we can take of the Legal Tender Act is, that it enacts in substance as follows : " Whenever any debt is discharged within the United States, the creditor shall forfeit to the debtor such per centage of the debt as is equal to the depreciation of legal tender notes since the debt was contracted. This is in fact the sum and sub- stance of the enactment. It made every promissory note, every bank bill, every dollar of bank stock, every bond of every State and railroad corporation, and indeed, every promise to pay money, a real unavoidable bet, which the creditor wins when gold goes down, and the debtor when gold goes up. This, in fact, is the result of every system of irredeemable legal tender paper, and must continue to be while human nature remains as it is. * * * To the lover of justice, the discussion of such a subject of spoliation, from a merely utilitarian point of view, must be repulsive in the extreme. No man who believes that honesty is the best policy ; no man who believes in the moral government of the universe ; no man who believes that the laws of nature always act to preserve the good- and destroy the evil, will ask for any other judgment on the system than that which will be pronounced by his own conscience. But it will be instructive to trace all this in- justice to its economic effects, present and future, if only to show how we are punished for transgressing a moral law. •" It is plain that while gold has been rising from par to a premium of 130 per cent., the creditor class of the community, represented by the owners of bank stock, depositors in savings banks, holders of bonds and mort- gages, and the frugal poor who have loaned their savings, have, on the whole, been subjected to heavy and unjust losses ; while the debtor class, represented by those who 334 APPENDIX. live beyond their income or do business on borrowed capital, have made heavy and illegitimate profits. Owing to the different fimctions of the two classes in social economy, their gains and losses are productive of effects which virtually concern the best interests of society, and are therefore well worthy the serious consideration of the philosopher and statesman. The debtor class, havii^ been from time to time relieved of a per centage of their equitable liability, have found less difficulty than usual in meeting their obligations. Hence there have been fewer failures than common, as well as larger profits, and un- usual business prosperity. For the country is naturally considered prosperous when there are few failures and large profits." — Newcomb. (D.) A FURTHER ILLUSTRATION. " Three years ago two hundred mechanics each put one hundred dollars into a savings bank. The savings bank loaned this 5^20,000 to a ship-builder, who ertiployed it in building a ship. He sends the ship to England and sells her for $22,000 in gold, making a legitimate profit often per cent. By every principle of justice $20,000 of the money belongs to the savings bank. But now the legal tender clause comes in and declares the builder relieved from the debt in payment of twenty thousand paper dol- lars. He therefore buys the paper with perhaps $8,000 • in gold, pays them to the bank, and keeps the additional $12,000 [in gold] for his own private use." — Newcomb. (See page 74.) , (E.) THE SUPREME FOLLY OF PREFERRING PAPER TO GOLD CURRENCY IN CALIFORNIA. In the present inflated condition of the currency of the United States, it becomes a question of much importance UNWISE LEGISLATION. 335 to California — a gold-bearing State of the Union — to know what fraction of the Value of gold results from the fact that this metal is money by constitutional provision, and what would be its value if demonetized, and thrown upon the world a*'merchandise. The value of money is in a direct ratio to demand, and in an inverse ratio to the supply. If the supply be ample, the price rules low; if it be limited, the value increases. By making a legal tender of paper, the domestic call for gold is greatly reduced, and it is driven to foreign countries for a market. But if all civilized countries rejected gold as money, its value as merchandise would not be one-fourth of its present value as money. Again : if all civilized countries made gold their only money, rejecting all forms of paper issue as such, its value in the markets of the world — and by its value I mean its exchangeable power for other forms of wealth — would be greatly advanced. If then, three-fourths of the value of gold results from the fact that it is money, what should be the wise policy of a gold-bearing State like California ? Certainly to con- tinue to support her staple, and keep it in use as money and for money ; not to deprive herself of three-fourths of its value by insisting that it shall only be merchandise, and that our money shall be nothing but credit and promises . Our mines yield more gold in six months than the whole circulation of the State. Would it not be suicidal to re- duce the value of gold by shadows and substitutes ? — And above all, by legislative enactments, to coerce it from circulation as our medium of exchange and measure of value ? AVhen the State of Maine shall legislate that white pine boards shall no longer be used for covering the roofs of buildings there, but that all her roofing material shall be tules imported from California ; when Massachusetts shall enact that water power shall no longer be used in that State to propel the machinery of her manufactures, but that all her power of manufacturing shall be slaves imported from the Southern States ; when New York shall make a law that in future commerce shall not be carried on by means of ships and ocean steamers, but that all commerce of the State shall be done in balloons, which shall navigate the air, and move with inconceivable velo- 336 APPENDIX. city ; when Indiana and Illinois shall legislate that bread shall no longer be made of wheat flour, but a substitute for it shall be rye flour and pdtatoes ; when Ohio shall enact that hams, bacon, and mess pork shall no more be eaten there, but a substitute shall be Rund in importing cod-fish from Newfoundland ; when Pennsylvania shall legislate that coal shall no longer be used there as fuel, but that wood shall be brought from the forests of Canada ; when Missouri shall make a law that railroad iron shall no more be made from the iron ore of her mountains ; when Louisiana shall decree that the