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Cornell University Law Library 
 
 The Moak Collection 
 
 PURCHASED FOR 
 
 The School of Law of Cornell University 
 
 And Presented February 14, 1893 
 
 IN HEnORY OF 
 JUDGE DOUGLASS BOARDMAN 
 
 FIRST DEAN OF THE SCHOOL 
 
 By his Wife and Daughter 
 A. M. BOARDMAN and ELLEN D. WILLIAMS 
 
Cornell University Library 
 KF 6205.S74 
 
 The legal-tender acts, considered in rel 
 
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THE LEGAL-TENDER ACTS, 
 
 OOKSIDEBED 
 
 IN RELATION TO THEIR CONSTITUTIONALITY 
 
 THEIR POLITICAL ECONOMY. 
 
 BY 
 
 A^^- 
 
 SAMUEL T. SPEAR D. D. 
 
 NEW TOEK: 
 BAKEK, VOOEHIS & CO., PUBLISHERS, 
 
 66 NASSAU STREET. 
 18T6. 
 
PREFACE. 
 
 The contents of this pamphlet were originally prepared as a 
 series of articles for publication in " The Independent." Each 
 article, with the exception of the second, was thus published in 
 the order in which the whole now appears. The Chicago Legal 
 News, the Albany Law Journal, and some of the daily papers, 
 occasionally referred to the articles, when in course of publication, 
 in such terms as to suggest to the author the expediency of pub- 
 lishing the series, when completed, in pamphlet form. In accord- 
 ance with that suggestion, the whole is now submitted to the 
 public in its present shape. 
 
 The first and principal question considered is, whether Con- 
 gress has the power, under the Constitution of the United States, 
 to declare that the debt obligations of the Government shall be 
 "lawful money and a legal tender " in /payment of debts and dis- 
 charge of contracts. The Supreme Court of the United States 
 has, in two successive decisions rendered about one year apart, 
 answered this question both negatively and affirmatively, in each 
 instance by a majority of one. The object of the first seven 
 articles is to ascertain which of these decisions is the one that best 
 accords with the Constitution. There certainly is no presumption 
 in raising such an inquiry when the Supreme Court so emphat- 
 ically contradicts itself by answering the question both ways in 
 the space of a single year. 
 
 The artides numbered eight and nine give the construction 
 which has been placed upon the Legal-tender Acts, and also a con- 
 cise history of the legal-tender debt. 
 
 The tenth, eleventh and twelfth articles are devoted to a ques- 
 tion of political economy — namely, whether, altogether aside from 
 the constitutionality of the Legal-tender Acts, there was any im- 
 perative necessity for making the notes of the United States 
 " lawful money and a legal tender," in order to carry on the war. 
 
4 - PEEFAOE. 
 
 The question is not whether it was necessary to resort to the issue 
 of Treasury notes in such form as to make them convenient for 
 circulation among the people, but whether it was wise to annex 
 the legal-tender quality to the notes. This question is considered 
 and answered in the negative. 
 
 The object of the thirteenth and last article is to examine the 
 merits of .that monetary scheme, which, arising from the legal- 
 tender policy adopted during the war, proposes that the Govern- 
 ment should be the direct source of all the paper circulation of 
 the country, that bank notes should be withdrawn, that the pres- 
 ent legal-tender notes should be continued unpaid, and that 
 additional issues of such notes should be made from time to time 
 as Congress shall judge expedient. Would this legal-tender-note 
 scheme give the country a good monetary system ? This question 
 is also answered in the negative, for reasons presented in the 
 article itself. 
 
 The reader will, in this prefatory synopsis, find a clew to the 
 general character of this pamphlet. The author trusts that his 
 investigation of the subject may be of some service to students of 
 our financial legislation. 
 
 Bkookltn, N. Y., November, 1875. 
 
COl^TENTS 
 
 PAGE 
 
 I. Paper Money and the Federal Convention 9 
 
 II. National Bills op Credit 15 
 
 III. The Question of Implied Power 20 
 
 IV. Legal-tender Eepudiation 34 
 
 V. The Money of the Constitution 41 
 
 VI. Lb&al-tender Power of the States 49 
 
 VII. Limitation of Legislative Power 55 
 
 VIII. Construction op the Legal-tender Acts 62 
 
 IX. The Legal-tender Debt 69 
 
 X. The Finance of War ...._. ; 75 
 
 XI. The Crisis in the Treasury 81 
 
 XII. The Plea of Necessity 88 
 
 Xin. The Legal-tender-note Scheme 96 
 
THE LEGAL-TENDER ACTS, 
 
 CONSIDERED IN EELATION TO THEIR CONSTITUTIONALITY AND 
 THEIR POLITICAL ECONOMY. 
 
PAPEK MONEY AND THE FEDEKAL 
 CONVENTION. 
 
 The Legal-tender Acts of 1862 and 1863, providing for the issue of 
 " United States notes, not bearing interest, payable to bearer at the Treas- 
 ury of the United States," declare that these notes " shall be receivable 
 in payment of all taxes, internal duties, excises, debts and demands of 
 every kind due to the United States, except duties on imports, and of all 
 demands and claims against the United States, of every kind vfhatsoever, 
 except for interest upon bonds and notes, which shall be paid in coin, and 
 shall also be lavpful money and a legal tender in payment of all debts, 
 public and private, within the United States, except duties on imports 
 and interest as aforesaid." To these acts the present legal-tender notes 
 of the United States owe their legal origin. The notes are debt obliga- 
 tions against the Government, promising to pay a dollar or dollars to the 
 bearer, and by the force of a statutory provision made a legal-tender in 
 payment of all debts, public and private, with the exceptions specified. 
 There can be no question that by the dollar or dollars stipulated to be 
 paid the established coin of the United States was intended. The Su- 
 preme Court of the United States, in the case of the Bank of New York 
 V. The Supervisors (7 Wallace, p. 26), decided that the dollars referred 
 to in these notes are the coined dollars of the United States. 
 
 Two decisions have been rendered by the Supreme Court of the 
 United States in respect to the constitutional validity of these legal ten- 
 der provisions. The first decision, given at the December term of 1869, 
 in the case of Hepburn v. Griswold (8 Wallace, p. 603), declared as 
 follows : 
 
 " 1. The clause in the acts of 1862 and 1863 which makes United 
 States notes a legal tender in payment of all debts, public and private, is, 
 so far as it applies to debts contracted before the passage of those acts, 
 unwarranted by the Constitution. 
 
 " 2. Prior to the 25th of February, 1862, all contracts for the pay- 
 ment of money, not expressly stipulating otherwise, were in legal effect 
 and universal understanding contracts for the payment of coin, and under 
 the Constitution the parties to such contracts are respectively entitled to 
 demand and bound to pay the sums due according to their terms, not- 
 
 2 
 
10 THE LEGA.L-TENDEE ACTS. 
 
 withstanding the clause in that act and the subsequent acts of like tenor 
 which makes United States notes a legal tender in payment of such 
 debts." 
 
 The second decision, rendered at the December term of 1870, in the 
 cases of Knox v. Lee, and Parker v. Davis {}2 Wallace, p. 457), reverses 
 the first and states the following ground : 
 
 " 1 . The acts of Congress known as the Legal-tender are constitu- 
 tional when applied to contracts made before their passage. 
 
 " 2. They are also valid as applicable to contracts made since." 
 
 The first of these decisions was made by a majority of four judges 
 against three in a bench of seven judges, and the second by a majority of 
 five judges against four in a bench of nine judges. This change was 
 'effected not by any change in the views of the judges who participated in 
 the first decision, but by the addition of two new members to the Court. 
 Though the second decision is, of course, the one that rules, being final 
 until it shall be reversed, if ever, the weight of authority which supports 
 each decision is, nevertheless, nearly equal. The Supreme Court is thus 
 placed in the unfortunate position of direct self contradiction in the space 
 of a single year — a fact certainly not creditable to the stability of its 
 judgment. 
 
 Considering the great importance of the question involved and the 
 present conflict of public thought in regard to it, we propose in a series 
 of consecutive articles to ascertain, if possible, which of the two decisions 
 is the one that best corresponds with the requirements of the Constitu- 
 tion. The question for discussion in this article is this : Did the framers 
 of the Constitution and the people in adopting it intend to give to Con- 
 gress the power to authorize the issue of a legal-tender paper currency 
 on the credit of the United States ? 
 
 The Madison Papers inform us that on the 29th of May, 1787, Mr. 
 Charles Pinckney laid before the Federal Convention the plan of a Con- 
 stitution, in which, among other things, it was provided that Congress 
 shall have power " to borrow money and emit bills of credit." These 
 " bills of credit " were at the time understood to be evidences of debt 
 directly issued by governmental authority, payable by the Government 
 at a future time, and designed to circulate among the people as money. 
 Usage had given them this import. Such .bills had been authorized by 
 the States, and to them in most instances had been attached the legal- 
 tender properly in payment of debts. In the plan of Mr. Pinckney it was 
 proposed expressly to confer on Congress the power of emitting " bills of 
 credit," in addition to its power of borrowing money. 
 
 This proposition was repeated in the draft of the Constitution made 
 by the Committee of Detail, which, being reported to the Convention on 
 
PAPER MONEY AND THE FEDERAL CONVENTION. 11 
 
 the 6th of August, 1787, authorized Congress " to borrow money and emit 
 ■bills on the credit of the United States." On the 16th of August the 
 Convention took up this clause for discussion, and Gouverneur Morris at 
 once moved to strike out the words " and emit bills on the credit of the 
 United States." The debate on this motion shows that the Convention 
 understood these " bills " to be paper money, such as had been previously 
 issued, and was well known under the title of " bills of credit." Mr. 
 Madison suggested whether it would not " be sufficient to prohibit the 
 making them a tender." Mr. Ellsworth said that he " thought this a fa- 
 vorable moment to shut and bar the door against paper money." Mr. 
 Mason said that he " had a mortal hatred to paper money." Mr. Mercer, 
 "who opposed the motion, avowed himself to be "a friend to paper 
 money," and thought it impolitic " to excite the opposition of those who 
 were friends to paper money." Mr. Wilson said that " it will have a 
 most salutary influence on the credit of the United States to remove the 
 possibility of paper money." These and similar utterances clearly show 
 that the members of the Convention understood themselves to be discuss- 
 ing the question of paper money with reference to the propriety of grant- 
 ing the power to Congress to issue it, as was proposed in the report of 
 the Committee of Detail [Madison Papers, pp. 1343-1346). 
 
 The result of the debate was a vote of nine States for striking out the 
 words " and emit bills on the credit of the United States," and of two 
 States for retaining them. The words being stricken out, the part of the 
 ■clause which granted the power " to borrow money " was then unani- 
 mously adopted. Mr. Madison appends a note to his account of the de- 
 bate, in which he says : "The 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 off the pretext for a paper currency, and 
 particularly for making the bills a tender, either for public or private 
 debts." 
 
 The entire plan of the Constitution having been agreed to by the 
 Convention, the whole was then referred to a committee to revise its 
 style and properly arrange its articles. This committee reported the 
 revised form of the Constitution on the 1 2th of September, 1787 ; and in 
 this report Congress was authorized " to borrow money on the credit of 
 the United States." The words " on the credit of the United States " 
 were restored without the words " and emit bills," and in this form the 
 clause was adopted by the Convention and subsequently ratified by the 
 people. 
 
 Nothing in the light of this history can be clearer than the intention of 
 the framers of the Constitution in respect to the question of paper money. 
 They did not mean to grant to Congress the power to authorize the issue 
 
12 THE LEGAL-TBNDEit ACTS. 
 
 of such money; and that they did not is proved not only by the debate 
 on the subject, but by the fact that by a vote of nine States against two 
 they struck out the words which they regarded as giving the power. 
 There were, indeed, some members of the Convention who were in favor 
 of retaining the words ; yet the vote shows a large majority on the op- 
 posite side. Mr. Madison, who was a member of the Convention, says 
 that the striking out of the words which granted the power, and vphich 
 were certainly debated in the Convention upon this supposition, would 
 " cut oif the pretext for a paper currency, and particularly for making 
 the bills a tender, either for public or private debts." Luther Martin ^ 
 who was in favor of giving to Congress the power to issue paper money, 
 is a good witness to show what the majority intended and did. In his ad-' 
 dress to the Legislature of Maryland relative to the proceedings of the 
 Convention, he says : 
 
 " When we came to this part of the report a motion was made to 
 strike out the words ' to emit bills of credit.' Against the motion we 
 urged that it would be improper to deprive Congress of that power j 
 that it would be a novelty unprecedented to establish a government which 
 should not have such authority ; that it was impossible to look forward 
 into futurity so far as to decide that events might not happen that should 
 render the exercise of such a power absolutely necessary ; and that we 
 doubted whether, if a war should take place, it would be possible for 
 this country to defend itself, without having recourse to paper credit, in 
 which case there would be a necessity of becoming a prey to our enemies 
 or violating the Constitution of our Government ; and that, considering 
 the administration of the Government would be principally in the hands 
 of the wealthy, there would be little reason to fear an abuse of the power 
 by an unnecessary or injurious exercise of it. But, sir, a majority of 
 the Convention, being wise beyond every event, and 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 a government to which 
 they were lavishing the most unlimited powers of taxation and to the 
 mercy of which they were willing blindly to trust the liberty and prop- 
 erty of the citizens of every state in the Union, and they erased that 
 clause from the system." [Elliotfs Debates, vol. ], pp. 369-370.) 
 
 Whether Mr. Martin had the best or the worst of the argument on 
 the general question of paper money is not here the point. We cite his 
 words to show what he thought of the action of the Federal Convention, 
 in striking out the words that related to " bills of credit." He wanted 
 the words retained, and because they were not retained he speaks sharply 
 of the Convention. His view was that the exclusion of these words 
 would render the emission of " bills of credit " by Congress impossible 
 in any case, except by " violating the Constitution." Madison had the 
 snme view, and the Convention had the same view, and this was the rea- 
 
PAPER MONET AND THE FEDERAL CONVENTION. 13 
 
 son why the words were stricken out. In the language of Mr. Ellsworth, 
 the intention was " to shut and bar the door against paper money." If, 
 nevertheless, the power of issuing such money was granted, as affirmed 
 by a majority of the Supreme Court in its second legal-tender decision, 
 then the Federal Convention did what a large majority of its members 
 , intended not to do. 
 
 It may, however, be said that the Constitution, while prohibiting the 
 States to " emit bills of credit," contains no such express prohibition in 
 respect to Congress. Why this difference if the power was meant to be 
 equally excluded from b9th 1 The answer is a very simple one. The 
 States were already in existence with their governmental powers and had 
 •exercised the power of emiting " bills of credit ;" and unless this power 
 was denied to them or exclusively vested in Congress they would still 
 retain it. It, therefore, required a formal denial or an exclusive grant to 
 Congress to dispossess them of the power. The Government of the 
 United States, on the other hand, even under the Articles of Confedera- 
 tion, had never attached the legal-tender property to paper issues, and, as 
 intended to be organized under the Constitution, it was to be a govern- 
 ment of powers limited to positive grants, either expressly made or made 
 by necessary implication. There was, hence, no necessity for denying to 
 it the power to " emit bills of credit." It was sufficient not to grant the 
 power ; and this, as has been already shown, is precisely what the Fed- 
 eral Convention meant by striking out the words which contained such a 
 grant. No sane interpreter of the Constitution has ever supposed that 
 Congress is authorized to do everything which it is not forbidden to do. 
 Its powers of action are matters of positive grant, and beyond these it 
 has no power. The absence of a prohibition surely confers no power. 
 
 So also the discussions in the State conventions that adopted the Con- 
 stitution, as given in Elliott's " Debates," show the general understand- 
 ing at the time, that if the Constitution was ratified it would put an end 
 to any further issue of " bills of credit." The fact that the States were 
 prohibited to emit such bills and that no power was expressly granted 
 to Congress to issue them, naturally led the people to conclude that the 
 ■Constitution would close the career of the paper-money system. It is 
 well known that the sad experience of the country had created a strong 
 public sentiment against paper money, and this sentiment found expres- 
 sion in the refusal of the Federal Convention to grant the power of such 
 issues to Congress, as it did in the prohibition of these issues by the 
 States. It would be easy to transcribe page after page from the writings 
 and speeches of the public men of that age showing that the general 
 mind of the country was adverse to paper money. 
 
 It is also a matter of history, both in Congress and out of it, that 
 
14: THE LEGAL-TENDER ACTS. 
 
 from the adoption of the Constitution down to the period of the Legal- 
 tender Acts, nobody ever pretended that Congress had the power to make 
 the promises of the United States to pay money a legal tender in pay- 
 ment of debts. No one has ever doubted its power to borrow money, 
 and issue therefor evidences of debt against the United States ; but the 
 power to authorize a legal-tender paper currency was never claimed for 
 Congress until the period above referred to. Daniel Webster is acknowl- 
 edged to be a very respectable authority as to the meaning of the Con- 
 stitution. Expressing not only his own views, but the standard view of 
 the country at the time, he used, in his speech on the " Specie Circular," 
 delivered in the Senate of the United States, in 1836, the following lan- 
 
 " Most unquestionably there is no legal tender and there can be no 
 legal tender, in this country, under the authority of this Government or 
 any other, but gold and silver, either the coinage of our own mints or 
 foreign coins, at rates regulated by Congress. This is a constitutional 
 principle, jierfectly plain and of the very highest importance. The 
 States are expressly prohibited from making anything 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 in 
 this respect but to coin money and to regulate the value of foreign coins, 
 it clearly has no 'power to substitute paper or anything else for coin as- 
 . a tender in payment of debts and in discharge of contracts. Congress 
 has exercised this power fully in both its branches. It has coined money 
 and still coins it ; it has regulated the value of foreign coins, and still 
 regulates their value. The legal tender, therefore, the constitutional 
 standard of value, is established and cannot be overthrown." ( Webster's 
 Works, vol. 4, p. 271.) 
 
 The view of Mr. Webster corresponds exactly with the intention of 
 the Federal Convention and with the entire interpretation of the Con- 
 stitution for about three-quarters of a century. Prior to 1862, there is- 
 not an act of Congress or a decision of the Supreme Court of the United 
 States that assumes the reverse. The last decision of this Court, declar- 
 ing the Legal- tender Acts of 1862 and 1863 to be constitutional, makes 
 the Constitution read as the Federal Convention intended that it should 
 not read, as Daniel Webster said that it did not read, and as the same 
 Court only a year before also said that it did not read. This change in 
 reading the Constitution began in 1862, and was transferred to the Su- 
 preme Court by adding two new judges, who believed in the constitu- 
 tionality of the Legal-tender Acts, and were known so to believe before 
 they became members of the Court. There can hardly be a doubt that 
 their opinions on this subject formed at least one of the reasons for their 
 appointment. The decision secured by their votes, reversing a former 
 
NATIONAL BILLS OF CEEDIT. 15 
 
 decision made only a year before, is greatly weakened in its judicial re- 
 spectability not only by its contradiction of the past, but by the circum- 
 stances under which it was given. It was a great mistake for the country 
 that the first decision was reversed. 
 
 Iff. 
 
 NATIONAL BILLS OF CREDIT. . 
 
 The meaning of the phrase " bills of credit," in the sense of that clause 
 of the Constitution which forbids the States to emit such bills, has been 
 authoritatively settled by the Supreme Court of the United States. The 
 first case involving this question was that of Craig v. The State of Mis- 
 souri (4 Peters, p. 410), decided in 1830. Chief Justice Marshall, in 
 stating the opinion of the Court, said : 
 
 "To emit bills of credit conveys to the mind the idea of issuing 
 paper intended to circulate through the community for its ordinary pur- 
 poses as money, which paper is redeemable at a future day. * * * 
 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 ordinary purposes of society. 
 * * * If the prohibition means anything, 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." 
 
 This definition, as the Court held, does not include "those contracts 
 in which a State binds itself to pay money at a future day for services 
 actually rendered, or for money borrowed for present use ;" yet it does 
 apply to all paper-issues by a State government designed for ordinary 
 circulation as a medium of exchange, and that, too, whether " made a 
 legal tender" or not. The certificates of indebtedness issued by the 
 State of Missouri were regarded as having this character, and hence the 
 act of the legislature authorizing them was pronounced unconstitutional. 
 
 The same question was involved in the case of Briscoe v. The Bank 
 of the Commonwealth of Kentucky (11 Peters, p. 257). The definition 
 given of a bill of credit in this case was as follows : 
 
 "To constitute a bill of credit within the Constitution, it must be 
 issued by a State, on the faith of the State, and be designed to circulate 
 as money. It must be a paper which circulates on the credit of the 
 State, and is so received and used in the ordinary business of life. The 
 individual or committee who issue the bill must have the power to bind 
 the State; they must act as agents, and, of course, do not incur any 
 resBonsibilitv. nor impart as individuals, anv credit to the paper. These 
 
16 THE LEGAL-TENDEE AOTS. 
 
 The Court decided in this case, that the notes of a bank created by 
 State law, " having a capital which the holders of the notes could resort 
 to for payment, containing no promise by the State, are not bills of credit 
 within the Constitution, although the State was the sole stockholder of the 
 bank," and also that, " when a State becomes a stockholder in a banking 
 corporation, it imparts none of its attributes of sover~eignty to the latter, 
 and can, as a stockholder, exercise no other power than any other stock- 
 holder to the same amount." This decision, rendered in 1837, was, in 
 its principles, re-affirmed in 1851, in the case of Darrington v. The State 
 Bank of Alabama (13 Howard, p. 12). The result of these judicial 
 determinations is that " bills of credit," in the sense of the Constitution, 
 are paper promises to pay money issued directly by a State, on the 
 credit of the State, pledging its faith^ and designed to circulate as money, 
 whether made a legal tender or not. 
 
 The clause of the Constitution forbidding the emission of such bills 
 was suggested by a well-known practice of the Colonies prior to the 
 Revolution, and of the States after the Declaration of Independence, as 
 well as of Congress during the Revolutionary War. Paper money, in 
 the shape of " bills of credit," sometimes declared a legal tender and 
 sometimes without this property, had been a common resort. The people 
 were familiar with the system, and when the Constitution was framed 
 and adopted, they had become strongly impressed with its evils. To 
 guarantee the future against the recurrence of these evils, or, in the lan- 
 guage of Chief Justice Marshal], "to cut up this mischief by the roots," 
 express provision was made that no State should " emit bills of credit." 
 Mr. Curtis, in his History of the Constitution (vol. 2, p. 364), says: 
 " Fears were entertained that an absolute prohibition of paper money 
 would excite the strenuous opposition of its partisans against the Consti- 
 tution; but it was thought best to take this opportunity to crush it 
 entirely, and accordingly the votes of all the States but two were given 
 to a proposition to prohibit absolutely the issuing of bills of credit." Mr. 
 Sherman, a member of the Federal Convention, said that he " thought 
 this a favorable crisis for crushing paper money." 
 
 The same general purpose which determined the Convention to place 
 this restraint upon, the States, also determined it to strike out from the 
 first draft of the Constitution the words which, in addition to the power 
 of borrowing money, gave to Congress the power to emit " bills of 
 credit." The Convention refused to place the latter power among the 
 enumerated powers of Congress, understanding, as the debate clearly 
 shows, the phrase " bills of credit" to mean precisely what it means in 
 the clause which forbids the States to emit such bills. What was done 
 was to deny the power to ttie States and refuse to grant it to Congress; 
 
NATIONAL BILLS OF CREDIT. 17 
 
 and in this way it was supposed that the mischief of paper money would 
 be " cut up " by the roots. Mr. Madison, in a note appended to his 
 history of the debate, says, that the refusal would " cut off the pretext 
 for apaper currency, and particularly for making the bills a tender, either 
 for public or private debts." Considering then the action of the Federal 
 •Convention, as well as the general views of that period, we must con- 
 clude that the framers of the Constitution did not contemplate " bills of 
 credit," in the form of Treasury notes designed to circulate for the 
 ordinary purposes of exchange, as coming within the limits of the 
 borrowing power or any other power granted to Congress. The borrow- 
 ing power was not in their view a power to create a paper currency of 
 any kind. It was not a power to create money. They distinguished be- 
 tween the two things, as is shown by their grant of the one and their 
 refusal to grant the other. In denying the bill power to the States and 
 mot granting it to Congress, and, still further, in making provision for a 
 metallic currency in the coining power, they Indicated their purpose to 
 supersede and prevent a paper medium of exchange in the form of 
 Government issues, and to secure only a metallic one. Whether right 
 or wrong as political economists and financiers, their theory as Constitu- 
 tion-makers was that the money of the country should be that of coinage, 
 and for this they made ample provision. They did so when thie view 
 represented the general sentiment of the people. It is difficult to see 
 how there can reasonably be any doubt on this point. 
 
 Congress has at different times construed the borrowing power as 
 authorizing the issue of Treasury notes, never made a legal tender until 
 the acts of 1862 and 1863. There were five acts of this character 
 during the war with Great Britain, the first approved June 30th, 1812, 
 and the last approved February 24th, 1815. Between October 12lh, 
 1837, and January 28th, 1847, there were twelve other acts authorizing 
 the issue of Treasury notes. The act of December 23d, 1857, gave au- 
 thority for the issue of twenty millions of dollars in such notes, with 
 denominations not less than one hundred dollars for each note. The 
 notes were made payable in one year after date, and receivable for all 
 ■dues to the Government, and also by creditors of the Government who 
 might " choose to receive such notes in payment at par." The act of 
 March 3d, 1859, "revived and continued " this act in force until July 
 1st, 1860. So, also, in the early stages of the Rebellion, and prior to the 
 Legal-tender Acts, Congress resorted again to the issue of Treasury notes 
 as a means of borrowing money. By the act of December 17th, 1860, 
 ten millions of dollars in such notes were authorized, the denominations 
 to be not less than fifty dollars ; and in other respects the notes were to 
 be lik;e those authorized by the act of December 23d, 1857. The act of 
 
18 THE LBGAI/-TENDEK ACTS. 
 
 July 17th, 1861, authorized the Secretary of the Treasury to issu- 
 '' Treasury notes of a less denomination than fifty dollars," not bearing 
 interest, but payable on demand by the assistant treasurers of the 
 United States at Philadelphia, New York, or Boston ; and by the act of 
 August 5th, 1861, these notes " of a less denomination than fifty dollars, 
 payable on demand without interest, and not exceeding in amount the 
 sum of fifty millions of dollars," were made receivable in payment of 
 all dues to the Government. 
 
 We thus see that at different periods, prior to the Legal-tender Acts, 
 Congress has regarded the borrowing power as authorizing the issue of 
 Treasury notes in obtaining supplies, and paying the debts of the Govern- 
 ment, while leaving the acceptance of the notes to the voluntary action 
 of the people. The notes were not intended to become, and, with the 
 exception of those authorized by the act of July 17th, 1861, never did 
 become a part of the general paper circulation of the country. They 
 were temporary expedients, and with the subsidence of the exigency 
 calling for them, they were withdrawn by being either funded or paid. 
 They did not establish a paper money system on the credit of the 
 United States. The jnost of them can hardly be called " bills of credit," 
 in the sense in which this phrase has been defined by the Supreme Court,. 
 Whatever may have been the character of these notes, the practice of the 
 Government extending over so long a period, and acquiesced in by the 
 country, would seem to settle the question, that Congress has the power 
 in borrowing money to issue Treasury notes in such form, and of such 
 denominations, as will make their transfer from to hand convenient. 
 The Government, as a contracting and debtor party, may stipulate with 
 the receivers and holders of these notes to pay them on demand or at st 
 fixed time, or to fund them into interest-bearing bonds, or to make them 
 receivable for taxes or other dues to the Government. Undisputed 
 practice says that Congress has the same power to borrow money by a 
 ten, twenty, fifty, or a hundred dollar note, that it has to borrow money 
 by a thousand dollar bond, although the former may be a bill of credit, 
 and hence the very thing in kind which the Federal Convention refiised to 
 give Congress the express power to issue. The constitutional right to- 
 issue such notes is not now an open question. It has been settled by 
 more then twenty undisputed precedents in the legislative practice of 
 Congress. 
 
 Moreover, whether any of these issues prior to 1862 were or were 
 not " bills of credit," there can be no doubt that those authorized by the 
 Legal-tender Acts of 1862 and 1863 are such bills in the fullest sense. 
 Such they would have been without the legal-tender property, and if they 
 had been destitute of this property it is not probable that any question as. 
 
NATIONAL BILLS OF CREDIT. 19 
 
 to their constitutionality would have been raised. They were meant ta 
 circulate among the people as money, and, by reason of their denomina- 
 tions as well as their quantity, to establish, at least for the time being, a 
 paper money system, which is the very thing that the framersofthe 
 Constitution meant to prevent. They are issued upon the credit of the 
 United States, not beaiing interest, and not payable on demand or at any 
 specified time. They are declared to be receivable in payment " of all 
 claims and demands against the United States of every kind whatsoever, 
 except for interest upon bonds and notes," and also to be " lawful money 
 and a legal tender in payment of all debts, public and private, within the 
 United States, except duties on imports and interest as aforesaid." 
 These attributes fix their character as national " bills of credit," as form- 
 ing a paper money system in the most complete sense. Being paid out 
 by the Government as " lawful money," and in effect legally forced upon 
 its creditors, they entered into general circulation as the money of 
 the country, except for comparatively limited purposes, entirely su- 
 perseding and displacing the money of coinage. They are exactly the 
 thing in kind not only forbidden to the States, but for the issue of which 
 the Federal Convention, by a vote of nine States to two, refused to give 
 any express authority to Congress. 
 