sugar from the cane shall no longer be used there, but that beet-sugar shall be imported from France ; when Alabama shall enact that g^ods manufactured from cotton shall no longer be used in that State, but that all her articles of clothing shall be made of gunny-bags and sackcloth f and when all the other States of the Union shall enact? laws equally sottish and equally destructive of their vital interests — then, and not till then, let California cap the climax of folly, and ordain that gold coin of the mints of the United States shall no longer be money here — shall no longer measure values in our State, but that we will import from the East paper promises redeemable twenty years hence, or long after we shall have any earthly cares to annoy us, and we will swear that these are the best measures of value that were ever instituted ; and as we look on the devastation and wide-spread ruin which such legislation has induced, like Nero who danced and fiddled while Rome was in ruins, we will shout paeans of joy, and, lo Triumphe ! Sic itur ad astra ! ! (See pp. 75 to 81.) February 6, 1864. (E.) THE MASSACHUSETTS ANTI-SPECIE DECISION— THE OPINION OF THE COURT IN FULL. (From the Boston Traveller of Mth Jauuaiy, 1884.) The Supreme Court of this State have recently decided in the case of Wood vs. BuUens, argued last September, A JUDICIAL DECISION. 337 that the plaintiff in action upon a promissory note pay- able on demand in specie, can only recover judgment for the amount of the face of the note and interest thereon, although he offers to prove that at the time when pay- ment of the note was demanded, specie was worth a pre- mium above par. The note on which the action was brought was as follows : "Chicopee, December 31, i86i. " $500. — For value received I promise to pay Joseph E. Wood or order five hundred dollars on demand, with interest — the above payable in specie. "A. BULLENS." The opinion of the Court was prepared by Judge Chap- man, and was as follows : " This action is brought upon a promissory note for $500, payable on demand, and interest, with the additional words, ' The above payable in specie.' The plaintiff proved that he had demanded payment of the note in specie, and offered to prove that on the day he made the demand specie wa.s worth a certain premium above par. He contends that he is entitled to recover judgment for the amount of such premium in addition to'the sum of JS500 and inter- est. This position assumes that specie is to be regarded as an article of merchandise, and not as money. For if we regard it as money, it is itself the standard of value, and the statement that a dollar can be above or below par is absurd. It is, in effect, a statement that a dollar can be worth more or less than a dollar. Dealers th money may for their own convenience, and especially in respect to foreign trade, treat money as merchandise, and speak of gold and silver as being above or below par. But when a gold or silver dol- lar is spoken of in this manner, it is with reference to something else as a standard of par value. Thus it sometimes happened that the market value of these two metals has changed, and that a dollar in silver has been worth more in market than a dollar in gold. Yet the Courts have been compelled by law to treat them as money, and to reg . rd a dollar of one metal as equal to a dollar of the other. Equality may be wholly or partially restored by debasing one species of coin or improving that of the other. It is one of the attributes of sovereignty to do this j and when it is done, courts of law must conform to the change, and regard that as a dollar which Congress declares to be so. A judgment in a suit upon a note must be ren- dered for a certain sum in money, expressed in dollars and cents. Execution must issue for this sum, with costs, and the amount is to be collected. If we were to add to the amount of the note and interest a further sum — for example, one hundred dollars as a pre- mium on specie — the execution would still be collectable in money.. If the officer could seize a sufficient amount of gold or silver to. pay the execution and costs, he would pay to the plaintiff the specie,. and thus the plaintiff would obtain more than the amount of his. DD 338 APPENDIX. debt If the defendant's goods should be sold at auction on execu- tion, and the purchasers should pay in spede, the same result would follow. If land should be set off on execution, its value may be so changed by the condition of the currency as to affect the in- terests of the parties materially. It may be that the judgment will remain unsatisfied till gold, as merchandise, shall sink below par. This would again affect the interests of the parties and the value of the judgment The weekly fluctuations of the gold market are constantly operating in the same way. But these are matters which are beyond the reach of courts of law. They involve values, and sometimes equities, which no judicial tribunal can adjust or regu- late. All that courts can do is to treat as money that which the statutes of the United States legally enacted declare to be money. If it were in mr power to rcndtr a specific judgmtnt, designating tht species of currency in which it should be paid, liv might avoid some of the existing difficulties, but we have no such authority." Here we have a case in Massachusetts, where the rul- ing of the Court would have been made payable in specie, according to the promise of the sigfner of the note, if there had been a statute of the State allowing the Court to render a specific judgment, designating the currency in which it should be paid. Certainly nothing could be more pertinent, or show the utilit)' of the Specific Contract Law of California more clearly, than this ruling of Judge Chapman. Everj' State in the Union needs a law which will enable courts and sheriffs to enforce the payment of contracts in gold coin, when the parties to such contracts stipulate such form of payment (Pages 75 to 81.) A RECENT DECISION. The following case came before the United States Court, Judge Smalley : " Lawrence Gladstone et al. a^. AVilliam Chamberlain et al. The defendants chartered the British vessel John of Gaunt from plaintiffs, to bring a cargo from the island of Ceylon to the United States, and in die contract agreed to pay plaintiffs $29,000 cash, in consideration thereof. On the delivery of the cargo, the defendants paid the above amount to plaintiffs in legal tender notes, and contended that that was a discharge of their obligations. Plaintiffe consider that only so much paid on account, and con- THE PROTECTIVE SYSTEM. 339 tended that the word cash in the contract meant specie — gold or silver. The question in relation to this point was, from the evidence, left to the jury to decide, which they did by bringing in a verdict for plaintiffs for $18,066 — that being the difference in value between gold and greenbacks at the time of the delivery of the cargo, with interest added to date. This verdict was strictly in accordance with the ruling of the Judge." " PUNISHING TRADE FOR THE SINS OF PAPER." " The truth is, this ' protective system ' bore so unequally on dififerent branches of industry, and on different sections of country, as to give some a license to extract tribute from others, and to ex- cite dishonest hopes and wishes in nearly all. Government having once opened the flood-gates of favoritism, each workman and each class was too weak to stem the torrent, and naturally strove to win as much and lose as little as possible. The hatter aimed to get the highest possible duty on imported hats ; the shoemaker on imported shoes ; the owners of cloth factories, on imported cloths : and so on, through all the trades which foreign competition could affect Some were more successful, and some less ; some got five per cent ' protection,' some twenty, some thirty, some fifty, with a juggle of false valuation that might raise it above one hundred in practice ; but all who got or tried to get any favoritism at all, became as truly implicated in the crime as those who got most, and as truly belonged with the opponents of free trade and natural justice. Hence the long endurance of the system, notwithstanding its im- policy and wickedness. Great pecuniary losses resulted from the fallacious hopes thus raised — hopes which led thousands to embark in ' protected ' branches of industry that they did not understand, trusting to a congressional abrogation of God's laws of trade for their customers and profits — ^yet aU pecuniary losses have been as nothing compared with the injury done to our national dignity and our political morals. The Protective System was a second dagger planted in the heart of democratic government, paper money being the first. It trans- formed our Government from an upholder and obeyer of God's jus- tice into a framer and enforcer of antagonistic laws ; from a protec- tor of man's personal rights into their violator and betrayer ; from a public watchman into a public abettor of trespass and extortion. It created a new order of nobility, in fact if not in form ; for it privi- leged men to make free with other men's rights and earnings. It degraded the laborer, by segregating him from the world-wide 340 APPENDIX. Republic of Industry — a republic where merit or the best workman governs by divine right — and compelling him, on local grounds, to spend his substance with those who could not serve him cheapest and best. By stripping him of his just rights over his own purse, the fruits of his own toil, it robbed him of his manhood and made him a Slave — a Government Chattel — who must buy and sell, not according to his own will, but the will of a master. I say this, not in the language of passion, but in scientific exactness ; for, certainly, so far as a man holds his personal rights subject to the power of another — so far as he is deprived of Any just liberty, whether by an individual or by Government — so far is he a slave, if not in title, yet in truth. Nor is the injury or the degradation any the less, be- cause it is inflicted by the victim's government instead of open enemies. Government can no more make or unmake the personal rights of its citizens than a farmer's watch-dog can make or unmake his title to his sheep. All that governments or majorities can right- fully do, in regard to any man's natural rights and liberties, is to guard them faithfully and strike down every invader. The fact that I and my fellow-citizens have clubbed together and employ a com- mon guard to stand sentry over our rights and liberties, gives me no claim to any right that is theirs, and gives them no destroying power over any right that is mine. They have no more right to rob me of my money, or of my right to spend it with whom I please, because I live under the same government that they do, than I have to shoot them because they live under the same government that I do. If we consider the Protective System in its other aspect, that of a system of taxation for the "support of Government, it is, if possi- ble, worse still. It apportions the burdens of Government without the slightest regard to equity, stripping some men and sections of perhaps a fourth of all their toil, while giving bounties or pensions to others, whose lives are no more virtuous, and whose industry is no more useful. Under the tariff of 1828, two men, A and B, might ' each take his year's produce to the old world and sell it for the same amount — say $1,100. If A brought home the proceeds of his crop in lace and jewelry, he would be taxed on his return seven and a half per cent, on JSi,ioo=iS82 50. If B brought home his crop in the form of one thousand yards of woolens, at one dollar and ten cents per yard. Government would tax him at forty-five per cent, on an assumed value «/"iS2,500=$I,I25, or $1,042 50 more than A. Less than one-thirteenth of A's crop would go for taxes ; Govern- ment would eat up the whole of B's ! Another wrong of the Protective System is, that it throws the whole burden of federal taxation upon one kind^f property, ojr the producers thereof, while practically exempting all others. It throws the whole burden upon those producers wko sell their work in the world's market, or abroad ; leaving those who produce nothing for; and carry nothing to, that market, tax free. Worst of all, (and this is the secret of its protective power) it enables this latter class to levy taxes or tribute upon the former, for their own jirivate pleasure and emolument ; for, to prohibit those who sell their crops in the world's market froni buying their supplies there, is to force them to FINANCIAL SCIENCE. 