 Now, the question to be considered in the sequel of this discussion is 
 not whether Congress can contract obligations in the name of the United 
 States, authorize appropriate evidences thereof, and give them such form 
 as it may think expedient ; not whether it may agree to receive these 
 evidences of debt in payment of taxes and other dues to the Government, 
 or to pay them in a specified way and at a specified time, or to pay them 
 in its discretion as to time ; not whether it may issue " bills of credit " 
 not made a legal tender; but whether it can constitutionally attach to 
 the debt obligations of the Government, whether they be bonds or " bills 
 of credit," whatever be their form or amounts, the compulsory proper- 
 ties of a legal tender in payment of the debts of the Government and of 
 all public and private debts, and thus, so far as the payment of debts and 
 the legal discharge of contracts are concerned, make them act as the equiv- 
 alent of the money of coinage as expressly provided for in the Constitu- 
 tion. Can Congress, under the Constitution of the United States, and 
 limited to the authority bestowed upon it by that Constitution, make a 
 debt evidence of the Government, a mere contract to pay money, the 
 lawful substitute for the money agreed to be paid 1 Can it say to the 
 people that the promises of the Government, shall be " lawful money and 
 a legal tender," and that this principle shall reach to all the debtor and 
 creditor relations of individuals ? There is no dispute now as to the 
 right of Congress to authorize the making of these credit premises, and 
 
^0 THE LEGAL-TENDEK ACTS. 
 
 in such form and to such amounts as it may judge best. The whole ques- 
 tion respects the added quality of " lawful money and a legal tender." 
 Where is the authority for this 1 Where is the authority for actually 
 creating any money except that of coinage ? To what power granted to 
 Congress is it to be traced ? 
 
 The issue of a Treasury note in such form as to be a " bill of credit " 
 is simply an act of borrowing money, like the issue of a thousand dollar 
 bond for the same purpose. The note is used to pay a debt or to pur- 
 chase supplies, and in either case it is used as a substitute for money. 
 Precisely the same is true in the issue of a bond bearing interest. The 
 Government lacking actual money thus employs its credit to meet present 
 necessities. This is entirely distinct from turning the evidence of that 
 credit into money itself by the mere force of a legal statute. It is bor- 
 rowing in the natural, the legitimate, the well understood sense, while 
 the other act is not borrowing money, but creating it at the time of the 
 professed borrowing. Can the creating act thus accompany the borrow- 
 ing act and really form a part of it ? There are no precedents in the 
 history of the Government antecedent to the Legal-tender Acts of 1862 
 and 1863 that even suggest this possibility. All the precedents for 
 about three-quarters of a century lead directly to the opposite view. 
 We are then to go to the Constitution itself with the inquiry whether the 
 legal tender provision of these acts rests upon its authority ; and for this 
 investigation the way is now prepared. 
 
 III. 
 
 THE QUESTION OF IMPLIED POWEE. 
 
 No one claims any express power in the Constitution by which Con- 
 gress is authorized to attach the legal-tender quality to the debt obliga- 
 tions of the Government. If the authority exists at all, it exists in the 
 form of an implied power. The clause of the Constitution relating to 
 the implied powers of Congress' reads as follows : 
 
 " The Congress shall have power ... to make all laws which 
 shall be necessary and proper for carrying into execution the foregoing 
 powers, and all other powers vested by this Constitution in the Govern- 
 ment of the Uni'ted States, or in any department or officer thereof." 
 
 The " foregoing powers " here referred to are the seventeen express 
 grants previously specified in the same section. The " other powers " 
 
THE QUESTION OF IMPLIED POWEEE. 21 
 
 are those elsewhere delegated to the Government, or to some department 
 or officer thereof. The authority to pass laws " necessary and proper " 
 to carry these powers into effect is implied in the powers themselves, 
 and would have heen implied if the Constitution had been silent on the 
 point ; yet, to preclude all debate on the question, it was thought expe- 
 dient to place the authority in express words. In regard to the term& 
 " necessary and proper," Justice Story, in his Commentaries on the Con- 
 stitution (vol. 2, p. 141), says that the word "proper," especially, "has 
 a sense at once admonitory and directory," and " requires that the means 
 should be hona fide appropriate to the end." Chief Justice Marshall, in 
 the case of McCulloch v. The State of Maryland (4 Wheaton, p. 3l6), 
 gave the rule, ever since recognized as correct, by which to decide 
 whether a law of Congress claimed to rest on an implied power comes 
 within the limits of the grant. His words are as follows : 
 
 " Let the end be legitimate, let it be within the scope of the Consti- 
 tution, and all means which are appropriate, which are plainly adapted to 
 that end, which are not prohibited, but consistent with the letter and 
 spirit of the Constitution, are constitutional." 
 
 A law enacted on the basis of an implied power, if it fails in any one 
 or all of these characteristics, is, hence, not constitutional ; and, whether 
 it does so fail or not, is a proper question for a court, with a case before 
 it involving the point, to consider and determine. Congress clearly 
 has the right of choice among constitutional means for the attainment 
 of constitutional ends ; but it has no choice among means not consti- 
 tutional. 
 
 The question, then, to be considered is, whether, as the result of 
 powers expressly delegated to the General Government, Congress has the 
 implied power to declare the note obligations of the United States a 
 legal tender in payment of debts, whether contracted before or after the 
 declaration ? Those who claim for Congress such a power are not agreed 
 among themselves as to the precise ground upon which they rest the 
 claim. Some base it upon the coining power of Congress ; others upon 
 its commercial power ; others upon its borrowing power ; others upon 
 what are designated as' the war powers of the Government ; others 
 upon the aggregate of the powers delegated to the United States ; and 
 still others upon the utility of the Legal-tender Acts as a means of 
 strengthening the Government. Let us, then, in the order above indi- 
 cated, test the Soundness of these several theories offered in support of 
 the legal tender legislation of Congress. 
 
 1. The Constitution expressly authorizes Congress "to coin money," 
 and "regulate the value thereof and of foreign coin." The established 
 
22 THE LEGAL-TENDEE ACTS. 
 
 use of the word " coin," as well as of the word " money," when spoken 
 of as coined, is sufficient to show that the power "to coin money " is 
 not a power to issue Government notes, and certainly not one to make 
 them a legal tender in payment of debts. Laws for the establishment 
 of mints, for striking coins, for determining their respective weights and 
 fineness, and giving them suitable denominations, come within the ob- 
 vious scope of this power, as " appropriate " and " plainly adapted " 
 means to the end; but, as Mr. Pomeroy, in his "Constitutional Law" 
 (p. 263), well says : " No amount of reasoning can show that executing 
 a promissory note, and ordering it to be taken in payment of public and 
 private debts, is a species of coining money." Such a construction, upon 
 its face, perverts the language of the Constitution. 
 
 Legal-tender notes, whether issued by the authority of Congress or 
 by that of the States, are inconsistent with the end sought by the coin- 
 ing power, and to secure which the power was exclusively vested in 
 Congress, while the States are expressly forbidden to coin money, to 
 emit bills of credit, or make anything but gold and silver coin a tender 
 in payment of debts. This end, as the Supreme Court of the United 
 States has repeatedly said, was to establish " a uniform and pure metallic 
 standard of value throughout the Union," and cut up the mischiefs of 
 paper money " by the roots." This object is as effectually defeated and 
 practically nullified by the legal-tender notes authorized by Congress, as 
 it would be if they were issued by the States. Such notes, by a well- 
 known law, drive the money of coinage into disuse, and take its place, 
 and themselves become standards of value. The coinage power, as an 
 express grant, while not implying the issue of such notes as an " appro- 
 priate " means of its exercise, is, hence, by reason of this inconsistency, a 
 virtual negative upon their issue. 
 
 2. The Constitution bestows upon Congress the express power " to 
 regulate commerce with foreign nations, and among the several States, 
 and with the Indian tribes." Judge Marvin, one of the ex officio Judges 
 of the Court of Appeals of the State of New York, in expressing, in 
 1863, his concurrence with the majority of the Court sustaining the 
 validity of the Legal-tender Acts, in the case of the Metropolitan 
 Bank v. Van Dyck (27 New York Reports, 400), rested his argument 
 mainly upon this power. The logic of the judge may be summarized 
 as follows : Congress has the express power " to regulate commerce 
 with foreign nations, and among the several States, and with the Indian 
 tribes," and therefore it has the implied power to issue United States 
 notes, and make them " lawful money and a legal tender in payment of 
 all debts, public and private, within the United States." The link by 
 which the inference is sought to be connected with the premise we have 
 
THE QUESTION OF IMPLIED POWEE. 23 
 
 in the fact that money, as the standard of value and the instrument of 
 exchange, has, as means to an end, a very important relation to com- 
 merce. The legal-tender notes, being declared to be " lawful money," 
 hold this relation, and hence they are constitutional in virtue of an im- 
 plied power. Such is the argument in the compass of a nutshell. 
 
 This argument, if good at all, is not peculiar to the commercial power 
 of Congress, but equally good to show that Congress may issue legal- 
 tender notes to carry into execution any other express power, since 
 money, as the means of paying the expenses of the Government, holds an 
 important relation to the exercise of all the express powers delegated to 
 the General Government. It would be no stretch of the principles of the 
 argument to derive the legal-tender power from the express power of the 
 President to malte treaties. Moreover the same reasoning could be equally 
 employed to prove that Congress can embark in the general business of 
 raising and getting out timber for ship building, of running saw-mills 
 at\d iron foundries, of manufacturing nails, and building steam engines, 
 <k;c., for the purpose of promoting commerce. Thesp and the like things 
 hold an important relation to commerce as really as does money. It so 
 happens also that the Constitution itself, in the express power " to coin 
 money," has made provision for this necessity of commerce. There is 
 no occasion for resorting to an implied power to find authority for the 
 creation of money, since the authority is fully given in an express power. 
 The coining power covers the case of money. To infer, as Judge Marvin 
 does, from one express power an implied power to do what is already 
 provided for by another express power, is a singular way of interpreting 
 the Constitution. 
 
 The slightest comparison of the Legal-tender Acts with the commercial 
 power granted to Congress, shows that they entirely exceed the limits of 
 this power. The power, as Chief Justice Marshall said, in the case of 
 Gibbons v. Ogden (9 Wheaton, p. 1), has nothing to do with that " com- 
 merce which is completely internal, which is carried on between man 
 and man in a state, or between different parts of the same State." It 
 must be foreign commerce, or commerce that goes from one State to 
 another, or commerce with the Indian tribes, in order to bring it under 
 the jurisdiction of Congress at all. Now, are the Legal-tender Acts con- 
 fined to these forms of commerce ? By no means. So far as the pay- 
 ment of debts is concerned, they extend to all monetary obligations, 
 " whether these debts," in the language of Judge Denio, " had any con- 
 nection with a commercial transaction, or were wholly foreign to and in- 
 dependent of it." They apply to a case in which one man has borrowed 
 money of another and given his note therefor, as really as to a case of 
 strictly commercial exchange. If it were conceded that the argument is - 
 
24 THE LEGAL-TENDEE ACTS. 
 
 valid SO far as it relates to foreign or inter-state commerce, or to com- 
 merce with the Indian tribes, it manifestly falls to the ground the 
 moment we apply it to trade and other transactions between citizens, 
 which are limited to a single State, and to which the commercial power 
 of Congress by the very terms of the grant does not extend at all. These 
 form far the larger part of the business transactions of society, and in 
 respect to them Congress has no power of any kind under its power to 
 regulate commerce. 
 
 What, moreover, is this power to regulate commerce ? Chief Justice 
 Marshall, in the case above referred to, said that it is the power " to pre- 
 scribe the rule by which commerce is to be governed," including trans- 
 portation, whether by land or water, as well as traffic or trading inter- 
 course. Laws prescribing such rules in respect to foreign or inter-state 
 commerce, or commerce with the Indian tribes, clearly come within the 
 scope of the power ; and these laws are committed to the discretion of 
 Congress. Yet what has such regulation, the only one authorized by the 
 Constitution ,■ to do, with determining the medium in which debts shall be= 
 paid and private contracts discharged ? What has it to do with declaring 
 what shall be a legal tender ? What has it to do with the sundry con- 
 tracts and exchanges of individuals in the same State? Absolutely 
 nothing, unless under the power to regulate commerce as delegated to 
 Congress we include the power to take charge of the internal government 
 of the several States. Eegulating commerce by prescribing rules there- 
 for within the limits of the Constitution is one thing, and declaring that 
 United States notes shall be a legal tender in payment of all debts, no 
 matter whether those debts have or have not any relation to the forms 
 of commerce over which Congress has jurisdiction, or to any commerce 
 at all, is entirely a different thing. There is no natural or " appropriate " 
 or "plainly adapted" relation between the power of such regulation and 
 declaring these notes to be a legal tender. The power does not authorize 
 the issue of notes at all, this being provided for in the borrowing power, 
 and much less does it authorize making them a legal tender in payment 
 of debts. The inference of Judge Marvin not only extends the power 
 entirely beyond its proper scope into a region foreign to itself, but also 
 confounds the distinction between different express powers, and in effect 
 " breaks down all distinction between the National and State Govern- 
 ments." 
 
 3. The Constitution also expressly authorizes Congress " to borrow 
 money on the credit of the United States." Laws providing for loans, 
 for fixing the amount, the rate of interest, and time of payment, and for 
 determining the forms of the debt obligations to be issued, are means 
 " plainly adapted " to carry this power into effect. The power granted 
 
THE QUESTION OF IMPLIED POWER. 25 
 
 is the power to borrow money, and when the Governnaent exercises the 
 power, it provides for making a contract with the lender not essentially 
 different from similar contracts made by individuals or private corpora- 
 tions. Its borrowing power is simply its power to make a contract for 
 this purpose, with the natural incidents and ways that belong to such a 
 transaction ; and with these elements the power is exhausted, unless we 
 so expand the import of the word as to make it mean something more, 
 and thus change the Constitution in interpreting it. 
 
 Those who claim that this pow'er includes, as one method of its 
 exercise, the implied power to declare that the notes of the United 
 States shall be a legal tender in payment of debts as between other 
 parties who, prior to the issue of the notes, have made their contracts 
 on the basis of the gold dollar, must hold that the Government, because 
 it is a borrower, and when it acts as a borrower, has a right to interfere 
 with the lawful private contracts of these parties, and determine that 
 they shall be satisfied in a manner different from the well understood 
 stipulation contained in the contracts themselves. This certainly gives 
 a new meaning to the word borrowing. The power thus claimed means 
 more than borrowing, since it is a power to change essentially the 
 import of contracts, and directly interfere with the rights of private 
 property vested in this form. If Congress may do this, under its 
 power to borrow money, then it is difficult to see what it may not do 
 under the same power. It has only to stretch the word to meet any 
 exigency. As suggested by Justice Field, in his argument against such 
 a construction. Congress may say that the notes of the Government 
 shall " serve as a free ticket in the public conveyances of the country, or 
 for ingress into places of public amusement" (12 Wallace, p. 643). 
 Why not annex these advantages to the notes, as well as the advantage of 
 using them as a legal tender in payment of debts previously contracted? 
 Why has not Congress as much right to do the one as it has to do the 
 other 1 The direct result in both cases is an invasion of the rights of 
 private property? And is this an "appropriate" and "plainly 
 adapted " means of borrowing money ? Because the Government is a 
 borrower, has it the right, under the Constitution of the United States, 
 to disturb and change contracts that are entirely independent of its 
 borrowing, and, in effect, deprive one of the parties of a portion of his 
 rights, and enable the other to repudiate a part of his debts? Can the 
 Government — a party that no one can sue — compel its creditors to 
 accept its notes in payment of claims against the Government, and also 
 compel other creditors to accept the same notes in settlement of money 
 contracts between them and their debtors, and that, too, whether the 
 contracts stipulate differently or not ? Is this borrowing money, within 
 3 
 
26 THE LEGAL-TENDEE ACTS. 
 
 the fair and natural meaning of the term 1 If so, then the borrowing 
 power, when exercised by the Government, is a power to repudiate 
 debt obligations, and authorize others to do the same thing. Almost all 
 contracts, especially in modern times, are computed and expressed in 
 money ; and, hence, there is a fundamental connection between these 
 contracts and money which it is not the province of the borrowing power 
 to destroy or change. 
 
 Justice Bradley, in expressing his concurrence with the majority in 
 the last legal-tender decision of the Supreme Court, says that " the power 
 to make Treasury notes a legal tender " is " a mere incidental one to 
 that of issuing the notes themselves, and to one of the forms of borrowing 
 money " (12 Wallace, p. 567). If the learned Justice had established this 
 proposition, then the implied legal-tender power would, of course, attach 
 to the express borrowing power. This, however, is the very point to 
 be proved and not assumed. It is not true that the authority to make a 
 contract for borrowing money and to issue an evidence of debt therefor, 
 is also an authority to make that evidence of debt a legal tender. The 
 first proposition does not, in its nature, embrace the second. ' 
 
 The fact that Congress saw fit to annex the legal-tender property to 
 the notes of the Government does not prove that the annexation was a 
 " necessary and proper," or an "appropriate" and " plainly adapted" 
 means of borrowing money. Daniel Webster once said that " a strong 
 impression that something must be done is the origin of many bad 
 measures;" and this may have been true of the action of Congress in 
 1862 and 1863. The legal-tender quality of Treasury notes, surely, was 
 not a means of adding to the certainty of their payment, since this 
 rested upon the ability and good faith of the Government, and not at all 
 upon their legal tender character. The quality was not necessary, as 
 the means of guarding against the depreciation of the notes, since the 
 facts prove that it did not so operate, and the history of all such paper 
 issues clearly proves that the legal-tender quality has absolutely no 
 power to prevent depreciation. The notes circulate in the channels of 
 trade for what they are deemed to be worth, independently of this 
 quality. Nor, again, was the quality necessary as a means to secure the 
 acceptance of the notes by, and their circulation among, the people, since 
 this result would have bren effectually gained by their receivability for 
 taxes and other dues to the Government, and, especially, their exchange- 
 ableness for interest-bearing bonds. It was not necessary to enable the 
 Government to sell its bonds, since the receivability of the notes in 
 payment for the bonds would, without the legal-tender quality, have just 
 as well answered this purpose and kept the notes at par with the bonds, 
 that is to say, at par with the actual state of the Government credit. It 
 
THE QUESTION OF IMPLIED POWEE. 27 
 
 was not necessary to furnish a currency for the people, since they 
 already had a currency ; and, moreover, the notes without the legal- 
 tender property and with the qualities above specified would have en- 
 tered into general circulation. 
 
 Let it be conceded, that it was wise and necessary to issue Treasury 
 notes as evidences of debt, and that such an issue is constitutional, as 
 'One way of borrowing money ; yet the question is, whether it was 
 " necessary and proper," in the sense of the Constitution, to attach to 
 these notes the legal-tender property ; whether this property is really 
 ancillary to the power of borrowing money, and whether the Govern- 
 ment, in the exercise of this power, can invade and change the vested 
 rights of private contracts, compelling creditors to accept less and 
 authorizing debtors to pay less than the stipulations of the contracts 
 require. This was the effect provided for, and this was the chief, if not 
 the whole value which the legal-tender quality gave to the notes. The 
 Government has some twenty times issued Treasury notes, as a means of 
 borrowing, and never found any difficulty in their acceptance and circula- 
 tion; and yet never, until 1862, has it made such notes a legal tender, 
 or even intimated that it had the power under the Constitution to do so. 
 
 The truth is, borrowing money is one thing, and declaring that the 
 obligations of the Government to pay money shall be a legal tender is 
 wholly a different thing. The two, to quote the words of Henry Clay 
 are not " congenial to each other," and do not '' partake of a common 
 nature." The latter, to quote the words of Mr. Sedgwick, is not "the 
 known and usual_ means " of the former ; or, in the language of Mr. 
 Giles, the exercise of "a subaltern authority, necessarily connected" 
 with the borrowing power ; or, in that of Mr. Ames, " fairly relative 
 rand necessarily incident" to the power; or, in that of Alexander 
 Hamilton, "a measure having an obvious relation to the end." That 
 the fi-amers of the Constitution did not design to bestow such an implied 
 power in the express power to borrow money, is proved by the fact that 
 they struck out the words in the clause referring to the borrowing of 
 money, which, had they been retained, would have expressly granted the 
 power. They certainly did not me^n to grant a power as implied, 
 wiich they refused to grant as express by a vote of nine States to two. 
 
 4. The Constitution expressly authorizes Congress " to declare war," 
 " to raise and support armies," " to provide and maintain a navy," " to 
 make rules for the government of the land and naval forces," and "to 
 provide for calling forth the militia to execute the laws of the Union, 
 suppress insurrections, and repel invasions." These express powers are 
 sometimes called war powers. They are powers that relate to military 
 and naval action, and are to be exercised by their " appropriate " and 
 
28 THE LEGAL-TENDEE ACTS. 
 
 " plainly adapted " means, Their exercise calls for the expenditure of 
 money no more really than does the exercise of any and every other 
 express power granted by the Constitution. Moreover, the four methods,, 
 as expressly provided in this Constitution, for procuring the funds neces- 
 sary to pay the expenses of the Government, whether in peace or in 
 war, are taxation, coining money, borrowing money, and the sale of the 
 public lands or other property belonging to the United States. These 
 methods are the same at all times, and for all purposes, being neither 
 increased nor diminished by war. 
 
 Now, the only possible relation that the legal-tender property an- 
 nexed to Treasury notes can have to the above express war powers is^ 
 simply that of aiding in furnishing the fiinds to pay the expenses of their 
 exercise ; and this is precisely the relation which it has to every other 
 express power. If the right to annex this property to Treasury notes 
 exists at all, it is not peculiar to the war powers, but is incidental to the 
 whole circle of express powers, in peace as well as in war. Does it exist 
 at all ? Clearly not, unless as the means of raising money to pay the 
 expenses of the Government ; and it so happens that the Constitution 
 rules out this idea by its express provisions for placing funds in the 
 Treasury to meet all public expenses. There is the taxing power, the 
 coining power, the borrpwing power, and the power to sell the public 
 lands or other property of the United States, as the constitutional sources- 
 of funds ; and if the issuing of legal-tender notes is not incidental to one 
 or more of these powers, then surely it is not incidental to the so-called 
 war powers, unless we have a new Constitution during the state of war. 
 That the right of issuing such notes is not incidental to the coining power 
 or to the borrowing power has been already shown ; and no one pretends 
 that it is implied in the taxing power or the power to dispose of the 
 property of the United States. 
 
 War does not change the Constitution, or add anything to the powers 
 of Congress in respect to raising funds, or alter the nature and scope of 
 these powers, or the nature of the transactions which they authorize. 
 The Supreme Court of the United States, in the case oi ex parte Milligan, 
 said that " the Constitution of the United States is a law for rulers and 
 people, equally in war and in peace ; " that " no doctrine, involving 
 more pernicious consequences, was ever invented by the wit of man 
 than that any of its provisions can be suspended during any of the great 
 emergencies of Government ; " and that the " Government, within the 
 Constitution, has all the powers granted to it which are necessary to 
 preserve its existence" (4 TFaZ/ac*, pp. 120, 121). The necessities of 
 the Govern n) en t are, by no means, the criterion of its constitutional 
 powers. The Constitution itself is that criterion, and there is no other. 
 
THE QUESTION OF IMPLIED POWER. '20 
 
 The emission of legal-tender notes, as a war measure, if it is any- 
 thing, within the limits of the Constitution, is such simply as a means of 
 borrowing money to pay the cost of war. It is only through the bor- 
 rowing power that the legal-tender property can have any relation to 
 the war powers of the Government ; and if it does not hold the relation 
 of an " appropriate " and " plainly adapted " means for exercising the 
 borrowing power, then it holds no relation to these war powers. The 
 question is not whether Congress has the authority to issue Treasury 
 notes as the means of borrowing money, but whether it has the authority 
 to attach the legal-tender property to these notes as a means of borrow- 
 ing, and thereby change the import of pre-existing contracts. There 
 being no such authority in the borrowing power, the conclusion is that 
 there is none in the war powers of the Government. These powers, in 
 their "appropriate" exercise, have no relation to providing funds 
 for the Treasury to pay the expenses incident to their exercise that 
 would not equally apply to the express power 'J to establish post offices 
 and post roads,'' or the express power " to constitute tribunals inferior 
 to the Supreme Court," or to any other po'wer expressly delegated by 
 the Constitution. All the express powers, in their exercis#, involve 
 expense, and hence the legal-tender property^ as attaphed to Treasury 
 notes, is no more authorized, by those that relate to war than by those 
 that relate to peace. 
 
 5. Justice Strong, in delivering the opinion of the Supreme Court of 
 the United States in the second legal-tender decision, said that Congress 
 lias powers which are " neither expressly specified nor deducible from 
 any specified power, or ancillary to it alone," but which grow " out of 
 the aggregate of powers conferred upon the Government, or out of the 
 sovereignty instituted " (12 Wallace, p. 535). In regard to this doctrine 
 Chief Justice Chase, while pronouncing it a novelty, " advanced for the 
 first time " in the Supreme Court, said : " If this proposition be admitted, 
 and it be also admitted that the Legislature is the sole judge of the 
 necessity for the exercise of such powers, the Government becomes prac- 
 tically absolute and unlimited " (12 Wallace, p. 582). It is certainly 
 a singular theory with which to justify the Legal-tender Acts, or any other 
 legislative action of Congress. Powers, as bestowed by the Constitution, 
 are special grants to do specific things, as the power to levy taxes, the 
 power to coin money, the power to borrow money, the power to estab- 
 lish uniform rules on the subject of bankruptcies, &c., and surely the 
 number of things which can be done in virtue of these grants is not to be 
 increased by adding them together. The addition is not a source of 
 power beyond what the grants themselves contain. The aggregate is not 
 greater than all the parts. If the Legal-tender Acts are not authorized as 
 
30 THE LEGAL-TENDER ACTS. 
 
 incidental to any one or several of the distinct powers expressly granted^ 
 taking each by itself, then plainly they are not incidental to the whole of 
 them, taking them altogether. The framers of the Constitution chose to 
 specify, in classes and by definite terms, the several things which Con- 
 gress may do ; and what is not included in this class description is not 
 within the constitutional competency of Congress. The theory of another 
 class of powers resulting from " the aggregate of powers," but not con- 
 tained in the grants of power themselves, taken separately, in eiFecb 
 changes the Constitution. What are these powers ? Who can tell what 
 they are, or what they authorize 1 How are they made up, and in what 
 do they consist? How are they to be recognized, and who shall fix their 
 limits ? The doctrine of express powers and of implied powers as in- 
 cidental thereto is in the letter of the Constitution ; but the doctrine of 
 deriving another and distinct class of powers from " the aggregate of 
 powers " is simply making a new Constitution in the process of interpret- 
 ing it. It would be a very dangerous doctrine to put into practice. 
 
 What, moreover, is this " sovereignty instituted," to which Justice 
 Strong refers? Plainly, not a sovereignty to do anything which any 
 governm«nt can do, but a sovereignty confined to the exercise of such 
 powers as are expressly granted or clearly implied. This is the only 
 sovereignty possessed by the Government of the United States. The 
 fact that other governments have the power to issue a legal-tender paper 
 currency, or the fact, if it be admitted, that all governments ought to 
 have this power, proves nothing in respect to this Government, since its 
 powers are not measured by those of other governments, or by what 
 ought to be, but by a written Constitution. If the power to issue such a 
 currency is not in the Constitution, that is the end of the question. The 
 want of authority to pass a law makes it unconstitutional as really as if 
 it were positively prohibited. Either it lacks the constitutional end, or 
 it is not an "appropriate" and "plainly adapted " means for the attain- 
 ment of such an end ; and in either case it is not warranted by the Con- 
 stitution. 
 
 6. Some supporters of the Legal-tender Acts have taken the ground 
 that any measure is constitutional which will strengthen the Government 
 or aid it in carrying on a war, and that making United States notes a 
 legal-tender was a measure of this character, and was therefore constitu- 
 tional. This doctrine entirely overlooks the fundamental fact that the 
 Government of the United States is one of enumerated ])o\\evs, either ex- 
 pressly granted or necessarily implied in those thus granted. It makes 
 the utility of a measure the test of its constitutionality, and if Congress 
 is the final judge of this utility, then its power is unlimited. The Con- 
 stitution, according to this theory, ought to contain a section or clause 
 
THE QUESTION OF IMPLIED POWER. 31 
 
 providing that Congress, in addition to its enumerated powers, shall have 
 power to do whatever it may judge useful and necessary to strengthen 
 and support the Government in any emergency which may arise. 
 Nothing of this character is either expressed or implied in the funda- 
 mental law of the land. The Government of the United States is a con- 
 stitutional government, hased upon a written Constitution, existing for 
 certain ends clearly indicated by specific grants, and endowed with 
 powers by no means embracing the whole circle of governmental powers. 
 It is built upon the principle of such special grants of power, and, con- 
 sequently, of limitation thereby. The Supreme Court of the United 
 States, in the case of the Pacific Insurance Company v. Soule (7 Wallace 
 p. 433), said : "The National Government, though supreme in its own 
 sphere, is one of limited jurisdiction and specific functions. It has no 
 faculties but such as the Constitution has given it, either expressly or 
 incidentally by necessary intendment. Whenever any act done under 
 its authority is challenged, the proper sanction must be found in its 
 charter, or the act is ultra vires and void." 
 