34 1 buy in the protected market, and to put them in the power of those who sell or keep stands in it. * * * **»»» To understand distinctly where the weight of the tariff falls, and whence the profits it conveys to pet interests are taken, (for every weight niust bear on something, and all money-profits must be parted with by somebody before they can be pocketed by anybody) we must ponder these cardinal truths of financial science, viz : — That all schemes for making either persons or nations rich without work, or out of proportion to the wealth they may actually produce, are utter fallacies, or else schemes of spoliation. That, as it is im- possible for darkness to cover all the earth at once, so long as the sun shall shine in the heavens, neither can any financial imposition darken all nations at once so long as Truth shall reign. That gen- uine labor-products, such as gold, wheat, cotton, and things whose value depends on true human needs instead of mesmeric and gov- ernmental illusions, will always have a world-wide currency ; while conventional wealth and might can only be kept up by being kept within the charmed circle or mesmeric sphere of their imagination- forcing creators. That there must always be a world's market, or center of trade for all nations, where things without intrinsic value are but losing ventures, and whither only things of true use can be profitably sent : such world's market being not so much a geo- graphical center as a region of. commercial sanity, wherein no man can be a merchant any further than he respects verities, and takes things for exactly what they are. That the true financial health and strength of a country are known by the ability of its producers to sell their works in the world's market readily and profitably ; which they can do in proportion to the lightness of their taxes, impositions and extortions, and the extent of their industry and skill. That as the farmer gains in purse, not by the grain he eats, but what he sells, so the only persons (save miners of the precious metals) who add aught to the moneyed wealth of a nation, are those who send and sell their labor-products abroad ; and a Government that ob- structs such sales by taxing its citizens, or confiscating portions of their goods as they return from foreign markets with their purchases, not only commits a sin, but a fatal blunder also. That cotton, and all products readily convertible into specie in the world's market, or that answer the purposes of cash therein, are virtual specie to that extent ; and every injury done to specieby the issuing of paper, is equally an injury to such cash-products, or, rather, to tlieir pro- ducers and owners. That in proportion as the wealth-producers of a country are compelled, either by law or custom, to give real wealth for paper wealth, real work or service for sham work or ser- vice, the cost of production among them is increased, and their ability to compete with other nations is diminished. That the real object and operation of a protective tariff are, to force a home mar- ket for such citizens as are thus shut out of the world's market at the expense of such other citizens as, owing to peculiar advantages of soil or climate, or to superior skill in certain kinds of work, are not shut out of the world's market. Thus, a protective tariff is a bludgeon to prevent people from making good bargains abroad and DD* 342 APPENDIX. bringing wealth into their own country, by way of driving them into bad bargains at home. It would never have been thought of but for the disturbing influence of paper money. It is as powerless as a land-tax to create wealth, though it can be used to force existing wealth out of its natural channel, and to wrest it from its owners. It can sometimes help a starving operative out of work to knock down and strip some less starved fellow-citizen as he travels along trade's highway ; but it never put a cent in any starveling's purse, without first taking it from some one having a better right to it than the taker." ******** ." Such have been the fruits of the ' Protective System ' — of our forty years' struggle to escape God's vengeance against paper money — nor are they any the less bitter because that system's advo- cates fancy, or have persuaded themselves, that they are actuated by patriotism instead of covetousness." (Book of Finance and Politics, pp. 120-131.) The preceding truthful and forcible representation of the action of the tariff ascribes, and no doubt justly, the origin of the system to the disturbing influence of paper money. But, while California must submit to the damag- ing operation of this national legislation upon all her im- ports from the markets of the world, she is called upon to bear a grievance, if possible, more intolerable, viz : that her gold is shorn of half its value in the domestic markets of the country, because our people will not use it as money — will insist upon making merchandise of it, and substitute promises to pay it, while the promisers have not the coin to redeem their issues. The Eastern people are clamorous for higher customs. They seem to be regardless of the action of high duties upon other States, if they can become wealthy from the losses which such confiscations impose upon other sections of the country. It is time that the intelligent and honest portion of their population should cease to attempt to con- trol the affairs of the nation upon unjust,, unequal, or in- equitable principles. They need no higher duties than what are now imposed ; and, if they would follow the teachings of science, they could become wealthy under a scale of customs far below what is now enacted. What they need is a sound cur- rency — a currency worth one hundred cents on the dollar, in gold coin. With such a currency, they could build fac- tories, make their machinery, purchase their raw materials, MIXED CURRENCY. 343 pay for their labor, and turn out the finished articles at about one-half the present prices ; and, in this manner, could compete with foreign manufacturers altogether more surely, more permanently, and more efficiently, than through an unnatural, forced, and violent support, by un- justly compelling the owners of gold to trade in domestic markets, which are so greatly above those of foreign countries, and protecting this unequal form of taxation by Federal law. We must make our currency as good as that of foreign nations, or give up manufacturing ; or sup- port manufactures by direct spoliation from other forms of national wealth. If the Eastern people would dismiss their inveterate attachment to false money, and use gold and silver, their trade with California would be greatly enlarged. The truth is, that, notwithstanding the enormously high tariff under which we are struggling, such is the baneful action of paper money in the old States, that California can still pay the duties on imports and do better than to pay the advanced prices which currency makes on domestic man- ufactures. The only remedy for this element of national disorganization is a gold currency, or its absolute equiva- lent. While the burdens of the nation are unequally im- posed, we cannot expect to advance in prosperity, har- mony, opulence, and peace. It seems to be almost super- erogatory to pursue the argument. A recent work of great merit has been published in Boston, written by the Hon. Amasa Walker, an author of the highest standing as a political economist, from which I will make some extracts. In treating on the effects of a mixed currency, he says : A mixed currency discourages domestic manufactures, disturbs the proper relation of exports and imports, and puts the balance of trade against the people employing the greater proportion of credit. These effects will be recognized as injurious by all classes of per- sons ; but those who are so solicitous for the positive encourage- ment of domestic manufactures, and for the restraint of imports, as to favor the enactment of prohibitory or protective laws imposing duties on the foreign article, will, of course, most fully appreciate and deeply feel this tendency of a mixed currency. The course of this will be best observed in an illustration from the manufacture of a specific article : " Suppose that a certain kind of broadcloth can be afforded by 344 APPENDIX. the foreign manufacturer, delivered at New York, for two dollars per yard : the same article might be made in this country, but would cost two dollars a yard, without any profit whatever. Of course, then, we cannot afford to make the article. The Govern- ment, in order to encourage its production here, lays a duty upon the imported article of fifty cents per yard ; but at the same time establishes banks which manufacture a mixed currency, and double the natural amount of money. The American manufacturer now proceeds to erect his mills ; but wages and materials have so ad- vanced in price, by the expansion of the currency, that it costs him twenty-five to fifty per cent, more than it otherwise would have done. He builds machinery ; but this also costs him proportion- ably high. He proceeds to purchase raw materials, and employ labor in manufacturing ; but all are advanced in price for the same reason. His own expenses for living are also greater ; and should he be obliged to hire money, that will generally be found to have advanced in price, or rate of interest Under these circumstances, he cannot make the cloth so as to afford a profit ; and it will not be surprising if he should clamor for more protection. But it may be said that the same causes that have advanced the expenses of living, and consequently of labor, will equally have advanced the price of broadcloth. Not so. The price of the broadcloth will be determined by the rate at which it can be afforded by the foreign manufacturer ; and if he can pay the duty of fifty cents per yard, and yet obtain a fair profit, he will send all the market demands. " There is another view of the matter. Suppose we would ex- port our plain cottons, for example, to India. We there meet the English article, made under a currency more valuable than our own, which can consequently be afforded for less ; since, with the same amount of the money of India, (i. e., value money) the English manufacturer can pay for much more labor in England than the American manufacturer can in America. It is true that the rate of wages is lower in England than in this country ; but in addition to this England has the very great advantage of a currency nearer the currency of international exchange, which is always strictly value money. In such a state of things, not all the tariffs that ever were or ever will be imposed can adequately protect our manufactures. So far as they have arisen or flourished, it has been in spite of these disadvantages."* During the continuance of the compromise tariff, established in 1832, and which terminated in 1842, the currency varied from jSii 82 to $17 61 per capita, equal to an expansion of more than fifty per cent. ; while during the same period prices fluctuated to a greater extent. The variation in prices was larger even than the per centage of protective duties. So the tariff of 1842, which began to take effect in 1843, when the currency was $6 18 per capita, was more than counterljalanced by the expansion of the currency to $9 94 in 1846. But the manufac- * Walker on Money and Mixed Currency, p. 39. TARIFF AND CURRENCY. 345 turer suffered as much from the periodical contractions as from the expansions that preceded them ; for while by the latter, the duties were rendered nugatory, all business men met great losses from the failures and the general derangement and stagnation which the former produced. No tariff of reasonable extent, such as the people of the whole nation would endure, can ever place the do- mestic manufacturer in a position of security and of reliable profit, while competing with such an immense advance in prices as must certainly accompany an expansion of the currency. Nor can it fail to be true that the normal industrial development of any country, in which such a currency exists, must to a very great degree be interrupted or distorted. All ordinary business calculations are overturned. An element of hazard is introduced fatal to the shrewdest schemes. The terrific struggles through which American manufacturers have passed, ever since the establishment of the first tariff in 1816, have been caused, not by foreign competition solely or mostly, but by a false and delusive domestic currency. Fully as we are op- posed to the policy of protective duties, we are still more opposed to that system of currency which neutralizes them, and renders the legitimate success of home manufactures impossible, even after so great sacrifices to introduce them. (The Science of Wealth, pp. 190-193.) See Nos. VIII and IX, pp. 142, 150. INDEX. PAGES, Achievement of Congress in regard to Currency — bring- ing it under the governance of the National instead of the State Legislatures 25 Amendihent of the