 The question, therefore, whether a law of Congress is constitutional 
 or not is not to be determined by finding out whether it is a good or a 
 bad law, useful or useless, wise or unwise ; but by ascertaining whether, 
 as to its end, it, comes within the limits of an expressly delegated power 
 or powers ; and if so, then whether, as to its means, it comes within the 
 limits of a power implied in such express power or powers. If it has 
 the first but not the second characteristic, or if it has neither, then it ig 
 not constitutional, no matter what'may be its effects. There are many 
 things that would be useful, yet which Congress has no power to do. A 
 great National University, like that of Oxford or Cambridge in England, 
 would be highly useful ; but nobody pretends that the General Govern- 
 ment has any power to establish such universities, or undertake the work 
 of popular education. The utility of the Legal-tender Acts is really a 
 question of political economy, and not of constitutional law at all. 
 Whether they are constitutional or not depends upon the question 
 whether they come within the grants of power made to Congress. This 
 is the whole question, and not_how much or how little good they did. 
 The wisdom of the legislation is entirely distinct; from its constitution- 
 ality. Its necessity and propriety, if they exist at all, exist only in re- 
 lation to the powers expressly granted to Congress ; and if these powers 
 do not comprehend it as an " appropriate " or " plainly adapted " means 
 to their exercise, then it is not warranted by the Constitution, whether 
 it did or did not aid the Government in conquering the late Rebellion. 
 
 lu considering the simple question of constitutionality, the Supreme 
 Court of the United States, in the case of Hepburn v. Griswold (8> Wal- 
 
32 THE LEGAL-TENDEE ACTS. 
 
 lace, p. 603), took the ground that the Legal-tender Acts were not 
 " necessary and proper,'' not " appropriate " or " plainly adapted " means 
 for the exercise of the powers granted to Congress, and that they are not 
 " consistent with the letter and spirit of the Constitution ; " and for this 
 reason the Court decided the acts to be unconstitutional in application to 
 prior contracts, which was the only question before the Court. In the 
 subsequent cases of Knox v. Lee, and Parker v. Davis (12 Wallace, p. 
 457), involving the same question, the Court reversed its previous de- 
 cision, now taking the ground tliat these acts were " necessary and 
 proper," that they were " appropriate " and " plainly adapted " means 
 to a constitutional end, and that they are " consistent with the letter and 
 spirit of the Constitution," and hence constitutional. In both . decisions 
 the rule laid down by Chief Justice Marshall is acknowledged ; and the 
 difference in the two arises from a different construction of the rule. 
 
 The construction adopted by the Court in the last decision proceeds 
 upon and in effect asserts this general principle : That any measure 
 which will in any way, to any extent, or under any circumstances, facili- 
 tate the exercise of the powers expressly delegated to the General Govern- 
 ment, or promote their operation, no matter how distant its relation to 
 these powers, or how foreign to their natural scope, is constitutional. 
 On this question of fact Congress is the judge, and not the courts. Any- 
 thing, for example, that will aid Congress in the exercise of the power to 
 borrow money, may be enacted into law as means to this end. The term 
 borrowing comprehends any means that will promote the end, no matter 
 how wide apart the two things may'be. Congress, under this rule of 
 interpretation, might establish by law a low rate of interest in all the 
 States, as the means of fafcilitating its own borrowing of money, by 
 offering a higher rate. There is no doubt that such a law would act as 
 a means to this end ; yet nobody believes that it would be a constitu- 
 tional method of exercising the borrowing power. So, also, as suggested 
 by Justice Field in his argument against the Legal-tender Acts, Congress 
 under this rule might have provided that the holder of legal tender notes 
 should be entitled to " a percentage out of the revenues of private cor- 
 porations," and that his entire property should be exempt " from State 
 and municipal taxation " (12 Wallace, p. 643). Such a law would make 
 the notes very profitable to the holders, and serve to secure their ready 
 acceptance from the Government ; and yet it would be a very strange 
 way of exercising the power to borrow money. 
 
 The serious difficulty with the rule of interpretation adopted by the 
 Supreme Court in its last legal tender decision is, that it so expands the 
 sphere of implied powers as virtually to make the Government one 
 of unlimited power. There is scarcely anything that, under this con- 
 
THE QDESTION OF IMPLIED FOWEE. ,33 
 
 struction, Congress may not do in the exercise of expressly delegated 
 powers. Things that are essentially foreign to each other, and hence 
 hold no " appropriate " or " plainly adapted " relation to each other, 
 may, nevertheless, be so related in the order of events that one will be 
 the means of the other. And if Congress, in the exercise of its dele- 
 gated powers, may reach to all possible means, whether naturally " ap- 
 propriate " or not, " plainly adapted " or not, and if the courts may not 
 review its decision on this question, then Congress is legally omnipoten'' 
 and can do whatever it shall regard as means to a constitutional end. It 
 can not only declare the note obligations of the Government to be "law- 
 ful money and a legal tender," as the means of borrowing money, and 
 thus create money in the very act of borrowing it, but it can do anything 
 else that will aid the Government in borrowing money. Anything is 
 constitutional that has any relation of means to the result. Whatever 
 will in any way promote the result Congress can do. It might even 
 make it a penal offense not to lend money to the Government when it 
 asks for a loan. The implied powers of Congress, according to this rule 
 of construction, sweep over an immense field, far greater than had hitherto 
 been recognized as coming within its jurisdiction. 
 
 This judicial enlargement of legislative power was logically necessary 
 in order to sustain the Legal-tender Acts. On the question of creating 
 and establishing money, those who drafted the Constitution gave to 
 Congress all the power they thought needful in the power " to coin 
 money," and " regulate the value thereof, and of foreign coin," and to 
 make laws " necessary and proper " to carry this power into execution. 
 They bestowed on Congress no express power to declare anything a legal 
 tender in payment of debts, and no implied power to this effect except 
 as it is incidentally involved in the power to coin money and regulate 
 the value thereof. Now if, under a Constitution thus constructed on the 
 subject of money, we are to have " lawful money" manufactured out of 
 mere promises to pay money, then it is manifest that the implications 
 arising from some other parts of it must undergo a sufficient stretching 
 to gain the end. This is precisely what was done ; and it is only by this 
 process that the Legal-tender Acts can be sustained. The borrowing 
 power has been stretched until it has become a money creating power, 
 and practically assumed and performed the functions of the coining 
 power. In this way the Constitution has been made to read as no one 
 prior to 1862 supposed that it did read. When, if ever, it will be neces- 
 sary to stretch the Constitution for some other purpose, time only can 
 determine ; yet it is by such methods that constitutions lose their original 
 character and are virtually changed in interpreting them. 
 
34 THE LEGAL-TENDEE ACTS. 
 
 IV. 
 
 LEGAL-TENDER REPUDIATION. 
 
 The purpose of this article is to state and establish the following- 
 proposition : The Legal-tender Acts of 1862 and 1863, so far as they re- 
 late to pre-existing contracts for the payment of money, are, in form 
 and in substance, a legalized method for repudiation and robbery, in- 
 consistent "with the letter and spirit of the Constitution." 
 
 That contracts made prior to 1862, and stipulating for payment in 
 dollars, referred to the coined dollars of the United States, is beyond a 
 question, since there was then no other dollar known to the law, and 
 hence no other to enter into the language of contracts. It follows that 
 the legislation which made the notes of the United States the equivalent 
 of these dollars for the payment of pre-existing debts, without the con- 
 sent and against the will of the .parties to whom the debts were due 
 under lawful contracts, did directly and most essentially change the 
 contracts on which the debts were founded. The change thus effected 
 invaded and to the full extent of the depreciation of United States notes 
 when tendered in payment of pre-existing debts, destroyed the vested 
 rights of ] the creditor parties, who, having contracted for payment in 
 dollars, were compelled to receive these notes at their face value. It 
 legislatively transferred from the creditor • to the debtor class an 
 amount of property equal to the difference between the two modes of 
 payment, as really as if the law had reduced the nominal amount of 
 dollars to be paid. A large aggregate of property existed at the time 
 in the shape of prior contracts or obligations to pay money ; and this 
 property, with its vested rights, was as real* and ought to Jiave been 
 held as sacred in the eye of the law as that which had a more tangible 
 and visible form. 
 
 .No irredeemable note circulation was ever protected against depre- 
 ciation by being made a legal tender. The quantity of the circulation, 
 the prospect of ultimate payment in coin or its equivalent, the time of 
 such payment, and especially its receivability at par by the Govern- 
 ment for debts due to it and ia exchange for interest-bearing bonds are 
 the controlling circumstances that will regulate its value. As a matter 
 of history, it is well known that the notes of the United States, though 
 a legal tender for the payment of debts, sunk in value with the increase 
 of their issue, till, in July, 1864, they reached the rate of two dollars 
 and eighty-five cents in notes for a dollar in gold. Chief Justice Chase, 
 
LEGAL-TENDEE REPUDIATION. 35 
 
 in delivering the opinion of the Supr6m,e Conrt in the case of Hepburn 
 V. G-riswold (8 Wallace, p. 603), thus states this point : 
 
 " Admitting, then, that prior contracts are within the intention of 
 the act, and assuming that the act is warranted by the Constitution, it 
 follows that the holder of a promissory note made before the act for a 
 thousand dollars, payable, as we have just seen, according to the law 
 and according to the intent of the parties in coin, was required, when 
 depreciation reached its lowest point, to accept in payment a thousand 
 note dollars, although with the thousand coined dollars due under the 
 contract, he could have purchased on that day two thousand eight hun- 
 dred and fifty such dollars. Every payment since the passage of the 
 act of a note of earlier date has presented similar though less striking 
 features." 
 
 Debtors, as they were authorized, by law to do, and as was expected 
 they would do, availed themselves of the privilege thus furnished, arid 
 paid their previously contracted debts in a depreciated paper currency, 
 thus repudiating not the whole amount due, but that part represented 
 by the depreciation of legal-tender notes. This result was not inci- 
 dental, coming to pass in the way of a remote consequence ; but direct 
 and immediate, following as the sure effect of the legal-tender legisla- 
 tion, and indeed actually provided for in the terms of that legislation. 
 Should Congress, in the exercise of its power " to fix the standard of 
 weights and measures," declare by law that a contract for the delivery 
 of a hundred bushels of wheat shall be satisfied by the delivery of one- 
 half of the stipulated arnount, as the direct consequence of changing the 
 meaning of the word " bushel," as it occurs in the contract, the legisla- 
 tion would be identical in principle and identical in result with the 
 Legal -tender Acts, considered in application to debts contracted before 
 their passage. 
 
 Or should Congress, in the exercise of its power " to coin money," 
 double the amount of gold represented by the term dollar, or reduce 
 the amount one-half, and then declare that the new dollar thus created 
 shall, in the payment of debts previously contracted, be the exact 
 equivalent of the old dollar, no one would hesitate to characterize this 
 law as an outrageous system for cheating the debtor class in the one 
 instance or the creditor class in the other. The thing to be paid would 
 be so altered and so different from the contracts as to involve and pro- 
 vide for all the practical effects of a fraud, not the less real because 
 legalized. Slight changes to adjust the varying values of gold and sil- 
 ver coins to each other are regarded as allowable ; but Congress cannot 
 debase these coins, and then make them the legal equivalent of former 
 coins in the settlement of prior contracts for the payment of money, 
 without perpetrating the grossest injustice and violating its constitu- 
 
36 THE LEGAL-TENDER ACTS. 
 
 tional duty, as well as giving a. false certificate. And if not, how can 
 it make a paper currency the iSgal equivalent of coin in the discharge 
 of contracts previously made, without involving the same consequences 1 
 The effect upon these contracts is precisely like that of debasing the 
 coins of a country, and yet giving them the same names and the same 
 nominal value. 
 
 Bearing in mind this statement of the case, we now proceed to the 
 inquiry whether legislatio'n having the character previously described, 
 and directly involving the results referred to, is " consistent with the 
 letter and spirit of the Constitution," which is one of the criteria laid 
 down by Chief Justice Marshall for determining whether a law is con- 
 stitutional or not. No one claims that the Constitution contains any 
 express authority for giving to the note obligations of the Government 
 the legal-tender quality in payment of debts ; and in a previous article 
 we endeavored to show that it contains no implied authority to this effect 
 under the general title of means " necessary and proper," or, in the 
 language of Chief Justice Marshall, " appropriate " and " plainly adapted " 
 to carry into execution powers expressly granted. We now go further, 
 and raise the question whether a law authorizing the issue of such notes, 
 and making them' a legal tender in payment of debts previously con- 
 tracted, is " consistent with the letter and spirit of the Constitution." 
 
 Take, first, the spirit of the Constitution. One of its objects, as set 
 forth in its preamble, is to " establish justice." Justice as between the 
 Government and the people, and as between individuals, is one of the 
 great ends which it seeks. This spirit pervades the representative sys- 
 tem which it establishes, and also the various restraints which it im- 
 poses on governmental power. Special provisions in the Constitution 
 refer to tlie idea of securing justice and preventing injustice. Those 
 that relate to the privilege of the writ of habeas corpus, to bills of at- 
 tainder, to ex post facto laws, to impairing the obligation of contracts 
 by State authority, to freedom of speech and of the press, to the 
 free exercise of religion, to the right of peaceably assembling and peti- 
 tioning for a redress of grievances, to the right of trial by jury, to the 
 processes of criminal procedure, to excessive bail and excessive fines, to 
 the sacredness of private property as against being taken for public use 
 without just compensation— these and the like are among the many 
 evidences that the spirit of the Constitution is one of justice, and that it 
 means to protect the people against governmental injustice through the 
 agency of law. Now, does any man in his sober senses believe that a 
 law which, in direct violation of a contract, and to the damage of the 
 creditor, provides for the payment of a debt that represents property 
 previously received by the debtor from the creditor, realizes the idea of 
 
LEGAL-TENDEK EEPDDIATION. 37 
 
 justice as between that debtor and creditor'? It ia enough to ask the 
 question, since no argument can make the answer clearer. Such a law 
 is in this respect legalized injustice, and this surely does not conform to 
 the spirit of the Constitution. 
 
 Take, secondly, the letter of the Constitution. The Fifth Amend- 
 ment addresses itself to the General Government, and expressly says 
 that no person shall be " deprived of life, liberty, or property, without 
 due process of law." Here are three rights protected against any de- 
 privation by the Government, except by " due process of law." What 
 is this "due process of law 1 " Daniel Webster, in the Dartmouth 
 College case, said that the phrase means " that every citizen shall hold 
 his life, liberty, property, and immunities under the protection of the 
 general rules •which govern society." Judge Cooley says that it means 
 that " life, liberty, and property are placed under the protection of 
 known and established principles, which cannot be dispensed with either 
 generally or specially, either by courts or by executive officers, or by 
 legislators themselves." "Due process of law," he adds, "in eacb 
 particular case means such an exertion of the powers of Government a& 
 the settled maxims of law sanction, and under such safeguards for the 
 protection of individual rights as those maxims prescribe for the class 
 of cases to which the one in question belongs." Justice Johnson, one of 
 the early justices of the Supreme Court of the United States, says that 
 the words " were intended to secure the individual from the arbitrary 
 exercise of the powers of Government, unrestrained by the established 
 principles oi private rights and distributive justice." 
 
 Here, then, is. a law which says that A., who, in the intent of the 
 parties and according to the law at the time of the contract, agreed to 
 pay to B. one thousand coined dollars, may discharge this contract by 
 paying him Government notes to the same nominal amount, whether 
 they are worth anything or not. The law acts directly upon the con- 
 tract by changing the meaning of one of its fundamental terms. Is this 
 according to " the general jules which govern society ; " according to 
 the " known and established principles which cannot be dispensed with ; " 
 according to " the established principles of private rights and distributive 
 justice;" or according to " the settled maxims of law" and "the safe- 
 guards " of law "for the protection of individual rights'? " Is there any 
 "due process of law" in sucji a law ? Is it one of the settled maxims 
 of law that the legislative power can directly change the meaning of 
 lawful private contracts 1 " Due process of law " clearly forms no part 
 of the Legal-tender Acts. They fly squarely in the face of the general 
 maxims of law in reference to private contracts. 
 
 Now, did this legal-tender legislation, as the direct result of its in- 
 
38 THE LEGAL-TENDER ACTS. 
 
 fringemeiit upon contracts and change of their terms, deprive anybody 
 of his property 1 It certainly did deprive hundreds and thousands of 
 their property to the full extent of the difference between the value of 
 the payment stipulated for and the value of the payment authorized by 
 it. It compelled creditors to accept less, and authorized debtors to pay 
 less, than their contracts demanded ; and what is this but taking prop- 
 erty from the one class and giving it to the other by the naked force of 
 a legal statute, without consideration and without judicial proceedings, 
 and contrary to the contracts between them ? In regard to this legisla- 
 tion Chief Justice Chase stated the truth when he said : '■ It violates that 
 fundamental principle of all just legislation that the Legislature shall not 
 take the property of A. and give it to B. It says that B., who has pur- 
 chased a farm of A. for a certain price, may keep the farm without pay- 
 ing for it, if he will only tender certain notes, which may bear some pro- 
 portion to the price, or be even worthless " (12 Wallace, p. 580). The law 
 operates directly not upon what is called the remedy as between debtor 
 and creditor, but upon one of the most vital terms of the debt obligation 
 itself, and impairs that obligation, by changing it, to the damage of the 
 creditor and to the benefit of the debtor. In this way it as really de- 
 prived the former of a portion of his property as it would have done if 
 it had authorized the latter to pay half of the nominal amount, or to 
 take any other property of the former without his consent ; and for this 
 reason the law does what is contrary to the spirit of the Constitution, 
 and also what the Constitution expressly says shall not be done. 
 
 Justice Chase (not the late Chief Justice, but a much earlier mem- 
 ber of the Supreme Court of the United States), in stating his opinion 
 in the case of Calder v. Bull (3 Dallas, p. 386), said that " there are 
 acts which the Federal or State Legislature cannot do without exceed- 
 ing their authority ; " and among the illustrations of such acts he speci- 
 fied " a law that destroys or impairs the lawful private contracts of 
 citizens," and also " a law that takes property from A. and gives it to 
 B." He further said : " To maintain that our Federal or State Legis- 
 lature possesses such powers, if they had not been expressly restrained, 
 would, in my opinion, be a political heresy, altogether inadmissible in 
 our free Republican Governments." So also Justice Miller, in deliver- 
 ing the opinion of the Supreme Court of the United States, in the recent 
 case of the Loan Association v. Topeka (20 Wallace, p. 655), held the 
 following language : 
 
 " The theory of our Governments, State and national, is opposed to 
 the deposit of unlimited powers anywhere. The executive, the legisla- 
 tive, and the judicial branches of these Governments are all of limited 
 and defined powers. There are limitations on such power which grow 
 
I,EGAL-TENDEK EEPUDIATION. 39 
 
 out of the essential nature of all free Governments — implied reserva- 
 tions of individual rights, without which the social comppct could not 
 exist, and which are respected by all Grovernments entitled to the name. 
 No court, for instance, would hesitate to declare void a statute which 
 enacted that A. and B., who were husband and wife to each other, 
 should be so no longer, but that A. should thereafter be the husband of 
 C, and B. the wife of D. ; or which should enact that the homestead 
 now owned by A. should be no longer his, but should henceforth be the 
 property of B." 
 
 The latter of these illustrations just fits the Legal-tender Acts, since 
 they directly, and not as a remote consequence, dispossessed the cred- 
 itor of a portion of his legal rights, as arising from contracts previously 
 made in respect to the payment of money, and to this extent robbed 
 him of his property, to the advantage of the debtor. Legal claims are 
 property as really as a " homestead." 
 
 But we are told that Congress, unlike the States, is not expressly 
 forbidden to impair the obligation of contracts. This is not in sub- 
 stance true, if we have correctly expounded the previously quoted 
 clause in. the Fifth Amendment; yet, if it were true, the absence of 
 such an express prohibition clearly does not imply a general power in 
 Congress to impair the obligation of contracts. Congress can act only 
 on the basis of positive grants of power, either expressly made or nec- 
 essarily implied. 
 
 We are told, again, that Congress is expressly authorized to pass 
 " uniform laws on the subject of bankruptcies throughout the United 
 States," and, hence, that in the exercise of this power it may impair the 
 obligation of contracts so far as the result arises from the exercise. 
 This is true, and what is the inference ? Surely, not that Congress has 
 a general power to impair such obligations ; but that it must do so, so 
 far as it does so at all, in the way provided — namely, by the passage 
 of a uniform bankrupt law. Still further, the bankruptcy power was 
 granted for the benefit of creditors as really as for that of debtors, and 
 especially to protect the rights of the former throughout the Union 
 against the injustice that might otherwise be perpetrated by the in- 
 solvent laws of the States. It contemplates the discharge of the debtor' 
 from his contracts only upon his ascertained inability to pay and the 
 surrender of all his property for the benefit of his creditors. A just 
 bankrupt law is as really in the interest of the creditor as it is in that 
 of the debtor. This is a very different thing from a law that directly 
 authorizes the debtor to satisfy his contracts, as Chief Justice Chase 
 well says, " without payment " according to contract, " without pretense 
 of inability, and without any judicial proceeding." The two cases are 
 not by any means analogous. 
 
•40 THE LKGAL-TENDEB ACTS. 
 
 It is also said that Congress may, in the exercise of its express 
 power to declare war, impair the obligation of contracts by suspending 
 all commercial intercourse between the citizens of the belligerent 
 nations during the state of war. So also Congress, in ' the exercise of 
 its commercial power, may, by an embargo, render the fulfillment of 
 contracts impossible. In levying taxes, it may so change the duty on 
 imports as to affect the prices of goods and very materially affect the 
 value of prior contracts in relation to those goods. It may, in the 
 exercise of the borrowing power, so impair the credit of the United 
 States as seriously to injure the holders of securities already issued. 
 All this is true ; but it is difficult to see how it bears upon the ques- 
 tion, whether Congress has the implied power to annex the legal-tender 
 quality to the notes of the Government, or how it answers the objec- 
 tion founded on the direct interference of such legislation with the 
 relations subsisting between debtor and creditor. Let these two 
 things be noted : L.That there is no pretense of any express power 
 for this legislation, and that the cases above referred to arise from the 
 action of clearly express powers. 2. That the results in these cases, in 
 affecting contracts and property valuations, are purely incidental, while 
 the Legal-tender Acts directly, in the very essence of their operation, 
 attack money contracts already made, and change one of their funda- 
 mental terms. They formally declare that A., who has agreed to pay 
 dollars to B., may pay him with Government promises to pay dollars, 
 and thus change the contract between the parties. The result is not 
 incidental, but direct. In legal effect, a new contract is made by the 
 force of law. ,Between such a law and the cases referred to there is no 
 analogy. A tariff law, for example, affects no rights and impairs no 
 obligations ; but such a law directly affects the vested rights of private 
 property as founded on money contracts previously made. It directly 
 and formally legalizes a breach of those contracts, and practically con- 
 fiscates the property of one class in the interests of another class. This, 
 in respect to hundreds of millions of dollars in the form of debt obli- 
 gations, was done on the very day that the first Legal-tender Act was 
 enacted. 
 
 The Supreme Court of the United States, speaking through its 
 Chief Justice,in the case of Hepburn v. Griswold (8 Wallace, p. 603), 
 said : 
 
 " No one probably could be found to contend that an act enforcing 
 the acceptance of fifty or seventy-five acres of land, in satisfaction of a 
 contract to convey a hundred, would not come within the prohibition 
 against arbitrary privation of property. We confess ourselves unable 
 to perceive any solid distinction between such an act and an act com- 
 pelling all citizens to accept, in satisfaction of all contracts for money, 
 
THE MONEy OP THE CONSTITU'nOJST. 41 
 
 half, or three-quarters, or any other proportion less than the whole of 
 the value actually due, according to their terms. It is difficult to con- 
 tjeive what act would take private property without due process of law, 
 if such an act would not." 
 
 We are aware that the decision of the Court in this case, after the 
 addition of two new judges, was subsequently reversed ; yet this 
 reversal does not impair the force of the reasons on which the decision 
 rested. Concede that Congress may, at its pleasure, and to any extent, 
 change the medium of paying debts, without any reference to contracts, 
 previously made, and then it is in its power, by simply changing this 
 medium, to repudiate the debt of the United States, and authorize a 
 universal system of repudiation. The concession sweeps the whole 
 deck, and leaves Congress without any restraint in the fundamental law 
 of the land as to what shall be money. Whether this is the actual 
 condition of things, we shall seek to ascertain in the next article, on 
 the Money of the Constitution. 
 
 THE MONEY OF THE CONSTITUTION. 
 
 The Constitution of the United States expressly authorizes Congress, 
 " to coin money " and " regulate the value thereof and of foreign coin." 
 It also forbids the States to " coin money," to " emit bills of credit," or 
 to " make anything but gold and silver coin a tender in payment of 
 debts." This grant of power and these prohibitions relate to a common 
 subject, and it is by taking them in their connection with each other 
 and in their object that we are to ascertain what is the money of the 
 Constitution — the money which its framers had in view and meant to 
 authorize Congress to establish. The just reading of the Constitution 
 on this subje'et, as observed by Daniel Webster, is the following : 
 
 " Congress shall have power , to coin money, regulate the value 
 thereof and of foreign coin ; but no State shall coin money, emit bills 
 of credit, or make anything but gold and silver coin a tender in pay- 
 ment of debts." ( Webster's Works, vol. 6, p. 36.) 
 
 Alluding to the prohibitions in respect to the States, Justice Wash- 
 ington, of the Supreme Court of the United States, in delivering the 
 opinion of the Court in the case of Ogden v. Saunders (12 Wheaton, p. 
 213), said : 
 
 4 
 
42 THE LEGALKTENDEE ACTS. 
 
 " These prohibitions, associated with the powers granted to Congress 
 to coin money, and to regulate the value thereof and of foreign coin, 
 most obviously constitute members of the same family, being upon 
 the same subject and governed by the same policy. This policy was to 
 provide & fixed and uniform standard of value throughout the United 
 States, by which the commercial and other dealings between the citizens 
 thereof, or between them and foreigners, as well as the moneyed tran- 
 sactions of the Government, should be regulated." 
 
 Justice Daniel, in delivering the opinion of the Supreme Court in 
 the case of the United States v. Marigold (9 Howard, p. 560), referred 
 to the coining power as " an important trust invested by the Constitu- 
 tion," and also " to the obligation to fulfill that trust on the part of the 
 Government — namely, the trust and the duty of creating and maintain- 
 ing a uniform and pure metallic standard of value throughout the Union." 
 He then proceeded to say : 
 
 " The power of coining money and of regulating its value was dele- 
 gated to Congress by the Constitution for the very purpose, as assigned 
 by the framers of that instrument, of creating and preserving the uni- 
 formity and purity of such a standard of value." 
 
 To secure the result thus aimed at, as stated by the Supreme Court 
 in the above cases, we have the provisions of the Constitution in respect 
 to the creation of money and the regulation of its value, with the re- 
 . strictions upon the States in reference to the same subject. The matter 
 is not left to the States, and is not committed to Congress except in 
 these provisions. 
 
 The money authorized is the product of coinage, which consists in 
 fabricating monetary coins and stamping them with the authority of the 
 Government. This money is distinguished from the obligations of the 
 Government to pay money in that clause of the Constitution which says 
 that Congress «hall have power " to provide for the punishment of 
 counterfeiting the securities and current coin of the United States." 
 The word " coin," when the Constitution was proposed and adopted, 
 was understood to mean a piece of metal, bearing a legal stamp and 
 made current as money. This is still its meaning. It has no other 
 meaning when used in connection with money. The power " to coin 
 money," as delegated to Congress, is the power to strike rAetallic coins 
 and to pass all laws " necessary and proper " for this purpose. That 
 the metals to be thus coined were, in the contemplation of the Consti- 
 tution, to be gold and silver, one or both, is evident from the following 
 considerations : 1. They were then and ever since have been the metals 
 in established use for this purpose. 2. The States are prohibited from 
 making anything but gold and silver coin a tender in payment of debts, 
 
THE MONET OF THE CONSTITUTION. 43 
 
 ■which clearly implies that what the Constitution calls " the current coin 
 of the United States " was to be composed of gold or silver or of both. 
 If it was to be any other kind of coin, the States would be constitution- 
 ally incompetent to make it a tender in payment of debts. Their 
 power in this respect is confined to gold and silver coin, showing this to 
 l^e the coin intended in the grant of the coining power. 3. The " foreign 
 ■coin," whose value Congress is authorized to regulate, was composed of 
 gold and silver, which suggests that the power to coin money refers to 
 the same metals of which this " foreign coin " was composed. 
 
 It is true that, under this power, Congress has authorized the striking 
 of minor coins, as the five-cent piece, the three cent piece, and the one- 
 oent piece, for the convenience of small change. These coins, however, 
 are not a legal tender at their nominal value for any amount exceeding 
 twenty-five cents in one payment ; and Congress, moreover, has provided 
 for their redemption in " lawful money " when presented in sums of not 
 less than twenty-five dollars. They have never been treated as standards 
 of value or as having any significance in the coinage system beyond that 
 of exchanging minimunn values that could not be conveniently exchanged 
 by gold or silver coins on account of the extreme smallness of the coins. 
 They are mere appendages to the coinage system. 
 