National Bank Act needed ; withdraw- ing the Bonds as Security for Issues, and deposit- ing Gold Coin , 26 Amount of Coin needed, rn i860, to make the entire Cur- rency of Metals, $377,500,000 29-31 Acts of Congress which conflict with the Supreme Law are Illegal 39 Admission of California into the Union with a Hard Money Constitution, estops Congress from forcing on her any form of Paper Currency 60 A great Objection to making National Bonds the basis for the Issue of Currency 109 Authority of Congress over the Currency 117-118 A Wrong System of Currency gives our Gold to Foreign- ers in dead Loss to the Nation ' 120 Acts of Congress have a most blighting Eifect upon the Value of Coin ■ 150 As to which should be allowed the Permanent Circulation of the Country — the Legal Tenders or the National Bank Currency 181 Action of Legal Tender on California 191 Borrowing Money on the Credit of the United States, is a Power delegated to Congress 48-49 Borrowing and Lending imply Volition — Free Agency. . . 54 Bills ofCredit defined bv Chief Justice Marshall.... 114-115 Banks of California are based, entirely, on Gold Coin 130-131 " Balance of Trade," by C. H. Carroll, Esq 159-164 Banks should no longer make Profits from Circulation. . . 172 Banks— their System Exists by the Sufferance of the People 172 Banks should not be the Custodians of the Coin for the Redemption of their Issues : the Coin should be held by the Federal Treasury 178-179 Bankers who Loan Real Money are among our most useful Citizens ; but those who Loan Credit instead, are working Mischief and Disorganization 245 348 INDEX. PAGES. Bank Deposits 263-264 Bill to Enlarge the Scope and Usefulness of the Independ- ent Treasury 266-285 Brief Recapitulation of the Salient Provisions of the Bill. All Banks of Issue exist by the Sutferance of Con- gress. The Credits of Banks may be controlled by Federal Law, if the Public Weal requires it, as well as their Outward Circulation. Opinion of Daniel Webster on the Right of Congress to restrain Bank- ing. Adam Smith on the Right of Government to restrain Natural Liberty (pp. 285, 286, 287, 288). A similar Bill, if it had been the Law of the Land in 1848, would have saved to the Union, in eighteen years, two billions of dollars 291-292 Civil War demonstrated the impotence of State Banks. . . 24 also demonstrated the need of Stronger Mone- tary Institutions 25 Currency of the Country — should never be any form of Credit 26 Congress should not tolerate any Currency which sacks the Nation of Gold 26 Currency of the Country in i860 30 Currency — The Difference to California between Coin and the National Banks 37 Constitution of the United States — the Authority of Cali- fornia for using Gold Currency Comparison of the Values of United States and British Gold Coin '42 Congress had no Authority to enact a New System for Raising Funds, where the Constitution had already provided one 48-56 Creditor should not be compelled by law to give the debtor a large fraction of his claim, for the benefit of the Nation, without Restitution by the Government ... 53 Conflicting Provisions of the Legal Tender Act with the Constitution 56 Currency should not be based on anything but Coin, dol- lar for dollar 87 Congress cannot regulate the Value of Coin unless it rules the Value of Currency, and makes Currency equiva- lent to coin 85, 86, 117 Congress, the Supreme Court of the United States, and Courts of the several States, must recognize the dif- ference in Value between the Coin of the Mints and the Inconvertible Promises to Pay that Coin 97-98 Circulation of the United Kingdom loo-ioi Currency — whenever it represents Coin, dollar for dollar, the issues of Paper will be essentially lessened. . . . 177 Congress has the same Right to Expel California from the Union as to Compel her to use Paper Money 104 Comparative Prices of National Stocks I2i INDEX. 349 PACKS. Currency cannot be Pure unless Equivalent to the Stand- ard 133 Currency may be Inflated in an equal per centage to the Tariff, without any check from imports 168 California Banks are Models of Banking for the World. . . 233-234 Causes which have, most efficiently, retarded the Progress of California 298, 299, 300 " Dollar " — the Legal Tender Act destroys its quality as a Standard 43 " Dollar " — it has ranged from 95 down to 35, and from 35 up to 70 cents on the dollar ; the Statutes at Large maintaining the absolute equivalent of the two Currencies for payments between Citizens 43-44 Demonetizing Gold Coin in the markets of the United States, for all purposes except Paying Duties and Interest upon the Public Debt, is a direct thrust at its Value at home 156 Damages which it inflicts on California 167-168 Difference between Lending Real Money and a Substitute. 177 Demonstration that a Paper Currency could not help Cali- fornia 2II-2I2 Debt is no proper basis for the issue of Currency 23 1-232 Deposit Account of Banks — how it may be abused 232 Defrauding by False Measures of Value as dishonorable as Cheating by False Measures of Quantity ; . . 237 Domestic Exchange — might be drawn by the Treasury with great mutual advantage to the Government and People 288 289 Decision in the United States District Court, New York, on Greenbacks 338 Extracts from Elliot's Debates in the Federal Convention 310 Extracts from Walker's " Science of Wealth," a work of high merit, on the action of the Tariff and Cur- rency upon Domestic Manufactures 343-345 Extortion of the Legal Tender Acts 44-45 Equal Taxation is designed by the Supreme Law 142 Establishing a Currency, by the Government, which is not immediately Convertible, is Revolutionary in its tendency, and thoroughly Demoralizing 180 Expenses of Working the Mines 210 Every man is compelled to use such Currency as the Community where he resides tolerates 248 Failures in Currency make failures in General Business in a Ten-fold Proportion 27 Fixity and Exactness requisite in all Standards — pre- eminently so in Standards of Value 40-41 350 INDEX. PAGES. Failure of the Legal Tender Act to keep Treasury Notes at the Par of Gold, an Effect of the Laws of Trade, not the Operation of Speculators or Brokers 45 Forced Loans by the Government 54 Framers of the Constitution purposely and decidedly Re- jected the Power of Issuing " Bills of Credit" by Congress "4t 3 '° Failures of 1857 "S. 257-8 Government Bonds not a Proper Basis for the Issue of Currency 3°S. 3°^> 26 Gold Coin should never be Cheapened by Issues of Paper 89 General Banking Law of New York a Failure in 1857. 