 Congress has by statute declared the gold and silver coins of the 
 United States to be a legal tender in the payment of debts — the former 
 for all sums and the latter for any amount not exceeding five dollars in 
 any one payment. The power to do this, though not expressly granted, 
 has been inferred as a natural and proper incident of the coining power 
 — as, indeed, a part of the power itself. It has been exercised unques- 
 tioned ever since the formation of the Government. The very idea of 
 real money existing under the authority of law is that it should have the 
 legal power of discharging debts, since it is the means of computing and 
 expressing debts. It is worthy of notice that, in declaring the coins of 
 the United States to be a legal tender at their nominal value, Congress 
 has not done so arbitrarily ; but in conformity with their real value — 
 namely, according to the weight of the coins or the actual value of the 
 metal. Hence, if these coins have lost by abrasion more than one-half 
 of one per cent, of their standard weight, they are to be recoined and 
 made of full weight ; and so if gold coins, made a legal tender for all 
 amounts, are reduced in weight below the standard and tolerance allowed 
 by law, they are then a legal tender only at valuation in proportion to 
 their actual weight. A slight and fixed alloy is provided for in both 
 classes of coins, for the purpose of increasing their hardness. 
 
 The word "dollar," which figures so largely as the unit of value in 
 the exchanges of the p6ople, occurs twice in the Constitution in the plural 
 
44 THE LEGAL-TENDEE ACTS. 
 
 form, as in the phrase " ten dollars for each person " and that of " twenty- 
 dollars" in the Seventh Amendment. This " dollar " was established by 
 the Congress of the Confederation, on the 6th July, 1785 ; and it was not 
 until April 2d, 1792, that Congress exercised its coining power under 
 the Constitution by establishing a mint and making provision for gold 
 and silver coins having a certain weight and fineness and bearing certain 
 denominations and devices. The Government in the outset accepted the 
 doctrine of the metallic dollar as established by the Congress of the Con- 
 federation and used that dollar as the money of account ; and the 
 moment it began to legislate under the coining power it reafBrmed the 
 same doctrine. 
 
 The substance of the interpretation placed upon the coining power by 
 the legislation of Congress since the adoption of the Constitution may 
 be summed up in the following propositions : 1. That up to the Legal- 
 tender Acts of 1862 and 1863 Congress has uniformly regarded gold and 
 silver as the materials composing the money authorized by the Consti- 
 tution. 2. That it has established one or the other, or both, with a cer- 
 tain denomination, weight, and fineness, as the monetary unit or standard 
 of value. 3. That, in regulating the value of the coins authorized to be 
 struck, it has done so by determining their weight and fineness, and in 
 this way made their mint or nominal value as nearly as possible identical 
 with their real value as metals. 4. That in coining the two metals — 
 namely, gold and silver — it has compensated for their difference in value 
 as metals by making a corresponding difference in the relative weight 
 of the respective coins, and thus adjusted the two classes of coins to each 
 other. 5. That in providing that these coins shall be a legal tender at 
 their nominal value it has always had respect to their real value. 6. 
 That it has never given to these coins the character of a debt obligation, 
 representing something else in which they are to be paid. 7. That the 
 minor coins, composed of other metals than gold or silver, have never 
 been regarded as money in the strict sense ; that they are made redeem- 
 able in " lawful money ;'' and that they are not a legal tender for a larger 
 sum than twenty-five cents in one payment. 
 
 The third, fourth, and fifth of the above propositions are the ones that 
 relate to the exercise of that power which the Constitution designates as 
 regulating the value of money. There is but one way in which this can be 
 done, and this consists in determining the weight and fineness of the 
 coins to be struck— in other words, the actual amount of gold or silver 
 in each coin. This is the only regulation that Congress has ever at- 
 tempted, and it is the only one possible. It is, in fact, simply a reliable 
 certificate of the Government'assuring the public that a given coin called 
 a dollar, for example, contains so much gold or silver. The value of the 
 
TPIE MONEY OF THE CONSTITUTION". 45 
 
 gold or silver is not created by the certificate, but simply expressed. 
 Real value is antecedent to all statutory law and all coining processes, 
 and depends in this case on the character of the metals and their uses for 
 other purposes. Were Congress to place the stamped value of coins 
 above or below their real value as metals, the coins would in the one 
 case disappear from circulation and go into the melting-pot as bullion, 
 and in the other they would not circulate at their stamped value. The 
 discretion of Congress in regulating the value of monetary coins is 
 restricted within very narrow limits by the law of real value, which can- 
 not be disregarded without defeating the whole purpose of coinage. 
 
 The Constitution does not say anything about a standard or measure of 
 value in connection with the coining power, for the obvious reason that 
 the idea is implied in the term money itself. The elementary use of 
 money is to compute and express other values by a comparison with 
 its own. It is the one thing which the people, by common consent, or 
 by law, or by both, use for this purpose. It is not possible to coin 
 mioney without coining a standard of value, or to use money 
 without using such a standard. All values must be expressed in 
 money, unless we go back to the system of direct barter ; and 
 hence money is and must be the standard of these values. We quote 
 as follows the language of Justice Clifford, of the Supreme Court of 
 the United States, in regard to money as the standard of value : 
 
 " Values cannot be measured without a standard, any more than 
 time or duration, or length, surface or solidity, or weight, gravity, or 
 quantity. Something in every such case must be adopted as a unit 
 which bears a known relation to that which is to be measured — as the dol- 
 lar for values, the hour for time or duration, the foot of twelve inches for 
 length, the yard for cloth measure, the square foot or yard for surface, 
 the cubic foot for solidity, the gallon for liquids, and the pound for 
 ■weight." (12 Wallace, p. 601). 
 
 Comm^ercial transactions require a standard or measure of value 
 just as really as they require a standard of weights and measures. And 
 Congress is authorized to supply both — the one in its power to coin 
 money and regulate the value thereof, and the other in its power to fix 
 the standard of weights and measures. The one standard furnishes the 
 language for expressing the specific quantities of the things involved in 
 exchange transactions, and the other furnishes the language for express- 
 ing in money the value of these quantities. The two in combination 
 enable the people to make intelligible and definite contracts in respect 
 to both quantity and value. 
 
 The conclusion that we now derive from this examination of the 
 coinage power is that money, in the constitutional sense — in the sense 
 clearly intended in and fully provided for by the Constitution — is the 
 
46 THE LEGAL-TENDEE ACTS. 
 
 money of coinage, and nothing else, composed chiefly of gold or silver 
 and established and stamped under the authority of the United States. 
 All the express power delegated to Congress, with its necessarily im- 
 plied power that refers to the creation of money, looks directly to such 
 money and such only. The grant upon its face is exhaustive of the 
 power of Congress upon this subject, and by obvious inference implies 
 a negative of all other power upon the same subject. The question of 
 creating and establishing money is constitutionally finished when the 
 Constitution says that Congress shall have power " to coin money " and 
 " regulate the value. thereof and of foreign coin," and to pass all laws 
 " necessary and proper " to carry this power into effect ; and further 
 says that no State shall coin money, emit bills of credit, or make any- 
 thing but gold and silver coin a tender in payment of debts. The 
 money of coinage, and nothing else, was meant by these provisions. 
 The provisions themselves exclude everything else. Daniel Webster 
 was right when he said that, " As Congress has no power granted to it 
 in this respect but to coin money and to regulate the value of foreign 
 coins, it clearly has no power to substitute paper or anything else for 
 coin as a tender in payment of debts and in discharge of contracts." 
 So, also, the Supreme Court of the United States was right when, in 
 the case of Gwin v. Breedlove (2 Howard, p. 29), it said : " By the Con- 
 stitution of the United States, gold or silver coin, made current by 
 law, can only be tendered in payment of debts." It was right when, 
 in the case of Sturges v. Crowninshield (4 Wheaton, p. 122), it said 
 that " nothing but gold and silver coin can be made a tender in pay- 
 ment of debts." If this proposition was true when Mr. Webster ut- 
 tered it, and the Supreme Court uttered it, years ago, then it is just as 
 true to-day. 
 
 The idea that paper obligations, which are simply promises to pay 
 money, whether issued by the authority of Congress or by that of the 
 States, can be invested with the character of " lawful money and a legal 
 tender " in payment of debts, and thus be made to take the place and 
 perform the functions of coined money, runs athwart the constitutional 
 idea in respect to money in two ways. 
 
 In the first place, it is wholly a different idea. The money of the 
 Constitution is the money of coinage ; and the " lawful money" of the 
 Legal-tender Acts is the money of the printing press and of debt obliga- 
 tions. The one is the money of real value and makes no promise; and 
 the other is the money of credit and makes a promise. The one is the 
 money intended in the coining power ; and the other is the money not 
 thus intended. The one is in itself a standard of value ; and the other 
 has no value in itself, and no value at all except as it is imparted by 
 
THE MONEY OF THE CONSTITDTION. 47 
 
 credit. The one is the money in respect to which the character and 
 quantity of the constituent material determine the Value ; and the other is 
 the money which derives all its value from promissory words. The one 
 is the money in which the Government creates no value, but simply 
 certifies to a fact ; and the other is the money in which the Government 
 pledges its faith to the payment of value. The one is a metal ; and the 
 other is a piece of paper. If the constitutional idea of money, as is 
 clearly the fact, is embodied in the money of coinage, then it cannot also 
 be embodied in the money of the paper-mill and the printing press. 
 The two things are so widely different that they cannot be embraced in 
 the same Constitution without a manifest contradiction. And, as there 
 is no doubt that the money of coinage is in the Constitution, it follows, 
 by the most obvious inference, that the other kind of money is excluded, 
 especially when there is no express grant of power authorizing its issue. 
 
 In the second place, these two kinds of money are practically so 
 incompatible that the issue of paper money nullifies and renders nugatory 
 the coining power in the end sought by it. Paper money, being the in- 
 ferior kind of money, and depending wholly on credit for its value, by a 
 well-known law of currency, drives the money of value and of coinage 
 into disuse, and takes its place in computing and expressing the ex- 
 changes of trade. The result is that the money expressly provided for 
 in the Constitution disappears from general circulation, and the end 
 sought by the provision is defeated. That to which the Constitution ex- 
 pressly points is not used, and that to which it does not point is used. 
 Credit takes the place of value, and expels value from use. Real money 
 is demonetized in the practice of society ; and fictitious money, without 
 any basis except that of credit, performs its functions. The uniform, 
 standard of value, about which the Supreme Court has so often spoken 
 as the object of the coining power, is superseded by a fluctuating standard 
 of credit, that means one thing to-day and another thing to-morrow. 
 There certainly can be no implied power granted to Congress which in 
 its exei'cise nullifies the end and object of an express power ; and, if not, 
 theti there can be no implied power to issue legal-tender notes so long as 
 the coining power remains a part of the Constitution and the only part 
 which expressly deals with the question of creating money. The " lawfiil 
 money " that does not rest upon this power is not constitutionally 
 " lawful," especially when it is inconsistent with and repugnant to the 
 very end designed to be attained by the power — namely, a uniform 
 standard for the computation of values. 
 
 lu 1814, while the country was at war with Great Britain, and when 
 the exigencies of the Treasury were exceedingly urgent, Mr. Hall, of 
 Georgia, introduced into the House of Representatives a series of five 
 
48 ' THE LEGAL-TENDEK ACTS. 
 
 resolutions, proposing the issue of United States notes as a means of 
 fiscal relief. The second of these resolutions provided " that the Treasury 
 notes which may be issued, as aforesaid, shall be a legal tender in all 
 debts due, or which may hereafter become due, between the citizens of 
 the United States, or between a citizen of the United States and a citizen 
 or subject of any foreign State or kingdom." The other four resolutions 
 were separately considered, but this legal-tender resolution the House 
 refused to consider by a vote of ninety-five against forty-two. Daniel 
 Webster was then a member of the House, and voted with the majority 
 [Benton's Abridgment, vol. 5, p. 361). 
 
 This is the only instance, so far as we have been able to ascertain, 
 during the whole history of the Government, prior to the Legal-tender 
 Acts of 1862 and 1863, in which the proposition to make Treasury notes 
 a legal tender in application to private debts ever came before Congress. 
 The summary manner in which it was met shows what was thought of 
 the expedient. The House refused t© consider what on its face bore the 
 stamp of an unconstitutional proposition. The idea that anything but 
 coined money can be made a legal tender in the compulsory payment of 
 debts is a modern idea in the interpretation of the Constitution. With 
 the above exception, we hear nothing of it in Congress until the period 
 of the Legal-tender Acts, and we hear nothing of it in the Supreme 
 Court of the United States until after this period. The whole previous 
 drift of legislative and judicial thought was in exactly the opposite 
 direction; and nothing can be more certain than that the Federal Con- 
 vention was a hard-money, a gold-and-silver-money Convention, and on 
 this subject nothing else, and that in this respect it represented the views 
 of the great majority of the people by whom the Constitution was 
 ratified. Taking into account the state of public feeling at the time of 
 ratification, arising from the bitter experience of the country in the use 
 of paper money, it is not at all probable that the Constitution would 
 have been ratified with the construction placed upon it by the Legal- 
 tender Acts. Chief Justice Marshall, in the case of Craig v. The State 
 Missouri (4 Peters, p. 410), said, in reference to paper money : 
 
 " 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 confidence between man and man. To cut 
 up this mishief by the roots — a mischief which was felt through the 
 United States, and which deeply aflfected the interest and prosperity of 
 all — the people declared in their Constitution that no State should emit 
 bills of credit." 
 
 If, however, the new theory of the Constitution be adopted, then the 
 people did not cut up this mischief by the roots at all. They left all 
 
THE LE9AL-TENDER POWEK OP THE STATES. 4:9 
 
 these roots in the power of Congress. True, the only express power 
 which they gave to Congress in respect to the creation of money is in 
 the coining power ; yet the possibility of the whole mischief was left 
 rooted in its implied powers. It is very remarkable, if it was really 
 left there, that the fact was not discovered by the Marshalls, the Taneys, 
 the Websters, the Bentons, the Wrights, and the long line of legislative 
 and judicial lights that have graced our public history from the adoption 
 of the Constitution down to 1862. Congress, when in 1812 authorizing 
 the first issue of Treasury notes, provided that the notes might be used 
 " in payment of supplies or debts due by the United States to such 
 public creditors or other persons " as might " choose to receive such notes 
 in payment at par." It is very remarkable that in subsequent resorts to 
 the issue of Treasury notes to meet special exigencies, some twenty in all, 
 Congress never discovered until 1862 that it had the power to make 
 such notes a legal tender in the payment of private debts. If the power 
 exists at all, it has existed during the entire history of the Government ; 
 yet that it did exist was not seen by the great thinkers of the country 
 until the above named period. This, we say, is remarkable, provided it 
 be a fact, that, in addition to the coining power and the legal-tender 
 power as an incident thereof. Congress has the power to attach the legal- 
 tender property to the debt obligations of the Government, and thus 
 produce the very mischief which, as Chief Justice Marshall says, the 
 people in their Constitution meant to cut up by the roots. 
 
 VI. 
 
 THE LEGALTENDEE POWER OF THE STATES. 
 
 The Legislature of the State of New York, on the 22d of March, 
 1875 {Laws of 1875, eh. 73), passed an act providing as follows : 
 
 " Every contract or obligation made or implied and payable within 
 this State, and made or implied after January 1st, 1879, and payable in 
 dollars, but not in a specified kind of dollars, shall be payable in United 
 States coin of the standard of weight and fineness established by the 
 laws of the United States at the time the contract or obligation shall 
 have been made or implied." 
 
 This upon its face is a legal-tender law, enacted by the authority of 
 a State Legislature, and declaring that the contracts which it describes 
 " shall be payable in United States coin " of the standard weight and 
 fineness established by law when the contracts were made. The Legal- 
 
50 THE LEGAL-TENDEE ACTS. 
 
 tender Acts of Congress, enacted in 1862 and 1863, if unrepealed when 
 this statute takes effect, will then, as jiow, declare that the notes of the 
 United States issued in pursuance thereof shall be " lawful money and 
 a legal tender in payment of all debts, public and private, within the 
 United States," except duties on imports and interest on the bonds and 
 notes of the Government. The inconsistency between these acts and 
 the above statute is direct and positive. Both cannot operate together 
 among the same people without a conflict of laws. We, hence, raise 
 the question whether the Legislature of the State of New York — on the 
 supposition that the Legal-tender Acts shall be unrepealed when the 
 above regulation becomes operative — will have exceeded its powers 
 by invading a domain of legislation already constitutionally occupied 
 by Congress. 
 
 It is well known, as a matter of history, that prior to the adoption 
 of the Constitution, the States had the power to coin money, to emit 
 bills of credit, to declare what shall be a legal tender in payment of 
 debts, and pass such laws as they saw fit in reference to the manner in 
 which contracts should be made and discharged. The whole subject of 
 private property, involving all exchange transactions between their own 
 citizens and all the instruments and evidences thereof, and all the rights 
 resulting therefrom, and all the questions of law as to acquisition, pos- 
 session, enjoyment, alienation, and transmission, and all contracts be- 
 tween parties relating thereto, was exclusively in the hands of the States. 
 It is there still, except so far as State jurisdiction has been qualified or 
 limited by powers delegated to the General Government, or by prohi- 
 bitions, and restraints imposed by the Constitution on State authority. 
 
 The express power vested in Congress to establish " uniform laws 
 on the subject of bankruptcies throughout the United States " creates 
 one of these exceptions. Such laws operate upon contracts and provide 
 for settling the debt relations between insolvent debtors and their credit- 
 ors, and take precedence of all State laws upon the same subject. So, 
 also, other resulting exceptions may arise from the power of Congress 
 to declare war, or its powers to regulate commerce with foreign nations 
 and among the several States and with the Indian tribes. It may 
 happen, as an incidental consequence of the exercise of these powers, 
 that contracts lawful when made will become invalid or impossible of 
 fulfillment and enforcement. Still further, the Constitution forbids the 
 States to pass any law impairing the obligation of contracts, to deprive 
 any person of property without due process of law, to coin money, to 
 emit bills of credit, or to make anything but gold and silver coin a 
 tender in payment of debts. These things, which they could have done 
 before the adoption of the Constitution, and some of which they did. 
 
THE LEGAL-TENDER POWER OF THE STATES. 51 
 
 they cannot do under it. Yet, with the exceptions and qualifications 
 thus made, the whole question of private property, and of all the legal in- 
 cidents pertaining thereto, and of contracts as to the manner of making 
 them, the mode of discharging them, and the parties competent there- 
 for, still belongs exclusively to the province of State legislation. The 
 Tenth A.mendment expressly declares that " 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." 
 
 The States under the Constitution have no power to " coin money," 
 and hence no power to manufacture the medium of paying debts. 
 This power is exclusively vested in Congress ; and it has been generally 
 assumed, as the natural incident thereof, that Congress has the right to 
 make the money of coinage a legal tender. The right, however, at- 
 taches to the coining power and the power to regulate the value of coins ; 
 and, hence, no inference can be drawn from it as the basis of conclud- 
 ing that Congress can also attach the legal-tender property to the debt 
 obligations of the Government, unless we adopt the manifestly false 
 doctrine that the issuing of such obligations in virtue of the borrowing 
 power is an exercise of the coining power. Mr. Albert Gallatin was 
 of opinion that Congress has no legal-tender power at all in respect to 
 the payment of private debts. His words are as follows : " As Con- 
 gress has no authority to make anything whatever a tender in payment 
 of private debts, it necessarily follows that nothing but gold and silver 
 can be made a tender for that purpose, and that Congress cannot au- 
 thorize the payment in any species of paper currency of any other 
 debts but those due to the United States." It is true that no express 
 legal-tender power is given to Congress ; yet during the whole history 
 of the Government the power with reference to the money of coinage 
 has been assumed as implied in the coining power. Long and undis- 
 puted practice has settled this construction. 
 
 Another and, for the purposes of this discussion, more important 
 prohib'tion we have in that clause of the Constitution which says that 
 " no State shall make anything but gold mid silver coin a tender in pay- 
 ment of debts." These words, while expressly declaring that no other 
 tender for the payment of debts than that of " gold and silver coin " shall 
 be established by the States, just as clearly imply a complete previous 
 jurisdiction in the States over the whole subject of debts and the method 
 and medium of payment ; and this jurisdiction they do not abrogate or take 
 away, but simply qualify in a certain respect. The States still retain 
 their original power to pass legal-tender laws, subject to the condition that 
 they must not make anything but gold and silver coin a tender in pay- 
 ment of debts, just as they retain their power to legislate on the general 
 
52 THE LEGAL-TENDEE ACTS. 
 
 Subject of contracts, subject to the condition that they must not pass any 
 law impairing the obligation of contracts. What was before an un- 
 qualified power now becomes a specific and limited power, by being 
 confined in its action to gold and silver coin ; and with reference to such 
 coin it is a complete power, not withdrawn or denied, but distinctly 
 recognized and in effect guaranteed by the Constitution of the United 
 States. The same Constitution that gives to Congress the power to coin 
 money just as clearly establishes the State right to make gold and silver 
 coin a tender in payment of debts. In the very act of limiting the legal- 
 tender power of the States it expressly excepts such coin from the limita- 
 tion, and this leaves them in full possession of the power in th's applica- 
 tion. They cannot exceed the limit fixed ; but within that limit they 
 have all the power they ever had. It is true, as suggested by the 
 Supreme Court of Michigan, that this clause is not " an enabling act ;" 
 yet it is a recognizing and declarative act, and, in the light of the Tenth 
 Amendment, places the legal-tender power among the "reserved" rights 
 ■of the States, subject to the qualification which it specifies. 
 
 The case, then, in respect to money as the legal medium of payment, 
 made by the Constitution, stands thus : Congress has the exclusive power 
 to coin money and regulate the value thereof and of foreign coin, and, as 
 has generally been assumed, the incidental but not exclusive power to 
 make the money of coinage a legal tender. The States, on the other 
 hand, possess no coining power; but they still retain the legal-tender 
 power, subject to the qualification of being forbidden to make anything 
 but gold and silver coin a tender in payment of debts. Congress being 
 thus authorized to coin money, and the States being thus limited to gold 
 and silver coin in providing for a legal tender, the result is that coined 
 money as the legal tender is secured in respect to both Governments. 
 
 The Legislature of New York, exercising the power thus reserved to 
 every State, has seen fit to declare by law that all contracts made and' 
 payable in that State after January 1st, 1879, and stipulating for pay- 
 ment in dollars, but not specifying the kind of dollars, shall be payable 
 in United States coin. In so doing it does not violate the Constitution 
 ■of that State, and does no more than the Federal Constitution recognizes 
 its right to do it at any time, and no more than it equally recognizes the 
 right of every other State Legislature to do. Has Congress, then, the 
 power at the same time to say, as against this statute, when it shall go 
 into effect, that all debts in the United States (of course, including those 
 in the State of New York contracted after the date specified) shall be 
 payable in the note obligations of the Government issued in pursuance 
 of the Legal-tender Acts 1 Has Congress the right to supersede the 
 ■operation of State laws, when those laws lie within the limits of powers 
 
THE LEGAL-TENDEE POWEE OF THE STATES. 53- 
 
 reserved to the States 1 Is the Constitution self-contradictory? Does it 
 concede and recognize the legal-tender power of the States in application 
 to gold and silver coin, and at the same time authorize Congress to 
 nullify the exercise of this State power by making Government notes a 
 legal tender in defiance of that exercise ? 
 
 If Congress, in the exercise of.its power to borrow money, and for th& 
 sake of borrowing at a cheap rate of interest, should pass a law providing 
 that in all individual contracts for the loan of money four per cent, should 
 be the highest legal rate, no one would hesitate a moment in pronouncing 
 the law a palpable interference with the reserved right of the States ta 
 regulate contracts in respect to the rate of interest. Congress may 
 stipulate for whatever rate it chooses on the bonds which it authorizes 
 in the process of borrowing money : but plainly it cannot regulate th& 
 interest rate in the several States, as between individuals, without coming 
 into conflict with the reserved rights of the States. So if the States^ 
 exercising the power which the Constitution has not withdrawn, but 
 distinctly conceded to them, shall declare that all contracts for the 
 payment of money shall be payable in the gold and silver coin of th& 
 United States, can Congress interfere with this legislation by providing 
 that such contracts shall be payable in United States notes 1 Is notthis; 
 gold and silver coin constitutional money 1 Is it not clearly implied in 
 the Constitution that the States have the power to make it a tender in 
 the payment of debts 1 How then can Congress subvert such legislation, 
 or defeat its operation, any more than it can subvert or defeat State 
 legislation in respect to the rate of interest? It plainly cannot do so 
 under the warrant of the Constitution, without supposing the Constitu- 
 tion to be inconsistent with itself. We have in it a clear recognition of 
 the State right to make gold and siver coin a tender in the payment of 
 debts ; we have, still further, the absence of any express power in Con- 
 gress to make the note obligations of the Government a legal tender ; 
 and, this being so, there can be no implied power in Congress to bestow 
 the legal-tender property upon these or any other obligations — certainly 
 not as against State legislation, which makes debts payable in gold and 
 silver coin. Congress cannot thus nullify the legal-tender laws of a State 
 without invading its jurisdiction. Its rights within their constitutional 
 sphere are beyond the reach of Federal legislation. 
 
 Whether the Legal-tender Acts of 1862 and 1863 will be repealed 
 or not before January 1st, 1879, it is impossible to tell; yet, be this as 
 it may, the legal-tender act of the New York Legislature, unless it shall 
 in the mean time be repealed, will then put an end to their practical 
 operation in respect to all contracts coming within the limits of its 
 description. This act is not based at all upon the supposition that the 
 
54 THE LEGAL-TENDER ACTS. 
 
 legal-tender legislation of Congress will then be out of the way. It 
 hangs upoo no contingency. It is positive and absolute, and declares 
 that the contracts described shall be payable in United States coin, and 
 that, too, whether the Legal-tender Acts of Congress are repealed or not. 
 And in taking this position, the Legislature of New York has simply 
 exercised a power which it has under the Constitution, and which equally 
 belongs to every other State. 
 
 The States have, then, only to exercise this power in respect to the 
 discharge of contracts, and thereby make them payable in the coin of 
 the United States, and the Legal-tender Acts in legal effect come to an 
 end, unless the courts, and especially the Supreme Court of the United 
 States, should take the ground that ,no State has the right to make debt 
 contracts payable in gold and silver coin so long as Congress says that 
 they may be paid in the notes of the United States. This, in plain 
 language, would be equivalent to saying that, so long as Congress chooses 
 to make United States notes a legal tender, no State can exercise its 
 reserved right to make contracts within its own jurisdiction payable in 
 gold and silver coin. It would be equivalent to saying that what the 
 Constitution clearly says the States may do Congress has the right to 
 say that they shall not do. It would be equivalent to abrogating a con- 
 stitutional State right by the legislation of Congress. It would, in short, 
 be equivalent to an alteration of the Constitution by a legislative en- 
 actment. 
 
 The payment of private debts in the several States is to be enforced 
 by State laws, through the agency of State courts ; and the prohibitory 
 mandate against making anything but gold and silver coin a tender in 
 payment of debts, being addressed 'to the State Governments, including 
 toth Legislatures and Courts, clearly implies that such coin, and such only, 
 was to be the medium of compulsory payment. Upon this point we 
 quote, as follows, the deliverance of Judge Denio, of the Court of Ap- 
 peals of the State of New York, in the case of the Metropolitan Bank 
 V. Van Dyck (27 Ifew York Beporis, 13 Smith, p. 543), decided in 
 1863: 
 
 " When the State Legislatures which are to establish the legal prin- 
 ciples respecting payments, and the courts which are judicially to 
 determine what shall be payments in any given instance, are forbidden 
 by paramount and supreme authority to make anything but coins struck 
 from the precious metals a payment, the natural and, I think, the in- 
 evitable result is that nothing except such coins can be adjudged to be 
 payment in any case whatever. And when, in connection with such in- 
 hibition, we find ample provision made by the supreme authority for 
 the supply of such coins by fabrication and by the adoption of those 
 coming from abroad, I cannot doubt that it was the persistent design of 
 
LIMITATION OF LEGISLATIVE POWER. 
 
 6^ 
 
 the Constitution, which contains these mandates, to require as a funda- 
 mental policy the exclusion of everything else than the coins indicated 
 from the attribute of compulsory payments." 
 
 Any different reading of the Constitution makes the instrument self- 
 contradictory. 
 
 VII. 
 
 LIMITATION OF LEGISLATIVE POWER. 
 
 Law, for the purpose of enforcing contracts, claims the right to de- 
 cide as to the class of persons legally competent to make contracts and 
 as to the subject-matter of the contracts to which it will give its support. 
 A lawful contract is, hence, one in which the parties have the " contract- 
 ual capacity," and in which the contents of their agreement lie within 
 the scope of legal recognition. To such contracts legal rights attach and 
 out of them legal duties arise, and this is what is meant by the obliga- 
 tion of contracts. The contracting parties are left free to make their 
 own bargain, and what the law does is not to make a new bargain for 
 them or alter the one they have made, but to bind them to good faith 
 with each other according to the terms of their contract. This it does 
 by ascertaining what the contract is and providing a suitable remedy 
 against its non-fulfillment. 
 