140 Gold Act of June, 1864 156 Government Circulation — The Gains from it are but an insignificant Consideration, compared with the Damage to the Nation in Advanced Prices 180 Government Power and Influence Reduced the Value of a single Shipment of $1,200,000 from California about $250,000 (foot-note) 187 Gold taken from the Mines belongs of right to the miner. 189 Gold, its Value, and the Constitutional Rights of the Pa- cific States, should be Efficiently Represented in Congress 19' Government Losses, by Paying Gold at Prices made by Paper 203 Government should make the Reform as Efficient for the People as for itself 203 Gold and Silver were intended for Mankind as Money. . . 238 Gold and Silver are recognized Standards, and given in needful quantities only 239 Gold and Silver, if depreciated by superabundance, no one may complain of it 240 Government Banking — if ever instituted — should be thor- oughly upon a Gold Basis : the easiest and most popular form of Taxation that could be devised . . . 290-291 How the Government could raise Money Constitu- tionally 66 How the Legal Tender Act subverts Justice and the Constitution 70, 71, 73 High Rates of Interest do not so thoroughly Demoralize a People as a vitiated Currency lig How to Resume Specie Payments .124-130, 137-138 How Banks of Issue force Coin from Circulation 171 How to Appropriate the Sinking Fund 187-188 How the Pet Banks used the Government in 1837 .... 193-194 How the Legislature of California loosed the Gordian Knot 221 How to Try Paper Money 247, 252, 253-254 INDEX. 351 PAGES. Increase of Currency augments Demand for it 20 Impossible Conditions should never be introduced into the Currency 21, 92 Implied Powers cannot be exercised by Congress where Express Powers are given for same purpose 48 Issues of Currency should be governed with as much Ab- solutism and Precision as the Issues of Coin 112 If Paper Money is a National necessity it is the bounden Duty of Congress to keep it equivalent to Coin . . . 134 Issue of Currency an Attribute of the Sovereignty 142 If the state of the Union be such that California must lose so immensely on her Gold, she should be compen- sated by some Equivalent I57~IS8 Imports during the year 1857 ; estimated loss to the country upon those imports, in gold value, equal to $72,000,000 168, 169, 170 Independent Treasury — its Uses and Advantages should extend to the People as well as the Government . . 203 Inflating Currency saves no Interest to a Country 223-227 Justice one of the Columns upon which our National Government is founded, p. 39. The Legal Tender Act subverts Justice 53 Kent, Chancellor, on the right and duty of Courts 56 King James' Legal Tender 58 Legal Tender Act Examined 39 Laws of the Mints relating to the purity of Coins 40 Losses direct by Inflating Currency 45, 46, 47 Losses by Inflation have doubled the cost of the war . . 47 Legal Tender, practically illustrated 49, Si> 333i 334 Legal Tender Act, if Constitutional, would quadruple the National Debt, pp. 51, 52 ; ergo, not adapted to the purposes for which it was enacted. Legal Tender Act contributes to enrich thousands by impoverishing millions 68 Legislation of Congress against Gold has been Vindictive 105 Legal Tender — National Banks demanding of Congress that their issues be made a complete Tender 1 1 1 Legal Tenders will not be Funded so long as the Banks and People can make them Tenders in Fact 136 Losses on Currency, how settled and balanced 154-155 Losses to the Body Politic by the Currency 206 Legal Tender Act allows States to make Treasury Notes a tender, whilst the Constitution forbids them to make anything but Gold and Silver Coin such tender 71 Legal Tender Notes — Has Congress the Power to make Notes a Legal Tender ? Opinion and irrefragable argument of the Honorable Judge Sharswood, of 352 INDEX. PAGES. Pennsylvania, demonstrating that the Legal Tender Acts of Congress are unconstitutional, pp. 312-331. Opinion of Judge Alexander, of Maryland, that Congress has no power to declare these notes legal tender, pp. 331-332. — Opinion of Judge Robinson, of the Court of Appeals of the State of Kentucky, declaring the Legal Tender Acts unconstitutional, pp. 332-333. — Illustration of Legal Tender, quoted from S. Newcombe 333-334 Land as Security for Issuing Paper Money, p. 302. An early Project to establish a Land Bank in England. The Scheme described by Lord Macaulay. The wonderful Effects to result from this Innovation, p. 303. — Every Person who had Real Property ought to have, besides that Property, Paper Money to the full value of that Property. The specula- tions of Briscoe and Chamberlayne on the subject of Currency. The tenacity of these champions to their demented project, p. 304. — Government Stocks compared with Land security as a Basis for issues. Neither of these a proper basis for Cur- rency. Money should Possess Value to exchange for Value, p. 15. — Monetizing Gold gives it a large fraction of its Value 21 Manifests of Gold shipments from San Francisco to March, 1866 31 Mint Laws of Congress are in Accord with the Constitu- tion and Justice. Same Laws in Conflict with the Legal Tender Acts, p. 54. — Both cannot be Con- stitutional 55 Massachusetts Anti-Specie Decision, showing the neces- sity for a similar law to the California Specific Contract Act, in every State of the Union 336-337 National Banks — their Charter may be amended .... 26 National Bank System in California would work intermi- nable Mischief 38 National Legislation, in conflict with justice and mo- ^ rality, is opposed to the permanent welfare of any People 59 National Banks, not organized on a proper basis to save the Wealth of the Country 120 National Banks — How to Resume Specie Payments 124—130 National Banks clamoring to make their issues legal tender 133 National Credit is largely dependent upon the annual Yield of the Mines 190 No Advantage to the Federal Government to change the Currency of California 217-218 Nature and quality, of Bank Deposits 229 Newcombe, Simon, on the Legal Tender Act 333-334 National Bank System, ethics of 258-259 INDEX. 353 PAGES. One Treasury Note is Legal Tender for another of the same tenor. This virtually bars redemption in coin 44 Only Regulation which can keep Currency at the Par of Gold 178 Possibility of making the basis of the Currency Gold Coin, dollar for dollar '. 