 Monetary contracts, or those in which money is stipulated to be paid 
 by one party to the other, are embraced in these general principles of 
 law. Money, in some form, is one of the most universal terms of con- 
 tracts. The connection between contracts and money is, hence, so inti- 
 mate, ifo constant, and so important, that law justly assumes and exer- 
 cises the right of determining what shall be money. It must do so in 
 order to supply a general rule for courts in the enforcement of contracts. 
 That which is the standard for computing and expressing all other values, 
 and is therefore the medium of exchange transactions, and to which 
 courts must refer in enforcing money contracts, ought to have a definite 
 and fixed character, known to the law and established by law. What law 
 can do on this subject is contained in two statements : 1 . It can, as its 
 own exclusive right, provide the process of furnishing the money of use 
 within the limits of its own jurisdiction. 2. It can make this money a 
 legal tender in payment of debts, Such money is "lawful money." It 
 has the sanction of law, and hence the general rule is that whatever has 
 this sanction is money. 
 
56 THE LEGAL-TENDEE ACTS. 
 
 It would, however, be a very serious mistake to assume that law is 
 omnipotent as the creator and establisher of money, and can, therefore, 
 make one thing serve as money just as well as another. There are some 
 things on this subject which law cannot do, and there are others which 
 it ouffht not to do '; and both classes are limitations upon its power. 
 
 Underlying the exchange transactions of society, we find the two 
 generic elements of quantity as determined by a standard of weight or 
 extension, and of value as ascertained and fixed by a standard of value. 
 Each must have a standard, and it is the province of law to select and 
 define a suitable standard for each. The Constitution assigns this duty 
 to Congress in the grant of power "to coin money, regulate the value 
 thereof and of foreign coin, and fix the standard of weights and meas- 
 ures." In the exercise of this power. Congress is subject to certain limi- 
 tations which grow out of the nature of things. Take, for example, a 
 standard of weight. What Congress can here do is to establish such a 
 standard by fixing upon something that has weight, and by declaring 
 that as the unit of weight it shall be the means of computing and ex- 
 ' pressing all other quantities by weight. To this unit and to its multiples 
 or its divisions it can give names that shall be both definite and intelli- 
 gible, as forming a part of the language of contracts. It can do the same 
 thing in respect to the measures of extension ; but in regard to neither 
 can it create the weight or the extension, or make that a standard of 
 weight which has no weight, or that a standard of extension which has 
 no extension. The standard of quantity must have quantity, either by 
 extension or weight ; and this necessarily limits the law-making power 
 in fixing " the standard of weights and measures." 
 
 Precisely the same necessity applies to money, considered as the 
 standard or measure of values. It is only by its own value that it can 
 compute other values. When a specific commodity is selected from all 
 the rest, whether by usage or by law, as the commodity which shall per- 
 form the functions of money in computing the value of other things, and 
 on this account be exchangeable for them, the very first condition of the 
 selection is that the commodity should have value independently of the 
 selection, founded on the twofold fact that men desire it and use it for 
 other purposes, and that it takes labor to produce it. This fact is not 
 created by the selec.tion. Those who talk about money as having no 
 value in the material of which it is composed, are talking about that 
 which has no exchange power, to which no legal enactment can impart 
 such a power, and which, hence, cannot compute the value of other things. 
 Their kind of money fails in the most elementary function of money. 
 They might as well talk about a standard of weight that has no weight or 
 a standard of extension that has no extension. Credit ts\q>xi&j , so called,. 
 
LIMITATION OF LEGISLATIVE POWEE. 57 
 
 is not money at all in the real sense, but simply a. promise to pay money. 
 Take from the United States notes the dollars which stand behind them 
 as the thing promised, and thus let the question be settled that the 
 promise is never to be fulfilled, and the value of these notes at once sinks 
 to the level of the paper composing them ; and nobody pretends that the 
 paper itself has anything to do %yith their monetary character. 
 
 If, for example, Congress should repeal all its coinage and legal- 
 tender laws, and substitute iron coins of the same weight as that of gold 
 and silver coins, and then declare them to be dollars and multiples of 
 dollars, having the same legal value as the present coins ; or if it should, 
 abandon coinage altogether, and adopt pieces of stamped paper, giving 
 to them the names and legal-tender power of these coins, does any one 
 suppose that such substitutes, though having all the sanction that law can 
 give to moneyj would or could take the place of gold coins and circulate 
 at the same value ? Can Congress by mere law legislate into an ounce 
 of iron or an ounce of paper the value that naturally belongs to an 
 ounce of gold 1 He who thinks that this can be done by law is beyond 
 the reach of discussion . The laws of value are older and stronger than 
 human statutes, were never made by them, and can never be unmade 
 by them. The very nature of things imposes limitations upon legisla- 
 tive power when exercised in establishing a standard of quantity or one 
 of value. The exercise is rather declarative than creative. 
 
 Now, from these limitations in respect to standards of quantity 
 and value arises another, which, considered in relation to public policy 
 and the claims of justice, is of the utmost consequence to human society. 
 This resulting limitation we state as follows : It is not a legitimate 
 exercise of the law-making power of any Government, whether placed 
 under any express restraints or not, to alter these standards, or substitute 
 new and different ones for them, or add new and different ones to them, 
 when they have once been established and as such have entered into the 
 language and terms of lawful contracts, and at the same time to make 
 these contrasts legally solvable, not according to the old standards under 
 which they were made, but according to the new and different standards 
 subsequently adopted. If there is anything settled among nations that 
 have any claim to civilization, then these two principles are settled : 
 1. That individuals have the right, within the limits of law, to make con- 
 tracts which the law will recognize and enforce. 2. That the duty of law 
 is to enforce such contracts according to the terms agreed upon by the 
 parties at the time they were made. Chief Justice Chase implied one 
 of these principles and affirmed the other when he said : " It is the 
 . appropriate function of courts of justice to enforce contracts according to 
 the lawful intent and understanding of the parties." 
 5 
 
58 _ THE LEQAL-TENDEE ACTS. 
 
 Let US then suppose that A. agrees to deliver to B.at a certain date a 
 hundred jfards of cloth of a specified kind, for which upon delivery B. 
 agrees to pay to A. one hundred dollars. The elements of this contract 
 are the kind of cloth, its quantity by yards, the time of delivery, and the 
 payment therefor in the stipulated number of dollars. The yard element 
 and the dollar element in the contract were defined by law when the 
 contract was made, and as thus defined they were incorporated by the 
 parties into the contract itself. Congress, however, we will further sup- 
 pose, sees fit, after the contract is made and before the time of delivery, 
 to exercise its power " to fix the standard of weights and measures," and 
 in doing so changes the meaning of the word " yard," making it a larger 
 or smaller measure of quantity, and then declares that in all contracts, 
 whether made or to be made, in which this word occurs, the term shall 
 be taken in the new sense assigned to it. Is this a legitimate exercise 
 of the power "to fix the standard of weights and measures V Concede 
 —what is undoubtedly true — that Congress may establish a new yard 
 for future contracts ; but plainly it cannot by its power to fix* the yard 
 measure change the yard quantity in application to previous contracts. 
 There is a law of eternal propriety and right that lies back of all consti- 
 tutions and all legal power, which forbids such an invasion of a lawful 
 contract by changing the meaning of one of its fundamental terms. The 
 parties meant the old yard, the one established by law at the time ; and 
 Congress, surely, cannot make the new yard the same thing by giving it 
 the same name. The " higher law " says that the old yard shall stand 
 for the purpose of the contract in question, and, hence, limits and 
 qualifies the power of Congress " to fix the standard of weights and 
 measures." 
 
 The other element in this contract fixed by law is the dollar element. 
 In the contract, as made, B. agreed to pay and A. agreed to receive, on a 
 certain condition, one hundred dollars. There is no .difficulty about 
 these dollars as to their number. What were they as to their kind? 
 At the time the contract was made, a dollar was the statute denomina- 
 tion of a piece of gold or silver weighing a prescribed number of grains, 
 having a prescribed degree of purity, and stamped by the authority of 
 the United States. Such was the legal definition of a dollar, and there 
 was then no other dollar. This is, of course, the dollar meant by the 
 parties — the dollar that the one agreed to pay and the other agreed to 
 receive. It is the dollar of the contract. Suppose then that before the 
 contract matures, Congress steps into the scene, with the exercise of the 
 coining power, the borrowing power, or any other power, and makes 
 what is called a note dollar, which is simply a promise to pay a coined 
 dollar, the legal equivalent of a coined dollar, for the purpose of se.ttling 
 
LIMITATION OF LEGISLATIVE POWEE. 69 
 
 this contract between the parties. The case will then stand thus : A. 
 must deliver to B.-the amount of cloth agreed upon as fixed by the num- 
 ber of yards specified ; and B. may deliver to A. the dollars stipulated in 
 the contract, or he may deliver the note dollars subsequently authorized 
 by Congress, and either will be a legal tender in fulfilling his part of the 
 bargain, no matter whether these note dollars are worth anything or not. 
 This is the case actually presented by the Legal-tender Acts of 1862 and 
 1863. These acts created what are called note dollars, paper dollars, 
 promise dollars, and for the purpose of paying debts made them 
 identical with real dollars by giving them the same legal value. Now, 
 the question is not whether Congress has the coining power, and not 
 whether it has the borrowing power ; but whether it is a legitimate ex- 
 ercise of the powers of any Government to establish a new medium of 
 payment, and in effect a new standard of value, and make this medium 
 applicable at its legal value to the payment of previously contracted debts. 
 The question is not whether this has sometimes been done ; but whether it 
 is a thing which ouffht ever to be done, yea, whether it does not exceed the 
 legitimate powers of Government over money. If a Government, by 
 giving to two different things the same name and the same legal 
 value, could also make them the same in actual value, then the 
 difference of things would not affect the value. This, however, 
 cannot be done. Coins of different weight, though declared to have the 
 same legal value, are not of the same actual value. Coined dollars and 
 note dollars, though by law made equivalents in the payment of debts 
 and discharge of contracts, are not only different things, but are not by 
 this law made actual equivalents. Is it, then, a just exercise of legislative 
 power to make things in legal effect equal to each other that are nof 
 equal to each other, and cannot be made so by any amount of statutory 
 enactment ? Is it a just exercise of this power to say to A., who stipulated 
 for real dollars in a contract with B., that the latter may pay and the 
 former shall receive note dollars, or mere promises to pay dollars? 
 Does not this violate the fundamental principle that lawful contracts are 
 to be enforced according to the intent and understanding of the parties as 
 indicated by their terms ? 
 
 Justice Strong, in the last legal-tender decision of the Supreme Court 
 of, the United States, disposes of such questions by saying that " the 
 obligation of a contract to pay money is to pay that which the law shall 
 recognize as money when the payment is to be made." This may do as 
 a general rule for courts, provided the law itself be constitutional ; but 
 back of this rule lies the important question whether the money which 
 the law establishes at the time of payment is the money which it did 
 establish at the time of the contract, and which was therefore the money 
 
60 THE LEGAL-TENDEE ACTS. 
 
 of the contract. If it be a diiferent thing at the two periods, especially 
 if the difference Le a great one, then the nnoney of payment and the- 
 money of the contract, when compared together, clearly show that law 
 has outraged the rights of individuals; and this is just what law should 
 never do. The general maxim that whatever the law maizes money is 
 money, and that is the end of it, furnishes a very poor apology for such 
 legislation. The powers of law over money are or ought to be qualified 
 and limited by the nature of the transactions iijvolved in the use of 
 money and the nature of the service rendered by money. It will not do 
 in a just estimate of things, to quote the above maxim, and then under 
 this theory debase the coinage of a country twenty-five per cent, or sub- 
 stitute paper promises for real money. This assumes that law has no 
 rule but its own pleasure, and that it can change the standard of value 
 and the medium of payment as often and as much as it pleases, asking 
 no questions and giving no answers. It arms law with the powers of a 
 despot, and leaves to the individual no reserved rights which law may 
 not invade. 
 
 The simple truth on this subject is that, while it is the province of 
 law to determine what shall be money, and while it is not beyond its 
 province to revise and change its own action, it should never make such 
 changes retrospective in their operation, since it cannot do so without 
 directly perpetrating injustice. Contracts lawfully made and involving 
 the obligation to pay money ouffht to be settled according to the- 
 standard of value established by law when they were made, and which, 
 therefore, formed one of the vital conditions of the contracts themselves. 
 Law ought to be limited by this principle of justice, founded on in- 
 dividual rights. It cannot work miracles. It cannot make twelve grains 
 of gold equal in value to twenty-four grains by giving the same name to 
 both. It cannot make the promise to pay a dollar equal to a dollar by- 
 declaring that it shall have the same legal value in the payment of debts.. 
 And, not being able to do these things, it should never attempt to do 
 that thing which involves gross injustice, as between debtor and creditor, 
 by changing the medium of payment. The injustice is precisely the 
 same as if the law should change the standard of weights and measures, 
 and make the change retrospective in its action, and thus alter the im- 
 port of all the previous contracts in respect to the question of quantity. 
 The standards of quantity and value, being once established and in- 
 corporated into the language of contracts, are the only just rule of 
 settling those contracts ; and hence they are limitations upon legislative 
 power against any changes that violate these contracts. It is quite true 
 that Governments have not always acted upon this principle; and it is. 
 ust as true that they have not always done right. 
 
LIMITATION OF LEGISLATIVE POWER. 61 
 
 It is then a grave objection to the Legal-tender Acts of 1862 and 
 1863, outside of the Constitution altogether, that they violate the" higher 
 law " of justice, by -which all legislation in relation to money should be 
 governed. They do so by giving to United States notes a legal character 
 •different from their actual character and different from the standard of 
 value under which lawful contracts were made prior to their issue, and 
 by compelling the acceptance of these notes at their face value in the 
 (Settlement of such conti-acts. No ingenuity can relieve this legislation 
 from the charge of injustice. Considered in relation to the medium of 
 payment and in relation to obligations previously assumed, it is an open 
 and undisguised authorization of a breach of faith between contracting 
 parties. 
 
 . The Supreme Court of the United States, in the cases of Bronson 
 V. Rodes, and Butler v. Horwitz, (7 fVallace, p. 229-262), decided that 
 the Legal-tender Acts have no application to contracts expressly stipulat- 
 ing for payment in coin. If this be sound doctrine, then the acts ought 
 to have no application to contracts which, in the intention and under- 
 standing of the parties, are thus payable. The legal significance of ex- 
 press words- is to make clear the intention or understanding of the con- 
 tracting parties ; and when this is evident, whether by express words or 
 not, the rule of law is furnished. A standard of value which the law 
 •establishes as one of the elements in lawful contracts commits the con- 
 science and integrity of the law, if it has such qualities at all, to the main- 
 tenance of that standard in the settlement of those contracts. This 
 principle is admitted by Justice Strong in respect to standards of 
 quantity. Why is it not just as sound a principle in respect to a standard 
 ■of value ? There is really no distinction between the two so far as they 
 impose the limitations of justice upon the action of law in respect to 
 them. When they become elements of lawful contracts they enter into 
 the composition of vested individual rights ; and these rights it is the 
 4uty of law to protect, and not to impair or destroy. 
 
 The Legislature of the State of New York has embodied the principle 
 liere urged in the statute, referred to in a previous article, which pro- 
 vides that every contract made after January 1st, 1879, "payable in 
 dollars, but not in a specified kind of dollars, shall be payable in United 
 States coin of the standard of weight and fineness established by the laws 
 of the United States at the time such contract or obligation shall have been 
 made or implied.^'' This makes the standard established by law at the 
 time of the contract the standard of the payment, and this is manifestly 
 just. Should Congress see fit to change the gold dollar by increasing 
 or decreasing the quantity of gold contained in it, the Legislature of the 
 Sitate of New York says that all debts contracted prior to this change 
 
62 THE LEGAL-TENDEE ACTS. 
 
 and payable in dollars, without any specification of the kind of dollars^, 
 shall be payable in the present coined dollars of the United States, and 
 not the new ones created by such a change. Or, should Congress see- 
 fit to issue more paper dollars or to continue the present ones in circula- 
 tion, the Legislature adopts precisely the same principle in respect to- 
 the question of payment. The dollar of the contract is to be the dollar 
 of the payment, and when the contract simply specifies dollars generally, 
 the law construes the term to mean the coined dollars of the United 
 States at the time of the contract. This is honest and right. 
 
 The plain truth is that money — genuine money, and not the pre- 
 tense of the thing — is bought and sold by the rule of .quantUi/, just as 
 really as wheat or corn or any other commodity. The reason why a 
 bushel of wheat is worth more than a peck of wheat consists in the fact 
 that the bushel contains more wheat than the peck. So the reason why 
 a gold eagle is worth more than a gold dollar consists not in the name 
 of either, but in the fact that the former contains more gold than the 
 latter. What the Government do.es in respect to real money is to weigh 
 it and certify to its purity beforehand, and thus relieve the people from 
 the necessity of doing these things for themselves. To change the weight 
 or change the purity, and yet compel the people to receive the money at 
 its previous legal value because the same names are used ,is a fraud upon 
 the public. 
 
 VIII. 
 
 CONSTRUCTION OF THE LEGAL-TENDER ACTS. 
 
 Duties on imports and interest on the bonds and notes of the United- 
 States are in express terms declared not to be payable in legal-tender 
 notes. There is, hence, no question of construction in respect to these 
 particulars, since the acts authorizing the notes are themselves entirely 
 explicit. 
 
 No specific reference, however, is made in these acts to the payment 
 of the principal of the bonded debt of the United States ; and this gives 
 the opportunity for raising the question whether the legal-tender notes 
 are applicable to this debt. Not long after the close of the war, the 
 ground was taken by a certain class of politicans that, except where the 
 stipulation expressly provides for payment in coin, the principal of the- 
 debt is payable in these notes. This construction was based upon the 
 fact that the law of their issue makes the notes receivable for " all claims 
 and demands against the United States, of every kind whatsoever," and 
 
CONSTKUCTION OF THE LEGAL-TENDEE ACTS. 63 
 
 also " lawful money and a legal tender in payment of all debts, public 
 and private, within the United States," with the exception of duties on 
 imports and interest on the bonds and notes of the Government. The 
 advocates of this theory insisted that these words, in the absence o*"any 
 express stipulation to the contrary, apply to the bonded debt of the 
 United States as really as to any other public or any private debt ; and 
 it must be confessed that, if such was not the intention of Congress, as is 
 undoubtedly the fact, the acts themselves were ia this respect carelessly 
 drawn. The Democratic party, by its National Convention of 1868, 
 declared that " where the obligations of the Government do not expressly 
 state upon their face, or the law under which they were issued does not 
 provide that they shall be paid in coin, they ougTit in right and in justice 
 to be paid in the lawful money of the United States." The contrast 
 here made between coin and this " lawful money " shows that legal- 
 tender notes were meant by the latter. 
 
 On this issue, among others, the Democratic party went into the 
 Presidential election of that year, and both the theory and the party 
 were rejected by the people. The first bill signed by President Grant 
 after his inauguration, known as the Public Credit Act, expressly 
 declares that ''the faith of the United States is solemnly pledged to the 
 payment in coin or its equivalent " " of all interest-bearing obligations 
 of the United States, except in cases where the law authorizing the 
 issue of any such obligation has expressly provided that the same may 
 be paid in lawful money or other currency than gold and silver." This 
 legislative construction undoubtedly represents the understanding of 
 both Government and people when the Legal-tender Acts were passed 
 and when the obligations were negotiated. The Treasury Department 
 of the Government has uniformly acted upon this view. Some of the 
 bonds of the United States stipulate simply for payment in dollars, 
 while others specify the kind of dollars ; and the established construction 
 is that all the bonds of the Government are payable in coined dollars, 
 unless the law of their issue otherwise provides. Even Mr. Pendleton 
 concedes this since the passage of the Public Credit Act of 1869. The 
 point is now as well settled as anything can be that depends on human 
 action. Any departure from this principle in the practice of the 
 Government would justly render the nation infamous in the eyes of the 
 world. 
 
 The different States of the Union, with the exception of California 
 and Massachusetts, have treated the legal-tender notes as applicable to 
 the payment of the interest and principal of State bonds, whether issued 
 before or after the passage of the Legal-tender Acts, unless the stipula- 
 tion expressly requires payment in coin. Such has been and still con- 
 
64 THE LEGAL-TENDEE ACTS. 
 
 tinues to be the general practice of the States. And, although this con- 
 struction comes within the language of the law, it is not the less true 
 that, in application to all ante-war State debts, it is simply a fraud under 
 the color of law by withholding from creditors a part of what was 
 agreed to be paid. The Legal-tender Acts did not compel the States to 
 take this course, but merely gave them the opportunity of doing so. 
 There is no doubt that State debts previously contracted and made 
 payable in dollars were, as to principal and interest, understood by both 
 borrower and lender to be payable in coin, and not in Government or 
 any other promises; and this understanding was and is the moral law 
 of the contract, as really as if it had been put in express words. Not to 
 comply with this understanding is so far to repudiate the contract. 
 
 " It is expected," said Justice McLean of the Supreme Court of the 
 United States, " that the action of a sovereign State will be characterized 
 by a more scrupulous regard to justice and by a higher sense of morality 
 than belong to the ordinary transactions of individuals." A State can- 
 not be sued against its own consent; and, hence, its creditors must rely 
 wholly upon its integrity and sense of honor. If this fails, law affords no 
 coercive remedy. Massachusetts has chosen not to repudiate her obli- 
 gations, and if all the States had followed her example, they would have 
 dealt honestly and fairly with their creditors. What she did was to 
 keep her faith, and this is just what every Government ought to do. 
 Ex-Secretary McCulloch, in his recent letters published in the New 
 York Tribune, alludes to this form of repudiation by the States as 
 among the reasons which have contributed to impair American credit in 
 foreign countries. Many of their bonds were held in Europe ; and many 
 of them.have been paid in a depreciated paper currency, made "lawful 
 money " by the act of Congress. It is not at all surprising that foreign 
 creditors should look upon such payment as a species of legalized 
 swindling. 
 
 In respect to obligations containing an express stipulation for pay- 
 ment in gold, the Supreme Court of Iowa, in the cases of Warnibold v. 
 Schlicting, and Troutman v. Gowing, took the ground which was subse- 
 quently reaffirmed by the court in the case of Hintrager v. Bates (18 Iowa 
 Reports, p. 174), decided in 1864, " that the payee of a promissory note, 
 payable in gold, was compelled to accept legal Treasury notes in pay- 
 ment, and that a party could not make a contract which would compel his 
 debtor to pay one rather than another kind of money which the law-mak- 
 ing power has declared equivalent." So also the Court of Appeals of the 
 State of New York, in the case of Bronson v. Rodes, held that a con. 
 tract made before the passage of the Legal-tender Acts, payable ex- 
 pressly " in gold and silver coin, lawful money of the United States,' 
 
OONSTEFCTIOI^' OF THE LE&AL-TENDER ACTS. 66 
 
 might be satisfied by the tender of United States notes. This question 
 came before the Supreme Court of the United States, in 1868, in the 
 cases of Bronson v. Rodes and Butler v. Horwitz (7 Wallace, pp. 229- 
 262) ; and in both the Court held that contracts expressly stipulating 
 for payment in coin " cannot be discharged by a tender of United 
 States notes issued under the Loan and Currency Acts of 1862 and 
 1863, and by them declared to be lawful money and a legal tender for 
 the payment of debts." The Court expressed no opinion on the consti- 
 tutionality of these acts ; but simply held that they had no application 
 to contracts whose express terms require payment in coin. Coined 
 dollars are a legal tender, as well as note dollars ; and, hence, where 
 the former are specifically named as the medium of payment, the con- 
 tract is in " substance and legal effect a contract to deliver a certain 
 weight of gold or silver, of a certain fineness, to ' be ascertained by 
 •count." It follows from this decision that the people, or any portion 
 of them, can, whenever they please to do so, practically repeal the 
 operation of the Legal-tender Acts. All they have to do is to stipu- 
 late in express words for coin payment. Such has been the practice in 
 California, and hence, business in that State has for the most part been 
 conducted on the basis of the gold dollar. 
 
 Another question of construction came before the Supreme Court of 
 the United States in 1868, in the ease of Lane County v. Oregon (7 
 Wallace, p. 71); and the decision of the Court in this case was that 
 " the clauses in the several acts of Congress of 1862 and 1863, making 
 United States notes a legal tender, have no reference to taxes imposed 
 by State authority." " Debts originating in contract or demands car- 
 ried into judgment, and only debts of this character," were held to come 
 within the provisions of the act. Taxes imposed by State authority 
 are not such debts — indeed, in their essential characteristics they are 
 are not debts at all, but rather imposts " levied by authority of Govern- 
 ment upon its citizens ; " and, hence, the acts of Congress making 
 Treasury notes a legal tender have no relation to them. Whether a 
 State shall assess and collect its taxes in coin or in legal-tender notes is, 
 then, a question for its own discretion. It may do either, unaffected 
 by the legislation of Congress. The Last legislature of the State of 
 New York passed a law providing " that all taxes levied and confirmed 
 in this State on and after January 1st, 1879, shall be collected in gold. 
 United States gold certificates, or national bank notes which are re- 
 deemable in gold on demand." This law, according to the decision of 
 the Supreme Court in the above case, is not in conflict with the Legal- 
 tender Acts. 
 
 One of the questions considered by the Supreme Court of the 
 
66 
 
 THE LEGAL-TENDER ACTS. 
 
 United States, in the case of Hepburn v. Griswold (8 Wallace, p. 603), 
 and a year afterward considered by the same Court, in the cases of 
 Knox V. Lee and Parker v. Davis {12Wallace, p. 457), was whether the 
 Legal-tender Acts are applicable to contracts for the payment of 
 money made before their passage, as well as to those made afterward. 
 In the first of these cases it was held that the acts apply to both classes 
 of contracts, and that so far as they relate to contracts made before 
 their passage, the acts themselves are unconstitutional. In the other 
 two cases the doctrine of the Court was that the acts comprehend both 
 classes of contracts, and that in respect to both they are constitutional. 
 This reversed so much of the former decision as affirmed the unconsti- 
 tutionality of the Legal-tender Acts. 
 
 Those who favor further issues of legal-tender notes, and propose to 
 make them either the whole or a part of the permanent paper currency 
 of the country, have assumed that the last decision of the Supreme 
 Court has settled the question, that Congress has the constitutional 
 power to authorize such issues at any time and for any purpose, in peace 
 as well as in war. This assumption is not at all justified by the decision 
 itself. What the Court affirmed is that the Legal-tender Acts of 
 1862 and 1863 were constitutionally valid at the time of their enact- 
 ment, and in the peculiar emergency created by the late war, by no 
 means committing itself to the general proposition that similar acts 
 would be equally valid at all times and for all purposes. Justice 
 Strong, in stating the opinion of the majority of the Court, held the 
 following language : 
 
 " This brings us to the inquiry whether they [the Legal-tender 
 Acts] were, when enacted, appropriate instrumentalities for carrying 
 into effect or execution any of the known powers of Congress or of any 
 department of the Government. Plainly, to this inquiry a considera- 
 tion of the time when they were enacted, and of the circumstances in 
 which the Government then stood, is important. It is not to be denied 
 that acts may be adapted to the exercise of lawful power, and appro- 
 priate to it in seasons of exigency, which would be inappropriate at 
 other times" (12 Wallace, p. 540). 
 
 The learned Justice then proceeded to describe the war exigency 
 which existed at the time, and based the opinion of the Court in part 
 upon this state of facts. So also Justice Bradley, in expressing his 
 concurrence with the majority of the Court in the last decision, said : 
 
 " The power to make Treasury notes a legal tender, while a mere 
 incidental one to that of issuing the notes themselves, and to one of the 
 forms of borrowing money, is, nevertheless, a power not to be resorted 
 to, except upon extraordinary and pressing occasions, such as war or 
 other public exigencies of great gravity and importance, and should be 
 
C0N8TETJCTI0N OF THE LEGAL-TENDEE ACTS. 6T 
 
 no longer exerted than all the circumstances of the case demand" {12 
 Wallace, p. 567). 
 
 These utterances would seem to indicate that the Court, whatever 
 may be said in respect to the logic of its decision, did not mean to 
 declare that Congress may, at any time and under any circumstances, 
 annex the legal-tender quality to the debt obligations of the Gov- 
 ernment. The Legal-tender Acts were sustained only on the ground 
 of a special emergency ; and even on this ground the previous de- 
 cision of the Court was overruled by a majority of but one. The 
 majority opinion is very far from authorizing the inference of those 
 who, in the state of peace, when the nation is in no peril, propose to 
 continue the issue of legal-tender notes for the ordinary purpose of 
 supplying a paper currency. 
 
 Mr. E. G. Spaulding, who introduced the first Legal-tender Act into 
 the House of Representives, in a letter dated December 8th, 1868, al- 
 ludes to the crisis which in his judgment called for the measure, and then 
 proceeds to say : 
 
 "In this great crisis I advocated the bill as a war measure — a meas- 
 ure of temporary relief to the Treasury, and on the ground that it was 
 an imperative necessity, to preserve the life of the nation. I conceded 
 that it was a forced loan, and could only be justified on the grounds of 
 necessity. * * * J am equally clear that as a peace measure it is 
 unconstitutional. No one would now think of passing a Legal-tender 
 Act making the promises of the Government (a mere form of credit) a 
 legal tender in payment of all debts, public and private. Such a law,, 
 passed while the Government is on a peace footing, could not be sus- 
 tained for one moment." 
 
 Whether Mr. Spaulding is correct in assuming that the Government 
 really has greater powers in war than in peace we do not pause to in- 
 quire ; yet he was certainly mistaken ift supposing that no one would 
 claim the legal-tender power for Congress in respect to Treasury notes in 
 the time of peace. Whatever may have been the fact in 1868, the num- 
 ber of persons who now make the claim is by no means inconsiderable ; 
 and the probability is that this question will be one of the most promi- 
 nent issues before the people in the next Presidential election. A better 
 statement in respect to the Legal-tender Acts was made by Secretary 
 Tessenden, in 1865, when he said : 
 
 " The right of Congress to borrow money and to issue obligations for 
 loans in such form as may be convenient is unquestionable ; but the au- 
 thority to issue obligations for a circulating medium as money and to 
 make these obligations a legal tender can only be found in the unwritten 
 law, which sanctions whatever the representatives of the people, whose 
 duty is to maintain the Government against its enemies, may consider in 
 a great emergency necessary to be done." 
 
68 THE LEGAL-TENDEE ACTS. 
 
 This concedes that such a measure does not lie within the limits of 
 the powers granted to Congress by the Constitution ; and this admission, 
 with all due respect to the Supreme Court of the United States, contra- 
 dicting itself in its two decisions on this subject, is according to the fact. 
 The only warrant for the measure, even in war, is an " unwritten law " — 
 ■a law not in the Constitution ; and such a warrant is a very dangerous 
 •one for a Government to act upon that derives all its powers from a writ- 
 ten Constitution. The precedent furnished by an overwhelming emer- 
 gency and defensible only by an " unwritten law " certainly will not do 
 for ordinary times. The safety of our political system and of the peo- 
 ple under it will be best secured by not trusting to an " unwritten law," 
 but by keeping its operations within the landmarks which it prescribes. 
 Justice Bronson, one of the ablest jurists that ever graced the bench of 
 New York State, in the case of Oakley v. Anderson (3 Corns, pp. 547, 
 568), held the following language : 
 
 " Believing, as I do, that the success of free institutions depends on a 
 rigid adherence to the fundamental law, I have never yielded to considera- 
 tions of expediency in expounding it. There is always some plausible 
 reason for the latitudinarian constructions which are resorted to for the 
 purpose of acquiring power — some evil to be avoided or some good to 
 be attained by pushing the powers of the Government beyond their 
 legitimate boundary. It is by yielding to such influences that Constitu- 
 tions are gradually undermined and finally overthrown * * * One 
 step taken by the Legislature or the Judiciary in enlarging the powers 
 of the Government opens the door for another, which will be sure to fol- 
 low ; and so the process goes on, until all respect for the fundamental 
 law is lost and the powers of the Government are just what those in 
 Authority please to call them." 
 
IX. 
 
 THE LEGAL-TENDER DEBT. 
 
 The primary character of the legal-tender notes of the United States 
 is that of a debt obligation, contracted during the late war, and pledging 
 the faith of the country to their payment. These notes, as promises to 
 pay money, come under what the Constitution styles the " securities " of 
 the United States. The fact that they are declared to be "lawful 
 money and a legal tender" in payment of debts does not make them any 
 less evidences of debt. Dispossessed of this character by a formal act 
 of repudiation or by an indefinite postponement of payment, practically 
 equivalent to repudiation, they sink at, once to the level of stamped 
 paper, and Jose all the value imparted to them as Government promises. 
 The Supreme Court of the United States, in. the case of The Bank of 
 New York v. The Supervisors (7 Wall. p. 26), had occasion to define 
 these notes, and in respect to them used the following language .• 
 
 " These notes are obligations of the United States. Their name im- 
 ports obligation. Every one of them expresses upon its face an engage- 
 ment of the nation to pay to the bearer a certain sum. The dollar note 
 is an engagement to pay a dollar, and the dollar intended is the coined 
 dollar of the United States — a certain quantity in weight and fineness of 
 gold or silver, authenticated as such by the stamp of the Government. 
 No other dollars had before been recognized by the legislation of the 
 National Government * * * They [the notes] secure the payment 
 stipulated to the holders by the pledge of the national faith, the only 
 ultimate security of all national obligations, whatever form they may 
 assume." 
 
 It was on this ground that the. notes, unlike gold or silver coin, were- 
 held by the Court to be " exempt from taxation by or under State au- 
 thority." Whether that part of the legislation which makes them "law- 
 ful money and a legal tender " be unconstitutional or not, there can be 
 no dispute about their validity as debt obligations or whether they bind 
 the faith of the Government. 
 
 The Acts of February 25th and of July 11th, 1862, under which 
 three hundred millions of dollars in these notes were authorized, ex- 
 pressly provided that the notes, in sums not less than fifty dollars or 
 some multiple thereof, may at the option of the holders be converted in- 
 to United States bonds of equal amount, bearing gold interest at the rate 
 
TO THE LEGAL-TENDEE ACTS. 
 
 of six per cent, per annum, payable semi-annually, and redeemable at the 
 pleasure of the Government after five years from their date, and payable 
 in twenty years thereafter. This convertible feature, thus incorporated 
 into the law, formed a part of the contract of the Government with the 
 receivers and holders of these notes. By the Act of March 3d, 1863, 
 authorizing the issue of one hundred and fifty millions more, it was pro- 
 vided that the holders of United States notes issued under the two pre- 
 vious acts " shall present the same, for the purpose of exchanging the 
 same for bonds, as therein provided, on or before the 1st of July, 1863, 
 ^nd thereafter the right so to exchange the same shall cease and deter- 
 mine." 
 
 This withdrawal of a right previously guaranteed in the law of issue 
 was, in respect to the first three hundred millions of these notes, a pal- 
 pable violation of the public faith. So long as Congress saw fit to con- 
 tinue the notes in circulation it was bound in honor to perpetuate the 
 convertible right. This right gave to the notes whatever value there was 
 in a six per cent, gold interest bond, and secured the holders against any 
 depreciation below this mark. The Government, in effect, promised to 
 redeem them on demand, not in gold, but in such a bond ; and when 
 Congress passed the Act of March 3d, 1863, limiting the promise to July 
 1st, 1863, and thereafter withdrawing it altogether, it violated the faith 
 •of the nation. The act was also bad, considered as a matter of financial 
 policy ; and this Senator Sherman, of Ohio, has repeatedly adm.itted, and 
 for it expressed his regret, as being a great mistake. The object was to 
 put upon the market a bond at a cheaper rate of interest ; and not only 
 did this object, for the most part, fail of success, but the notes themselves 
 suffered a rapid and great depreciation, as shown by the rise of the gold 
 premium and a corresponding inflation of prices, thus subjecting the 
 Government to a large increase in the cost of war material, and thereby 
 adding to the expenses of the war, besides deranging the whole business 
 operations of the community. Moreover, if the original right of con- 
 version had been continued, as was demanded by good faith, legal-tender 
 notes would not only long since have reached par with gold, but would 
 for the most part, if not entirely, have been funded by the spontaneous 
 action of the people, provided the Government had adopted a policy 
 suited to this end. The increase of interest by an increase of the bonded 
 debt, as the result of funding, would have been a trifle in comparison 
 with the evils which have actually ensued from this mistake. The con- 
 traction of the circulation would have been by the action of the people ; 
 and for any lack of circulation an ample remedy might have been fur- 
 nished in the system of free banking. 
 
 By the second section of the Act of June 30th, 1864, Congress made 
 
THE LEGAL-TENDEE DEBT 71 
 
 another pledge in respect to the legal-tender debt, in the following words : 
 '* Nor shall the total amount of United States notes, issued or to be is- 
 sued, ever exceed four hundred millions of dollars, and such additional 
 sum, not exceeding fifty millions of dollars, as may be temporarily re- 
 quired for the redemption of temporary loan." It was in July of this 
 year that these notes sunk to the point of two dollars and eighty-five 
 cents in notes for a dollar in gold ; and, in view of the great deprecia- 
 which had occurred. Congress thought it expedient to say to the public 
 that the business of manufacturing paper money in the form of forced , 
 loans should go no further. In the space of about twelve months it had 
 authorized the issue of four hundred and fifty millions of dollars in such 
 money * and the consequences in the depreciation of the currency, the in- 
 flation of prices, and speculation in gold were then palpable to every 
 thoughtful eye. Confronted by these facts, Congress saw the necessity 
 net only of stopping at the point then reached,. but also of assuring the 
 public that no more currency of this character should be issued. It fixed 
 a limit not to be exceeded. 
 
 Mr, Hugh McCulloch,becoming the Secretary of the Treasury in 1865, 
 after the war was closed, and believing, and that, too, correctly, that the 
 currency was inflated far beyond the wants of legitimate business, and 
 that the excess was being used to foster dangerous speculation, that would 
 in the end bring disaster, recommended Congress, in his December re- 
 port of 1865, to adopt measures for the gradual payment and retirement 
 of the legal-tender debt. The House of Eepresentatives promptly and 
 almost unanimously passed the following resolution : 
 
 " Mesolved, That this House cordially concurs in the views of the 
 Secretary in relation to the necessity of a contraction of the currency, 
 with a view to as early a resumption of specie payments as the business 
 interests of the country will permit, and we pledge co-operative action 
 to this end as speedily as practicable." 
 
 The sentiment of this resolution found practical expression in the Act 
 of April, 12th, 1866, providing that the Secretary of the Treasury might 
 retire and cancel not more than ten millions of dollars in United States 
 notes within six months from the passage of the act, and thereafter not 
 more than four millions of dollars in any one month. Under this au- 
 thority, the Secretary did retire forty-four millions of these notes, when 
 Congress, by the Act of February 4th, 1868, withdrew the power of 
 any further reduction, leaving the outstanding legal-tender debt at three 
 hundred and fifty-six millions of dollars. 
 
 The next thing that Congress did in respect to this debt we have in 
 a pledge given in the Public Credit Act, approved March 18th, 1869, 
 declaring that " the faith of the United States is solemnly pledged to 
 
72 THE LEGAL-TENDEE ACTS. 
 
 the payment in coin or its equivalent of all the obligations of the Umte(J 
 States not bearing interest, known as United States notes," and that 
 " the United States solemnly pledges its faith to make provision at the 
 earliest practicable period for the redemption of the United States notes 
 in coin." The policy of the Government during the whole of President 
 Grant's first term was to use its surplus revenue in buying up its un- 
 matured bonded debt and leaving the legal-tender debt to shift for it- 
 self! The " earliest practicable period " to make provision for this debt 
 had not come, and hence, no direct effort of any description wys made-, 
 to restore the currency of the country to a sound condition. Theoretically,: 
 the greenbacks were acknowledged to be a debt ; yet practically they 
 were treated as money, pure and simple. Secretary Boutwell's* entire 
 policy was to buy bonds, and leave the currency of legal-tender due- 
 bills to run on the credit of promises unfulfilled. He declined to grap- 
 ple with the elementary question of treating these due-bills as a debt 
 and providing for their payment. In respect to this point his theory 
 was to wait for " the earliest practicable period," which did not come 
 during his secretaryship, and under the purely waiting policy would not 
 come in a century. 
 
 The session of Congress in 1873-74, following the September panic 
 of 1873, was a session of earnest and stormy debate, yet with no action 
 that looked toward making any provision for the payment of the green- 
 back debt. " The earliest practical period " had not then come. The 
 twenty-six millions of retired notes which Secretary Eichardson had is- 
 sued, contrary to the plain meaning of the law, were legalized, and thus 
 the aggregate amount outstanding was carried up to three hundred and 
 eighty-two millions of dollars. The only sensible thing, done on the sub- 
 ject was the President's veto of the first currency bill passed by the two 
 Houses of Congress. 
 
 The first positive step taken by Congress, since April 12th, 1866, 
 that has the slightest show of dealing with legal-tender notes as 
 debts, involving the obligation of payment, we have in the Act of 
 January 14th, 1875. This act specifies January 1st, 1879, as the period 
 on and after which the Government pledges itself to redeem United 
 States notes in specie, and thus to treat them as demand obligations, and 
 also authorizes the Secretary of the Treasury to make provision for car- 
 rying the pledge into effect, directing him in the mean time to retire these 
 notes at the rate of eighty per cent, of the additional bank notes that 
 may be issued. The act itself was a compromise of conflicting views, 
 and, while not all that it should have been, or that must be done in order 
 to accomplish the end, still it was a step in advance. It fixed a day as- 
 
THE LEGAL-TEKDEE DEBT. Y3 
 
 " the earliest practicable period " for the specie payment of the legal- 
 tender debt. 
 
 The one elementary question which is now engaging public thought, 
 in respect to which there is no little division of opinion among the peo- 
 ple, and which will in all probability be the controlling question in the 
 next Presidential election, is whether United States notes shall be 
 practically regarded as debt obligations, and provision be made for their 
 payment and withdrawal, or whether they shall be regarded chiefly, if 
 not exclusively, as money, " lawful money and a legal tender," not only 
 to be perpetuated indefinitely in the future, but to be increased by new 
 issues of the same character, and to supersede the bank note circulation 
 of the country. Stated in a different form, the question is whether the 
 American people, by the resumption of specie payment and the payment 
 of the legal-tender debt, will return to the currency of value, the cur- 
 rency of the world, and treat paper merely as a representative thereof ; 
 or go forward with the present system of Government paper money, and 
 finally make it the entire paper circulation of the country, to be increased 
 from time to time as Congress shall see fit to authorize additional issues. 
 Stated in another form, the question is whether our money shall be that 
 of coinage, supplemented by representative paper notes convertible on 
 demand into coin, which is the only moufy provided for in the Constitu- 
 tion ; or whether it shall be the money of the paper mill and the print- 
 ing press. This is no new question in the history of the world. The 
 money of coinage and paper money have both been tried, not only in 
 this country, but by other nations ; and the results are well known. As 
 a general fact, the exigency of war has led to the issue of paper money ; 
 and when the step has once been taken the difficulty is to retrace it and 
 recover the previous ground. In some cases, indeed, in most cases, the 
 previous ground has been recovered only by a down right repudiation 
 of the money as a debt, thus rendering it worthless as a currency and 
 throwing the entire loss upon the holders. This was the fate of the 
 monetary scheme of John Law, of the French Assignais, and for the 
 most part of the paper money issued before and during the American 
 Revolution. 
 
 That portion of the people who reason from the obligations of the 
 national faith, from the debt character of the legal-tender note, and from 
 the natural laws of exchangeable value, to which money is no exception, 
 propose to pay the debt, and not to contract any more debts of the same 
 kind to be paid. Those, on the other hand, who reason from what is 
 printed on the back of the legal-tender notes, from their currency character 
 as " lawful money and a legal tender," and who practically ignore what 
 is printed on their face, and who, moreover, forget that the value of the 
 6 
 
fi THE LEGAL-TENDEE ACTS. 
 
 notes depends upon their credit as obligations to be paid, and not at all upon 
 the paper of which they are composed, and, independently of their credit, 
 not at all upon their legal-tender quality, propose to continue and increase 
 these notes without payment, and thus in effect reduce them to the con- 
 dition of merely stamped paper, having the form of a monetary obliga- 
 tion, which in practice would be simply a lie. 
 
 Between these two classes there can be no compromise. Their views 
 are as wide apart as the poles. They hold scarcely nothing in common. 
 They differ radically in their fundamental conception of money. The 
 money of the one class is merchandise, a commodity, a part of a nation's 
 wealth, having value aside from its uses as money, and selected by reason 
 of this value and other appropriate properties, both of which are best 
 combined in gold and silver, to perform the double function of apprais- 
 ing other values and acting as the medium of exchanging them. The 
 money of the other class does not depend upon its commodity character 
 at all or upon the value or quantity of the m.aterial composing it, but 
 wholly upon the words printed upon it and upon a legal statute authoriz- 
 ing those words. Nature creates one kind of money, and the other is 
 absolutely the creation of statute law. The one is the money of value, 
 and the other is wholly the money of credit. 
 
 Which, then, of these tw^ classes represents the majority of the 
 American people ? Which of these theories is the one that will be 
 finally adopted 1 Will the people go back to the Constitution, to the 
 money of the Constitution, and to the only money that it authorizes ? 
 If so, then they will pay the legal-tender debt at "the earliest practical 
 period," and thus redeem the nation's pledge and maintain its public 
 faith. If not so, then they will launch out upon the high seas of paper 
 money, and finally come back to constitutional money through repudia- 
 tion. The people have conquered the greatest rebellion of history, 
 liberated every slave in the land, and established their unity as one na- 
 tion by a demonstration that will stand good for at least a century. 
 Have they now the character, the intelligence, the honesty, the good 
 sense to meet and wisely dispose of the currency question left as one of 
 the inheritances of the war ? This is the problem which now awaits 
 their action in the future. 
 
THE FINAl^'OE OF WAR. 75 
 
 THE FINANCE OF WAR. 
 
 Dr. Amasa Walker, in his " Science of Wealth," has a chapter on 
 the " Finance of War," the object of which is to show the fallacy of the 
 common idea " that a vastly greater amount of money is needed in time 
 ■of war than of peace." The substance of his argument is that war does 
 not increase the aggregate production of the people beyond that of peace ; 
 that it does not add to the number of exchanges incident to the transac- 
 tion of business, or to the amount of services to be paid for; and, hence, 
 that, so far as the people themselves, in distinction from the Government, 
 ■are concerned, the volume of money sufficient in peace will be equally so 
 in war. Money is simply the medium of exchange and the measure of 
 values ; and if war does not increase the number of exchanges or the 
 amount of the commodities exchanged, then it creates no general neces- 
 sity for an increased quantity of money. * 
 
 The belligerent Government, however, as such, is in a position very 
 different from that of peace. Besides its usual function of enacting and 
 administering the laws and paying the expenses thereof, it is engaged in 
 the special and extraordinary business of war ; and this creates a demand 
 for an unusual number of agents, as well as for a large amount of war 
 material. Armies and navies are to be supported and equipped and kept 
 in the fighting condition. These war appliances involve expense, and 
 hence the "money-chest" of the Government is subjected to a greatly 
 increased draft upon its resources. It has more bills to pay, and money, 
 or its equivalent, though not the direct instrument of military campaigns, 
 is, nevertheless, the instrument of paying these bills. It is in this sense 
 only that money forms the " sinews " of war. It belongs to the financial 
 machinery of war ; and, since the Government is the prime operator and 
 manager, and since, moreover, the business is one of rapid destruction, 
 and not reproduction, all the time consuming the capital invested, and 
 yielding no profits in the economical sense, the Government must have 
 some way of constantly replenishing its own Treasury. The augmented 
 ■current that flows out demands a corresponding current that flows in. 
 
 The financial problem to be solved in war is in Rind precisely like 
 the one of peace, differing from it only in a larger demand for the means 
 with which to pay larger expenses. How shall these means be procured ? 
 
 The first and direct answer is that the Government must collect more 
 money from the people by increased taxation. The taxing power is one 
 
76 THE LEGAL-TENDER ACTS. 
 
 of the most absolute of all the powers of Government, and its exercise- 
 may be carried to almost any extent. So far as war expenses are met in 
 this way, no debt is incurred. The people, through a tax levy, pay the 
 bills at the time, and by paying them have the opportunity of learning 
 the cost of war. It is best, alike in the economical and the moral sense^ 
 that they should carry a heavy tax burden. The sacrifice is a good 
 teacher. It would be unfortunate for the world if governments could 
 conduct war without bringing home to the consciousness of the people 
 the element of cost by an increased rate of taxation. The burdens thus 
 experienced restrain the belligerent tendency of nations and contribute a 
 powerful influence to the promotion of peace. 
 
 The other method of obtaining funds, beyond those supplied by taxa- 
 tion, is to borrow money by contracting a debt. All governments are 
 clothed with the borrowing power, and to it there are ordinarily no limits, 
 except such as may be imposed by their credit. The world is rich enough 
 to be a lender. A vast individual wealth in every nation is ready for the 
 service of war, provided the basis of credit is sufficiently reliable. It is 
 by the exercise of the borrowing power that the nations of the earth have 
 carried their debts up to about twenty-five billions of dollars, the most of" 
 which was incurred for war purposes. 
 
 The United States, during the late Eebellion, resorted to both of these- 
 methods of raising funds. Taxes were increased far beyond their peace 
 rate, and a huge war debt was contracted, amounting at the close of the 
 struggle to some twenty seven hundred millions of dollars. A part of 
 this debt consisted and still consists in United States notes, declared to- 
 be "lawful money and a legal tender in payment of all debts, public and 
 private, within the United States," with certain specified exceptions.. 
 These notes were paid out by the Government as money, and with them 
 the expenses of the war were in part paid. In the space of about twelve 
 months four hundred and fifty millions of dollars in such notes were au- 
 thorized to be issued, not because the ordinary business of the people 
 demanded such an issue, but because the Government wanted funds with 
 which to carry on the extraordinary business of war. Congress thought 
 it expedient to take the short out and manufacture funds, by creating 
 money through the agency of the Treasury Department. The printing 
 press was called into requisition, and loans were negotiated by printing 
 money outright in the form of debt obligations, declared to be " lawful 
 money and a legal tender," and hence made compulsory in their accept- 
 ance for the payment of debts. This is sometimes called a forced loan. 
 It is really no loan at all in the sense of a free contract between parties. 
 It is pure compulsion. It is manufacturing paper money and compelling, 
 creditors to take it at its face value or forfeit their claims. 
 
THE FINANOE OF WAB. 77 
 
 The necessary result of this measure was the direct legal substitution 
 ■of Treasury notes for coin, by the force of law. The financial and busi- 
 ness operations of society were at once placed on the basis of inconvert- 
 ible paper money ; and its volume, increasing until paper issues of dif- 
 ferent kinds, more or less a legal tender, reached in July, 1864, the 
 enormous aggregate of eleven hundred millions of -dollars, was far in 
 -excess of any business wants of the people. The Government in reliev- 
 ing its own necessities, forced the country into this condition ; and 
 .although it is now more than ten years since the close of the war, the 
 paper money system then inaugurated still remains. 
 
 It is hardly necessary to say that the frequently told story of history 
 -repeated itself. The notes, notwithstanding they were legally just as 
 good as gold, with their increased issue, circulated at an increasing dis- 
 count, until they were not worth forty cents on a dollar as compared 
 with gold. The rise and fluctuation of prices, corresponded in general 
 "with the movement of the gold premium. The business of the country, 
 as is always the fact under such circumstances, became largely a system 
 of gambling and speculative ventures. In a word, the usual consequences 
 of inflating the currency beyond the natural demands and growth of 
 business followed the issue of these notes ; and since the notes had no 
 monetary character or standing outside of the United States, there was 
 Tio outlet by which any redundancy could be carried ofi" in the operations 
 of international trade. Gold — the world's money and standard of value 
 — left the country, and was used to pay in part for a largely increased 
 importation of foreign goods. 
 
 The fact that these notes were issued by the Government for its own 
 relief in the emergency of war, had no tendency to prevent or even 
 modify these economical results. The results depended on natural 
 oauses, entirely sure in their action. The aggregate production of the 
 country was not increased ; the number of persons engaged in the differ- 
 ent branches of industry was not augmented ; and, although there was a 
 great demand for whatever was necessary to prosecute the war, and a 
 great diversion of labor from other channels in this direction, still the 
 ■wealth of the nation was being consumed at a rapid rate for purposes 
 not economically reproductive. A great war is a wasting process ; and 
 the artificial stimulus of a redundant paper currency, though it may con- 
 ceal the fact for a time, cannot permanently conceal it or prevent the 
 result. High prices are no proof of prosperity. The sudden enrichment 
 of a few persons is no evidence of general thrift. To such a state of 
 things there is always an economical sequel of exhaustion, stagnation, 
 .and depression, from which recovery is effected only by slow degrees. 
 
 Still further, the Government, as such, was constantly in the market 
 
78 THE LEGAL-TENDEE ACTS. 
 
 as a large borrower. by the sale of its bonds, and a large purchaser of 
 commodities and labor. Its bonds were sold at par in legal-tender- 
 notes ; yet the latter were so depreciated that the former did not, for an 
 average, bring much if any more than fifty cents on a dollar, if estimated 
 according to the gold standard. The funds thus realized were expended^ 
 in the purchase of Commodities and labor at rates some two or three 
 times above their usual mark. In this way the bonded debt of the 
 Government was increased, beyond what it would have been but for 
 these causes, probably by not less than a billion of dollars, besides leav- 
 ing, as an inheritance from the war, a disordered state of our whole cur- 
 rency system, with all the evils naturally allied therewith, and especially 
 the difficulty of retracing our steps and returning back to the specie 
 standard of values. 
 
 The general theory upon which governments have resorted to the 
 forced acceptance and circulation of their own notes has been that of a 
 temporary expedient to bridge over an existing emergency, and not that 
 of an established policy. The expedient is one __of the fine arts in war 
 finance. It is a quick and easy way of getting money by legislatively 
 creating it on the spot. The intention at the time is to make it merely 
 a temporary resource to get through a crisis ; yet history shows that 
 the actual result is almost always different. Professor Sumner, in his 
 " History of American Currency," says that paper money " cannot be 
 taken up and laid down as we choose. It is a mischief easily done but 
 most difficult to cure." The first step leads to the second, and indeed 
 very often, in furnishing immediate relief, creates the necessity for the 
 second step. 
 
 The French Constituent Assembly entered upon the paper money 
 scheme in May, 1790, by authorizing the issue of four hundred millions 
 of francs in Assignats, which is equivalent to eighty millions of dollars- 
 In September of the same year the issue had risen to twelve hundred 
 millions of francs ; ia 1793, to three thousand six hundred and twenty- 
 six millions ; in 1794, to eight thousand eight hundred and seventeen 
 millions and a half; in 1795, to nineteen thousand six hundred and 
 ninety-nine millions and a half; and on the 7th of September, 1796, the 
 issue amounted to forty-five thousand five hundred and seventy-nine mill- 
 ions, or more than nine billions of dollars, when the whole of it became 
 totally worthless. Then a new kind of paper money was tried, in the 
 form of Mandats, of which six hundred millions of francs were at first 
 issued; but which in the end went up to twenty -four hundred millions, 
 and finally became just as worthless. The Continental Money, starting 
 with a limited issue in the outset, was at length swollen to some three 
 hundred millions of dollars, the most of which fell as a dead loss upon 
 
THE FINAJTCE OF WAE. 79 
 
 the holders. Professor Sumner's chapter on Austrian paper money 
 presents the same history. The work of M. Wolowski on the finances 
 of Russia shows a nation that has been struggling, for more than a 
 hundred years under a depreciated paper currency. Royal edicts have 
 repeatedly placed limits to the issue ; yet the next war, on the theory 
 of a temporary expedient, has exceeded these limits. Italy tells the 
 same story. 
 
 So also Congress, during the Rebellion, restricted its first issue of 
 legal-tender notes to one hundred and fifty millions of dollars, and pro- 
 vided for funding them into a six per cent, gold-interest bond. Senator 
 Fessenden, in his speech on the subject, said that the issue was " not to 
 be resorted to as a policy" but as " a temporary measure." " It has 
 been defended," he said, " simply and solely on the ground that it is to 
 be a single measure, standing by itself and not to be repeated." Such 
 was doubtless the thought and the theory of the moment; and yet this 
 " single measure " was repeated twice in about twelve months, and legal- 
 tender notes were expanded to four hundred and fifty millions of dollars. 
 And even this limit was exceeded by the issue of interest-bearing notes, 
 made a legal tender, with the exception of their interest ; and to these 
 were added thexotes issued by the national banks, with no correspond- 
 ing reduction of Government notes. The simple truth is, that Congress, 
 by its " single measure," got itself into the paper-money rut, and there 
 was no getting out of it. The measure became a policy after being once 
 adopted. There was no retreat from it and no curtailment of it, but a 
 continuous expansion, until Congress, in June, 1864, saw the necessity 
 of legislatively declaring that there should be no further issue of non- 
 interest-bearing legal-tender notes. This " single measure " had em- 
 braced within its own grasp the whole financial system of the country. 
 
 Is it any matter of wonder that the notes were depreciated, that 
 prices were doubled and trebled, that speculation became rampant, that 
 gold fled to a more congenial climate, that foreign importations were ex- 
 cessive, and that all kinds of even legitimate business were intoxicated 
 by such an immense inflation of the circulating medium 1 No one who 
 understands the laws of currency feels any surprise at the result. Con- 
 gress did not mean or anticipate all this in the outset ; yet, having once 
 inaugurated the paper-money policy by " a single measure," onward it 
 went, and onward it had to go by the very necessities of the policy. No 
 Government ever got on the back of paper money that did not ride 
 much further than it meant to ride; and every Government, once in 
 this position, must get off", or it will finally ride into repudiation, and 
 come back to the currency of value by a universal crash of credit. 
 Paper notes, as the representative equivalent of coin, by being converti- 
 
80 THE LEGAL-TENDEE ACTS. 
 
 ble into coin, do not displace the coin, but simply share the field with it. 
 But when these notes not only entirely outrun the point of redeemable- 
 ness, but by their volume greatly exceed the amount of coin that would 
 circulate in their absence, then all experience teaches that the financial 
 system is moving toward the breakers. Make these notes a legal 
 tender, and flood the market with them, as was done during the war, and 
 the consequences in the form of depreciation, inflated prices, fluctuating 
 values, wild speculation, general extravagance, and ultimately a reckon- 
 ing day of disaster are as certain as the laws of nature. 
 