27-29 Paper Money lessens the purchasing power of Gold 35 Principle of the Specific Contract Law recognized 81-82 Protection of Coin includes standard weight and fine- ness, and the suppression of all Currency Circula- tion which does not represent the Coin 86-87 Power of Congress over the Currency 117 Paper Money might discharge all its functions equally well and represent coin on deposit, dollar for dollar 134-135 Prices of Goods in Foreign Markets 144-145 Profits of the Mines greatly over-estimated at the East — takes a Mine to work a Mine 190 Pacific Railroad — The Pressing Claims upon the Govern- ment for its speedy completion. Estimate of its Cost. Is required as a Measure of National De- fense. Four Billioxs of dollars have been paid and incurred to bind the Union together, North and South. ^Yould $200,000,000 be an Unreason- able amount to expend in binding the Union, East and West ? pp. 294, 295, 296. — More necessary and efficient, as a measure of National Defense to the Pacific Coast, than the entire American N.^\-y, pp. 296, 297. — The claims of California on the Fed- eral Government for direct aid are immeasurably greater than those of any other State in the Union, pp. 298, 299. — These are for Losses on her Treasure in the past eighteen years, $693,000,000. In ad- dition, the work should be accomplished for Na- tional Defense. Still further, when done, will make the Union at large worth many fold the entire cost of the enterprise 299 300 301 Possibility of a Metallic Currency. Opinion of the great Political Economist, Dr. Tellkampf, of the Univer- siti- of Breslau, in Prussia. 306-307 "Punishing Trade for the Sins of Pafery The Protec- tive System described, Financial Science, etc, etc., from the Honest Man's Book of Finance and Pol- itics 339-342 Quotations fi-om Scripture, proving the Abomination of all False Measures 235 Quotations, proving that Gold and Silver are recognized by the Scriptures as Measures of Value 239 354 INDEX. ; PACES.' Rapidity of Circulation cannot compensate fof deficiency of supply l6 Reduction of the Public Debt 69 Regulation of the Currency the right and duty of Con- gress 85 Resumption of Specie Payments — how to Resume. . ., 124-130 Responsibility of the Federal Treasury. 139 Restrictions upon the Mines by the Government will lessen their product 210 Returns of the National Banks, October, 1866 : liabilities, $901,558,020; specie on hand, $8,170,835 309-310 Say, J. B. on the adaptation of the precious metals for Money. 16 Substitution of Currency for Money, demonetizes real coin by expelling it from the country (p. 18). Dr. Adam Smith's Rule for Circulation 18 State Bank Issues — have been upon a wrong basis 25 State Banks have no more right to issue Bills of Credit than to coin Gold — the Supreme Law forbids both 25 Sacrifices consequent upon the Use of Paper Money 27 States cannot Coin Money — of course, must use the Coin of the Mints, since nothing else is legal tender S7 Specific Contract Law of California — Extracts from the law 76 " is not Unconstitutional in Coercing Gold Payments 76-77 " All the Mint Laws corroborate the Act . . 78-79 " is an Act to bring in force one of the cardinal points of the Supreme Law 80-81 Solvency of the Currency should never be at the Hazards of general business 93"94 Specific Contract Law of California, or one similar in scope, should be passed by Congress for the benefit of all Citizens of the United States 104-105 Specie Payments — how to resume 124-130 Specie in the Banks — New York, Boston, Chicago 132-133 Secretary McCuUoch on Prices 165-166 Sales of Gold — should not be made to buoy Currency. How to use the excess of Gold in the Treasury. The dif- ference in value between Gold and Currency should be universally admitted and acted upon. ..183, 184, 185, 186 Silver Coin of the Mints — incomparably better basis for the issue of Currency than Government or State Stocks, or any form of wealth, except Gold coin . . . 292-293 Treasury Notes, by enactment of Congress, being legal tender, such law does not keep them at the par of Gold 65 The Independent Treasury Bill 107 The National Losses under the old State Bank systems. . 108 The fundamental principle of Issue of the national banks, upon a wrong basis 112 INDEX. 355 FAGES. Tribute which the People must pay to the State Bank . Systems .....' 123-124 Tariff of the United States — acts with crushing influence upon the prosperity of California 143 " " is estimated to yield from 50 to 75 per cent 143 " " takes one-third from the Value of Gold for uses in the markets of the world 144-149 " " . its action upon different inter- ests 145 " " everything should bear its just proportion of the nation's burden (p. 146). "A house divided against itself cannot stand." Each of the great sources of national wealth have equal claims on the fostering care of the Government (p. 146). Immense losses which the Tariff has im- posed upon California (p. 147). Loss for the year 1866 ^28,289,589, including Internal Revenue 147 The Tariff bolsters a vitiated Currency in direct proportion to the amount imposed 152-153 The Interests of the Union at large, and of the Pacific States specially, concurrent and identical in the mat- ter of Metallic Currency 164 The Interests of the Union and the Pacific States should not be sacrificed to favor Banking Monopolies. . . . 167 The Statutes at Large should not aid injustice by coercing equalities in Currencies which are not equivalents. 188 The various Systems of Banking that have been tried in the United States 196 United States — need not dependjupon Commerce for Gold Coin 30 Uniformity and Equality in Taxation and Imposts the design of the Constitution. The Legal Tender Act is in direct conflict, in this respect, with the Supreme Law 52-53 Unlimited Liability of Stockholders — no proper basis for the issue of Currency 91-92 Undrawn Loans — proceeds of notes discounted should not be considered Deposits 230 Unwise Legislation for California 335~336 Values would be adjusted to Coin with great exactness, if not interfered with by Paper Currency 22 Value of Gold should not be reduced by substitutes 35-36 Values adjust Currencies 37 Value of the Pound Sterling in American Gold coin 42 Value of Coin cannot be kept up while the Power to issue Bills of Credit runs riot 133 Valuable Opinions on Currency, etc., etc 221-222 3S6 INDEX. rA