 Moreover, Congress in the outset of this policy did not exercise the 
 precaution of providing a limit of time beyond which the legal-tender 
 property should not attach to Treasury notes. The property being 
 purely the creature of law, the period of its existence might have been 
 limited by declaring that the legal-tender provision should cease to be 
 operative in one year or two years, or at some definite time after the 
 close of the war. The whole country, in anticipation of such a limita- 
 tion, would have adjusted itself to it. The war measure would not then 
 have passed into the category of a peace measure for any length of time. 
 The original idea was that of a temporary expedient, and the legislation 
 should have explicitly made it such, and thereby given notice to the 
 country and the world that the notes at a certain time after the close of 
 the war, if then in existence, should have no other character than that of 
 debt obligations. This would long since have secured either their fund- 
 ing or payment in gold. They would have disappeared, and under proper 
 regulations bank notes and specie would have taken their place. The 
 change could not haive occurred without some difficulties ; yet the diffi- 
 culties would have been no greater than those which must be surmounted 
 in getting back to specie payment at any time. The return is never a 
 royal road and never made easier by long delays. 
 
 This exhibit of facts is preliminary to the inquiry whether there was 
 any real necessity for resorting to legal-tender notes, which is the com- 
 mon and only plea for the measure. Is it a good plea ? 
 
THE CEISIS IN THE TEEA80EY. 81 
 
 XI. 
 
 THE CRISIS IN THE TREASURY. 
 
 The Honorable E. G. Spaulding, in his introduction to a second 
 edition of his " Financial History of the War," gives a concise statement 
 of the crisis in the Treasury Department of the Government which led 
 to the first Legal-tender Act. We summarize the statement as follows : 
 
 Congress, by the Act of July 17th and the Supplementary Act of 
 August 5th, 1861, authorized a loan of two hundred and fifty millions of 
 dollars, and in the latter act suspended the operation of the Sub-Treas- 
 ury law of 1846 so far as to permit the Secretary of the Treasury to 
 deposit any of the moneys thus obtained " in such solvent specie-paying 
 banks " as he might select, and to draw against such deposits " for the 
 payment of public dues." The object of this provision was to enable 
 the Secretary to make use of the system of bank and clearing-house 
 agency in the disbursement of these funds. After the battle of Bull 
 Eun the banks of New York, Philadelphia and Boston promptly agreed 
 to take one hundred and fifty millions of this loan, with the expectation 
 that Secretary Chase would avail himself of the permission above re- 
 ferred to, and thus check against the funds standing to the credit of the 
 Government in the payment of his war accounts. He, however, de- 
 clined to do so, and, hence, required the banks to pay the loan into the 
 Sub-Treasury in the form of gold or gold certificates. The result was 
 that he drained out the gold reserve of the banks, forced them to a 
 ■suspension of specie payment in December, and thus brought on the 
 crisis in the Treasury of the United States, which formed what was re- 
 garded as the necessity for the first Legal-tender Act. 
 
 Mr. Spaulding considers this as a very grave mistake in financial 
 policy, but for which there would have been no suspension of specie pay- 
 ment by the banks in the month of December. Had the funds which 
 they had agreed to loan to the Government been deposited with them, 
 and had their machinery been used as a disbursing agency, the Treasury 
 <;risis of January and February, 1862, would not have occurred. The 
 banks would for the most part have retained their gold and been in a 
 condition to extend still further aid to the Government. Their suspen- 
 sion of specie payment was forced upon them as the result of a mistaken 
 policy on the part of the Secretary of the Treasury. Alluding to this 
 jnistake, Mr. Spaulding says : " The Secretary, in breaking the banks. 
 
82 THE LEGAL-TENDEE AOTS. 
 
 at the same time broke the Sub-Treasury and both were discredited to- 
 gether." 
 
 The question, then, which, in these circumstances confronted Con- 
 gress in the months of January and February, 1862, was to determine 
 in what way the borrowing power of the Government should be so 
 exercised as to meet the existing emergency. The necessity for resort- 
 ing to the issue of Treasury notes in some form as the means of im- 
 mediate relief was apparent and urgent ; but whether these notes should 
 be made " lawful money and a legal tender " or not involved the two 
 questions of constitutional power and financial expediency. Congress, 
 after a debate of nearly two months, decided to authorize the issue of 
 one hundred and fifty millions of dollars in legal-tender notes ; and with 
 this decision the Rubicon was passed and the political economy of incon- 
 vertible paper money was established as a cardinal feature in the policy 
 of the war. 
 
 Was this legal-tender legislation wise 1 Was it necessary ? Was 
 it the best thing that could be done 1 In the language of Senator Fes- 
 senden, was it " absolutely indispensable ? " Was Congress shut up to 
 this unusual and extraordinary method of relief? The question now is 
 not whether Congress had the constitutional power to adopt the measure, 
 or whether the issue of Treasury notes was expedient ; but whether the 
 annexation of the legal-tender property to these notes was expedient. 
 To say that the Government urgently needed to borrow money by is- 
 suing evidences of debt therefor in some form proves neither the neces- 
 sity nor the wisdom of making these evidences " lawful money and a 
 legal tender." The two things are distinct and involve different con- 
 siderations. There is no cjloubt about one of them. But as to the other, 
 the general answer of political economy, based on a broad' collation of 
 facts, is that legal-tender notes are never expedient ; that the legal-tender 
 quality does more harm than good ; that its disadvantages far exceed all 
 its possible advantages ; and, hence, that a nation is weakened rather 
 than strengthened by it. Whatever is gained thereby is more than lost 
 by the evils resulting from it. 
 
 Mr. Robert B. Minturn, of New York city, at the request of Secre- 
 tary Chase, addressed tp him a letter dated January 11th, 1862, in 
 which he discussed the qtiestion of expediency as between raising funds 
 in the usual way of borrowing and resorting to the issue of an incon- 
 vertible legal-tender currency. From this letter, evincing alike keen 
 sagacity and comprehensive vision, we make the following extract as to 
 the former of the above methods : 
 
 " A.t a time when the wealth of the country is necessarily consumed 
 at so great a rate, a sound system of finance should favor economy in. 
 
THE CEISIS m THE TEEAStTET. ' 83 
 
 public and private expenses, and at the same time stimulate industry 
 to supply 'the unavoidable waste. If, then, the Government raise* 
 money on long bonds, pledging the national honor to pay interest and 
 principal in gold, and selling the bonds at the best price it could obtain 
 in the open market, the following results would, I believe, be realized : 
 
 " 1. The difficulty of obtaining money, the high interest to be paid, 
 and the heavy taxes necessary to give the loans a market would urge 
 the greatest economy and efficiency in the Government. 
 
 " 2. The low rates at which the loan would probably sell would 
 attract foreign capital, of which we have great need. 
 
 " 3. The loss represented by the rate of discount at which the loans 
 might be negotiated would fall, as it should do, on the whole nation, 
 and be distributed through a term of years. 
 
 " 4. The inevitable high rate of taxation (which would be needed 
 to induce capitalists to feel confidence in investing in the loans) would 
 force the people to a realization of the extent to which they are becom- 
 ing poorer. It would consequently stimulate them to economy in all 
 articles of import, and to the utmost industry in increasing the wealth 
 of the country by production; thus counterbalancing, to as great an ex- 
 tent as possible, the impoverishment of the nation by the war." 
 
 Turning to the proposition of issuing legal-tender notes, Mr. Min- 
 turn presents that side of the picture as follows : 
 
 " But if, on the other hand, the expenses of the war are met by an 
 issue of inconvertible currency, the results will, I believe, be directly 
 the reverse. 
 
 " 1. The mere printing of paper and circulating it, by giving the 
 prerogative of a legal tender, is so much easier than borrowing money 
 at high rates of interest and repaying loans by heavy taxes, that if the 
 former course is once begun, it is in danger of being carried on indefi- 
 nitely ; and the natural check to extravagance in the administration of 
 the Government, which jvould be found in the difficulty of borrowing, 
 is quite lost. 
 
 " 3. The greater the quantity of an inconvertible currency that is 
 issued, the lower will its value fall by an infallible natural law. Not 
 only, therefore, will foreign capital not come to the aid of the Govern- 
 ment in the shape of loans, but both foreign and domestic capital will 
 be transferred abroad by its owners, to escape the loss entailed by a 
 constantly depreciating standard of value. This movement set in some 
 time since — say two months or more ago — in anticipation of the 
 country adopting an inconvertible currency, as has been clearly indi- 
 cated by a steadily advancing rate of exchange on Europe, in face of a 
 balance of trade in favor of this country. 
 
 " 3. If the Government currency were finally redeemed in gold, the 
 loss arising from repaying in specie that which had been originally 
 issued at a depreciated value in exchange for supplies would, it is true, 
 fall on the whole nation, but in a much heavier form than the loss 
 considered under the head (third) above. But before redemption, and 
 while depreciation was going on, all creditors of the country would be 
 losers in exact proportion to the decline of the currency. The debtor,^ 
 
S4 THE LEGAL-TENDEK ACTS. 
 
 being able to discharge his obligation in a currency less valuable than 
 it was at the time he borrowed, becomes to that extent, by the action 
 of law, the owner of property which properly belongs to his creditors. 
 It is easy to see the way in which such enactments operate, to force 
 wealth away from a country where there is even danger of such a con- 
 dition of the currency ; and the effect occurs just at a period when our 
 national policy should be such as to attract wealth hither by every 
 assurance of legal protection and security. 
 
 "4. With an irredeemable currency the Government would be 
 tempted to tax but lightly, since an onerous taxation would not be nec- 
 essary to enable them to raise money, but only to furnish them means 
 for redeeming the currency — a difficult operation, which would eventu- 
 ally be postponed as long as possible. The people would then not be 
 aware of the rate at which the resources of the country and the wealth 
 of each one were being consumed ; and they would, therefore, be with- 
 out the natural stimulus to economy and industry imposed by heavy 
 taxation, and would not deny themselves a free indulgence in articles 
 of import, which would be paid for in the gold which would have been 
 supplanted here as a medium of exchange by the legal substitution of a 
 less valuable currency. 
 
 " Thus, instead of the wealth of the nation being economized, by the 
 people being stimulated to a moderate use of imports and to paying for 
 them as far as possible by increased production, they would be seduced 
 by a fictitious financial ease into the opposite course of consuming freely 
 articles imported from abroad, and paying for them by the gold repre- 
 senting their accumulated wealth." 
 
 Two days after this letter was written, Mr. John M. Forbes ad- 
 dressed a shorter letter to Senator Fessenden, who was then chairman of 
 the Senate Committee on Finance, from which we make the following 
 ■extract : 
 
 " First. Taxation for interest and current ordinary expenses. On this 
 all agree now, but many will oppose if you once get into the irredeem- 
 able gulf 
 
 " Second. Your main reliance for the Government must be upon sell- 
 ing your long bonds at the net prices they will bring, after a fixed policy 
 bas been announced ; and, of course, using proper judgment as to the 
 time and manner of bringing them forward. 
 
 " Third. Avail of short loans, exchequer bills, or emission of small 
 notes for currency, under the advice of experts, in whichever manner or 
 form promises to give greatest relief temporarily ; but it will be a fatal 
 error to rely upon it as your chief dependence. It is limited in amount, 
 and liable to great mischief the moment it is pushed beyond a certain 
 and very moderate amount. 
 
 " Fourth. Make this currency or short paper or demand paper — in 
 whatever shape you put it — as good as possible, by providing for its 
 being received by Government for all dues, by fixing a mode of its re- 
 demption, and by making it fundable at a good rate of interest. Raise 
 it all you can to make it good, and cause it to be received by all classes 
 voluntarily in payment of debts already existing ; but avoid making it 
 
THE CEI8IS m THE TEEASUEr. 85« 
 
 a legal tender, unless you want to see it depreciate. To make it a legal 
 tender will be to give notice to capitalists to get their capital out of the 
 country as fast as possible ; and to foreign capitalists to keep from send- 
 ing money here, and to sacrifice what available stock they hare, Govern- 
 ment included, as early as possible, before the depreciation has got very 
 bad." 
 
 The Supreme Court of the United States, in the case of Hepburn v^ 
 Griswold (8 Wallace, p. 603), had occasion to consider the question 
 whether the legal-tender legislation was " necessary and proper " in the 
 sense of the Constitution ; and, in considering this question, the Court 
 was compelled to examine a question of fact in political economy. The 
 decision of the Court was that the measure was not "necessary and 
 proper," and the argument was in part directed to the proof of this fact. 
 From this argument we make the following extracts : 
 
 " Now, we have seen that of all the notes issued, those not declared 
 a legal tender at all, constituted a very large proportion, and that they 
 circulated freely and without discount. It may be said that their equality 
 in circulation and credit was due to the provision made by law for the 
 redemption of this paper in legal-tender notes. But this provision, if at 
 all useful in this respect, was of trifling importance compared with that 
 which made them receivable for Government dues. All modern history 
 testifies that, in time of war, especially when taxes are augmented, large 
 loans negotiated, and heavy disbursements made, notes issued by the 
 authority ©f the Government and made receivable for dues of the Govern- 
 ment always obtain at first a ready circulation, and even when not 
 redeemable in coin on demand are as little and usually less subject to 
 depreciation than any other description of notes for the redemption of 
 which no better provision is made." 
 
 "It is denied, indeed, by eminent writers, that the quality of legal 
 tender adds anything at all to the credit or usefulness of Government 
 notes. They insist, on the contrary, that it impairs both. However 
 this may be, it must be remembered that it is as a means to an end to 
 be attained by the action of the Government, that the implied power of 
 making notes a legal tender in all payments is claimed under the Con- 
 stitution. Now, how far is the Government helped by this means ? 
 Certainly it cannot obtain new supplies or services at a cheaper rate, for 
 no one will take the notes for more than they are worth at the time of 
 the new contract. The price will rise in the ratio of the depreciation ; 
 and this is all that could happen if the notes were not made a legal 
 tender. But it may be said that the depreciation will be less to him 
 who takes them from the Government, if the Government will pledge 
 to him its power to compel his creditors to receive them at par in 
 payments. This, as we have seen, is by no means certain. If the 
 quantity issued be excessive and redemption uncertain and remote, great 
 depreciation will take place. If, on the other hand, the quantity is only 
 adequate to the demands of business and confidence in early redemption 
 is strong, the notes will circulate freely whether made a legal tender or 
 not." 
 
-86 THE LEGAL-TENDER ACTS. 
 
 "But if it be admitted that some increase of availability is derived 
 from making the notes a legal tender under new contracts, it, by no 
 means follows that any appreciable advantage is gained by compelling 
 creditors to receive them in satisfaction of pre-existing debts. And 
 there is abundant evidence that whatever benefit is possible from that 
 compulsion to some individuals or to the Government is far more than 
 out-weighed by the losses of property, the derangement of business, the 
 fluctuations of currency and values, and the increase of prices to the 
 people and 'the Government, and the long train of evils which flow from 
 the use of irredeemable paper money." 
 
 The theory of the Court, as presented in this case, is that there was 
 no necessity for impressing upon Treasury notes the character of " lawful 
 money and a legal tender ;" that the notes, being made receivable for 
 taxes and exchangeable for bonds, would have met the wants of the 
 Government as well without as with this character ; and, hence, that the 
 imperative necessity urged in support of the constitutionality of the 
 legal-tender legislation did not exist in fact. Chief Justice Chase, who 
 delivered the opinion of the Court in this case, also delivered a dissenting 
 -opinion when the Court, as the consequence of a change in its member- 
 ship, overruled its previous decision. From the latter opinion we quote 
 as follows : 
 
 " The real question is, was the making them [the notes] a legal tender 
 a necessary means to the execution of the power to borrow money 1 
 If the notes would circulate as well without as with this quality, it is idle 
 to urge the plea of such necessity. But the circulation of the notes was 
 amply provided for, by making them receivable for all national taxes, 
 all dues to the Government, and all loans. . . . Nobody could pay 
 a tax or any debt or buy a bond without using these notes. As the 
 notes, not being immediately redeemable, would undoubtedly be cheaper 
 than coin, they would be preferred by debtors and purchasers. They 
 "would thus, bj' the universal law of trade, pass into general circulation. 
 As long as they were maintained by the Government at or near par 
 value of specie, they would be accepted in payment of all dues, private 
 as well as public. Debtors, as a general rule, would pay in nothing else, 
 unless compelled by suit ; and creditors would accept them as long as 
 they would lose less by acceptance than by suit. In new transactions 
 sellers would demand and purchasers would pay the premium for specie 
 in the prices of commodities. . . . The real support of a note 
 circulation not convertible on demand into coin is receivability for debts 
 due to the Government, including specie loans, and limitation of amount. 
 . . . When the Government compels the people to receive its notes, 
 it virtually declares that it does not expect them to be received without 
 compulsion. It practically represents itself insolvent. This, certainly, 
 does not improve the value of its notes. It is an element of deprecia- 
 tion. . . . But the apparent benefit is a delusion, and the necessity 
 imaginary. In their legitimate use the notes are hurt, not helped, by 
 being made a legal tender. The legal-tender quality is only valuable 
 for the purpose of dishonesty. Every honest purpose is answered as 
 well and better without it " (12 Wallace, pp. 577-579). 
 
THE 0EISI8 IN THE TEbASUBT. 87 
 
 The clear and lucid statement of consequences, as given by Mr. 
 Minturn, in that branch of it which relates to the issue of legal-tender 
 notes, has been largely confirmed by the result. When he wrote his 
 letter, the measure was pending before Congress ; and what he foresaw 
 as probable in the event of its adoption has become history. So also 
 the equally lucid statement of Chief Justice Chase, when delivering the 
 opinion of the Supreme Court of the United States, and when delivering 
 his own opinion of dissent from the second legal-tender decision of the 
 Court, alike denies and refutes the theory of Congress in adopting the 
 measure, and of those who defend it as wise legislation. The suggestion 
 of Mr. Forbes was that the chief reliance of the Government should be 
 upon regular loans made in the usual way ; that the resort to Treasury 
 notes to a " moderate amount " should be simply an expedient for 
 temporary relief, and that Congress should by all means avoid making 
 these notes a legal tender. Many of the views embodied in these state- 
 ments of opinion were urged by the minority in both Houses of Congress ; 
 yet they did not prevail. 
 
 The doctrine of an imperative necessity, so great that it could be 
 met only by the legal-tender expedient, or could not be so wisely met in 
 ^ny other way, is the doctrine that carried the day. It was the plea of 
 the hour. How much, if anything, there is in the plea is a question that 
 we reserve for further consideration in the next article. It may be well, 
 however, here to say that the country was not exhausted at the time by 
 a long and protracted war. It had hardly entered upon the solid business 
 of fighting. Neither the financial nor the military strength of the nation 
 had been put to any severe test. Although the Rebellion had assumed 
 formidable proportions, still the power of the loyal States, and of the 
 •Government through them, was at least twice that of the rebel States. 
 The most that had beea done was simply preparation. It was in these 
 circumstances that, in the very outset of the war, a remedy was resorted 
 to which has been generally, if not universally, regarded as the extreme 
 expedient of a most desperate condition. Was it wise legislation ? 
 Was it necessary ? Was there no other of better way of relieving the 
 Treasury ? 
 
88 THE Legal-tendee acts. 
 
 XII. 
 
 THE PLEA OF NECESSITY. 
 
 Thk one argument which, in the winter of 1861-62, more than any- 
 other, and more than all others put together, prevailed with the majority 
 of the two Houses of Congress in passing the first Legal-tender Act, was 
 the plea of an imperative and overwhelming necessity. The funds of 
 the Treasury were nearly exhausted, its liabilities and daily outgoes were 
 large, and money must be had to pay the army and purchase supplies. 
 But for these circumstances, no one, in Congress or out of it, would have 
 though of turning the Treasury Department of the Government into a 
 national paper-mill for the manufacture of paper money. It was the 
 supposed necessity of the situation that determined Congress to adopt 
 the legal-tender provision in the Loan and Currency Act of of February 
 25th, 1862, authorizing the Secretary of the Treasury to issue one hun- 
 dred and fifty millions of dollars in legal-tender notes. The provision 
 was admitted to be an unprecedented measure in the history of the 
 Government, justifiable only upon this ground. 
 
 If we concede that the necessity was real, and that no other course 
 than the one pursued was at the time open, to Congress, we are instantly 
 met with the question whether this same unavoidable necessity existed 
 on the 11th of the next July, when, after the lapse of only about four 
 months, one hundred and fifty millions of dollars more in the same kind 
 of notes were authorized. Still further, did this necessity recur again on 
 the 3d of the next ensuing March, when authority was given for the issue 
 of another one hundred and fifty millions in these notes ? Did the orig- 
 inal necessity demand successive issues of legal-tender paper ? Did it 
 continue during the war, as the explanation of the various forms and 
 amounts of this paper that were finally issued? Rather, is it not histor- 
 ically true that what was urged in the outset as a necessity, as a " single 
 measure," not to be repeated, became an established policy in conducting 
 the war 1 Congress very readily passed from the necessity to the policy ; 
 and this is just what governments are apt to do, yea, what they almost 
 always do, after having taken the first step. Becoming fascinated with 
 with the facility and promptitude of legal-tender therapeutics, they pro- 
 ceed from the necessity to the policy, and seldom fail entirely to over- 
 dose the patient, and hence the extreme danger of the first prescription. 
 
 Recurring then to the period when the first Legal-tender Act was 
 
THE PLEA OF NBOESSITT. HV 
 
 passed, we find the House -Committee of Ways and Means equally 
 divided between two bills — the Spaulding bill and the Morrill bill — 
 which, without going into their details and minor differences, were, never- 
 theless, so much alilie in their general principles that either bill, with 
 slight modifications, could have taken the place of the other, with the 
 single exception of the legal-tender provision in the former and its ab- 
 sence in the latter. Both bills proposed the issue of Treasury notes, re- 
 ceivable for taxes and other dues to the Government, and exchangeable 
 at the option of the holders for Government bonds. When, however, 
 we come to the legal-tender element, they part company and are as wide 
 apart as the poles. The Spaulding bill, being in some respects changed 
 by the Senate, yet retaining this element, is the one that finally became- ■ 
 a law and was put to the test of trial. The Morrill bill was not tried ^ 
 and, hence, there is no evidence from actual experiment that it would not 
 have met the wants of the Government at the time or that its general 
 principles would not have sufficed during the war. Nor is there any 
 such evidence in any essential difference between the two bills, unless it 
 be in the legal-tender provision of the one and its absence in the other. 
 
 This, then, brings us directly to the question that relates to the finan- 
 cial necessity and efficacy of this legal-tender element. Sifting the pro- 
 "vision to its bottom, we find in it these two distinctive features : 1. It 
 gave to the Government the Uffal power of compelling its then existing 
 and also its future creditors — whether soldiers in the army, sailors in the 
 navy, civil officers, or persons to w'hom it was or might be indebted for 
 services or supplies — to accept the authorized notes in discharge of their 
 claims. 2. It gave to the receivers of these notes from the Government 
 and all subsequent holders thereof the same legal power to compel their 
 creditors to accept the notes in payment of debts. The provision did 
 not create the notes or make them what they were in other respects, but 
 simply invested them with this legal character. Having been printed 
 and duly signed, they started from the Treasury on their financial 
 mission in possession of this attribute. How much service did it 
 render 1 
 
 Take first the Government. What was the advantage to it from the 
 legal-tender quality beyond what would have been derived from Treas- 
 ury notes without this quality? It is doubtful whether it contributed 
 anything at all ; and when we look at the whole question on all sides of 
 it there is no doubt that the disadvantages far exceed the advantages, 
 even supposing that there were some benefits from the measure. The 
 quality added nothing to the promissory character of the notes or the 
 amount promised, and furnished no guaranty for their ultimate payment. 
 It did not increase their value to the Government or to their receivers by 
 7 
 
"90 THE LEGAL-TENDKE ACTS. 
 
 a solitary penny, as arising from their receivableness for taxes and other 
 dues to the Government and their exchangeableness for interest-bearing 
 bonds. It was upon these provisions that the notes were mainly if not 
 exclusively dependent for their market value ; and to the action of these 
 provisions the legal-tender quality has no relation. They are as powerful 
 without it as they can be with it. 
 
 There was no necessity, in order to secure the acceptance and circula- 
 tion of the notes among the people, that the Government should resort 
 to legal compulsion, when the circumstances were certain to produce the 
 desired result without it. The people at the time of the first Legal-tender 
 Act were and for some two or three months had been doing business on 
 ithe basis of inconvertible bank notes, and the $50,000,000 of demand 
 Treasury notes previously authorized. Both classes of notes were 
 circulating — the bank notes at a slight discount below specie ; and, 
 itaoreover, there was no business want for a larger note circulation. 
 The new notes to be issued, with their receivabilify provisions, would, 
 without the legal-tender quality, have been just as good as bank notes, and 
 in some respects better, and just as good as the demand notes of the 
 Treasury, except for the payment of customs duties. There was nothing 
 more certain than that the creditors of the Government would have 
 accepted the notes in payment of their claims, and that by the laws of 
 trade they would have passed into general circulation, not only among 
 the people, but between the Government and the people. They would 
 have been the only payment which the Government could offer at the 
 time, and the interests of the creditors would have prompted them to 
 -accept the notes without a moment's hesitation. There is not the slightest 
 evidence that, so far as the Government was concerned, they would not 
 have met the crisis then existing, or indeed any future necessity demanding 
 the use of notes, just as well without the legal-tender quality as with it ; 
 and had the issue been moderate, they would not have depreciated below 
 the general credit of the Government. They would have gone back to 
 the Treasury for taxes, and in the purchase of bonds, and then gone out 
 of it for the payment of its liabilities; and thus they would have circulated 
 freely between the Treasury and the people. In the very nature of things, 
 nothing else was within the limits of probability, and scarcely of possi- 
 ]oility ; and, hence, there was no imperative necessity for the legal-tender 
 provision, to enable the Government to pay its debts or purchase 
 supplies with these notes, or to get them into general circulation. In this 
 respect it did nothing for the Government in the exigency calling for the 
 issue of notes that could not have been done without it. 
 
 But it may be said that the legal-tender property had a, tendency to 
 lessen the extent of the depreciation of the notes, that would have 
 
THE PLEA OF lifEOESSITY. 91 
 
 ^occurred without it. The serious difficulty with this proposition is that 
 it is not true. The history of inconvertible paper money contradicts it. 
 The degree to which notes not convertible into coin on demand will be 
 depreciated depends upon their volume, as compared with the wants of 
 business, and the prospect of ultimate payment. In respect to the first 
 point, the legal-tender property constitutes a most dangerous temptation 
 to overissue, seldom resisted by a government after it has once adopted 
 the policy ; and in respect to the second point, the property is a declara- 
 tion of governmental bankruptcy. As a means of preventing deprecia- 
 tion, it has absolutely no power ; and as a financial policy, it is the surest 
 road to the result. No government can safely trust itself the moment it 
 enters upon the business of manufacturing paper dollars as a legal 
 substitute for real dollars. The chances are a hundred to one that it will 
 run the printing press to the depreciation of its own credit, and sink the 
 commercial value of its notes by their excessive volume. This is 
 precisely what was done by Congress, and what, in all probability, would 
 not have been done to the same extent, if the legal-tender policy had not 
 been adopted. 
 
 As to new contracts, made after the notes had passed into circulation, 
 it is sufficient to say that the legal-tender provision did not and could not 
 lift the notes a hair's breadth above their market value. The Govern- 
 ment could not buy with them at their legal value as the equivalent of 
 gold, and nobody else could. Their depreciation was expressed as a 
 commercial fact in the prices of commodities computed in this currency ; 
 and the fact that the notes passed from hand to hand as so many dollars, 
 fully competent at their face value to settle previous contracts, did not 
 -change the fact of their depreciation, or make them equal to real dollars 
 in purchasing power. They circulated and entered into new contracts 
 for what they were deemed to be worth ; and this is just what would 
 have* happened if they had not been made a legal tender. The legal- 
 tender property did not release them from the operation of this law. It 
 not only was not necessary to secure the circulation of the notes, but it 
 had no tendency to prevent their depreciation, and added nothing to their 
 purchasing power in new contracts made after their issue. What service, 
 then, did this property directly render to thQ Government that could not 
 have been just as well rendered without it ? None whatever. 
 
 Take, secondly, the receivers of the notes in the first instance from the 
 Government, especially the soldiers, whose protection formed one of the 
 themes of eloquent appeal by those who advocated the measure on the 
 floor of Congress. Was not the legal-tender quality a benefit to the 
 soldiers, in enabling them to pay their debts at the face value of the 
 .notes 1 This supposed advantage goes upon the theory that the soldiers, 
 
92 THE LEGAL-TENDEE ACTS. 
 
 as a body, were debtors at the time of the first Legal-tender Act, and' 
 could, hence, use the notes at their face value to pay their debts, and 
 could not use notes without the legal-tender quality for the same pur- 
 pose with equal advantage. We do not know how many of the soldiers- 
 were debtors at the time ; yet there is no probability that they belonged 
 largely to the debtor class. At any rate, there is nothing in this argu- 
 ment, so far as they were concerned, except upon the supposition of 
 their previous indebtedness. Still further, what advantage did the sol- 
 dier derive from the legal-tender property when the Government- 
 adopted a financial policy, in part for his protection, and then steadily 
 pursued it, which gradually depreciated the money paid to him and 
 finally sunk it nearly two hundred per cent, below par with gold, and cor-- 
 respondingly raised the price of all things upon which his family livedo 
 without an equal advance in his wages ? Did this help him or his- 
 family ? Did a policy that took the direct road to depreciation, and 
 compelled the soldier to accept poor money, help him 1 Could he com- 
 pel the grocer, the butcher, or anybody else to receive the money at par 
 with gold? Was not the soldier under the necessity of paying out the 
 notes at their market value, which is all that he would have had to do if 
 they had not been made a legal tender ? There was in Congress, as- 
 there has since been out of it, not a little of meaningless and empty 
 oratory about the soldier, in advocacy of the legal-tender provision. It 
 did him vastly more harm than good, as it did every man who worked, 
 for wages. 
 
 As to -other persons to whom the Government was indebted at the- 
 time — such as contractors, furnishers of supplies, public officers, etc. — 
 the legal-tender provision, so far as it helped them in the payment of 
 their debts, by enabling them to pay in a currency less valuable than 
 that of the contract, did so at the expense of their creditors. If it 
 helped one party, it in the same degree injured the other; and tRis is 
 precisely what it did in every instance in which the provision operated 
 to secure payment, in a depreciated currency, of a debt previously con- 
 tracted. Judge Agnew, of the Supreme Court of Pennsylvania, in the- 
 case of Shollenberger v. Brinton (52 Pennsylvania Reports, p. 87), based 
 his defense of the legal-tender provision in part upon its necessity as the 
 means of guaranteeing the holder of the notes, and in this way maintain- 
 ing " the public credit." A law that provides for the downright rob- 
 bery of the creditor for the benefit of the debtor, and for the benefit of 
 the Government, because it will dispose those who have debts to pay the 
 more readily to receive the notes, is certainly a very novel way of 
 maintaining the public credit. 
 
 Chief Justice Woodward, of the same Court, in delivering his opin- 
 
THE PLEA OF NEOESeiTT. 93 
 
 lion in the same case, regarded this feature as the monstrous enormity 
 inherent in the legal-tender law. There were debts in this country to 
 >the amount of hundreds of millions of dollars, contracted on the gold 
 basis, when the first Legal-tender Act was passed ; and its direct effect, 
 .as these debts matured for payment, was to reduce their amount by the 
 whole amount of the depreciation of the notes at the time of payment. 
 A plea for the necessity of the law, based on the advantages to the 
 holders of the notes, and regardless of the rights and interests of their 
 oreditors, is simply a plea for open and undisguised injustice. It is a 
 •plea which, upon its very face, acknowledges an outrage to the rights of 
 one party, and releases another from the full measure of his obligations, 
 as the means of procuring a supposed benefit to the Government. The 
 •credit of the Government, in plain English, is to be strengthened by a 
 law which enables the holders of its notes virtually to steal the property 
 ■of others. It first forces the notes upon its own creditors, in order to 
 ^sustain its credit; and then it forces the acceptance of these notes upon 
 those to whom these creditors sustain the relation of debtors, in order 
 still further to sustain its credit. 
 
 Looking, then, at the side of supposed advantages from the legal- 
 tender policy, we deny that there was any moment during the war in 
 which there was any real necessity for resorting to it, or that anything 
 was gained by it which could not have been better gained without it. 
 The necessity was purely imaginary. 
 
 This, however, is but one side of the questidn — since, if we take the 
 iegal-tender policy, we must take it as a whole, with all its objections 
 -and disadvantages ; and when we come to this aspect of the question, 
 what we find is that all possible benefits are vastly outweighed by the 
 •disadvantages. Considered as a problem in political economy. Professor 
 
 -•Sumner says, and says truly, that " the proposition involves an absui:d- 
 ity ; " that " whatever strength a nation has is weakened by issuing legal- 
 tender notes ; " and that " one might as well say that it is necessary to 
 open the veins of a weak man who has a heavy physical task to per- 
 
 :form" (History of American Currency, p. 202). This is strong lan- 
 guage, yet not too strong for the facts of history, including the history 
 of this country during and since the late Rebellion. It is granted that 
 the issue of Treasury notes was necessary ; yet this is entirely distinct 
 
 ^from the question whether the annexation of the legal-tender property to 
 the notes was necessary or useful. What the the notes did because they 
 
 .were notes, issued on the credit of the Government, is one thing ; and 
 
 ■what the legal-tender property did is quite another thing. The present 
 
 i nquiry relates entirely to the latter point. 
 
 What, then, did this property, in connection with the policy that ad- 
 
94 THE LEGAL-TENDER ACTS. 
 
 ministered it, do in the way of evil ? It started out by violating the- . 
 very first principles of financial wisdom in forcing upon the people a kind 
 of mopey that was sure to bring disorder and derangement into all the 
 business operations of society. It flooded the market with a vastly 
 greater quantity of money than the people had any legitimate use for^ 
 It inflated prices, stimulated wild speculation, fostered extravagance, pro- 
 moted dishonesty, invited excessive importations of foreign goods, and 
 drove nearly all the gold out of the country. It changed values by a. 
 false and fictitious standard of value, that was constantly fluctuating. It 
 confiscated the private property of creditors to vast amounts by forcing 
 upon them, in payment of their just claims, a kind of currency inferior 
 to that contemplated in their contracts. It gave notice to foreign capital 
 to keep away from the coijntry, and to domestic capital to get away as- 
 fast as possible. It fell with oppressive and crushing weight upon those 
 who worked for wages and lived on fixed salaries, by increasing the cost 
 of living, without a proportionate increase of their income. The pittances 
 of the poor intrusted with savings banks, and the limited incomes of 
 widows, orphans, and many aged people, upon which they were depend- 
 ent for their daily bread, felt the blow of the legal-tender provision. 
 The stocks of private corporations, of States and cities, received for 
 money lent and owned and held abroad, were made payable, as to both 
 interest and principal, in the mere promises of the Government ; and 
 the effect was to discredit the Government in the family of nations and 
 cast a dark shadow upon our national honor. The expenses of the war 
 were largely increased by this policy. The people were deceived by it 
 as to the real waste and destruction of the war ; and, not distinguishing- 
 between a credit currency and capital, they supposed themselves rapidly 
 growing rich, when no such fact existed. The borrowing temper was , 
 stimulated to an inordinate degree; and, hence, private corporations. 
 States, and municipalities rolled up immense debts in prosecuting schemes- 
 either of a doubtful character or altogether premature in their date. The 
 law of the land made the notes of the United States a perpetual lie, by 
 declaring their equivalence to gold in a court of justice when they were 
 not its equivalent anywhere else. The necessity was created for the dif- 
 ficult steps of a final return to the specie standard of value, with all the 
 evils and losses of the process, or for the permanent divorcement of the 
 country from this standard, which would be a greater curse than the evils 
 incident to a return to it. 
 
 Such are some of the fruits, not of issuing Treasury notes, but of 
 attaching the legal-tender property to these notes. The property was 
 not only useless, and therefore unnecessary for the attainment of any 
 desirable end which could not have been attained without it, but, far- 
 
THE PLEA OF NECESSITY. 95; 
 
 ■worse than this, it has proved the prolific source of a long and dreary 
 catalogue of evils, and in this respect has simply added another chapter 
 to its well-known history. The Honorable Mr. Morrill, of Vermont, 
 then a member of the House of Representatives and now a Senator of 
 the United States, was right when he spoke of the expedient as " a meas- 
 ure not blessed by one sound precedent and damned by all." The Hon- 
 orable Roscoe Conkling, of New York State, was right when he gave his 
 reasons "for voting against the attempt by legislation to make paper a 
 legal tender," when he said that " no precedent can be urged in its favor," 
 when he drew a prophetic picture of the evils to result therefrom, and 
 declared his firm belief that " all the money needed can be provided in 
 season by means of unquestionable legality and safety." Senator Fes- 
 senden was right when he said that the measure is a " confession of bank- 
 ruptcy," that "it is bad faith" and- "in its very essence a wrong," that 
 it " encourages bad morals," that " it must inflict a stain upon the na- 
 tional honor," that " it necessarily changes the values of all property," 
 and that, as a still " stronger objection," " the loss is to fall most heavily 
 upon the poor." These gentlemen, as well as other Republicans sym- 
 pathizing with their views, belonged to the then dominant party ; and 
 they felt constrained to resist the measure in its inception as unnecessary 
 and unwise. 
 
 The majority in the two Houses of Congress were unquestionably 
 influenced by what they regarded as best for the country. Yet, in a sorb 
 of half panic, combined with patriotic fervor, they concluded that because 
 money was needed the legal-tender provision was needed. And, so 
 reasoning, they leaped over the Constitution and committed the financial 
 policy of the war and the interests of a great nation to a kind of political 
 economy whose evils have never failed tp exceed all its possible benefits. 
 
S6 
 
 THE LEGAL-TENDEE ACTS. 
 
 XIII. 
 
 THE LEGAL-TENDEE-NOTE SCHEME. 
 
 We give the above title to a monetary scheme, which, though as to 
 its central idea, by no means a novelty in the history of the world, is, 
 nevertheless, in this age and country, one of the inheritances of the 
 legal-tender policy adopted during the late war. The fundamental prin- 
 ciple of the scheme is that the Government should directly issue all the 
 paper currency in use among the people, declaring it to be " lawful 
 money and a legal tender." and at all times determining its volume. 
 This supposes, of course, the continuance of the present legal-tender 
 notes unredeemed and unpaid, the withdrawal and retirement of all 
 bank circulation and the issue of Government notes in its place, and also 
 further issues of such notes from time to time as Congress shall judge 
 expedient. To these elements is added, as a sort of appendage, the 
 issue of Government bonds bearing interest at the rate of three-sixty- 
 five per cent., exchangeable by the Government on demand for an 
 equal amount of its notes, and always receivable by it upon the return 
 of the notes. 
 
 Such is the legal-tendernote scheme which is now propounded for 
 the consideration of the American people, and is moreover urged by a 
 class of speculative financiers as a great improvement of our monetary 
 system. The design of this article is to examine the merits of this plan ; 
 and for this purpose the reader is asked to note the following particulars : 
 
 1. There is not the faintest shadow of authority for the plan in the 
 Constitution of the United States. It cannot be brought within the 
 scope of the coining power, either as a means or an end, except by the 
 most monstrous perversion of language. Those who talk about coining 
 the credit of the Government in the form of legal-tender notes contradict 
 all the dictionaries of the land, and use words in a false sense. Nor 
 does the scheme come within the scope of the borrowing power. The 
 idea that the power to borrow money includes the power to create 
 money in this form, for the purpose of supplying a circulating medium, 
 involves a mode of reading the Constitution that reads all the sense out 
 of it, and at the same time robs its language of any definite and certain 
 meaning. Nor has the scheme any relation to the war powers of the 
 Government, since it does not rest upon them as a basis, or even pro- 
 fess to be a means for carrying them into execution. It is a currency 
 
THE LEGAL-TENDEE-NOTE SCHEME. 9T 
 
 ascheme for peace, is proposed in the time of peace, and has no pretense 
 of any justification or foundation in the necessities of war. By no con- 
 struction, except one that would outrage all the laws of interpretation, 
 can the Constitution be so stretched as to comprehend such a monetary 
 system ; and we cannot think that the Supreme Court or any other 
 court of average judicial intelligence would hesitate a moment in declar- 
 ing it to be unconstitutional. The first thing, then, for these currency 
 reformers to do is to amend the Constitution, and thereby give Congress 
 the power to put their theory into practice ; and, while they are about 
 it, they might as well make the amended Constitution consistent with 
 itself by abolishing the coining power altogether. Congress would not 
 meed both powers, since the former would render the latter practically 
 useless. 
 
 2. This scheme, by contemplating no final payment of the legal- 
 tender notes already issued, is in this respect a scheme for repudiation. 
 These notes are bona fide debt obligations upon their face and by the 
 law of their issue. They have been so declared by the Supreme Court 
 of the United States and are so regarded in the Public Credit Act of 
 1869. They pledge the faith of the nation to payment. This new 
 scheme, however, proposes to repudiate this pledge, since payment of 
 the notes is no part of its purpose. They are to be kept indefinitely in 
 circulation, having the form of debts, but not treated as debts. Their 
 ■exchangeability for bonds bearing interest at the rate of three-sixty-five 
 per cent, is not a provision for their payment, certainly not the provision 
 contained in the contract of issue. 
 
 3. The volume of the cui-rency, according to this system, is to be 
 committed to the absolute and exclusive pleasure of Congress. History 
 teaches that paper money, if irredeemable in gold on demand, depreciates 
 in proportion as its volume is increased ; and hence the power to con- 
 trol this volume is the power to control the money value of all the 
 private property in the land, and make the whole business of society de- 
 pendent on the currency will of Congress. Gold and silver distribute 
 and regulate themselves by the natural laws of trade, and so does paper 
 ■currency when redeemable in these metals ; but in this monetary scheme 
 the sovereign will of Congress is to be the sole determiner of the 
 amount of notes to be issued, with no limitation imposed by their re- 
 demption in gold. What guaranty could the people have that this power 
 would be discreetly exercised? No government, unless officered by arch- 
 angels, would be wise enough to decide beforehand just how much cur- 
 rency will be ne^ed for the convenient transaction of business ; and it 
 is doubtful whether archangels would be equal to the task. The problem 
 <an be solved only under a system that spontaneously accommodates 
 
98 THE LEGAL-TENDEE ACTS. 
 
 itself to the movements of trade, expanding or contracting with their 
 expansion or contraction ; and for this purpose no plan has ever yet been 
 devised that will at all compare with the bank-note system under the 
 safeguards and regulations of law. Banking responds naturally to the 
 law of supply and demand. Those - who advocate this legal-tender-note 
 scheme cannot have well considered what a vast concentration of power 
 it implies in Congress, and with what great liabilities to mistakes, abuses, 
 and corruptions, especially in the direction of overissue, it is fraught. 
 They cannot have read the history of paper money ; or, if familiar with 
 it, they are strangely blind to its oft-repeated lessons. The experiment 
 which they propose is not essentially a new one. It has been tried over 
 and over again, and uniformly with disastrous results. 
 
 4. The scheme appears equally faulty if we consider the only ways 
 in which a credit circulation can be directly issued by the Government. 
 One of these ways is to create a debt in the currency form to meet any 
 excess of disbursements over receipts ; and hence, if the ordinary rev- 
 enue, as should always be true of every solvent Government in time of 
 peace, be equal to the expenditure, not a solitary note could be issued, 
 however urgently the wants of the people might demand a greater vol- 
 ume of circulation, unless the Government should diminish its revenue 
 or increase its expenses, and by one or the other process run into debt 
 in order to issue more currency. The second method would be to adopt 
 the policy of making loans to individuals or private corporations in the 
 form of Government notes ; and this would at once convert the Treas- 
 ury of the United States into a bank, clothed with the power and 
 charged with the duty of discounting commercial paper, buying bills of 
 exchange, and doing a general banking business. The third method 
 would be to issue notes for the purpose of paying the bonded debt of 
 the Government, exchanging notes for the bonds at the legal value of 
 the former, which would be repudiation to the full amount of their dis- 
 count as compared with gold, or making the exchange by paying the 
 currency premium on the bonds, and in either way so inflating the 
 volume of the circulation as to depreciate its market value just in pro- 
 portion to the extent of the inflation. It oughc to be suflicient simply to 
 state these possible methods of getting a legal-tender currency out of the 
 Treasury and into the hands of the people. The idea that runs so flip- 
 pantly in a popular harangue is beset with the most formidable difficul- 
 ties the moment we examine the quo modo of its operation. No one 
 not literally stupefied or frenzied with a visionary theory would rec- 
 ommend the Government to adopt any one of the methods above 
 sketched. 
 
 5. The proposed scheme would not and could not adjust itself to the: 
 
THE LEGAL-TENDEE-NOTE SCHEME. 99 
 
 f 
 
 wants of business, unless the Government should add the banking func- 
 tion to its Treasury Department. This adjustment can be secured only 
 by what is called a commercial currency — a currency that, born of com- 
 merce, increases or decreases with its tides. Banking, under the regu- 
 lations of law, yet free to work its machinery in a normal manner, 
 supplies the requisite conditions of such a currency in its system of dis- 
 counts and payments. When business is active and a greater volume is 
 needed, the increase naturally flows out in the form of discounts. The 
 banks then enlarge their discount line, and with this the circulation ex- 
 pands. When, on the other hand, the amount of business lessens, the 
 notes issued to meet greater wants naturally return to the banks for 
 redemption, and are not at once reissued to the same extent. Thus the 
 circulation ebbs and flows by banking machinery according to the wants 
 of trade. Its changing volume in actual use is determined by the law of 
 snpply and demand, and in this respect its movements are analogous to 
 those of specie. Now, unless the Government shall undertake to furnish 
 a banking system in the operations of its own Treasury, it cannot, upon 
 the very face of the case, give to the people a circulating medium that 
 will spontaneously adapt itself to their business necessities. Bank 
 agency,. in the form of discounts, payments and redemption, is indispen- 
 sable to the end ; and the only way in which the Government itself can 
 do the work is to become a banker. Does any one, not a financial 
 lunatic, propose that the Government should add banking to its ordinary 
 duties ? 
 
 The proper fiscal operations of the Government consist in collecting 
 its revenues and paying them out to meet its current expenses. This it 
 must do. Observe, then, that it collects the largest revenue just when 
 business is most active and when the need for a circulating medium is 
 greatest, and the smallest revenue when the reverse conditions exist.. 
 As a revenue collector and disburser of funds for its own expenses, the 
 Government cannot avoid this result. Money goes into the Treasury as 
 revenue, and goes out of it in the form of disbursements; and in neither 
 movement does the action of the Government have any reference to the 
 wants of business, so as to increase or decrease the volume of the circu- 
 lating medium according to those wants. The only way in which the 
 Government can obviate results that naturally arise from its purely fiscal 
 function is to become a banker, as well as a collector and disburser of 
 revenue, lending money freely when its collections from the people are 
 largest and their demand for it is greatest. Its fiscal function of collec- 
 tion and disbursement has no relation to their wants, and can have none, 
 as a means of meeting them, unless the banking function shall be added 
 thereto ; and this at once makes the Government a banker. , 
 
100 THE LEGAl-TENDEE ACTS. , 
 
 6. The entire withdrawal from the banks of all power to issue a 
 currency would in many parts of the country have the effect of denying 
 to the people the facilities and advantages of a banking institution. 
 This would be the result wherever the reception of deposits alone, with- 
 out note issues, would not be sufficiently profitable to form any motive 
 for the organization of a bank or the continuance of one already organ- 
 ized. A great many banks, especially in the country districts, would be 
 closed up, and the people would be deprived of the convenience afforded 
 by them, if this new scheme were put into practice. Banking capital 
 would seek other and more remnuerative modes of employment ; and 
 this would involve a serious loss to the people. 
 
 7. The general credit of no government is good enough to maintain 
 a note circulation at par with gold, except by redeeming it in gold &t the 
 option of the holder. If, therefore, this legal-tender-note scheme pro- 
 posed gold redemption, then, in order to carry it out, the Government 
 would have to keep in its Treasury a sufficient amount of gold to 
 redeem on demand all the notes presented. Supposing the notes to 
 amount to eight hundred millions of dollars, the Treasury would, have 
 to carry at all times not less than two hundred millions of dollars in 
 gold. Gold redemption is, however, no part of scheme ; and hence 
 nothing is more certain than that the notes — notwithstanding their legal- 
 tender character — would circulate at a depreciated and fluctuating value ; 
 and that the extent of the depreciation would in general keep pace with 
 their volume. The scheme, then, proposes a permanently depreciated 
 paper currency, as compared with the money of the Constitution and the 
 money of the commercial nations with which we trade. 
 
 It is difficult, without writing a book, to enumerate in detail all the 
 consequences of this one fact. They strike in all directions. By a law 
 as sure as that which governs the tides, this depreciated currency would 
 supersede the general use of gold and silver, and cause them to be 
 exported to other countries. Such has been the effect of the notes now 
 in use, and the effect would be continued. Though the richest gold 
 producing country in the world, we should nevertheless be among the 
 poorest in 4he money of the world. If the Government should make 
 these notes receivable for customs duties, then it would have no means 
 of paying either the interest or principal of its bonded debt, unless it 
 repudiated the doctrine of gold payment and paid in a depreciated 
 currency, or went into the market as a purchaser of gold, and paid the 
 premium on it as fixed by gold speculators. If, however, the Government 
 continued its present law in respect to customs duties, we should never- 
 theless have a double legal tender — one of gold and the other of in- 
 convertible paper notes — both having the same legal value for ordinary 
 
THE TEGAL-TENDEE-NOTE SCHEME. 101 
 
 debts, yet constantly differing in the degree of their commercial value. 
 Speculation in one of these tenders by buying and selling it at prices 
 computed in the other, would be a permanent business. The whole 
 foreign trade of the country, alike in what is sold and what is bought 
 abroad, must be estimated and expressed in gold values ; and as these 
 values, when here expressed in currency values, would fluctuate according 
 to the greater or less depreciation of the currency at one time than at an- 
 other, our foreign trade and all domestic trade directly dependent upon it, 
 would be in the state of constant uncertainty, perplexity, and danger on 
 the question of prices. We should derive little or no benefit from the 
 natural tendency of the gold treasure of the world to equalize its distribu- 
 tion among the nations of the earth according to their relative demand for 
 it. 
 
 This system would, indeed, give us a home currency, that could not 
 be exported and certainly would not run away ; and the reason would 
 be that nobody outside of the United States would deem it worth enough 
 to accept it in payment for anything. We could not convert it into the 
 money of the world, except at a discount, and could not use it at all as 
 an international medium of exchange. If it be said that this would 
 relieve us from the disturbing influences of foreign trade, then let it be 
 remembered that we cannot separate domestic and foreign trade, except 
 by abolishing the latter altogether. The two kinds of trade, if they 
 exist in the same country, necessarily exist in the state of alliance and 
 merge themselves into each other. That an international medium, as the 
 basis of foreign trade, in current use among the people, is a great com . 
 mercial desideratum no one doubts who understands the nature of such 
 trade ; and that no money that is not the money oi value in the material 
 of which it is composed can be such a medium is as certain as the natural 
 laws of exchange. Money that has not sufficient value to be exported 
 and still retain its value is by this fact proved to be an inferior kind of 
 money. Yet this is just the sort of money proposed to the people as. 
 the permanent money of the country, accompanied with the certainty 
 that it would expel gold and silver from general use. With such a 
 monetary millennium all the industries of the land are to be blest. 
 Printed bits of paper, made money by the naked force of statute law, 
 constitute the beginning, the middle, and the end of the whole system. 
 
 8. The three-sixty-five-bond appendage of this scheme adds nothing 
 to its value and is no remedy for its defects. The bonds are to be issued 
 by the Government in exchange for the notes, and the notes are always 
 to be accepted in exchange for the bonds, at the option of their respective 
 holders. The market value of each would rest upon the other, since 
 either by being presented to the Treasury could on demand be converted 
 
102 
 
 THE LEGAL-TENDEE ACTS. 
 
 into the Other. How much, then, would a thousand-dollar three-sixty-' 
 five bond be worth ? Just as much as a thousand dollars in legal-tender 
 notes. How much would the latter be worth? Just as much as the 
 former. Would either be at par with gold ? No. Would either pre- 
 vent the depreciation of the other ? No. Even if the interest on the 
 bond was paid in gold, and the principal was ultimately paid in the same 
 way, this would not save it from depreciation, as the necessary conse- 
 quence of the low rate of interest ; and if neither is to be paid in gold, 
 then we have a paper system of bonds and notes, convertible into each 
 other and each dependent upon the value of the other, without any real 
 and positive value as the basis of either, with the single exception of 
 |;he paper of which they are composed. Any one who expects that either 
 with such moonshine would be maintained at par with gold has a remark- 
 able faculty of believing. 
 
 But would not this convertible system have the effect of reducing the 
 rate of interest, and thus prove a blessing to borrowers ? Clearly not. 
 The most that it could do would be to prevent the rate from falling 
 helow three-sixty-five per cent., since the Government would be ready at 
 all times to pay this rate ; but it would have no power to ■ prevent the 
 rate from rising above this mark. The people would not lend money to 
 the Government on such bonds when they could get more interest, as 
 would generally be the fact, and would lend only when the market rate 
 of interest was at this point, and would be below it but for the rate 
 offered by the Government. Borrowers would gain "no benefit from the 
 system, since, in order to get the notes from the Government, they must 
 first have the bonds, and since, further, in order to get these bonds, they 
 must, if they have not previously obtained them from the Government, 
 as their wants necessarily imply, go into the market and buy them with 
 notes ; and if they have the notes, then they do not need to borrow. 
 The system gives no one either notes or bonds ; and no one can get 
 either unless he has the other. Either would exchange for the other ; but 
 before any one could work the plan he must have one or the other. We 
 do not understand that the advocates of the system propose that the 
 Government should start" the people off by making to them & free gift of 
 bonds or notes. If it issues either, it must receive an equivalent there- 
 for, at the time of issue. 
 
 There is, moreover, no probability that the people would invest their 
 notes in these bonds except for merely temporary purposes ; and so far 
 as they did this the United States Treasury would be simply a deposit 
 bank, paying interest to the depositors for the privilege of holding their 
 funds, and the bonds issued therefor would be equivalent to pass-books, 
 and all of them would be demand liabilities. The banks would avail 
 
THE LEGAL-TENDEE-NOTE SCHEME. 103 
 
 themselves of the opportunity when they could not lend money at a 
 higher rate of interest ; and it would not be surprising if speculators 
 should see in the plan a chance for testing- the resources of the Treasury 
 as a means of affecting the money market. If the amount of these de- 
 mand-bond liabilities was large, especially if, as anticipated by the advo- 
 cates of this system, the bonded debt of the United States should be 
 finally changed into this form, the Treasury, besides being ready to pay the 
 current expenses of the Government, would need to keep on hand a pro- 
 portionate surplus of legal-tender notes to guarantee its own solvency. 
 Without this there would not be a single business day in the year in 
 which it might not be reduced to absolute bankruptcy. The theory 
 places the Treasury in the condition of a deposit or savings bank, and 
 makes every bond issued in exchange for notes a demand liability ; and 
 hence, if it went into an extended operation, it would put the credit of 
 the Government in constant peril. The Government would derive no 
 advantage from this part of the scheme ; and so far as the people derived 
 any advantage it would be at the expense of the Government. 
 
 Contrasted with and opposed to this whole system is the long-tried 
 theory of a banking currency not made a legal tender, not directly issued 
 by the Government, but regulated and guaranteed by the provisions of 
 law and redeemable on demand in specie. This theory proposes that the 
 Government should pay its legal-tender debt as soon as practicable and 
 withdraw the notes from circulation. This being accomplished, then all 
 the fiscal operations of the Government and all the business transactions 
 of society return to the gold standard of value. The money provided for 
 in the Constitution again becomes the money of use, and the Govern- 
 ment, so far as the creation of money is concerned, goes back to the func- 
 tion of coinage. Note issues then resume the character of mere repre- 
 sentatives of money, and are no longer regarded by law as money itself. 
 What the law does is to regulate banking and guard the rights and inter- 
 ests of the note-holder. This, we say, is the old theory of paper currency, 
 which has been successfully tried by the most advanced nations of the 
 earth for more than a hundred years. And, while it is not absolutely 
 perfect or free from all objections, it has more advantages and fewer dis- 
 advantages than any other system for a paper circulation which the wit 
 of man has ever yet invented. 
 
 Secretary Chase, who, as is well known, was the framer of our Na- 
 tional Banking Law, in his reports of 1861 and 1862 considered the whole 
 subject of Government notes and bank-notes in respect to the question 
 of their relative advantages, and gave it as his judgment that the prepon- 
 derance of advantage is decidedly in favor of the latter. The same ques- 
 tion has been subjected to repeated examination in other countries by 
 
^"^ THE LEGAL-TENDEE ACTS. 
 
 eminent statesmen and learned commissions, and the same conclusion 
 adopted. With a few rare exceptions, all the political economists of this 
 country and of Em-ope — the men who have made the subject a study in 
 the light of history — are unanimous in the opinion that a well-regulated 
 system of bank currency, redeemable on demand in gold, is greatly supe- 
 rior to any possible system of Government circulation. Such a system 
 the country already has by the authority of Congress ; and what is now 
 needed is to get the notes of the United States out of the way, by paying 
 and retiring them, and thus remove the last financial relic of the legal- 
 tender policy established during the war. 
 
 Whether this shall be done, when it shall be done, and how it shall 
 be done— these are the questions that ai^ now strongly occupying the 
 public attention. The advocates of the legal-tender-note scheme do not 
 propose to have it done at all. Their doctrine moves in exactly the op- 
 posite direction. What was resorted to as a temporary expedient at first, 
 and then became a war policy— in regard to the constitutionality and 
 necessity of which we have already expressed an opinion, with its reasons 
 — they desire and design to make the permanent policy of peace. It is 
 to be hoped that the American people will be sufficiently wise to keep 
 these currency schemers and their disciples in the minority.